In Coalition to Defend Affirmative Action, Integration and Immigrant Rights and Fight for Equality by Any Means Necessary v. Regents of the Univ. of Michigan (PDF), a divided panel of the Sixth Circuit struck down a 2006 voter-approved amendment to the Michigan constitution, Proposal 2, which prohibits Michigan’s public colleges and universities from granting “preferential treatment to[] any individual or group on the basis of race, sex, color, ethnicity, or national origin.”  Over a strong dissent by Judge Gibbons, the panel majority, written by Judge Cole, ruled that Proposal 2 ran afoul of U.S. Supreme Court precedent interpreting the Equal Protection Clause because it “unconstitutionally alters Michigan’s political structure by impermissibly burdening racial minorities.”

As this blog reported, the en banc Court accepted review of the panel decision and, in November 2012, affirmed the ruling. By an 8 to 7 vote (with Judges Kethledge and McKeague recusing themselves), the Sixth Circuit ruled that Proposal 2 violates the “political structure doctrine” of the Fourteen Amendment.  This blog observed at the time that the en banc ruling may “offer the Supreme Court an opportunity to revisit a doctrine not at issue in [the Supreme Court's current affirmative action case, Fisher v. University of Texas at Austin (No. 11-345)] and which the High Court has not addressed for 30 years.”  It appears that the Supreme Court is going to take up that offer in Schuette v. Coalition to Defend Affirmative Action (No. 12-682), and the Sixth Circuit Appellate Blog will keep a keen eye on developments before the High Court.

The plaintiff American Beverage Association raised a dormant Commerce Clause challenge to a Michigan statute, Mich. Comp. Laws 455.572a, amending the state’s Bottle Bill and requiring certain beverages sold in Michigan to bear a unique-to-Michigan mark.  The statute was passed to keep people from redeeming bottles in Michigan for a 10-cent refund when the bottles were purchased in other states that don’t require bottle deposits. Notably, the statute prohibited the sale of bottles that contained the unique mark in any state other than Michigan and imposed fines and potential jail sentences for violations.  As a practical matter, the out-of-state manufacturers raised concerns that they were being required maintain segregated manufacturing and distribution networks that deprived them of economies of scale and a flexibility in managing their inventories. 

In a unanimous decision, the Sixth Circuit concluded that the statute violated the Commerce Clause because it had extraterritorial effects.  American Bev. Ass’n v. Snyder, Case No. 11-2097 (Nov. 30, 2012).  Although the statute was not discriminatory (it applied to all manufacturers of a certain size), it imposed criminal penalties for the sale of bottles bearing the unique-to-Michigan mark in other states.  Judge Sutton authored a separate concurrence questioning whether extraterritorial effect should, by itself, be a bar to state regulation of commerce.  However, because current precedent invalidates state regulations that are not discriminatory but are extraterritorial, he joined the court’s opinion. 

The defendants filed a Motion for Rehearing En Banc, requesting clarification about whether extraterritoriality ended the inquiry or, as defendants suggested, it could still survive if it “advances a legitimate local purpose that cannot be adequate served by reasonable nondiscriminatory alternatives.”  In his concurrence, District Judge Rice (S.D. Ohio) indicated he believed that a finding of extraterritoriality ended the discussion, but there was no clear resolution of the issue in the main opinion.  Although defendants may have been disappointed with the substantive answer they received, the petition for rehearing did lead to the panel issuing an amended decision including a statement that no further review of the local purpose or other reasonable alternatives was necessary following their finding of extraterritorial effect. 

Now that the issue regarding extraterritoriality has been fully resolved, it appears that the defendants may be preparing a petition for certiorari.  Not only did they indicate in their petition for rehearing that they were considering such a move, but they have also recently filed a motion to stay the issuance of the mandate.  We will continue to monitor this case and any action by the Supreme Court.

We will also be monitoring yet another alcoholic beverage case pending before the Sixth Circuit, Maxwell’s Pic-Pac, Inc. v. Dehner, Case No. 12-6056, which attacks Kentucky’s prohibition against grocery stores and convenience stores selling package liquor and wine as a violation of the federal Equal Protection Clause and state separation of powers requirement.  Briefing is scheduled to conclude this spring.

As we reported on our blog a few weeks ago, the U.S. Supreme Court recently ordered the Fourth Circuit to reconsider a constitutional challenge to the abortion mandate brought by Liberty University, the private Christian college based in Virginia founded by the late Reverend Jerry Falwell.  Liberty University argues the abortion mandate is unconstitutional on the ground that it involves the “forced funding of abortions” in violation of the school’s right to religious liberty. 

It is only a matter of time before the Sixth Circuit addresses the constitutionality of the abortion and contraception mandate.  Just a few weeks ago, District Court Judge Robert H. Cleland of the U.S. District Court for the Eastern District of Michigan became the second judge in the country to grant a motion for preliminary injunction that halts enforcement of the HHS mandate.  See Opinion, Legatus, et al. v. Sebelius, Case No. 12-12061 (E.D. Mich.).  The plaintiffs are being represented by The Thomas More Law Center (“TMLC”), which, as you’ll recall from our prior coverage, is the same pro-life legal group that was unsuccessful in the Sixth Circuit last year in challenging the individual mandate under the Affordable Care Act.  See Opinion, Thomas More Law Center, et al. v. Obama, et al. (Sixth Circuit, Case No. 10-2388).  TMLC’s lawsuit challenges the constitutionality of the HHS Mandate under the First Amendment as a violation of the free exercise of religion and of free speech.  It also claims that the abortion and contraception mandate violates the Religious Freedom Restoration Act of 1993 and the Administrative Procedure Act.

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Given the clear Circuit split, the government  may seek further review either through rehearing or appeal in this case.  Until the issue is resolved, employers should consider filing any potential refund claims prior to the statute of limitations for seeking the refund expires.

The Third Circuit, in March of this year, reduced a cost award on appeal by $95,000, excluding costs of the prevailing party’s vendor which were attributable to data collection, preservation of metadata, keyword searching, culling, and production.  Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012)  (PDF).  A petition for writ of certiorari  to appeal that decision is currently pending before the United States Supreme Court on the issue of whether the Third Circuit erred in concluding that only “scanning and file format conversion can be considered ‘making copies’” under Section 1920(4). (PDF)  That petition highlights the different approaches throughout the Circuits, including that of the Fifth Circuit in affirming an award of costs for optical character recognition scanning (OCR), which expenses were disallowed as costs in Race Tires.  See Rundus v. Dallas,  2009 U.S. Dist. LEXIS 101429, at * 7 (N.D. Tx. Nov. 2, 2009) (PDF), affirmed by 634 F3d 309 (5th Cir. 2011) (PDF). 

Just a few weeks after the Third Circuit’s decision, the Northern District of California expressly declined to follow the Third Circuit’s decision in Race Tires and applied a broad construction of § 1920 to award over $700,000 in electronic discovery costs to the prevailing party.  In re Online DVD Rental Antitrust Litig., 2012 WL 1414111 (N.D. Cal. Apr. 20, 2012) (PDF).  This award of costs is currently on appeal to the Ninth Circuit Court of Appeals.

Find out how the Sixth Circuit has treated the costs associated with electronic discovery under §1920 after the jump.

Under a previous version of §1920, the Sixth Circuit held that the district court did not abuse its discretion in awarding costs for electronic scanning and imaging.  BDT Products, Inc. v. Buro-Datentechnik GMBH & Company KG, 405 F.3d 415, 420 (6th Cir. 2005) (PDF).  That issue is again before the Court in Frye v. Baptist Memorial Hospital, Case No. 12-5371, in which the appellant urges the Sixth Circuit to refuse recovery to the prevailing party its costs for OCR. (PDF)   Whether the Sixth Circuit will take the opportunity to clarify the precise scope of electronic discovery charges recoverable as costs under 28 U.S.C. §1920, whether it will rely on its prior precedent in BDT, or whether the United States Supreme Court will accept the petition for writ of certiorari in Race Tires and resolve the contours of electronic discovery costs remains to be seen.

The question of whether the individual mandate is a valid exercise of Congress’s taxing power should not come as a surprise to readers of this blog.  We’ve been following the taxing power argument for over a year, and we specifically highlighted the possibility that the Supreme Court ultimately would uphold Congress’s authority to enact the individual mandate under its plenary taxing power (as opposed to the commerce power, which is an argument that did not find support with the majority of the justices).  While a majority of legal experts were expecting the Supreme Court to invalidate the individual mandate today, we cautioned against making predictions based on oral arguments, and we were right.

Interesting, while the Supreme Court held that the individual mandate was a tax for constitutional purposes, it also held that it was not a tax for purposes of the Anti-Injunction Act, which would have barred plaintiffs’ challenge.   The Court’s conclusion relating to the Anti-Injunction Act is the same conclusion reached by the Sixth Circuit a year ago (on June 29, 2011) when it became the first Circuit Court in the country to uphold the health care statute’s constitutionality.  See Thomas More Law Center, et al. v. Obama, et al. (Sixth Circuit, Case No. 10-2388).  But it’s also where much of the Supreme Court’s agreement with the Sixth Circuit ended.  Chief Justice Roberts flatly rejected the Sixth Circuit’s central reasoning in Thomas More that the individual mandate could be upheld under Congress’s commerce power.  In doing so, the Chief Justice accepted the “activity” vs. “inactivity” distinction previously rejected by the Sixth Circuit under which the plaintiffs argued that Congress could not stretch its commerce clause authority to regulate intrastate inactivity or, in effect, mere “existence” within the borders of the United States.  Chief Justice Roberts also disagreed with the view expressed by Judge Sutton in his concurring opinion in Thomas More that the individual mandate could not be sustained under Congress’s taxing power.

But if there is one important point of agreement between Chief Justice Roberts and Judge Sutton, it is that the policy merits of the individual mandate should be resolved by the people’s elected representatives, not by a judiciary acting as a super-legislature.  And so the debate over the individual mandate will rage on in the political sphere.  Meanwhile, generations of constitutional law students will debate and analyze today’s Supreme Court’s decision spanning 193 pages.  It’s an exciting time to be a constitutional law scholar.

Next week, the U.S. Supreme Court is expected to rule on the constitutionality of the individual mandate in a landmark ruling that not only will have immediate political ramifications, but also could have long-term structural consequences for congressional authority and the reach of the federal government’s power under the Commerce Clause.  Interestingly, a recent insider survey of nearly 60 legal experts found that most of them expect the Supreme Court to strike down the individual mandate.  Their views were shaped in large part by the oral arguments before the Court back in March (although query whether oral arguments are a reliable predictor of a court’s decision). 

So how do you think the Supreme Court will rule?  And will it be a 5-4 decision, as many are predicting? 

No matter how the Supreme Court rules, it is certain to draw upon the differing views in the three opinions from the Sixth Circuit’s Thomas More case.  We’ll be covering the Supreme Court’s decision and offer an in-depth analysis.