Supreme Court Action: Misdemeanors And Firearms, FICA, and Lanham Act Standing

The Supreme Court issued one opinion on Wednesday and two on Tuesday.  The case from Wednesday is United States v. Castleman (12-2371).  Castleman pleaded guilty in Tennessee to the misdemeanor offense of having “intentionally or knowingly cause[d] bodily injury to” the mother of his child.  Federal authorities discovered that Castleman was selling firearms on the black market.  He was indicted on a variety of charges including a violation of 18 U.S.C. §922(g)(9) which forbids the possession of firearms by anyone convicted of “a misdemeanor crime of domestic violence.”  The question before the Court was whether the domestic violence conviction qualified as a conviction to invoke §922(g)(9).

Castleman argued that his conviction did not qualify as a misdemeanor crime of domestic violence because it did have the use of physical force as an element.  The District Court agreed that physical force for purposes of the federal statute must entail violent contact with the victim.  The Sixth Circuit affirmed, though it equated physical force as the same as required under a related statute, the Armed Career Criminal Act (ACCA), and a Supreme Court case, Johnson v. United States, 522 U.S. 133 (2010),  that interpreted “violent felony” under the ACCA.  The Sixth Circuit found that Castleman’s conviction for domestic violence did not qualify as a misdemeanor offence under this analysis.

The Supreme Court reversed, holding that Congress incorporated the common-law meaning of “force” which could be offensive touching.  This would support a common-law battery conviction.  Domestic violence can include acts which would not be characterized as “violent” in a nondomestic context.  Congress intended the use of the words “domestic violence” as a term of art in the statute.  Castleman’s other arguments which relied on legislative history and Court doctrines were rejected.

Justice Sotomayor delivered the opinion of the Court and was joined by Chief Justice Roberts, and Justices Kennedy, Ginsburg, Breyer, and Kagan.  Justice Scalia filed an opinion concurring in part sn concurring in the judgment.  Justice Alito filed an opinion concurring in the judgment and was joined by Justice Thomas.  Justice Scalia would have reached the same conclusion as the majority on narrower grounds.

The first case from Tuesday is United States v. Quality Stores, Inc. (12-1408).  The issue is whether severance payments given to employees involuntarily terminated due to Quality Store’s bankruptcy are exempt from FICA withholding.  Quality Stores made payments to severed employees according to various plans and reported the payments as wages on W-2 forms.  The company also withheld taxes and FICA contributions in making payments.  It later sued on behalf of itself and its employees for the return of that money.  The Bankruptcy Court, the District Court, and the Sixth Circuit Court of Appeals held for Qualities Store.  The Supreme Court reversed.

The Court examined the FICA statute’s definition for wages and stated that severance payments easily fell into the description:

FICA defines “wages” as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” §3121(a). The term “employment” encompasses “any service, of whatever nature, performed . . . by an employee for the person employing him.”  §3121(b).

The Court noted that statutory exemptions from FICA included severance pay granted when an individual retires due to a disability.  This was specific enough to conclude that general severance pay was not exempt from FICA withholdings.  Similar historical changes to the Act and parts of the IRS Code further supported the Court’s opinion.  Justice Kennedy delivered the opinion of the Court and was joined by all members except Justice Kagan who did not participate in the case.

The second case from Tuesday comes from the Sixth Circuit as well.  It is Lexmark Int’l Inc. v. Static Control Components, Inc. (12-873).  Lexmark sells printer cartridges for its printers that contain chips which limit them as the only cartridge that work in Lexmark printers.  Lexmark had a program in place that gives consumers incentives to return used cartridges to Lexmark (the “Prebate” program) so they may not be used by third party “remanufacturers.”  Static Control manufactures chips which mimic those of Lexmark’s allowing remanufacturers to bypass cartridge controls set in place by Lexmark.  Lexmark sued Static Controls for copyright violations.

Static Control countersued for violations of the Lanham Act.  The Act authorizes suit for misleading statements or representations of fact.  The allegations of Static Control’s counterclaim are that Lexmark mislead consumers into thinking they had to legally return cartridges under the Prebate program; further, Lexmark sent letters to remanufacturers advising them that it was illegal to use Static Control’s chips to refurbish Lexmark cartridges.

The District Court dismissed the counterclaim.  The Sixth Circuit reversed, though it used a different test to determine whether Static Control had standing to bring the Lanham Act claim.  There were three competing options within the Circuit Courts:

[The Sixth Circuit] observed that the Third, Fifth, Eighth, and Eleventh Circuits all refer to “antitrust standing or the [Associated General Contractors] factors in deciding Lanham Act standing,” as the District Court had done. Id., at 410 (citing Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 165 F. 3d 221, 233–234 (CA3 1998); Procter & Gamble Co. v. Amway Corp., 242 F. 3d 539, 562–563 (CA5 2001); Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F. 2d 985, 990–991 (CA8 1993); Phoenix of Broward, Inc. v. McDonald’s Corp., 489 F. 3d 1156, 1162–1164 (CA11 2007)). By contrast, “[t]he Seventh, Ninth, and Tenth [Circuits] use a categorical test, permitting Lanham Act suits only by an actual competitor.” 697 F. 3d, at 410 (citing L. S. Heath & Son, Inc. v. AT&T Information Systems, Inc., 9 F. 3d 561, 575 (CA7 1993); Waits, supra, at 1108–1109; Stanfield v. Osborne Industries, Inc., 52 F. 3d 867, 873 (CA10 1995)). And the Second Circuit applies a “‘reasonable interest’ approach,” under which a Lanham Act plaintiff “has standing if the claimant can demonstrate ‘(1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising.’” 697 F. 3d, at 410 (quoting Famous Horse, Inc. v. 5th Avenue Photo Inc., 624 F. 3d 106, 113 (CA2 2010)). The Sixth Circuit applied the Second Circuit’s reasonable-interest test and concluded that Static Control had standing because it “alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that th[o]se interests were harmed by Lexmark’s statements to the remanufacturers that Static Control was engaging in illegal conduct.” 697 F. 3d, at 411.

Lexmark argued the case on “prudential standing,” or as the Court put it:

“‘the general prohibition on a litigant’s raising another person’s legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff ’s complaint fall within the zone of interests protected by the law invoked.’”

The Court stated that Static Control’s allegations fell within the zone of interest that the statute authorizes.  The Court’s analysis of the Lanham Act statute language shows that it protects false advertising in a commercial (as opposed to consumer) context.  Further, Lexmark’s statements to other remanufacturers can be considered as proximate cause of Static Control’s business losses.  Static Control has stated a claim under the Lanham Act though must still prove its allegations at trial.  Justice Scalia delivered the opinion for a unanimous Court.  – Mark

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