International Municipal Lawyers Association - Local Government Blog

Court issues decision in Cuomo v. Clearing House Association

June 30, 2009
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In 2005, the Attorney General for New York began an investigation into lending practices by national banks in the State of New York and whether these practices violated New York’s fair-lending laws. As part of the investigation, the Attorney General (Eliot Spitzer) sent a letter to a number of national banks asking that they provide specific non-public information about their lending practices. These letters were sent “in lieu of subpoena.”

The Office of the Comptroller of the Currency (“OCC”) and a banking trade group, the Clearing House Association, brought suit to prevent the information request, on the basis that OCC’s regulations under the federal National Bank Act prohibited state law enforcement against national banks. Section 484(a) of the National Bank Act reads:

“No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized.”

The OCC, charged with administering the National Bank Act adopted regulations further defining the term “visitorial powers.” The regulations stated in part that “(o)nly the OCC. . .may exercise visitorial powers with respect to national banks. . . . State officials may not exercise visitorial powers. . .such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions.” (emphasis added).   

The district court entered an injunction in favor of OCC and the Clearing House Association which prohibited an attorney general from enforcing state fair-lending laws through demands for records or judicial proceedings. The Second Circuit Court of Appeals affirmed. The Supreme Court affirmed in part and reversed in part.

The Court, in its opinion written by Justice Scalia, started its analysis by looking at prior decisions to help determine the “outer limits” of the term “visitorial powers,” noting that the Supreme Court has “always understood ‘visitation’ as [the] right to oversee corporate affairs, quite separate from the power to enforce the law.” For example, in First Nat. Bank in St. Louis v. Missouri, 263 U.S. 640 (1924), the Court upheld the right of the Attorney General of Missouri to bring a suit to enforce a state anti-bank-branching law against a national bank. In that case, the Court stated the federal government may perform visitorial administrative oversight, such as “inquir[ing] by quo warranto whether a national bank is acting in excess of its charter powers.” However, if it is a state statute of general applicability which is not substantively pre-empted, then the Court stated that “the power of enforcement must rest with the [State] and not with” the federal government. The Court went further to state that “reading ‘visitorial powers’ as limiting only sovereign oversight and supervision would produce an entirely commonplace result – the precise result contemplated by our opinion in St. Louis, which said that if a state statute is valid as to national banks, ‘the corollary that it obligatory and enforceable necessarily results.”

The Court noted that the OCC had tried to limit its regulation by noting in its argument that existing case law did recognize that states retained some power to regulate national banks, in areas such as contract, debt collection, taxation, zoning, criminal, and more. However, the Court noted that the language of OCC’s regulation was much more since it categorically prohibited “prosecuting enforcement actions” and defined visitorial powers to include “[e]nforcing compliance with any applicable. . .state laws concerning” “activities authorized or permitted pursuant to federal banking law.”

The Court concluded by applying the above-mentioned principles to the case. “Visitorial powers” in the National Bank Act:

“refers to a sovereign’s supervisory powers over corporations. They include any form of administrative oversight that allows a sovereign to inspect books and records on demand, even if the process is mediated by a court through prerogative writs or similar means.”

However, in this case the state attorney general was not acting in the “sovereign-as-supervisor” role, but instead was in the role “sovereign-as-law-enforcer.” This role is not a “visitorial power” and this, the OCC erred by extending the definition to include “prosecuting enforcement actions” in state courts.

The judgment of the Second Circuit was affirmed in part and reversed in part. The particular action by the Attorney General, the threatening letter “in lieu of subpoena,” is not an exercise of power of law enforcement “vested in the courts of justice” which the National Bank Act exempts from the ban on the exercise of supervisory power. The Court affirmed the injunction below as applied to the letter. More importantly, the Court vacated the injunction and reversed the lower courts decision that had prohibited the Attorney General from bringing a judicial enforcement action.

The decision can be found here.

Supreme Court Rules in Ricci v. DeStefano

June 30, 2009
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In the 5-4 decision, the U.S. Supreme Court released its decision in Ricci v. DeStefano this morning.  The case, an appeal from a ruling of the Second Circuit Court of Appeals, deals with Title VII of the Civil Rights Act of 1964 in the context of firefighter testing and promotion procedures.  Title VII prohibits intentional acts of employment discrimination based on race, color, religion, sex, and national origin.  The plaintiffs were all firefighters employed by the City of New Haven, Conn., who applied for promotion and took the necessary exams in 2003. The exams were prepared by an Illinois company that specialized in entry-level and promotional examinations for police and fire departments.  The company’s vice-president subsequently testified that all of the questions were drawn from or based in the syllabus, and that the exam was facially neutral.  However, when the results came in, all but one of the top candidates was white (the exception was Hispanic).  New Haven’s Civil Service Board, charged with certifying the results, held hearings in which the “very significant disparate impact” was raised by the City’s corporation counsel, who “strongly advocated against certifying the exam results” (because “a statistical demonstration of disparate impact,” standing alone, “constitutes a sufficiently serious claim of racial discrimination to serve as a predicate for employer-initiated, voluntar[y] remedies – even . . . race-conscious remedies”).  The Board ultimately decided not to certify the results, relying on federal, state and local anti-discrimination laws. It argued that it had a good-faith belief that Title VII mandated non-certification, and that the City could have faced Title VII liability for adopting a practice having a disparate impact on minority firefighters.

When Ricci and some of the other applicants sued, alleging violations of Title VII and their equal protection rights, the district court upheld the City’s decision and granted it summary judgment, finding that the defendants’ “motivation to avoid making promotions based on a test with a racially disparate impact, even in a political context, [did] not, as a matter of law, constitute discriminatory intent;” and that there was no Equal Protection violation in the decision not to use the promotional exams. “None of the defendants’ expressed motives could suggest to a reasonable juror that defendants acted ‘because of’ animus against non-minority firefighters who took” the exams.  The Second Circuit – a panel that included now Supreme Court nominee Sonia Sotomayor – affirmed in a very brief, two-page decision.  After the Supreme Court agreed to hear the case, IMLA filed an amicus brief in support of the City.

In today’s ruling, the Supreme Court reversed and remanded, focusing only on the Title VII issue and finding it unnecessary to deal with the Equal Protection arguments.  Justice Kennedy delivered the opinion of the Court, ruling that the City’s action in discarding the tests violated Title VII: a “race-based action like the City’s in this case is impermissible under Title VII unless the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under the disparate-impact statute.  The [City], we further determine, cannot meet that threshold standard.”  Fear of litigation alone could not justify the City’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions.

Certain government actions to remedy past racial discrimination – actions that were themselves based on race – were constitutional only where there was a “strong basis in evidence” that the remedial actions were necessary.  Applying the strong-basis-in-evidence standard to Title VII, before an employer could engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional, disparate impact, the employer had to have a strong basis in evidence to believe it would be subject to disparate-impact liability if it failed to take the race-conscious, discriminatory action.  Here, the Board’s hearings produced no strong evidence of a disparate-impact violation. The majority of the Court concluded that all of the evidence demonstrated that the City rejected the test results only because the higher-scoring candidates were white.  Without some other justification, the Court held that this express, race-based decision-making was prohibited.

A threshold showing of a significant statistical disparity and nothing more was far from the required strong basis in evidence that the City would have been liable under Title VII had it certified the test results.  That was because the City could be liable for disparate-impact discrimination only if the exams at issue were not job-related and consistent with business necessity, or if there existed an equally valid, less discriminatory alternative that served the City’s needs but that the City refused to adopt.  Based on the record the parties developed through discovery, there was no substantial basis in evidence that the test was deficient in either respect.

Accordingly, the City’s race-based rejection of the test results could not satisfy the “strong basis in evidence” standard. “On this basis, we conclude that petitioners have met their obligation to demonstrate that there is ‘no genuine issue as to any material fact’ and that they are ‘entitled to judgment as a matter of law.’”

The majority concluded that “[o]ur holding today clarifies how Title VII applies to resolve competing expectations under the disparate-treatment and disparate-impact provisions.  If, after it certifies the test results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.”

The decision is available online at

Sorting Out Sonia Sotomayor

June 29, 2009
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Posted By: Dwight Merriam, Partner, Robinson & Cole, LLP

According to the Washington Post this morning, 62% of Americans think Sonia Sotomayor should be confirmed for the U.S Supreme Court because she is “about right” ideologically. The question is, how good will she be for municipal attorneys?


Pablo Martinez Monsivais/Associated Press

Pablo Martinez Monsivais/Associated Press

I was privileged to attend Yale Law School when she did. I’m almost eight years older and she graduated a class behind me, but I had been off in Vietnam and elsewhere with the Navy for 7 years. Yale Law School is a small place with only 170 or so in class. Regrettably, however, I didn’t get to know her well. When she was nominated, I began to read everything I could about her and to consider the decisions she wrote or joined in to try to get a bead on her.
The short answer is that she can’t be pigeon-holed.
Judge Sotomayor has participated in 3,600 (not a typo) decisions, I assume most of which are routine motions and the like. In the 10 years on the Second Circuit, she has authored over 150 decisions.
The case most talked about among property rights and government types alike is Didden v. Port Chester in which she voted with the majority 5-4 in 2006, after Kelo, in a short unsigned opinion to uphold Port Chester, New York’s taking of private property to enable a 27-acre urban renewal project.
The pro-property rights advocates were quick to look for a wooden stake to drive through her heart because of this decision. “This is the worst federal court takings decision since Kelo,” said Ilya Somin, who teaches property law at George Mason University and was quoted in a New York Times article. “It’s very extreme, and it is significant as a window into Judge Sotomayor’s attitudes toward private property.”

On the other side of the ledger is Brody v. Village of Port Chester. There, she wrote an opinion a year earlier finding that publication in the newspaper of a proposed eminent domain taking failed to meet the requirements of due process.

In Riverkeeper Inc. v. USEPA, she authored an opinion in 2009 that held costs to industry need not be considered in determining how to protect fish from power plant discharges. The decision was described as “anti-business.”

The U.S. Supreme Court granted certiorari and reversed in April holding that cost-benefit analysis is not categorically forbidden by the Clean Water Act. Entergy Corp. v. Riverkeeper Inc.

On the other hand, or was that the same hand? – I’m running out of hands here – in Natural Resources Defense Council v. Abraham (2003), her panel ended up on the side of a coalition of states and environmental groups that had sued the federal government for weakening the energy conservation standards for appliances.

In New York v. National Service Industries (2006), Judge Sotomayor wrote a decision for the court in a Superfund case in which the State of New York sued a company to recover the state’s costs of cleaning up a hazardous waste site. The court held that the company was not liable for what a remotely-connected firm had done.

Not a property rights, environmental or land use case, but certainly one of municipal law that is getting much press is Ricci v. DeStefano. The case is about white firefighters in New Haven who were not promoted when no black firefighters qualified for advancement. Her three-judge panel of the Second Circuit in an unsigned opinion rejected the race discrimination claim of the white firefighters, including a Hispanic. The court in a per curium opinion declined to rehear the case. The Supreme Court took the case, arguments were held in April, and the decision is pending was released this morning. [UPDATE 06/29/2009: From the New York Times — Justices Rule for White Firefighters in Bias Case — The Supreme Court ruled on Monday that white firefighters in New Haven, Conn., were unfairly denied promotions because of their race, reversing a decision that Sonia Sotomayor, a Supreme Court nominee, endorsed as an appeals court judge. Read More:]
Here are a couple [1 and 2] of gossipy personal items which might help you fill out your own picture of Judge Sotomayor. She has been married and divorced, never had any children, is generous to her clerks and staff, has little accumulated wealth, and won $8,283 at a casino last year while visiting a casino with her mother.

To sum up Sonia Sotomayor…

I believe it is fair to say, based on the totality of her record, that she is a liberal of the non-dogmatic variety, makes narrow decisions sharply focused on the cases before her, is not a judicial activist, will be an active questioner in oral arguments unlike Justice Thomas, respects private property rights, understands the needs of government especially to carry out the common good, and will prove to be more of a centrist.

“You throw the sand against the wind…and the wind blows it back again.” – William Blake … but is it a taking?

June 22, 2009
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Posted By: Dwight Merriam, Partner, Robinson & Cole, LLP

The big news this last week was that on Monday, June 15th the U.S. Supreme Court granted certiorari in a takings case, Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, et al. (Florida Supreme Court, decided September 29, 2008, rehearing denied December 18, 2008).  Click here for the Florida Supreme Court opinion.   Here is the Florida Court of Appeal decision which gives more details.

Municipal lawyers will want to follow this for two reasons.  First, it ends a four-year hiatus since the U.S. Supreme Court took on a takings case (last decided were Kelo, Lingle and San Remo Hotel) and it will be the first for the new chief justice.  Second, at root, the case is about global warming and, specifically, the government’s role in adaptation planning. For a primer on the latter, see the recent Pew Center report

As a planner and land use lawyer, I see adaptation planning as the leading regulatory issue of the next decade.

The case was covered by on June 16th with several good links. It was also addressed by the Eminent Domain Law Blog.

The Court will be deciding whether Florida’s state legislation, the Beach and Shore Preservation Act, effects a per se taking of the upland owners’ property.  Click here for the relevant portion of the statute.

This is the provision at the center of the controversy, a vesting statute contrary to the common law of accretion, that basically gives the state the ownership of the land it creates when it fills seaward of the “erosion control line” which becomes the new property boundary:

161.191 Vesting of title to lands.

(1)  Upon the filing of a copy of the board of trustees’ resolution and the recording of the survey showing the location of the erosion control line and the area of beach to be protected as provided in s. 161.181, title to all lands seaward of the erosion control line shall be deemed to be vested in the state by right of its sovereignty, and title to all lands landward of such line shall be vested in the riparian upland owners whose lands either abut the erosion control line or would have abutted the line if it had been located directly on the line of mean high water on the date the board of trustees’ survey was recorded.

(2)  Once the erosion control line along any segment of the shoreline has been established in accordance with the provisions of ss. 161.141-161.211, the common law shall no longer operate to increase or decrease the proportions of any upland property lying landward of such line, either by accretion or erosion or by any other natural or artificial process, except as provided in s. 161.211(2) and (3). However, the state shall not extend, or permit to be extended through artificial means, that portion of the protected beach lying seaward of the erosion control line beyond the limits set forth in the survey recorded by the board of trustees unless the state first obtains the written consent of all riparian upland owners whose view or access to the water’s edge would be altered or impaired.

Under the statute the state renourishes beaches, adding sand to them to combat erosion.  The project which started the current litigation would widen the beach at Destin, Florida by 210 feet for a length of 6.9 miles.  Who owns that “new” (actually “restored” given that it is renourishment after all) beach?  The State of Florida says it’s theirs; the littoral owners see the restored beach as belonging to them, not the state.

Take a look at the beach, courtesy of the Environment News Service.

The beach at Destin, Florida (Photo by Jennifer Lee)

The beach at Destin, Florida (Photo by Jennifer Lee)

The takings question before the Florida Supreme Court was this:  “On its face, does the Beach and Shore Preservation Act unconstitutionally deprive upland owners of littoral rights without just compensation?”  The Florida court found no per se taking.  It’s a matter of avulsion, not accretion, said the court.  In following the case you’ll come to learn the critical difference between the two and be able to impress family and friends.  The sound bite version is that avulsion deals with large, sudden changes, while accretion is little bits on new land very slowly over a long time.  Hurricane Opal (1995) was avulsive.

Hurricane Opal's 8 to 14 foot storm surge damaged hundreds of structures along the Florida Panhandle in October 1995. (Photo courtesy UACE 1995).

Hurricane Opal's 8 to 14 foot storm surge damaged hundreds of structures along the Florida Panhandle in October 1995. (Photo courtesy UACE 1995).

The questions presented to the U.S. Supreme Court are:

The Florida Supreme Court invoked “nonexistent rules of state substantive law” to reverse 100 years of uniform holdings that littoral rights are constitutionally protected. In doing so, did the Florida Court’s decision cause a “judicial taking” proscribed by the Fifth and Fourteenth Amendments to the United States Constitution?

Is the Florida Supreme Court’s approval of a legislative scheme that eliminates constitutional littoral rights and replaces them with statutory rights a violation of the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution?

Is the Florida Supreme Court’s approval of a legislative scheme that allows an executive agency to unilaterally modify a private landowner’s property boundary without a judicial hearing or the payment of just compensation a violation of the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution?

This is a case to watch.  And with your other eye, keep track of Casitas Municipal Water District v. United States, 543 F.3d 1276 (Fed. Cir. 2008), reh’g and reh’g en banc denied, — F.3d –, 2009 WL 367528 (Feb. 17, 2009).  The U.S. Court of Appeals for the Federal Circuit held that it was a per se taking to require the water district to provide a fish ladder at its facilities and divert some of its water to protect the fish under the Endangered Species Act.  Watch for a certiorari petition. Two motions for extension of time have been granted so the Solicitor General has until July 15th to file.

Supreme Court rules in Osborne Case

June 18, 2009
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The Supreme Court released its decision today in the case of District Attorney’s Office for the Third Judicial District v. Osborne, opinion available here. In a nod to federalism, the Court held there is no due process right under the U.S. Constitution for an individual to obtain postconviction access to a State’s evidence for DNA testing. As the Court states in today’s opinion,

The elected governments of the States are actively confronting the challenges DNA technology poses to our criminal justicesystems and our traditional notions of finality, as well as the opportunities it affords. To suddenly constitutionalize this area would short-circuit what looks to be a prompt and considered legislative response.

IMLA, along with the Council of State Governments and the National Association of Counties, submitted an amicus brief, available here 

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This blog is made possible by the International Municipal Lawyers Association (IMLA), but may include guest bloggers (who are attorneys with experience in local government matters) who might or might not work for IMLA. Their views (and those expressed on this site) do not necessarily express the views of IMLA.