Starr International: Prudential Standing’s Last Stand?

[Editors’ Note: This post is not technically a “Term Preview” since only a cert petition has been filed so far in the case, but it’s very much a petition to keep an eye on. Additionally, the author alone takes sole responsibility for every bad pun in this post.]

Introduction

In Lexmark International back in 2014, the Supreme Court called into question the continuing vitality of “prudential standing,” a doctrine the Court elsewhere characterized as rooted in justiciability concerns above and beyond Article III’s requirements. In Lexmark, the Court reclassified two of the three types of “prudential standing” restrictions, but notably, it did not say how “third party prudential standing” fits into the picture. Instead, the Court deliberately left that question off for “another day.” A pending cert petition in Starr International, out of the Federal Circuit, asks the Court to resolve this lingering issue in a case stemming from the government’s bailout of AIG during the recession last decade. If the Court takes up this request, which it very well may, Starr International may mark the end of prudential standing as we know it.

 I. Review: Article III’s Requirements and “Prudential Standing”

Article III, Section 2 of the U.S. Constitution gives federal courts jurisdiction over specific “cases” and “controversies.” Of course, merely affixing the label “case” or “controversy” to a dispute does not give federal courts jurisdiction. Rather, certain elements of a “case” or “controversy” serve to “identify those disputes which are appropriately resolved through the judicial process” as opposed to those disputes that cannot be resolved by the courts because they do not constitute an Article III “case” or “controversy.” Whitmore v. Arkansas, 495 U.S. 149, 155 (1990). These elements also demarcate “fundamental limits on federal judicial power in our system of government.” Allen v. Wright, 468 U.S. 737, 750 (1984).

To have an Article III “case” or “controversy,” a plaintiff must have “standing,” without which a party is not “entitled to have the court decide the merits of the dispute.” Warth v. Seldin, 422 U.S. 490, 498 (1975). The Court has stated that “the irreducible constitutional minimum of standing contains three elements.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). First, the party asserting the existing case or controversy “must have suffered an injury in fact,” that is, “an invasion of a legally protected interest which is (a) concrete and particularized; and (b) actual or imminent, not conjectural or hypothetical.” Id. (citations omitted) (internal quotation marks omitted). Second, “there must be a causal connection between the injury and the conduct complained of.” Id. Third, “it must be likely . . . that the injury will be redressed by a favorable decision.” Id. at 560-61 (internal quotation marks omitted). Basically, in order to be able to have a federal court hear the case, a plaintiff must be able to identify a real, personal injury caused by the defendant(s) that the court can redress.

In addition to this “core component derived directly from the Constitution,” the Court’s standing doctrine also

embraces several judicially self-imposed limits on the exercise of federal jurisdiction, such as the general prohibition on a litigant’s raising another person’s legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff’s complaint fall within the zone of interests protected by the law invoked.

Allen, 468 U.S. at 751. These “judicially self-imposed limits” are commonly referred to as “prudential standing.”

II. “‘Prudential Standing’ Is a Misnomer”

There’s one problem with this. The Court has recognized that “prudential standing” is not an “Art. III standing problem.” Warth, 422 U.S. at 500 n.12; see also Valley Forge Christian College v. Americans United for Separation of Church & State, 454 U.S. 464, 474 (1982) (noting that prudential standing exists apart from and “[b]eyond the constitutional requirements”). The Court, however, has also emphasized that federal courts “have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given.” Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821). That is, a court cannot decline to hear a dispute simply because it thinks it would be unwise for it to do so, if the court otherwise has jurisdiction over the case and the parties are properly before it.* Yet, with its “prudential standing” jurisprudence, the Court has erected “self-imposed” barriers that prevent litigants who otherwise have a “case” or “controversy” from having their disputes adjudicated. This does not sit well.

To some extent, the apparent contradiction stems from poor labeling. For instance, as Judge Silberman recognized, “the term ‘prudential standing’ is a misnomer–at least in the context of whether a plaintiff . . . is within the ‘zone of interests’ of the relevant substantive statute.” Ass’n of Battery Recyclers v. EPA, 716 F.3d 667, 675-76 (D.C. Cir. 2013) (Silberman, J., concurring). After all, “whether the plaintiff came within the ‘zone of interests’ . . . . is an issue of statutory standing. It has nothing to do with whether there is case or controversy under Article III.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 97 (1998). The “zone of interests” test is not really a “standing” issue at all, something the Court recognized when it observed that the test “does not implicate subject-matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.” Verizon Md. Inc. v. Public Serv. Comm’n of Md., 535 U.S. 635, 642-43 (2002). This “standing” rule is actually a question regarding the merits of a plaintiff’s claim–does the plaintiff have a judicially-cognizable claim under the law invoked? So, upon closer inspection, it turns out that one aspect of prudential standing has nothing to do with standing at all. See also Henry P. Monaghan, Third Party Standing, 84 Colum. L. Rev. 277, 278 n.6 (1984) (“Use of the term ‘standing’ to describe the scope of the issues that a litigant may raise can be faulted.”).

Likewise, “the rule barring adjudication of generalized grievances” is not really a “standing” issue but simply another way of identifying disputes where the plaintiff has not actually been injured or where there is no Article III “case” or “controversy.” See, e.g.Lance v. Coffman, 549 U.S. 437, 442 (2007) (per curiam) (holding that plaintiffs’ injury was inadequate, and so they lacked standing, where the injury was an “undifferentiated, generalized grievance about the conduct of government”); DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 344 (2006) (internal quotation marks omitted) (finding that plaintiff lacked standing under Lujan because the alleged injury was simply “a grievance . . . suffer[ed] in some indefinite way in common with people generally”). That is, the prohibition on “generalized grievances” is not a “prudential” restriction, but rather one way of articulating whether a plaintiff has satisfied the requirements of Article III.

III. Last Man Standing–the Third-Party Prohibition

This thus leaves only “the general prohibition on a litigant’s raising another person’s legal rights” as a rule of “prudential standing” at this point. This rule, however, is “closely related to the question whether a person in the litigant’s position would have a right of action on the claim.” Warth, 422 U.S. at 500 n.12. As such, it sounds similar to the “zone of interests” test that the Court concluded is more properly conceived of as a merits question, not a threshold standing requirement. See, e.g.Steel Co., 523 U.S. at 97 (describing the “zone of interests” test as one which examines whether a “cause of action encompasses a particular plaintiff’s claim”); Brian C. Lea, The Merits of Third-Party Standing, 24 Wm. & Mary Bill of Rts. J. 277, 281 (2015) (“[T]he rule is best understood as going to the merits of a litigant’s claim or defense.”). Justice Scalia recently seemed to want to take the doctrine in that direction, but he did not go all the way and do so. See Bradford C. Mank, Prudential Standing Doctrine Abolished or Waiting for a Comeback? Lexmark International, Inc. v. Static Control Components, Inc., 18 U. Pa. J. Const. L. 213, 257 (2015) (speculating that, in Lexmark, Justice Scalia wanted to convert “third-party standing” into this type of test but “he could not convince his colleagues to eliminate the last major prong of prudential standing” in that case); see also Antonin Scalia, The Doctrine of Standing as an Essential Element of the Separation of Powers, 17 Suffolk U. L. Rev. 881, 885 (1983) (criticizing the “bifurcation” between constitutional and prudential standing and asserting that “the Court must always hear the case of a litigant who asserts the violation of a legal right”). Doing so would eliminate this last prong of prudential standing, rendering that category obsolete.

Alternatively, if this third-party standing rule were a true “prudential” rule not tethered to Article III, then it is in trouble. In 2014, the Court came close to completely eliminating the category of prudential standing, rejecting in that case the contention that it could decline to hear a dispute “on grounds that are ‘prudential,’ rather than constitutional.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1386 (2014). The Court observed that its “prudential standing” jurisprudence “is in some tension with our recent reaffirmation of the principle that ‘a federal court’s obligation to hear and decide cases within its jurisdiction is virtually unflagging.'” Id. (quoting Sprint Commc’ns, Inc v. Jacobs, 134 S. Ct. 584, 591 (2013)). The Lexmark Court then explicitly re-categorized two of the three types of “prudential standing” restrictions, but, because “[t]he limitations on third-party standing are harder to classify” and Lexmark did not “present any issue of third-party standing,” the Court opted to put off “consideration of that doctrine’s proper place in the standing firmament” for “another day.” Id. at 1387 n.3.Paypal Button4

To many courts and commentators, this signaled the impending demise of “third-party standing,” at least as a “prudential” rule. See, e.g.City of Oakland v. Lynch, 798 F.3d 1159, 1163 n.1 (9th Cir. 2015) (“[T]he Supreme Court’s recent decision in Lexmark . . . calls into question the viability of the prudential standing doctrine.”); Lea, supra, at 279 (noting that in Lexmark, the Court “suggested it might re-examine whether the rule barring assertion of third-party rights is a true matter of judicial ‘prudence,’ a matter of judicial power under Article III, or a matter concerning the merits of a litigant’s claim or defense”); Standing: Civil Procedure–Lexmark International, Inc. v. Static Control Components, Inc., 128 Harv. L. Rev. 321, 328 (2014) (“Lexmark has abruptly upended prudential standing doctrine.”); S. Todd Brown, The Story of Prudential Standing, 42 Hastings Const. L. Q. 95, 133 (2014) (“[I]t is time to write the epilogue for the story of prudential standing.).

Confirming these suspicions, the Court has cited Lexmark for this very proposition to call into question other “prudential,” self-imposed limits. See Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2347 (2014) (avoiding resolution of concerns about “the continuing vitality of the prudential ripeness doctrine,” but quoting Lexmark to indicate it too is “in some tension” with recent developments). Furthermore, reconceptualizing or abrogating this third-party standing restriction would track with other changes over the past few decades. See, e.g., Monaghan, supra, at 278 (“Developments in the last three decades have substantially eroded, if not completely decentered, the Yazoo model. . . . a familiar example . . . . are the jus tertii standing cases, in which litigants related to third parties in certain ways are permitted to raise the latter’s rights. Few judges or commentators seem inclined to scrutinize the premises of this expanding ‘third party standing’: So long as he suffers an injury in fact that is both fairly traceable to the challenged statute and likely to be redressable by a favorable judgment, the litigant has standing in the constitutional sense.”).

The Court thus appears poised “to reconsider . . . third-party standing . . . sooner rather than later.” Lea, supra, at 280. Either this “prudential standing” rule needs to be reclassified in light of the Court’s “virtually unflagging” obligation to hear cases within its jurisdiction, it needs to be integrated into Article III’s requirements (perhaps by making it part of the “actual controversy” inquiry, which requires the plaintiff to have “a personal stake in the outcome of the lawsuit,” see Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 669 (2016)) notwithstanding earlier pronouncements that third-party standing is not an Article III rule, or else it must be abandoned. Sprint Commc’ns, Inc., 134 S. Ct. at 591. See also Henderson v. Shinseki, 562 U.S. 428, 435 (2011) (“We have urged that a rule should not be referred to as [jurisdictional] unless it governs a court’s adjudicatory capacity, that is, its subject-matter or personal jurisdiction.”).

IV. A Starr Emerges

If the Court still wants to bring clarity to this area of the law, it may have the opportunity to do so soon. Enter Starr International.

During the economic crisis in the last decade, the government bailed the insurer AIG out, and, in exchange, the government “received a majority stake in AIG’s equity under the loan, which the Government eventually converted into common stock and sold.” Starr Int’l Co. v. United States, 856 F.3d 953, 957 (Fed. Cir. 2017). One of AIG’s largest shareholders, Starr International, then sued in the Court of Federal Claims, alleging that the government’s actions were unlawful. Id. (For more on the merits, see here and here). The Court of Federal Claims agreed in part, and the government appealed, “arguing that Starr lacks standing to pursue its equity-acquisition claims.” Id. The Federal Circuit, in turn, agreed with the government. Id. Although it acknowledged “that Starr has satisfied the requirements of constitutional standing derived from Article III,” the Federal Circuit nevertheless held that Starr was barred from pursuing its claim thanks to the “prudential” doctrine of “third-party standing.” Id. at 964-65. In a one-sentence footnote, the court addressed the implications of Lexmark, noting that the Court there “shed the ‘prudential’ label for certain other requirements of standing but did not expressly do so for the principle of third-party standing.” Id. at 965 n.8.

Starr appealed this decision. Adding to its already formidable slate of advocates (Starr was represented by Supreme Court regular David Boies and former Solicitor General Charles Fried, among others, before the Federal Circuit), Starr brought in former Solicitor General Paul Clement to help write the cert petition. The petition has only one Question Presented:

Whether a private party with Article III standing may be barred from asserting constitutional claims for money damages against the federal Government because of the equitable doctrine of “third party prudential standing.”

In its petition, Starr argues that, “[a]lthough the Lexmark Court did not definitively resolve how to classify third-party standing, the Court’s reasoning makes plain that third-party standing cannot survive as a ‘prudential’ doctrine.” Id. at 23. In order for “the third-party standing doctrine . . . to survive as a standing doctrine, as opposed to a merits doctrine or something else, it will need to be justified in terms of Article III’s constitutional minima.” Id.  According to Starr, regardless of how the Court ultimately resolves this issue, “one thing that is clear after Lexmark is that a party with conceded Article III standing should not be barred from the courthouse based on vague prudential or equitable factors.” Id.

It is hard to see how Starr is wrong, but, at the very least, it seems self-evident that this issue needs to be resolved by the Court. First, the language in Lexmark is fairly unequivocal. “Virtually unflagging” leaves little wiggle room for a doctrine that bars a party from pursuing its claim even when that party has a proper “case” or “controversy.” Second, Lexmark was a unanimous decision, without a single justice taking issue with Justice Scalia’s reformation of prudential standing doctrine, suggesting that the entire Court wants to clean up this area of law. Cf. Henderson, 562 U.S. at 435 (“[W]e have tried in recent cases to [bring some discipline] to the use of [the label ‘jurisdictional’].”). Third, Lexmark deliberately noted but reserved this question for “another day.” With this petition, it seems “another day” has finally come for the Court to answer this question.

Conclusion

Starr International presents the Court with an opportunity to resolve an issue it left open just a few years ago in Lexmark, in an area of law it has expressed particular interest in as of late, in a case where both sides are represented by top-notch advocates. It will be interesting to see what the Solicitor General has to say, if/when the government opposes certiorari. In the meantime, it seems safe to say that odds are good this case goes the distance.

 

 

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One big caveat here concerns the political question doctrine, which is partly a judicially self-imposed rule not to hear cases when they involve certain types of disputes within or between the other branches of government. See, e.g.Baker v. Carr, 369 U.S. 186, 217 (1962) (highlighting various types of disputes that present “a political question”). The doctrine is “essentially a function of the separation of powers,” id.much like Article III’s “case” or “controversy” requirement, Allen, 468 U.S. at 750, and comparable justifications for these doctrines suggest that similar analyses should apply to them. See, e.g., Zivotofsky v. Clinton, 566 U.S. 189, 194-95 (2012) (quoting Cohens, 19 U.S. (6 Wheat.) at 404) (identifying the political question doctrine as “a narrow exception” to the rule that “the Judiciary has a responsibility to decide cases properly before it, even those it ‘would gladly avoid'”); Warth, 422 U.S. at 500 (noting that, without prudential standing, “the courts would be called upon to decide abstract questions of wide public significance even though other governmental institutions may be more competent to address the questions”); Flast v. Cohen, 392 U.S. 83, 95 (1968) (noting that both standing and the political question doctrine are subspecies of justiciability limitations on courts).

Like with “prudential standing,” so too with the political question doctrine, the trouble is that, so long as a party has brought a valid “case” or “controversy” into federal court, then “a federal court’s obligation to hear and decide a case is virtually unflagging.” Sprint Commc’ns, Inc. v. Jacobs, 134 S. Ct. 584, 591 (2013) (internal quotation marks omitted); see also Wilcox v. Consol. Gas Co., 212 U.S. 19, 40 (1909) (citation omitted) (“When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction. . . . The right of a party plaintiff to choose a Federal court where there is a choice cannot be properly denied.”). Because of this “virtually unflagging” obligation, the Court may, at another time, need to reconsider and possibly abrogate the more “prudential” sounding prongs of the political question doctrine. See Baker, 369 U.S. at 217 (articulating prudential justifications for the political question doctrine, such as where a court could not resolve an issue “without expressing lack of the respect due coordinate branches of government,” or where there is “an unusual need for unquestioning adherence to a political decision already made,” or where there is “the potentiality of embarrassment from multifarious pronouncements by various departments on one question”); see also Zivotofsky, 566 U.S. at 204 (Sotomayor, J., concurring) (“The final three Baker factors address circumstances in which prudence may counsel against a court’s resolution of an issue presented.”).

In fact, the Court already appears well on its way to jettisoning Baker’s prudential factors. See, e.g., Zivotofsky, 566 U.S. at 195 (quoting Nixon v. United States, 506 U.S. 224, 228 (1993)) (explaining that a controversy “‘involves a political question . . . where there is a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it,'” without mentioning the prudential Baker factors); id. at 213 (Breyer, J., dissenting) (disagreeing with the majority and asserting that the case presented a political question based on “prudential considerations” like those articulated in Baker); Nixon v. United States, 506 U.S. 224, 228 (1993) (quoting Baker, 369 U.S. at 217) (describing a political question as one in which “there is ‘a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it,'” without mentioning the prudential Baker factors); United States v. Munoz-Flores, 495 U.S. 385, 390 (1990) (“[D]isrespect . . . cannot be sufficient to create a political question.”); Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 230 (1986) (“[U]nder the Constitution, one of the Judiciary’s characteristic roles is to interpret statutes, and we cannot shirk that responsibility merely because our decision may have significant political overtones.”); Powell v. McCormack, 395 U.S. 486, 549 (1969) (“Our system of government requires that federal courts on occasion interpret the Constitution in a manner at variance with the construction given the document by another branch. The alleged conflict that such an adjudication may cause cannot justify the courts’ avoiding their constitutional responsibility.”); see also Rachel E. Barkow, More Supreme Than Court? The Fall of the Political Question Doctrine and the Rise of Judicial Supremacy, 102 Colum. L. Rev. 237, 333-34 (2002) (noting that “calls for abandonment” of the political question doctrine “should apply only to the prudential strand of the doctrine,” because, among other reasons, “[t]he prudential strand of the doctrine cannot be reconciled with the principle, announced . . . in Cohens v. Virginia”).

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