Legal Corner: U.S. Supreme Court Update

The U.S. Supreme Court term ended in June, and several decisions were issued that directly affect municipalities. Thank you to Matt Stone, League Summer Extern from Sandra Day O'Connor College of Law at ASU, who contributed to the summaries of these cases.

South Dakota v. Wayfair

In 2016, the South Dakota Legislature enacted a law that requires the collection of sales tax on sellers with no physical presence in the state to directly challenge the previous Supreme Court's Commerce Clause decisions, including Quill Corp. v. N. Dakota By & Through Heitkamp, 504 U.S. 298, 112 S. Ct. 1904, 119 L. Ed. 2d 91 (1992). South Dakota then filed a declaratory judgment action seeking to overturn the existing law, and after the state suffered losses on appeal, the U.S. Supreme Court overturned Quill.

Justice Kennedy wrote for the majority, which included Justices Ginsburg, Alito, Gorsuch, and Thomas. The Court found that Quill is flawed because the physical presence rule is not required in order to show a substantial nexus; instead of resolving "market distortions," it produces them; and it "imposes the sort of arbitrary, formalistic distinction" that is contrary to the Commerce Clause. The Court stated that Quill has come to serve as "a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a State's consumers..." and has had the effect of discouraging physical presence in multiple states. Here, Quill "treats economically identical actors differently, and for arbitrary reasons."

Moving forward the Court reiterated that future Commerce Clause analysis relies on whether there is a substantial nexus with the taxing state – does the taxpayer or collector avail itself of the substantial privilege of carrying on business in that jurisdiction? According to the Court, a substantial nexus exists here based on both economic and virtual contacts with the state. This decision grants the state and cities and towns with a possible new source of revenue, and levels the playing field for all retailers who conduct business in Arizona.

Janus v. American Federation of State, County and Municipal Employees

Mark Janus and Brian Tyrgg, Illinois state employees, filed a complaint alleging that they are being forced to pay fees as a condition of public employment, violating their First Amendment rights. In Abood v. Detroit Board of Education (1977) the Supreme Court held that the First Amendment does not prevent "agency shop" arrangements where public employees who do not join the union are still required to pay their "fair share" of union dues for collective-bargaining, contract administration, and grievance-adjustment.

Justice Alito wrote for the majority, which included Justices Roberts, Kennedy, Thomas, and Gorsuch. The Court overruled Abood and found the agency fee to be unconstitutional because it violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern, even if they choose not to join the union or strongly object to the positions the union takes in collective bargaining and related activities. Following this decision, public-sector unions will have to obtain affirmative consent from nonmembers before such fees are collected in the future.

Lozman v. City of Riviera Beach

Fane Lozman was a frequent critic at the Riviera Beach City Council after he learned the City planned to redevelop its waterfront area and take the property under eminent domain. At a city council meeting, Mr. Lozman began speaking about the arrest of former county commissioners and a councilperson had Mr. Lozman arrested when he refused to stop talking after being told that comments must relate to City business. He sued the City claiming they arrested him based on an official policy of the City to retaliate against him, in violation of his First Amendment free speech rights. A jury ruled against Mr. Lozman. The Eleventh Circuit affirmed the jury's finding holding that the officer had reasonably believed Mr. Lozman was committing the offense of disturbing a lawful assembly, and his First Amendment retaliatory arrest claim failed as a matter of law.

The Supreme Court, in an 8-1 decision (Thomas dissenting) held that Mr. Lozman must show that the alleged retaliatory arrest was a "substantial or motivating factor behind the prosecution" regardless of whether there is probable cause for the arrest (here, Mr. Lozman conceded that probable cause existed for his arrest). The Court remanded the case to the lower court to determine whether any reasonable juror could find that the City formed and used a retaliatory policy to intimidate Mr. Lozman, and whether his subsequent arrest was an official act by the City; and whether the City can prove that Mr. Lozman would have been arrested because of his conduct, regardless of retaliation. The Court dismissed concerns about a flood of cases being filed against local policy makers based on this decision because the plaintiff must show that retaliation is an official city policy. The footage from the city council meeting is available here.

Minnesota Voters Alliance v. Mansky

Minnesota law bans voters from wearing political badges, buttons or other insignia at the polling place that may be designed to influence or impact voting. During the November 2010 election, Andrew Cilek entered his polling place in Hennepin County wearing a "Please I.D. Me" button and a t-shirt made by the North Star Tea Party Patriots. An election worker twice refused to allow Mr. Cilek to vote because these items are prohibited by Minnesota law. Mr. Cilek sued and alleged the law was unconstitutional on its face because it was overbroad under the First Amendment. The Eighth Circuit upheld the law. The Supreme Court reversed and held that Minnesota's law was unconstitutional because the ban on political apparel at polling places violates the First Amendment's free speech clause. The law was vague because it provides little guidance about what kind of apparel may or may not be worn to the polls, and the state has not provided any "objective, workable standards." Arizona law is more narrowly tailored than Minnesota and therefore, this decision should not impact Arizona's electioneering law.

Murphy v. National Collegiate Athletic Association ("NCAA")

The Professional and Amateur Sports Protection Act ("Act") prohibits states from enacting legislation legalizing sports gambling. New Jersey enacted a statute directly contravening the Act and the major sports leagues and the NCAA brought a lawsuit against the State. Justice Alito writing for the majority, with Justices Robert, Kennedy, Thomas, Kagan, and Gorsuch (and Breyer in part), held that the Act violates the anticommandeering doctrine because the ban "unequivocally dictates what a state legislature may and may not do...state legislatures are put under the direct control of Congress." The Court found that this is a "direct affront to state sovereignty," and rejected arguments that the Act preempts the law because preemption impacts private actors and does not regulate conduct by the states. Therefore, the Act is unenforceable as it relates to states although Congress is free to regulate sports gambling directly.

Unless Congress takes action, states may enact a statute permitting and regulating sports gambling, which many commentators agree has the opportunity for increased revenue for the states. Additionally, this case has spurred interest to review other federal laws that regulate states directly, which may result in future litigation against other laws that may violate the anticommandeering doctrine.

Masterpiece Cakeshop Ltd. v. Colorado Civil Rights Commission

Jack Phillips is the owner of Masterpiece Cakeshop and told a same-sex couple that he would not create a cake for their wedding celebration because of his religious opposition to same-sex marriages although he would sell them other baked goods, e.g., birthday cakes. The couple filed a complaint with the Colorado Civil Rights Commission ("Commission") and ultimately an administrative law judge found that Mr. Phillips' action was discriminatory. The Colorado Court of Appeals agreed with the Commission, and the Supreme Court reversed. Justice Kennedy delivered the opinion, with Justices Roberts, Breyer, Alito, Kagan, and Gorsuch, and found that the Commission's actions toward Mr. Phillips violated the Free Exercise Clause of religion because the Commission failed to treat Mr. Phillips' claims with "neutral and respectful consideration" and exhibited "clear and impermissible hostility toward the sincere religious beliefs that motivated his objection."

The Court did not rule definitively on whether refusing service to same-sex couples violates the Constitution; however, the Court stated that when resolving future disputes, there must be "tolerance, without undue disrespect to sincere religious beliefs, and without subjecting gay persons to indignities when they seek goods and services in an open market."

According to the International Municipal Lawyers Association amicus brief, there are over 100 local governments in 38 states that have adopted ordinances protecting citizens from sexual-orientation discrimination in public accommodations. Although this case focused more on the treatment of Mr. Phillips by the Commission, it allows future complaints to be brought forward for review.

Conclusion

In addition to the cases mentioned in the article, two law enforcement cases were issued that may be worthy of further study for your police departments. In Carpenter v. U.S., the Supreme Court held that a warrant is required before law enforcement can access location data from cell phone providers because there is a Fourth Amendment expectation of privacy in an individual's location, movements, and how that information is used by third parties. And in Collins v. Virginia, the Court held that while officers may search an automobile without a warrant if the officer has probable cause, this exception to the Fourth Amendment does not apply when an officer physically enters the area immediately surrounding and associated with the home. Please consult with your attorney for more information about how these particular cases may impact your city or town.