High court is good for business
The Bush administration and corporate lobbyists long have sought sweeping “tort reform” to limit lawsuits and massive jury awards -- without much success. But in the last year, they quietly have been winning much of what they’ve wanted on a case-by-case basis in the Supreme Court.
With a week to go in their term, the justices have handed down a dozen rulings that sharply limit the damages that can be won in lawsuits or make it harder to sue corporations.
“The Roberts court is even better for business” than the court led for two decades by the late Chief Justice William H. Rehnquist, said Washington attorney Maureen E. Mahoney, who is a longtime friend of Chief Justice John G. Roberts Jr. and a former clerk for Rehnquist. “There is unquestionably a greater number of business cases before the court, and [the justices] are quite willing to limit damage remedies.”
In February, for example, the court threw out an $80-million punitive damage verdict against cigarette maker Philip Morris, ruling that juries cannot use a single victim’s suit to punish a company for harm done by its products to thousands of others.
Last month, in a similar decision, the court set aside a California jury’s $55-million verdict against Ford Motor Co. arising from a rollover accident involving its Ford Explorer.
Two weeks ago, the court shielded the insurance industry from paying millions of dollars in damages for not notifying customers when they check their credit ratings.
A few days before that, the court protected employers from being sued over pay discrimination against women and minorities that occurred in past years. The 5-4 decision overturned a verdict in favor of a female supervisor at a Goodyear Tire plant, saying she had failed to point to discrimination in the 180 days prior to filing her suit -- a strict statute of limitations set in the Civil Rights Act of 1964.
On Monday, the court threw out a massive suit alleging “an epic Wall Street conspiracy” among the nation’s leading investment bankers to fix the prices of new stock offerings during the Internet boom of the late 1990s. It was the third decision this year to restrict the reach of antitrust laws.
None of these pro-business decisions came as a huge surprise. But lawyers who practice regularly before the high court say it is noteworthy that business has been winning so consistently.
It is “a very business-friendly court,” said Beth S. Brinkmann, a Washington lawyer who served in the Clinton administration. The justices have made it harder to sue business on many fronts, she said.
Corporate lawyers say that suing companies should not be too easy because that encourages frivolous suits, and defending against them -- even when the claim is ultimately rejected -- can cost millions of dollars.
Last month, in the case of Bell Atlantic vs. Twombly, the Supreme Court made it easier for companies to win a quick dismissal of some claims.
Five years ago, a group of plaintiffs’ lawyers alleged the “Baby Bell” companies that provide local phone service had secretly conspired not to compete with each other. If this were true, these companies had violated antitrust laws and were subject to damages that could run into the billions. The lawyers claimed to represent every American who had phone service or subscribed to a high-speed Internet line.
Two years ago, a federal appeals court in New York cleared the suit to go forward. But on May 21, the Supreme Court threw it out. It was not enough to say a conspiracy was possible, Justice David H. Souter said in an opinion for a 7-2 majority. Rather, the plaintiffs must show real evidence of a “plausible” conspiracy at the start, he said.
This seemingly technical tweak is likely to have a broad effect, legal experts say, because it set a higher hurdle for civil suits. It will also encourage more trial judges to dismiss claims at the earliest stages, they said.
The ruling strikes “a blow to the plaintiffs’ bar, which has used such bare assertions to extort money from businesses operating legitimately,” said Robin S. Conrad, a lawyer and vice president of the U.S. Chamber of Commerce. “Frivolous lawsuits have huge costs to consumers, workers and the overall economy.”
But a lawyer who represents consumers and accident victims in the high court said business advocates are celebrating too soon.
“I think it’s a premature to say this a pro-business court,” said Robert S. Peck, president of the Center for Constitutional Litigation. “The court takes on these issues one at a time, and in some of the cases, they are taking baby steps. Business is not always getting the victory they asked for.”
Peck represented the family of the deceased smoker in the punitive-damages case involving Philip Morris. He noted the Supreme Court did not set a hard-and-fast rule for limiting such verdicts, but rather told the Oregon courts to reconsider the $80-million award in this case. “It’s not clear they will change the award at all,” he said, referring to the Oregon judges.
Consumer advocates say it is especially important that victims of corporate wrongdoing have the option of going to court, partly because the federal government for years has been scaling back its regulation of business.
“It is only in the courtroom where an individual consumer stands on an equal footing with a powerful corporation. It is there they can have their day in court before a jury,” Peck said. “If it is all decided in the halls of power, the corporations are going to have their way.”
The high court is due to issue more decisions today and release its final rulings of the term next week.
One closely watched case will decide whether to protect companies from suits alleging securities fraud. Business lawyers want to make it harder to sue companies for fraud after a sharp drop in the stock price. They say plaintiffs need real evidence of fraud and deceit, not just rosy predictions for the future that did not come true. A ruling on this issue is due in Tellabs vs. Makor.
The justices also have yet to decide a business case that could affect how much shoppers pay for products ranging from watches and handbags to golf clubs and tennis rackets. For nearly a century, it has been illegal under antitrust laws for manufacturers to set a minimum retail price for their products.
That rule is being challenged this year by a Los Angeles maker of women’s handbags. Mahoney predicted the court is likely to strike down the long-standing rule.
“This court subscribes to the Chicago school of law and economics,” she said, referring to the free-market theories associated with the University of Chicago that cast a skeptical eye on nearly all regulation of business.