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SCOTUS News, May 5th, 2017: Venezuela; y Miami

The Supreme Court released two opinions this week. Let’s look at the details.

Venezuela v. Helmerich and Payne

Helmerich and Payne is an American company with a subsidiary operating in Venezuela. The government of Venezuela seized oil rigs owned by the subsidiary. Both the Venezuelan subsidiary, and the American parent company, filed claims under the Foreign Sovereign Immunities Act (FSIA). They claimed that Venezuela’s expropriation of their property violated one of the FSIA’s exemptions to foreign sovereigns.

Venezuela won the case. The FSIA has few exceptions to the general rule of non-violation of a state’s sovereignty. The relevant exception in this case concerned property rights when a nation expropriates property in violation of international law. The District Court ruled that the exception did not apply in this case. The standard used by Helmerich and Payne was a so-called “nonfrivolous” argument on the violation of property rights. The District Court ruled that this standard is too low. Because the Venezuelan subsidiary is a national of Venezuela, the District Court ruled in favor of Venezuela on jurisdictional grounds.

The District of Columbia Circuit reversed in part and affirmed in part. SCOTUS vacated and remanded on certiorari. Their opinion adheres closely to the language of the original District Court ruling. The property taking did not violate international law, and so the FSIA’s exceptions are not triggered. Justice Breyer, writing for a unanimous court, discussed at length the original intent of the FSIA and its use in stabilizing international relations. States trying to bring other states to court in various jurisdictions would not only be chaotic, but would also be detrimental to the stated purpose of the FSIA.

Bank of America v. Miami/Wells Fargo v. Miami

This case concerns the Fair Housing Act (FHA). The FHA prohibits any kind of discrimination in housing, and allows an “aggrieved person” to file suit in any case of alleged discriminatory violation. Bank of America (BoA) and Wells Fargo allegedly conducted predatory mortgage lending practices to minority communities in Miami. These practices led to multiple home foreclosures during the mortgage crisis circa 2010. These foreclosures led to declining property values for the remaining homes in the communities. The decline in home values and home ownership led to property tax instability, as well as increased cost for municipal services to blighted neighborhoods. Miami sued the two banks because of these negative effects on the communities. The city did so as an “aggrieved person” under the FHA.

BoA and Wells Fargo countered that Miami does not qualify as an aggrieved person per the FHA. They argued a lack of “proximate cause” before the District Court. The two banks disagree that their practices had a significant legal connection to the urban blight that resulted. The District Court dismissed Miami’s claims for two reasons relevant to the questions presented to SCOTUS. Firstly, the alleged harms were economic in nature, not discriminatory, and thus fell outside the FHA. Secondly, Miami did not show sufficient causation between the bank’s practices and the neighborhood blight that created the conditions for the suit.

The Eleventh Circuit reversed the District Court’s dismissal. They stated that the FHA grants broad standing for Miami to assert discrimination in court. Furthermore, the Eleventh cited prior precedent affirming the broad standing when dealing with matters of discrimination.

SCOTUS granted certiorari to clear up the matter. The majority agreed with the Eleventh Circuit that Miami’s claim falls within the “zone of interest” for an FHA complaint. The economic interests are clear (i.e. declining home values led to cascading effects). The Justices also point to many of the same precedents the Eleventh used as justification. In addition, they point out that when the FHA was revised in 1988, the language that had been used in similar cases in the past went unchanged. This demonstrates Congress’s intent to maintain established precedent.

However, this is as far as SCOTUS goes. They point to the doctrine of proximate cause in order to establish fault for the community’s problems. The housing market deterioration the banks indirectly created through their policies is not a “first step” away from the implementation of those policies. In other words, though it is easy to draw a logical connection between the banks’ decisions and the later effects, the intermittent mitigating factors are far too wide-ranging to be within the scope of the FHA’s litigation measures. No other lower courts have weighed in on the issue. And here, the Eleventh Circuit incorrectly utilized the proximate cause doctrine. For these reasons, SCOTUS vacated and remanded the case.

Thomas, joined by Kennedy and Alito, concurred in part and dissented in part. They agree with the majority’s conclusions about proximate cause. They disagree, though, with their “zone of interests” argument, citing different precedents. Their explanation of the “zone of interests” intended by the FHA is far narrower.

The Crowd and the Algorithm

This week was, in a word, uneventful. Neither the Crowd nor the Algorithm anticipated an invasion of Venezuelan sovereignty. The Algorithm’s shakiness on Thomas and Kennedy was just a tiny blip.

venezuela helmerich payne

Venezuela v. Helmerich and Payne

As for the Miami case, the five-Justice majority, and the conservative bloc led by Thomas, came to the same judgment, vacatur, just by different roads. The statutory solidity of previous precedent made this one a no-brainer for both man and machine.

About two dozen cases remain for the 8-member Court. The last dozen or so opinions this year will include Justice Gorsuch. This promises to provide an exciting finish for our FantasySCOTUS Crowd later this summer. Be sure to follow us and the {Marshall}+ Algorithm on Twitter to stay up to date.