Reply Brief — J.P. Morgan Chase & Co. v. Retirement System of Alabama

FILED |

No. 03-419 |

IN THE

Supreme Court of the United States

J.P. MORGAN CHASE & CO., et al.,

Petitioners,

v.

THE RETIREMENT SYSTEMS OF ALABAMA, et al.,

Respondents.

ON PETITION FOR.A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

REPLY BRIEF

JAY B. KASNER

Counsel of Record

JOHN L. GARDINER

Cyrus Amir-Mokri

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

Four Times Square

New York, NY 10036

(212) 735-3000

Counsel for Petitioners

184467 cr

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

CORPORATE DISCLOSURE STATEMENT

The corporate disclosure statement for Petitioners was

set forth at page iii of their Petition for a Writ of Certiorari,

and there are no amendments to that statement.

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TABLE OF CONTENTS

Corporate Disclosure Statement ................

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Table of Cited Authorities ......... Pet A i aay 8

Introduction... 6s esss +40 4 ene ee

I. The Question Was Presented and Decided

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II. The Jurisdiction-Stripping Provisions of

28 U.S.C. §§ 1334(d) and 1452(b) Violate the

Exceptions COMMS ....<Js530005 Oe

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Page

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TABLE OF CITED AUTHORITIES

Cases:

Allied Signal Recovery Trust v. Allied Signal Inc., 298

eB ee)

City of Waco v. United States Fidelity & Guaranty

| re

Crowell v. Benson, 285 U.S. 22 (1932) ..........

Doleac ex rel. Doleac v. Michalson, 264 F.3d 470 (5th

ieee soy s hese ha scenes

In re Dow Corning Corp., 113 F.3d 505 (6th Cir.),

cert. denied, 522 U.S. 977 (1997) ............

In re Federal-Mogul Global, Inc., 300 F.3d 368 (3d

Cir. 2002), cert. denied, 537 U.S. 1148 (2003) ..

Felker v. Turpin, 518 U.S. 651 (1996) .........-.

INS v. Chadha, 462 U.S. 919 (1983) .........45.

Mangus v. Miller, 317 U.S. 178 (1942) ..........

Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803)

eae ae eee se ee Che ee SOS SC Re STC T THEO HTH HS 8

Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304

el ached bade pero knw she wes

Ex parte McCardle, 74 U.S. (7 Wall.) 506 (1869) ...

Page

lv

Cited Authorities

In re Pan American Corp., 950 F.2d 839 (2d Cir. 1991)

nse eee eee Oe 84H CHE EOC PEO NW EC TE CEE TS CE SE SE EH

Quackenbush v. Allstate Insurance Co., 517 U.S. 706

CR sad eva wan ener SONS eee eee

Republican Party of Minnesota v. White, 536 U.S. 765

Bo rer? rere nny ee

Thermtron Products, Inc. v. Hermansdorfer, 423 US.

336 (1976), overruled in part by Quackenbush v.

Allstate Insurance Co., 517 U.S. 706 (1996) ...

Thompson v. Magnolia Petroleum Co., 309 U.S. 478

bere ree Sere ere Py hig 4 ro

In re United States Brass Corp., 110 F.3d 1261 (7th

Ce CIE oon dc ec ee es

United States v. Morrison, 529 U.S. 598 (2000) ...

Ex parte Yerger, 75 U.S. (8 Wall.) 85 (1869) .....

United States Constitution:

ie. a ae NGS ek oe eee ene

Rule:

Sco. SOONG COE TENG 1G on. 5 os ce cis tvs ces

Page

7

Cited Authorities

Page

Statutes:

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BO Vian BREET 84055004 ke ee ee 5

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28 USC. § 1990K6) .....<+..>. 502s ees 2

ae UDA. § TAPERED ov 6h 9

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45 UBS. 6 1QGR <okkvgesc ese passim

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Si WG. BOO sso bane se vs50e ee eee 4

WT Saas § DOOOO + sks vk see sasen een eee 4

Other Authorities:

H.R. Rep. No. 95-595 (1977), reprinted in 1978

UE ot ow er errr reset 9

]

INTRODUCTION

The Petition raises the highly important question whether

Congress has the power to foreclose this Court’s ability to review

classes of decisions by inferior Article III courts based on the

legal content of those decisions. Petitioners submit that such

foreclosure violates the Exceptions Clause, U.S. Const. art. II],

§ 2, cl. 2. The statutes at issue, 28 U.S.C. §§ 1334(d) and

1452(b), completely withdraw from this Court’s scrutiny district

court decisions to abstain from federal bankruptcy jurisdiction,

including where, as here, the district court justifies abstention

on grounds of comity with state interests. Thus, the statutes not

only strip this Court of the appellate jurisdiction the Constitution

secures to it, they do so in an area of law that demands sensitive

balancing of state and federal interests in decisions governing

the exercise of federal jurisdiction.

The urgency of review here is further underscored by the

statutes’ real world consequences. This Court, through Justice

Story, once explained that it was essential that one tribunal finally

and conclusively decide federal questions to ensure uniformity

in the interpretation of federal law. See Martin v. Hunter s Lessee,

14U.S. (1 Wheat.) 304, 347-48 (1816). The WorldCom litigation

is an example of the doctrinal confusion and discordant rulings

that Justice Story’s opinion decries. The absence of appellate

review over bankruptcy abstention decisions has spawned

divergent case law at the district court level, with some district

courts (such as the district court below) making substantial

departures from settled abstention doctrine. These discordant

rulings result not from application of the same legal principles

to variant facts, but from disagreement over the substance of

the legal principles themselves.

Respondents’ rejoinder is diversionary. In discussing the

criteria for granting review under this Court’s Rule 10, they

principally assert that this Court should decline review because

there is no circuit conflict. (See Brief in Opposition (“Opp. Br.”’)

at 4-7.) But Petitioners never relied on the logic of circui*

2

conflicts to justify this Court’s review. Indeed, such a showing

would be impossible because to date, aside from the Eleventh

Circuit Court of Appeals, no other court has ever ruled on the

question here presented. '

Respondents thus fail to counter Petitioners’ showing that

the question presented is in and of itself important. Nor can

they dispute that abstention decisions in the district courts are

discordant, a fact starkly demonstrated by the WorldCom

litigation.? Respondents’ at best meager showing confirms that

a grant of certiorari in this case is warranted.

I. The Question Was Presented and Decided Below

Respondents contend that the question presented in the

Petition “was not before or decided by the United States District

Court below or by the Court of Appeals.” (Opp. Br. at 1.)

The statement concerning the court of appeals is demonstrably

false; the statement about the district court is true, but irrelevant.

The district court could not have decided the question

presented in the Petition because a challenge to the

constitutionality of a statute that bars appellate review is not

1. In this vein, Respondents cite a string of circuit decisions

(see Opp. Br. at 6-7) to suggest that the cases unanimously stand

opposed to Petitioners’ position. But none of the cited cases addressed

the question presented by the Petition. These cases held unremarkably

that 28 U.S.C. § 1334(d) and/or 28 U.S.C. § 1452(b) bar appellate review

of abstention decisions.

2. Respondents remark that “the Petition fail[s] to cite any

28 U.S.C. § 1334(c) and (d) statutory abstention decision of this Court,

of a Court of Appeals, or of the highest court of a state, which is contrary

to the decision of the District Court and of the Eleventh Circuit.”

(Opp. Br. at 5-6.) The Petition amply demonstrates that the district court’s

opinion is at odds with abstention principles and that it clashes with

other district court opinions. Otherwise, a search for appellate opinions

criticizing the district court’s decision would be futile, given the statutory

bar on appeals. Similarly, the Eleventh Circuit’s decision does not conflict

with any other because, as explained, no other case addresses the

Exceptions Clause question.

3

ripe until the district court has entered a final order. See Doleac

ex rel. Doleac v. Michalson, 264 F.3d 470, 492 (Sth Cir. 2001).

The first opportunity to raise the question, therefore, was before

the court of appeals, which is precisely what Petitioners did.

That Petitioners raised an Exceptions Clause challenge before

the Eleventh Circuit cannot in good faith be disputed. It is

unnecessary even to take the modest step of looking at the record

below because Respondents’ brief confirms this fact. The lengthy

passage Respondents quote from the United States’ brief in the

court of appeals in part states: “Defendants’ [i.e., Petitioners’ ]

sole constitutional complaint is that Congress exceeded its

Exception Clause power by shielding abstention orders from

Supreme Court review.” (Opp. Br. at 3 (emphasis in original).)

There also can be no question that the court of appeals

decided the Exceptions Clause question. Citing Felker v. Turpin,

518 U.S. 651 (1996), the court of appeals first held that it had

jurisdiction to determine the constitutionality of 28 U.S.C.

§§ 1334(d) and 1452(b).° It then held that the statutes were

constitutional on the authority of Ex parte McCardle, 74 U.S.

(7 Wall.) 506 (1869), and Ex parte Yerger, 75 U.S. (8 Wall.) 85

(1869), both of which were Exceptions Clause cases. If the court

of appeals was not deciding the Exceptions Clause issue, there

would have been no reason for it to refer to these decisions.

In the face of this clear record, Respondents attempt to

obfuscate the issue by asserting that the Eleventh Circuit

addressed only the constitutionality of the statutes’ bar on

appellate review by courts of appeals. (See Opp. Br. at 2-3.)

Here, Respondents conjure a “‘severability” hypothesis to state

that the court of appeals could have ruled (and in fact did rule)

3. Therefore, when the court of appeals stated that it lacked

jurisdiction to decide whether the district court’s abstention was proper

(see Opp. Br. at 1-2), it was merely stating that it had already concluded

that there was no Exceptions Clause violation and that the statutory bar

on appellate review of abstention-based remand orders remained in force.

Respondents’ contrary gloss misapprehends the court of appeals’

decision.

4

on the constitutional validity of the prohibition on its review

without actually reaching the legitimacy of the foreclosure of

this Court’s appellate jurisdiction. (See id. at 3.) This argument

is fundamentally flawed because, as explained, the Eleventh

Circuit actually ruled on the Exceptions Clause question and,

therefore, on the validity of the statutes’ prohibition on review

by this Court. In all events, the distinction Respondents seek to

draw is at best metaphysical because, in the context of

bankruptcy abstention orders, foreclosure of appellate

review in the courts of appeals itself would result in an

Exceptions Clause violation. The reason stems from the manner

in which Congress has regulated the appellate jurisdiction of

the federal courts.

As a general matter, for cases coming through the federal

system, the certiorari or certification jurisdiction of this Court

is properly invoked only with respect to cases in the courts of

appeals. See 28 U.S.C. § 1254. The courts of appeals, in turn,

have jurisdiction to review final decisions of the district courts

“except where a direct review may be had in the Supreme Court.”

28 U.S.C. § 1291. Therefore, litigants may not as a general

matter repair to this Court upon disappointment with a result in

a district court. Direct appeal from a district court to the Supreme

Court must be specifically authorized by statute. Such statutes

exist to be sure, see 28 U.S.C. § 1253 (permitting direct appeals

to this Court from orders granting or denying injunctions in

civil actions required by an Act of Congress to be heard by a

district court of three judges); 28 U.S.C. § 2284 (requiring a

district court of three judges to hear actions challenging the

constitutionality of congressional district apportionments);

47 U.S.C. § 555(c) (constitutional challenges to 47 U.S.C. § 534

or 535 to be heard by a district court of three judges), but there

is none that permits direct review in the circumstances of this

case.

Thus, with respect to the statutes at issue here, to bar courts

of appeals from reviewing abstention orders is tantamount to

withdrawing such orders from this Court’s scrutiny, which

5

amounts to an Exceptions Clause violation. Thus, Respondents’

“severability” hypothesis is meritless even on its own terms.

II. The Jurisdiction-Stripping Provisions of 28 U.S.C.

§§ 1334(d) and 1452(b) Violate the Exceptions Clause

Respondents offer miscellaneous assertions attacking the

substance of Petitioners’ Exceptions Clause arguments.

The assertions are mostly irrelevant and none has merit.

1. Respondents claim that Petitioners argue that 28 U.S.C.

§§ 1334(d) and 1452(b) “forbid all access to review of this case”

(Opp. Br. at 7) in this Court. This is a severe overstatement.

Petitioners never have suggested that issues properly raised and

preserved in a remanded action cannot be the subject ofa petition

for certiorari under 28 U.S.C. § 1257. Petitioners point only to

what §§ 1334(d) and 1452(b) actually foreclose, which is review

of absiention and remand decisions by federal district courts.

This distinction is critical because abstention orders do not form

part of the remanded action and, therefore, contrary to

Respondents’ supposition, cannot be the subject of a certiorari

petition under § 1257 from the final decision of a state court of

last resort. (See Opp. Br. at 7).

Respondents similarly misapprehend the relevance of

mandamus and the Waco doctrine. The statutory language, which

forbids review “by appeal or otherwise” of decisions to abstain

or not to abstain, encompasses mandamus. See Jn re Federal-

Mogul Global, Inc., 300 F.3d 368, 388-89 (3d Cir. 2002),

cert. denied, 537 U.S. 1148 (2003); Jn re United States Brass

Corp., 110 F.3d 1261, 1266 (7th Cir. 1997) (Posner, J.).

Mandamus review is possible when the appeal does not request

substantive review of the abstention decision but only a

determination whether the entry of an abstention-based remand

amounted to an abuse of judicial power. See Allied signal

Recovery Trust v. Allied Signal Inc., 298 F.3d 263, 270 (3d Cir.

2002); In re Dow Corning Corp., 113 F.3d 565, 569 (6th Cir.),

6

cert. denied, 522 U.S. 977 (1997). Petitioners, however, seek

substantive review of the remand order.* The Waco doctrine is

inapt because it only permits review of remand orders ta the

extent they resolve substantive merits issues that would have

preclusive effect on the post-remand litigation in state court.

See City of Waco v. United States Fid. & Guar. Co., 293 USS.

140, 143 (1934). This case obviously does not implicate the

Waco doctrine.

2. The Petition does not raise a question concerning the

Supremacy Clause. The discussion in Section III (see Opp. Br.

at 10-11) is irrelevant.

3. Respondents next contend that because the night to

removal is a statutory procedural right created by Congress, it

is “subject to the established rule that there is no vested

constitutional right to a mode of procedure.” (Opp. Br. at 13)

Respondents again misapprehend Petitioners’ position. As the

passage Respondents quote from Doleac reveals, the cases that

address whether there is a “vested constitutional nght to a mode

of procedure” all concern due process. (See id.) This is not a

due process case, it is an Exceptions Clause case. Rights afforded

to individuals by due process are not coextensive with the

limitations imposed on Congress by the Exceptions Clause.

Different constitutional provisions that are addressed to different

concerns are analyzed differently. See Crowell v. Benson, 285

U.S. 22, 45-54 (1932) (distinguishing the analysis of due process

and Article III-based claims, even though they arose from the

same set of core facts).

4. The suggestion that Thermtron Products, Inc. v. Hermansdorfer,

423 U.S. 336 (1976), overruled in part by Quackenbush v. Allstate

Insurance Co., 517 U.S. 706 (1996), somehow may permit review here

is also mistaken. That decision construed 28 U.S.C. § 1447(d) — not

28 U.S.C. § 1334(d) as Respondents contend (see Opp. Br. at 8) — and

concluded that substantive review of remand decisions is forbidden

unless remand is based on an extra-statutory factor. See Thermtron

Prods., 423 U.S. at 351-52. By its terms, the principle underlying

Thermtron Products is inapplicable here, where Petitioners seek

substantive review of the abstention order.

7

Respondents are also wrong to assert that, by virtue of its

power to create a statutory right to removal, Congress has

“plenary power” to limit appeals to this Court. (See Opp. Br. at

11-12.) The argument proves too much. Congress has plenary

authority to create statutory causes of action and procedural rules

in all areas in which it legislates. Yet one cannot plausibly argue

that Congress has “plenary power” to withdraw the Supreme

Court’s appellate jurisdiction in al/ of these instances.

Recognition of such authority would allow Congress to

withdraw completely this Court’s appellate jurisdiction and thus

give currency to the observation that the “Exceptions will

swallow the rule.” As in other areas of constitutional law, the

“greater” power here does not include the “lesser.” See, e.g.,

Republican Party of Minnesota v. White, 536 U.S. 765, 788

(2002). Just because Congress may have plenary power to create

procedural rights does not confer upon it absolute license to

withdraw them from this Court’s appellate jurisdiction once they

have been created.

4. Turning to the Exceptions Clause (see Opp. Br. at 14),

Respondents make two basic assertions. First, they contend that

the history of Congress’s legislation shows that it has had plenary

power over this Court’s appellate jurisdiction. (See id. at

15-16.) Second, they posit that this Court itself has held

that Congress enjoys this sweeping power. (See id. at 16-20.)

Both contentions are incorrect.

So long as it remains the province of the judiciary “to say

what the law is,” Marbury v. Madison, 5 U.S. (1 Cranch) 137,

177 (1803), particularly on the subject of the Constitution, Acts

of Congress must give way. See id. at 176 (“The powers of the

legislature are defined, and limited; and that those limits may

not be mistaken, or forgotten, the constitution is written.”);

see also United States v. Morrison, 529 U.S. 598, 616 (2000)

(“Under our written Constitution, however, the limitation of

congressional authority is not solely a matter of legislative

grace.”). The mere fact that legislation has survived for many

years does not immunize it from constitutional scrutiny.

8

See, e.g., INS v. Chadha, 462 U.S. 919, 941-42 & n.13, 959

(1983) (striking down legislative veto, which Congress had been

enacting for fifty years). The history of Congressional

enactments cannot, therefore, settle the issue.

In all events, historical trends support Petitioners’ reading

of the Exceptions Clause. For instance, Respondents mistakenly

characterize the grant to this Court in 1802 of jurisdiction in

federal criminal cases “where the judges of the circuit court

were divided on a question of law” (see Opp. Br. at 15) as an

exercise of the Exceptions power. In truth, this was an exercise

of Congress’s power to regulate this Court’s appellate

jurisdiction, see U.S. Const. art. III, § 2, cl. 2, and this particular

exercise comports perfectly with Petitioners’ understanding of

the Exceptions Clause, because it preserves this Court’s ability

to ensure uniformity m federal criminal law.’ The other evidence

adduced by Respondents, construed most favorably to their

stance, bespeaks a constant expansion of this Court’s appellate

jurisdiction over time. This supports the view that there in fact

is a developing consensus that all questions of federal law

decided by Article III courts must in some way have the

opportunity to reach this Court.

Respondents’ reading of case law (see Opp. Br. at 18-19)

was anticipated in the Petition. As explained there, the broad

pronouncements in some of this Court’s decisions must be

tethered to the controlling facts therein presented. Otherwise,

taken to their logical conclusion, those pronouncements would

recognize a plenary power to control this Court’s appellate

jurisdiction that Congress clearly does not possess, and cannot

5. Whereas an “exception” completely forecloses this Court’s

ability to review a case or question, “regulation” merely affects the mode

in which the case may reach this Court’s docket and the

manner in which this Court may exercise its appellate jurisdiction.

Thus, contrary to Respondents’ supposition (see Opp. Br. at 16),

Congress’s provision for certiorari jurisdiction does not constitute an

“exception” but a “regulation,” because such jurisdiction does not at all

forbid this Court’s review of any classes of cases.

9

possess if this Court properly is to fulfill its constitutional

responsibility of ensuring the uniformity in interpretation of

federai law.°

5. Respondents’ assertion that neither Mangus v. Miller,

317 U.S. 178 (1942), nor Thompson v. Magnolia Petroleum

Co., 309 U.S. 478 (1940), “involved abstention in the context

of bankruptcy-related cases” (see Opp. Br. at 20-21) is frivolous.

The legislative history of 28 U.S.C. § 1334(c)(1) — the

bankruptcy abstention statute here relevant — identifies the

paradigm for abstention as follows: “‘The [discretionary

abstention]. subsection recognizes the exigencies that arise in

such cases as Thompson v. Magnolia Petroleum, 309 U.S. 478

.. (1940), in which it is more appropriate to have a State court

hear a particular matter of State law.”” Jn re Pan American Corp.,

950 F.2d 839, 846 (2d Cir. 1991) (alteration in original) (quoting

H.R. Rep. No. 95-595, at 446 (1977), reprinted in 1978

U.S.C.C.A.N. 5963, 6401). As the Second Circuit recognized,

§ 1334(c) “codifie[s] Magnolia Petroleum.” Pan American, 950

F.2d at 846. Because Congress intended for “statutory”

abstention to mimic “non-statutory” abstention doctrine,

Respondents’ attempt to distinguish between “statutory” and

“non-statutory” abstention (see Opp. Br. at 21-22) a fortiori

fails. The cases cited by Respondents (see id.) do not stand for

a contrary proposition; the reason why abstention was deemed

unreviewable in those cases was because, unlike 28 U.S.C.

§ 1447(d) (which was the statute at issue in Quackenbush vy.

Allstate Insurance Co., 517 U.S. 706 (1996), and from which

abstention-based remand orders are exempt, see id. at 711-12),

28 U.S.C. §§ 1334(d) and 1452(b) specifically prohibit review

of abstention orders.

6. Respondents are also incorrect to assert that Petitioners advocate

limiting the exceptions power to precluding review of questions of fact.

(See Opp. Br. at 16.) Congress may prohibit review of questions of law,

but they must be done in a manner that is neutral with respect.to legal

content, such as amount-in-controversy limitations.

10

6. The final quiver in Respondents’ bow is that this Court

should forego review because the case has advanced in state

court. (See Opp. Br. at 22-23.) The point is factually incorrect

and legally irrelevant. Respondents do not, and cannot contend,

for example, that the controversy is moot. Relief for Petitioners

will be timely, moreover, because the litigation in state court is

only in its preliminary stages, with discovery tracking the

multidistrict litigation in the Southern District of New York

(where this action should have been transferred in the first place

(see Petition at 2-8)). The constitutional question here presented

is ripe for immediate consideration and decision.

CONCLUSION

For the foregoing reasons, and for the reasons set forth in

the Petition, Petitioners respectfully request that this Court grant

the writ of certiorari.

Respectfully submitted,

JAY B. KASNER

Counsel of Record

JOHN L. GARDINER

Cyrus AMIR-MokRri

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

Four Times Square

New York, NY 10036

(212) 735-3000

Counsel for Petitioners