Unpresented Arguments Should Not Be Alternative Grounds for Decision

Unpresented Arguments Should Not Be Alternative Grounds for Decision

By David A. Gauntlett

Introduction

In the recent Unicolors[1] Supreme Court case, Unicolors failed to comply with a copyright registration technicality. The argument that prompted certiorari review was that joint mistakes of both law and fact secured a safe harbor protection for the registrant. The Court determined that section 411(b)(1)(A) was satisfied so long as the copyright holder lacked “knowledge that it was inaccurate.” In so ruling, the Court did not follow any prior precedent.

The dissent by Justice Thomas, in which Alito joined and Gorsuch concurred, vigorously argued that the Court should have dismissed the grant of certiorari as improvidently granted because the Ninth Circuit Court of Appeals did not meaningfully consider these questions. The majority disagreed. It claimed that the “knowledge” in question was a “subsidiary question barely included” in the issue presented pursuant to 14.1(a). The majority asserted that the Ninth Circuit had addressed the issue by analyzing whether “Unicolors knew that certain designs included in the registration were confined and, therefore, were each published separately to exclusive customers.”[2]

The dissent disagreed. It emphasized that the advocates had no occasion to address the deciding issue either in briefs or oral argument, reasoning that:[3]

“Unicolors’ new merits-stage arguments present novel legal questions. Unicolors claims that “knowledge” in §411(b)(1)(A) is satisfied only by actual knowledge . . . rather than . . . constructive knowledge . . . . It further contends that a copyright applicant must actually know that it is misapplying a legal standard rather than simply misstating the facts.”[4]

Federal Appellate Courts Problematically Adjudicate Issues Not Argued by the Parties

In insurance coverage cases, Federal Appellate Courts routinely address fresh legal issues that the advocates had no occasion to address.[5] This has led to a number of decisions that affirm denials of coverage on grounds distinct from those addressed by the district court where neither party’s advocates have addressed the points of law adjudicated. For example, in analyzing whether fact allegations sufficed to evidence liability for common law invasion of privacy claims which were asserted, the Ninth Circuit did not contemplate making public private facts. It did not consider that zip code addresses expose personal “information to the individual detriment”[6] apart from the conduct in violation of the Song-Beverly Act of 1991.[7] Yet the court found that such claims were not even colorable under the common law because the court ruled before the facts were developed in the underlying action.[8] The court’s suggestion that there was no potentially meritorious claim was premature as a motion to dismiss was granted before the facts supporting the common law privacy invasion claims were fully developed.[9]  

In Interstate Bakeries, the court relied on a citation to Penn-Star, stating that “a court is barred from ‘reading into [a complaint] any factual assumption’” when determining the duty to defend.[10] That decision, however, did not justify ignoring inferences from facts alleged, which settled Missouri case law required the court to consider.[11] Decisions from the Ninth[12] and Seventh[13] Circuits reveal the applicability of this doctrine.[14] Notably neither has been subsequently cited for the novel rules of decision they adopted to resolve those cases.

Certification to State Supreme Courts Is Preferable to a Petition for Rehearing

In addressing state law issues, which Federal Courts are bound to apply under Erie,[15] a number of Federal Courts of Appeals (principally the Second, Fifth, and Ninth Circuits) have decided open questions of state law. In performing that task, such courts are bound to follow rules of stare decisis, especially where they are articulated by applicable state law. Courts can reserve the right to address these points by either requesting a targeted briefing or a right to oral argument, allowing advocates to address novel legal issues not previously briefed to the federal courts.[16]

The other avenues for review, such as Petitions for Rehearing, are problematic. Few are granted. Even fewer lead to en banc review. Similarly, U.S. Supreme Court review is rarely granted, but a better pathway is state Supreme Court certification of pertinent issues. The challenge is to ensure that the issues certified allow litigants the opportunity to present their views before the case is adjudicated. The U.S. Supreme Court clarified that, where it has not decided a legal issue, it would decline to do so “in the absence of adversarial briefing.”[17] In so ruling, the Court clarifies that stare decisis is a particularly important legal principle when breach of contract claims are at issue, such as insurance coverage disputes, because of the reliance element that informs their resolution.[18]

Conclusion

State Supreme Courts should be invited to revisit Federal Appellate Court decisions that do not allow full development of legal issues decided by the respective parties’ advocates. This principle offers a distinct pathway to securing certification review.[19]

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[1] Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 20-915, 2022 U.S. LEXIS 1226 (Feb. 24, 2022).

[2] Id. at *14.

[3] Citing cases governing U.S. Supreme Court precedent on why issues decided must be in briefs; see City & Cnty. of San Francisco v. Sheehan, 575 U.S. 600, 609–10 (2015) (dismissed for lack of “adversary presentation” of the question presented after petitioner pressed a narrower version of original argument re: whether someone who is a “direct threat” can be “qualified” for an ADA accommodation); Yee v. City of Escondido, 503 US 519, 537 (1992) (Court declined to rule on whether ordinance effected a regulatory taking as that “[was] a question related to the one petitioners presented, and perhaps complementary to the one petitioners presented, but it [was] not ‘fairly included therein.’").

[4] No. 20-915, 2022 U.S. LEXIS 1226 at *21, internal citations omitted.

[5] David A. Gauntlett, Rethinking Federal Appellate Court Legerdemain in Analyzing the Scope of “Potential Coverage,” American Bar Association, (March 13, 2019), https://www.americanbar.org/groups/litigation/committees/insurance-coverage/articles/2019/federal-scope-potential-covereage/.

[6] Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277, 287 (2014)  (“Moreover, that the precise causes of action pled by the third party complaint may fall outside policy coverage does not excuse the duty to defend where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability.”).
Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277, 287, 172 Cal. Rptr. 3d 653, 659, 326 P.3d 253, 258 (2014)

[7] Cal. Civ. Code § 1747.08(a)(3); Big 5 Sporting Goods Corp. v. Zurich Am. Ins. Co., 957 F. Supp. 2d 1135, 1144 (C.D. Cal. 2013) (Big 5 argues that “[n]o matter how minimal, spare, or recondite complaint allegations may be, if they raise the merest glimmer of possible coverage, then the duty to reimburse defense expenses is triggered (citing  Hyundai Motor Am. v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092, 1097 (9th Cir. 2010). . . . The Court concludes [that Big 5 has met its burden].").

[8] Big 5 Sporting Goods Corp. v. Zurich Am. Ins. Co., 635 F. App'x 351, 354 (9th Cir. (Cal.) 2015).

[9] Big 5, 635 F. App’x at 354.

[10] Interstate Bakeries Corp. v. OneBeason Ins. Co., 686 F.3d 539, 542 (8th Cir. (Mo.) 2012) (quoting Penn-Star Ins. Co. v. Griffey, 306 S.W.3d 591, 599 (Mo. Ct. App. 2010)).

[11] Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277, 287 (2014) (“‘[T]he duty to defend [arises] where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability.’”) (citing Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 654 (2005)).

[12] Atain Specialty Ins. Co. v. Lake Lindero HOA, No. 21-55319, 2022 U.S. App. LEXIS 3313, at *5 (9th Cir. (Cal.) Feb. 7, 2022) (Policy application referenced facts beyond those analyzed in briefing and purportedly evidenced problematic statements justifying affirmance of district court’s ruling).

[13] Prolink Holdings Corp. v. Fed. Ins. Co., 688 F.3d 828, 832 (7th Cir. (Ill.) 2012) (ProLink’s rewrite of Federal’s policy required “an express statement” of defamation coverage to demonstrate covered liability despite the absence of any such requirement in the policy language)

[14] Terra Nova Ins. Co. v. Fray-Witzer, 449 Mass. 406, 417-418 (Mass. 2007) (Applying New Jersey law) (“New Jersey law is clear that when construing an ambiguous phrase in an insurance policy, courts should ‘consider whether clearer draftsmanship by the insurer ‘would have put the matter beyond reasonable question’ . . . . In other words, had Terra Nova and Royal wished their policies to pertain only to violations of privacy created by the content of material, it was incumbent on them to draft explicit policies to that effect.”)

[15] Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938) (“Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State.”).

[16] J. James Cooper, et al., To Certify or Not to Certify: Tips for Federal Appeals of Novel Insurance Coverage Issues, https://www.batescarey.com/files/To%20Certify%20or%20Not%20to%20Certify%20%281.30.22%20Final%29.pdf (2022).

[17] Sheehan, 575 U.S. at 609–10; see also Yee, 503 US at 537.

[18] Pearson v. Callahan, 555 U.S. 223, 233 (2009) (“Considerations in favor of stare decisis are at their acme in cases involving property and contract rights”) (quoting Payne v. Tennessee, 501 U.S. 808, 827 (1991)).

[19] See Cooper, et al., pp. 3–4 (collecting cases in which Federal Appellate Courts incorrectly decided issues of state law that were later corrected by state Supreme Courts).