The Roberts Court: Does Business Have Friends in High Places?

The current Supreme Court has attracted a reputation for treating business litigants favorably. Is the assertion true? Based on an analysis of decisions from 1946-2011, two esteemed professors, along with Judge Richard A. Posner, have indeed found a pro-business trend in the Roberts Court compared with Supreme Courts of years past. And an examination of decisions from the 2012-2013 term reveals a number of pro-business holdings across a swath of industries.

How Business Historically Has Fared in the Supreme Court (1946-2011)¹

On balance, business litigants historically have fared worse in the Supreme Court than non-business opponents.

A business win in the lower court decreases the probability that business will win in the Supreme Court.

When the federal government opposes the business litigant, a Supreme Court Justice of any ideology is less likely to vote for business. The probability of a business litigant winning increases when the Solicitor General files a supporting amicus curiae brief support and increases further when the Solicitor General supports a business respondent.

Over time, justices appointed by Presidents of both political parties have become more favorable to business.

What We Know About the Roberts Court

The Roberts Court is in fact friendlier to business litigants than either the Rehnquist or Burger Courts. In particular, the Roberts Court is accepting and reversing more cases in which the business litigant lost in the lower court.

Five of the ten most pro-business justices since 1946 are currently serving on the Roberts Court, with Justices Roberts and Alito the most favorable to business of all justices since 1946. On the Roberts Court, no Republican-appointed justice is less favorable to business than any Democrat-appointed justice.

After the appointment of Justices Roberts and Alito, the three other conservative members of the Court (Justices Scalia, Thomas and Kennedy) became more favorable to business.

Key Business Wins from the 2012-2013 Term

American Express v. Italian Colors Restaurant. Holding: Courts may not invalidate a contractual waiver of class arbitration on the ground that a plaintiff’s cost of arbitrating individually exceeds the potential recovery, making individual prosecution impractical in many consumer cases. Effect: A successful motion to compel individual arbitration based on a waiver of class arbitration may now effectively dispose of the case, because plaintiffs may not have an appetite to arbitrate on an individual basis. With class arbitration foreclosed by waiver, business may see an increase in more fundamental arguments by plaintiffs that no agreement to arbitrate, whether individually or class-wide, was ever reached. Companies in consumer industries that utilize class arbitration waivers should confirm that their procedures for communicating and distributing arbitration agreements (including waiver provisions) comply with current governing law in each relevant jurisdiction and can withstand future challenges.

Gabelli, et al. v. SEC. Holding: The five-year statute of limitations for the Securities and Exchange Commission to seek civil penalties for securities fraud begins to tick when the fraud occurs, not when it is discovered, in a case brought against an investment adviser under the Investment Advisor Act. Effect: Risks of SEC investor fraud penalty actions decline significantly five years after the acts occurred. The SEC may interpret the decision as applying to other civil penalty actions subject to the general statutory five-year limitations period. Business can expect the SEC to be more vigilant in completing investigations and filing cases before the five-year limitations cut-off. On a positive note, the accelerated timeline for SEC actions may reduce discovery costs associated with investigations.

Kiobel v. Royal Dutch Petroleum. Holding: For a claim under the Alien Tort Statute (“ATS”) to survive a motion to dismiss, it must “touch and concern” activities occurring in the territory of the United States. The claim cannot be premised on violations of the law of nations occurring wholly outside of the United States, and mere corporate presence of a defendant in the U.S. is not enough to support a claim. Effect: Restricts access to US courts for claims arising from human rights violations in a foreign country where a company conducts business. Post-Kiobel district court decisions have differed on the meaning of “touch and concern,” and appeals are pending in at least three circuits. With significant restrictions on ATS claims, business may see increased efforts to assert human rights claims under expressly extraterritorial statutes such as the Trafficking Victims Protection Act and the Anti-Terrorism Act.

Vance v. Ball State University. Holding: An employer is strictly and vicariously responsible under Title VII of the Civil Rights Act for the acts of “supervisors” who are “empowered” to take “tangible employment actions” against lower-level employees, and not managers who merely oversee or direct employees’ everyday activities. Effect: By drawing a bright line around the meaning of “supervisor,” the decision is likely to streamline Title VII cases and perhaps increase the odds of pre-litigation resolution.

Conclusion

As always, business litigants will continue to fare best before the Supreme Court with careful selection of appellate issues and cogent presentation of arguments. Businesses are seeing benefits from appealing to the Supreme Court, especially when they lose in the lower appeals court. Strategically, a business litigant will benefit if it is able to win support from the federal government or the Solicitor General, and effective corporate communications with regulators may increase prospects for a favorable ruling.

1. The analysis presented here is adapted from How Business Fares in the Supreme Court, Lee Epstein, William M. Landes, and Richard A. Posner, Minnesota Law Review, Vol. 97 no. 4, April 2013.