Congressional Court Watcher: Circuit Splits from September 2024

Legal Sidebari

Congressional Court Watcher: Circuit Splits

from September 2024

October 4, 2024

The U.S. Courts of Appeals for the 13 “circuits” issue thousands of precedential decisions each year.

Because relatively few of these decisions are ultimately reviewed by the Supreme Court, the U.S. Courts

of Appeals are often the last word on consequential legal questions. The federal appellate courts

sometimes reach different conclusions on the same issue of federal law, causing a “split” among the

circuits that leads to the nonuniform application of federal law among similarly situated litigants.

This Legal Sidebar discusses circuit splits that emerged or widened following decisions from the last

month on matters relevant to Congress. The Sidebar does not address every circuit split that developed or

widened during this period. Selected cases typically involve judicial disagreement over the interpretation

or validity of federal statutes and regulations, or constitutional issues relevant to Congress’s lawmaking

and oversight functions. The Sidebar only includes cases in which an appellate court’s controlling opinion

recognizes a split among the circuits on a key legal issue resolved in the opinion.

Some cases identified in this Sidebar, or the legal questions they address, are examined in other CRS

general distribution products. Members of Congress and congressional staff may click here to subscribe to

the CRS Legal Update and receive regular notifications of new products and upcoming seminars by CRS

attorneys.

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Civil Procedure: Sitting en banc, the Ninth Circuit overruled prior circuit precedent and

held that the False Claims Act’s (FCA’s) first-to-file rule, which bars a private entity from

either intervening in or bringing a related action based on the facts of a pending FCA

case, is not jurisdictional in nature. This means, among other things, that a litigant who

did not timely invoke the first-to-file rule would likely forfeit the ability to raise it on

appeal. The Ninth Circuit’s decision is consistent with the position taken by four other

circuits, but splits with the Fourth, Fifth, and Tenth Circuits, which held the rule is

jurisdictional (Stein v. Kaiser Found. Health Plan, Inc.).

Civil Rights: A Ninth Circuit panel upheld a lower court’s ruling granting a preliminary

injunction blocking Arizona from enforcing against the plaintiffs an Arizona law barring

transgender girls from playing on girls’ interscholastic or intramural sports teams. The

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panel observed that a prior Ninth Circuit ruling recognized that heightened constitutional

scrutiny applies to laws that discriminate based on transgender status. The court

concluded that the district court did not err in finding that Arizona failed to provide an

adequate justification for the restrictions to withstand such scrutiny. In so doing, the

circuit court recognized that the standard of scrutiny it applied differed from the approach

taken by the Sixth Circuit, which applied the more deferential rational-basis review

standard to a law prohibiting certain medical treatments for transgender minors (Doe v.

Horne).

Criminal Law & Procedure: The Fourth Circuit widened a circuit split over whether a

Heck dismissal constitutes a “strike” under the federal in forma pauperis statute, 28

U.S.C. § 1915. Section 1915 of the Prison Litigation Reform Act allows prisoners to

bring a civil action or appeal a judgment in federal court without prepaying filing fees,

unless three or more prior actions or appeals were dismissed on certain enumerated

grounds (strikes), including failure to state a claim. In Heck v. Humphrey, the Supreme

Court held that to recover damages for an allegedly unconstitutional conviction or

imprisonment under 42 U.S.C. § 1983, the plaintiff’s conviction or sentence must have

been reversed on appeal, expunged by executive action, declared invalid by a state court,

or called into question by a federal court’s issuance of habeas relief. The Fourth Circuit

joined several circuits in holding that a prisoner’s prior suit barred on Heck grounds

constituted a dismissal for failure to state a claim and is therefore a strike under Section

1915. The court split with the Second and Ninth Circuits, which have recognized that

Heck dismissals do not always constitute strikes under Section 1915 (Brunson v. Stein).

Criminal Law & Procedure: The Ninth Circuit upheld a criminal defendant’s

convictions for activities arising out of a workers’ compensation fraud scheme in which

patients were routed to health care professionals who were complicit in the scheme for

unnecessary medical services. In so doing, the panel decided that prosecution for honestservices mail fraud under 18 U.S.C. §§ 1341 and 1346, which courts have interpreted to

include as an element of these offenses a breach of a fiduciary duty, may be based on a

breach of a physician’s duty to his or her patient. Disagreeing with the Eighth Circuit, the

panel joined the Seventh Circuit in holding that the same element is required to prove

honest-services fraud in public- and private-sector cases. In both types of cases, the

government must show a deprivation of the intangible right to honest services;

prosecutions in private-sector cases do not require an actual or intended tangible harm to

the victim (United States v. Solakyan).

Environmental Law: A divided Ninth Circuit directed the lower court to dismiss as

moot a citizen suit brought under the Clean Water Act (CWA) against a defendant alleged

to have violated the CWA by discharging pollutants without a permit. The majority held

that the case was rendered constitutionally moot when, following the lower court’s

verdict, the defendant obtained a permit authorizing the discharge. The court’s mootness

determination applied not only to the plaintiff’s claims for injunctive and declaratory

relief, but also to its claim for civil penalties under the CWA. Agreeing with the Eighth

Circuit, the panel majority reasoned that after the Supreme Court decided Friends of the

Earth, Inc. v. Laidlaw Environmental Services, Inc., citizen suit claims for civil penalties

are subject to the same mootness standards as claims for injunctive relief. The court

observed that several other circuits concluded otherwise before Laidlaw, but found these

cases unpersuasive in light of the Supreme Court’s decision (Coastal Env’t Rts. Found. v.

Naples Rest. Grp., LLC).

Freedom of Information Act (FOIA): The Ninth Circuit held that when a federal

agency misses its statutory deadline to respond to a FOIA request, and the federal agency

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responds to a FOIA request after the requester files suit to compel production, a district

court need not dismiss the case on account of the requester failing to exhaust the agency’s

administrative appeals process. The Ninth Circuit joined the Fourth Circuit in this

holding, but split with the Fifth Circuit, which has held that an agency’s post-lawsuit

FOIA response compels the lower court to dismiss the case in order for the requester to

first seek administrative review (Corbett v. Transp. Sec. Admin.).

Health: A divided Tenth Circuit affirmed a lower court’s decision to not preliminarily

enjoin a Colorado statute that bars mental health professionals from attempting to change

minors’ sexual orientation or gender identify through “conversion therapy.” The majority

decided that the plaintiff’s challenge was unlikely to succeed, including her claim that the

law violated her First Amendment free speech rights. Joining the Ninth Circuit and

splitting with the Eleventh Circuit, the panel majority held that the prohibition is a

regulation of professional conduct that only incidentally involves speech, and therefore

does not need to survive strict constitutional scrutiny to satisfy First Amendment

requirements. The court held that the Colorado law withstood rational basis standard of

review because it was rationally related to Colorado’s legitimate interest in protecting

minors from harmful therapeutic treatments and ensuring the integrity of the mental

health profession (Chiles v. Salazar).

Indian Law: A divided en banc Ninth Circuit declined to rehear a three-judge circuit

panel decision affirming a district court’s determination that a tribal court had subjectmatter jurisdiction over the tribe’s breach-of-contract lawsuit for insurance claims related

to COVID-19 pandemic business closures. Although the tribe and its businesses brought

the insurance claims in connection with tribal properties on tribal land, the insurance

companies were neither part of the tribe nor physically present on the tribe’s reservation.

A majority of the en banc judges recognized that neither Supreme Court nor circuit

precedent required the nonmember to be physically present on tribal land for a tribal

court to assert jurisdiction over consensual relationships between nonmembers and tribal

members on tribal land. The majority also stated that Supreme Court caselaw did not

require a federal court to make an independent inquiry into whether the tribal court

properly exercised jurisdiction over the nonmember, splitting with the Seventh Circuit

and agreeing with the Fifth Circuit (Lexington Ins. Co. v. Smith).

Labor & Employment: Reversing the lower court, the Ninth Circuit reinstated the

plaintiff’s suit against his former employer under the False Claims Act, in which he

alleged he was fired in retaliation for raising concerns about improper billing practices. In

so doing, the panel widened circuit splits on two different matters. The panel joined

circuits that have used the McDonnell Douglas burden-shifting framework to analyze

FCA retaliation claims. Under this framework, if an employee establishes a prima facie

claim of retaliation, the employer bears the burden of showing a legitimate, nonretaliatory

reason for its adverse action. Next, the employee bears the burden of showing the stated

reason was pretextual. The court disagreed with the Third Circuit, which used a different

framework drawn from First Amendment retaliation cases. The court also addressed the

notice element of an FCA retaliation claim, requiring that the employer know of the

employee’s protected conduct, deciding that the plaintiff’s reporting of billing

irregularities to his employer met the notice requirement. The panel disagreed with the

Tenth and Fifth Circuits, which have required an employee (such as the plaintiff) whose

duties include ensuring regulatory compliance and reporting irregularities to satisfy a

higher notice standard. So long as the employer is aware of the employee’s efforts to stop

an FCA violation, the panel reasoned, the notice element of an FCA retaliation claim is

satisfied (Mooney v. Fife).

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Maritime Law: The Ninth Circuit widened a circuit split over the Limitation of Liability

Act, which generally permits a shipowner to cap its total liability for losses or injury

resulting from a maritime accident that occurs “without the privity or knowledge of the

owner.” The law establishes a procedure for when multiple claimants seek money

damages from the same accident, under which a federal district court may apportion

compensation among those claimants and enjoin other courts from adjudicating related

claims. Courts have recognized an exception when there is a single claimant, making the

procedure unnecessary. In this case, the victim of a maritime accident brought claims

against a shipowner and third-party defendants, while the vessel owner sought

indemnification and contribution from those third-party defendants. The shipowner

argued that the law’s multi-claimant procedures applied and required all the claims to be

resolved by the same federal district court. Disagreeing with the Eighth and Sixth

Circuits, which held that indemnity and contribution claims do not create multiple

claimants because those claims are considered to be derivative of the underlying tort

claim, the Ninth Circuit held that third-party indemnity and contribution claims do give

rise to a multiple claimant situation subject to the Limitation of Liability Act’s special

procedures (In re Live Life Bella Vita LLC).

Securities: The Fourth Circuit affirmed a lower court’s dismissal of a class action lawsuit

brought by stockholders against a corporation and its directors alleging a breach of

fiduciary duties. Except when all the plaintiffs and defendants are from different states,

class action lawsuits alleging violations of state law generally must be brought in state

court, but may be removable to federal court if certain criteria set forth in the Class

Action Fairness Act (CAFA) are met. CAFA does not extend federal subject-matter

jurisdiction to class actions that “solely” involve claims relating to the “the internal

affairs or governance of a corporation” or the “rights, duties (including fiduciary duties),

and obligations relating to . . . any security” under state law. The Fourth Circuit held that

this carveout did not apply to the class action before it because one of the claims involved

aiding and abetting a breach of a fiduciary duty against a corporate outsider, which the

court reasoned did not relate to the “internal affairs” of the corporation or the rights and

duties created by a security. The panel acknowledged disagreement with the Second

Circuit, which had held that an almost identical action fell under the CAFA carveout.

While the Fourth Circuit found that federal subject-matter jurisdiction existed over the

suit, it still concluded that the plaintiffs had not adequately alleged a duty was breached

(Kim v. Cedar Realty Tr., Inc.).

Separation of Powers: A divided Eighth Circuit affirmed a lower court’s denial of a

preliminary injunction in a case challenging the constitutionality of the Horseracing

Integrity and Safety Act (HISA) and enforcement actions taken under HISA by the

Horseracing Integrity and Safety Authority (Authority), a private, nongovernmental

entity. Under HISA, the Authority proposes and enforces rules about horseracing, subject

to the oversight of the Federal Trade Commission (FTC). In deciding that the plaintiffs’

constitutional challenge was unlikely to succeed, the Eighth Circuit concluded that the

power wielded by the Authority did not violate the private nondelegation doctrine

because it operates under the oversight and control of the FTC. The circuit panel split

with a Fifth Circuit decision that held that HISA’s enforcement provisions are facially

unconstitutional because Congress impermissibly delegated government power to a

private entity not accountable to the people. In September, Justice Samuel Alito, acting in

his Circuit Justice capacity, issued an administrative stay of the Fifth Circuit ruling to

give the Supreme Court time to consider an emergency application filed by the federal

government (Walmsley v. FTC).

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Author Information

Michael John Garcia

Deputy Assistant Director/ALD

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