The Supreme Court returns to the bench tomorrow, to begin the final round of hearings in its current term. Both cases on Monday have deep historic roots – the first in an 1819 ruling by the Court on state-federal relations, the second in the original Constitution and its clause dealing with the plight of people and businesses in debt.
The “live” audio (no video) of the hearings will be available at Quick Links on the Court’s homepage – supremecourt.gov – and at c-span.org/supremecourt and C-Span Now App.
First case: United States v. State of Washington The hearing, scheduled for one hour, will start at 10 a.m.
Background: In the early decades of the new American government under the Constitution, a lingering issue was whether state governments remained as strongly independent as they had been under the old Articles of Confederation, and what that meant for their relationship with the new centralized national government. Were the states still sovereign, or did they give up much of that when they agreed to ratify the new Constitution?
Some among the founding generation believed that the answers to those questions were written in the new Constitution’s Article VI: “This Constitution and the laws of the United States which shall be made in pursuance thereof…shall be the supreme law of the land, any thing in the constitution or laws of any state to the contrary notwithstanding.”
The meaning of that would be significantly tested when the Supreme Court decided the case of McCulloch v. Maryland in 1819. The University Press of Kansas, in releasing a 2006 book-length study of that decision, noted its reputation as “the Supreme Court’s most important and influential decision – one that essentially defined the nature and scope of federal authority and its relationship to the states.”
Even before the Constitution was written, the colonies along the Atlantic seaboard had had difficulty managing their economies, regularly failing to keep sound currency in circulation so that the colonists were able to handle debts and public finance. Those problems persisted after the colonies became states in 1789 and were aggravated by public debt from the War of 1812.
One of the most imaginative among the Founders, Alexander Hamilton, believed that the solution to this abiding problem was to create a national bank and, with it, a national currency to shore up the states’ shared economy. Congress enacted that into law first in 1791, and reenacted it in 1816 after the first law had lapsed.
The idea was bitterly opposed among states’ rights advocates, including those in Maryland’s state legislature. Maryland had a branch of the national bank in Baltimore, which competed with a number of state-chartered banks. In 1818, the legislature imposed a tax on notes issued by the national bank; that tax could be avoided only if the bank paid a $15,000 annual fee.
The Baltimore branch’s cashier, James W. McCulloch, issued notes without paying the state taxes, launching the court case that ultimately would reach the Supreme Court. The unanimous decision that emerged in 1819 declared the state tax unconstitutional under Article VI, establishing the doctrine that the Constitution came from the people directly, and was not a compact among sovereign states.
Conceding that state governments must have the power to impose taxes, Chief Justice John Marshall’s opinion nevertheless noted that “the power to tax is the power to destroy.” The Constitution, the Court said, did not allow states to assess taxes on a federal activity created by the legitimate exercise of the powers of the national government, declaring: “It is of the very essence of supremacy to remove all obstacles to its action within its own sphere.”
That concept of national government immunity to state regulation, by taxation or otherwise, is at the heart of the first case being heard by the Court on Monday. An appeal by the federal government brings that old case from the 19th Century into the Atomic Age.
The case arises out of a dispute over protecting the health of workers exposed to radiation and toxic chemicals on a contaminated site near the small farming town of Hanford, Washington – the site of a federal facility that had produced most of the weapons-grade plutonium for nuclear bombs in the U.S. military arsenal during World War II and the Cold War. Except for the efforts to clean up the site, it no longer functions except as a national park commemorating the Manhattan Project, which developed the first atomic bomb.
The cleanup, expected to continue for another 60 years or so, is being done by some federal employees and by many more workers employed by private companies under contract with the federal government.
Washington’s state legislature, finding that the private firms were not taking adequate measures to protect their workers’ health, in 2018 passed a new workers’ compensation law to deal with what it regarded as the unique health hazards of the Hanford site. The law allows the private workers to make claims without proving that their health problems can be traced to their jobs. (The federal government employees there have their own compensation system.)
Because the state law provided special benefits only for the employees of private contractors at a federal government site, and because the federal government may face millions of dollars in compensation obligations passed on by contractors, the federal government challenged the law’s constitutionality, relying on Article VI and the 1819 Court ruling.
Although Congress in 1936 had given states permission to apply state workers’ compensation laws to federal facilities, the government argues that this permission only applies if the same compensation scheme applies to all workers across the state. Washington disagrees, arguing that the 1936 law allows states to adopt unique compensation schemes based on novel health hazards in a particular workplace.
The question before the Court: Will the Supreme Court clarify how far state governments may go in providing health benefits for workers employed by federal contractors at federal sites?
Significance: This case reaches the Court at a time when its strong new conservative majority is showing increasing sympathy for the powers of state governments, especially when those come into conflict with federal laws or programs. The doctrine of federal immunity to state controls does not arise frequently, so this case has major potential for clarifying that doctrine – if the Court is able to decide it.
Since the Court agreed in January to hear the government appeal, the state has been attempting to end the controversy without a ruling by the Court and with its benefits scheme at Hanford mostly intact. In March, its legislature passed a new law, repealing the part of its compensation law challenged in the case and making compensation applicable to any worker facing radiation hazards at any site in the state, but exempting all federal military sites. The state argued that this should end the dispute (that is, make it legally “moot”).
The federal government responded, arguing that the controversy continues, with claims still being filed by contractors’ employees under the 2018 state law. It implied that the state was trying to manipulate the Court’s processes.
Last week, with the hearing only a week away, the state notified the Court that it now takes the position that, in any pending case that a worker files under the now-repealed law, the state will concede that the worker is not entitled to those benefits but will have their claim judged under the new, statewide law for similar workers. That, it argued, should end the dispute.
The Court has long followed the practice that, if a legal controversy is no longer a “live” one, the Court has no jurisdiction. Tomorrow’s hearing probably will reveal how the Justices react to the latest developments and the state’s attempt to scuttle the case.
Second case: Siegel v. Fitzgerald This hearing will begin after the first case has concluded; it is scheduled for one hour.
Background: When the Philadelphia convention drafting the Constitution in 1787 was tying up loose ends, the delegates explored how the new document would treat people who go into debt and can’t pay. Some were concerned about the practice in England of keeping debtors in prison – a fate that, of course, would keep them from going to work to try to earn money to pay creditors. Debtor’s prison was mostly for the poor.
Many of the colonies had gotten into the habit of favoring debtors, regularly adopting debtor- relief laws, which varied widely and complicated economic cooperation between colonies. The limited debate the delegates had over the debt-management issue focused on the plight of debtors caught between conflicting state laws. Some delegates worried that a person in debt in one state might flee to another to avoid repaying, others fretted that a person released from debt in one state might be summoned elsewhere to pay.
It was late in the convention, so the state rights’ sentiment that would seriously complicate the ratification process later did not emerge over the debt question even though the delegates were taking away significant state power. The result was adoption of the Bankruptcy Clause in Article I, giving Congress authority “to establish uniform laws on the subject of bankruptcy throughout the United States.”
Over the long history since then, the Court has had comparatively little opportunity to interpret the meaning of that authority. When it has stepped in, the Court usually has been divided because of the seemingly unending debate over how the original Constitution treated the sovereignty claims of the states. For example, in a significant decision in 2006 that directly involved a state agency’s duties under bankruptcy law, the Court split 5-to-4 with strenuous arguments on both sides about state sovereignty.
Tomorrow, in the second case to be heard, the Court will again look at the uniformity question. The outcome will affect about $100 million in potential refund claims by corporate debtors that had paid hefty fees for processing their bankruptcy cases under Chapter 11. (The federal bankruptcy code’s Chapter 11 allows a bankrupt firm to reorganize and maybe stay in business.)
Chapter 11 cases are handled by the Justice Department in 48 states and by the federal courts in two – Alabama and North Carolina – under a peculiar system enacted by Congress in 1978. In 2017, Congress decided to raise the quarterly fees that corporations in Chapter 11 cases in 48 states would pay – an increase of 833 percent (from $30,000 to $250,000).
This was done to cover a shortfall in federal funds for processing cases in those jurisdictions. Later, the higher fees were assessed in the two-state system, too, but only for some debtors.
Across the country, trustees handling cases in the 48-state group sued, claiming that the higher fee system violated the uniformity mandate set in the Constitution. Among those suing was the bankruptcy trustee handling the Chapter 11 case of the electronics retail chain, Circuit City Stores. Federal appeals courts reached conflicting results on the dispute, and the Circuit City case is now before the Supreme Court. The federal government is defending the differing fee system and is opposing any refunds if that system were to be nullified.
The questions before the Court: Did Congress act unconstitutionally in 2017 in imposing two different fee schedules in bankruptcy cases and, if it did, what is the remedy?
Significance: As the case has developed, the Justices have a choice to make that seems simple but is entangled in the complex bankruptcy code. The outcome could provide new guidance on how rigorously to apply the uniformity mandate of the Bankruptcy Clause in Article I.
Some lower courts have ruled that Congress had the power to set up two bankruptcy systems, and thus also had the power to set a fee schedule at a unform rate within each system even if, between the systems, the fees differ. Other courts have ruled that the differing fee schedule is invalid, no matter why Congress chose the dual system.
The more challenging question could be what remedy to impose if the 2017 law is ruled invalid. The Justices, however, might choose to leave that to further exploration in the lower courts.
On Tuesday, the Court will hear two separate cases on the consequences when a federal agency or a federal trial judge makes a mistake in interpreting the law.
