May 23, 2018 / 9:28 PM / 3 months ago

Unprecedented 5th Circuit case tests scope of nationwide injunctions

(Reuters) - For opponents of federal government policies, nationwide injunctions have become an indispensable weapon. The strategy - developed by Republican state Attorneys General and business groups during the Obama administration and widely deployed by Democratic AGs and civil rights organizations in the Trump era - is to challenge new federal rules or regulations in a friendly jurisdiction, seeking an injunction against implementation that will apply across the country. By issuing a nationwide injunction, a single federal judge can halt federal policy. The wisdom and propriety of these injunctions is hotly debated, and the U.S. Supreme Court could curtail them when it issues a ruling in Hawaii’s challenge to President Trump’s travel ban. But, at least for now, the law allows trial judges broad reach to enjoin rules and regulations far beyond their courtrooms.

A corollary question is the depth of judges’ power. Yes, they can block the federal government from nationwide implementation of the challenged policy. But do nationwide injunctions also bar regular people from suits rooted in the enjoined policy? If a judge enjoins the government from enforcing new rules, does the injunction bind the tens or hundreds of millions of Americans affected by the rules?

That question is now before the 5th U.S. Circuit Court of Appeals in an unusual case with potentially vast implications. A judge in Texas held a private employee and her lawyers in contempt of court for violating an injunction he had issued against enforcement of the Department of Labor rule – even though the employee and her lawyers were not involved in the DOL injunction case. As Jenner & Block wrote in an opening appellate brief filed Tuesday, the contempt ruling threatens to turn every nationwide injunction against a federal agency into a hammer to beat private citizens into submission. “This court should not lightly embrace a legal theory that effectively empowers a single district judge to enjoin - and then potentially hold in contempt - tens of millions of nonparties throughout the country,” the Jenner brief warned.

“It’s a nationwide injunction multiplied by 300 million,” said Jenner’s Matthew Hellman in an email. “The notion of nationwide injunctions has become more controversial in recent years. But the ruling here goes dramatically further than a nationwide injunction. Nationwide injunctions apply nationwide to the party they’re issued against. In this case, the district court held that its injunction applied not just to the parties before it, but every individual and business in the entire country.” 

Here’s the backstory on the appeal. In November 2016, U.S. District Judge Amos Mazzant of Sherman, Texas, granted a nationwide injunction to Nevada and other challengers protesting an Obama Labor Department rule that would have required companies to pay overtime to employees earning less than $47,400 a year. The injunction barred the Labor Department from enforcing the rule.

After it was issued, lawyers for a Chipotle employee named Carmen Alvarez consulted law professors about the scope of the prohibition. The profs said the injunction did not bind private employees and Alvarez still had a live cause of action because Judge Mazzant had only blocked enforcement, not effectuation of the rule. Alvarez’s lawyers from Cohen Milstein Sellers & Toll, Outten & Golden and Green Savits filed a suit against Chipotle in federal court in New Jersey, alleging violation of the overtime rule.

Chipotle, represented by Messner Reeves and Cantey Hanger, alerted Judge Mazzant. The company asked for Alvarez and her lawyers to be held in contempt for defying his injunction against Labor Department enforcement of the overtime rule.

Mazzant granted Chipotle’s motion in March, ruling that although Alvarez and her lawyers were not involved in the underlying case, they were bound by his injunction against Labor Department enforcement of the overtime rule.

Citing the U.S. Supreme Court’s 2010 ruling in Taylor v. Sturgell (553 U.S. 880), Judge Mazzant said injunctions can cover entities “in privity” with parties in the injunction litigation as long as those entities were adequately represented. In this case, he said, the Labor Department specifically said it was litigating on behalf of millions of employees who would be entitled to overtime pay. “Alvarez was in privity with the DOL when she asserted the validity and enforceability of the final rule via her lawsuit to recover overtime wages based on the criteria in the final rule,” Judge Mazzant wrote. “As such, the injunction bound her.” He ordered Alvarez and her lawyers to withdraw the New Jersey suit and to pay Chipotle’s fees for the contempt litigation. That’s the decision now before the 5th Circuit.

Jenner and its clients contend in the new 5th Circuit brief that Judge Mazzant was just wrong, under the Federal Rules of Civil Procedure and Supreme Court interpretation of the rules, about the scope of his injunction and his authority over parties that never appeared before him. “Under the district court’s logic, every nationwide injunction against the federal government would apparently be binding, in personam, against each of the tens or even hundreds of millions of Americans that the relevant arm of the government purports to serve. And, pursuant to the district court’s apparent jurisdictional holding, all of those individuals would automatically be subject to the personal jurisdiction of the issuing court, such that each could be held in contempt and disciplined for perceived noncompliance,” the brief said. “The Federal Rules do not give a single district judge that extraordinary power, and for good reason.”

To me, the big public policy question is whether Judge Mazzant’s contempt order would actually deter a private citizen from suing to vindicate a right enjoined by a judge in a proceeding against a government agency. Does anyone really bring such cases?

Judge Mazzant suggested no in his March contempt ruling. He implied that Alvarez and her lawyers were extreme outliers in suing under a policy the government has been enjoined from enforcing. The reason neither side could cite precedent on the scope of nationwide injunctions in similar cases, he said, is because plaintiffs don’t sue in these circumstances.

But by May 1, the judge was rethinking the potential impact of his contempt decision. Alvarez and her lawyers had asked Mazzant to stay the ruling so they could appeal. (In particular, the law firms said they would suffer irreparable reputational harm if they were required to disclose the contempt finding in filings in their other cases.) Judge Mazzant granted the stay. Significantly, conceded that the appeal raises a serious, albeit novel, issue of public concern.

“The contempt order’s privity analysis has real consequences for real people: If other citizens sue to enforce a federal agency’s rule, which has been enjoined, they and their lawyers may also be held in contempt,” the judge wrote. “This bears consequences for the relationship between the federal government and the American people.”

If you needed an endorsement of the 5th Circuit appeal, they don’t come much stronger than that.

I emailed Chipotle’s lawyers from Messner Reeves and Cantey Hanger but didn’t hear back.

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