U.S. Supreme Court Seen Siding with Business on Key Issues

By | July 8, 2008

The Supreme Court under Chief Justice John Roberts has carved out a reputation for pro-business rulings in a series of important decisions.

In its recently ended term, the high court threw out the largest punitive damages award in U.S. history over the Exxon Valdez oil spill, ruled against securities fraud lawsuits like the one by Enron Corp investors and made it harder to sue medical device manufacturers.

Legal experts said there has been a greater pro-business tilt in the past several terms under Roberts — who has been joined by Justice Samuel Alito, President Bush’s other appointee to the nine-member court — than under the previous chief justice, the late William Rehnquist.

Business interests considered the 2007-08 term a big success, with victories in important cases more than offsetting defeats in what they viewed as less significant cases mainly on workplace discrimination.

“This has been a very successful year for the business community,” said Washington lawyer Miguel Estrada at a recent briefing sponsored by the U.S. Chamber of Commerce’s national litigation center.

In one of the biggest wins, the court slashed the record punitive damages that Exxon Mobil Corp had been ordered to pay to commercial fishermen, Alaska natives, property owners and others harmed by the nation’s worst oil spill, in 1989.

By a 5-3 vote, with Alito recused because he owns Exxon Mobil stock, the court ruled the record $2.5 billion in punitive damages was excessive under federal maritime law and should be cut to the amount of actual harm — about $500 million.

Business groups said the ruling could have an impact far beyond federal maritime law in reining in excessive punitive damages, which are designed to deter and punish corporate wrongdoing. They have long sought to limit such awards.

“CONSEQUENCES”

Sen. Patrick Leahy, who chairs the Judiciary Committee, criticized the ruling.

He said it has “real-world consequences” for those harmed by the spill. Eleven million gallons of oil were dumped into Alaska’s Prince William Sound when the Exxon Valdez supertanker, with a drunk captain, ran aground.

“This ruling is another in a line of cases where this Supreme Court has misconstrued congressional intent to benefit large corporations,” the Vermont Democrat said.

“These decisions leave ordinary Americans without a remedy for their serious injuries and in turn offer a shield to big corporations,” Leahy said. “We may need to hold yet another hearing to look at this harmful trend.”

The court in January barred securities fraud lawsuits against bankers, accountants and others who may have helped companies deceive their shareholders.

The court ruled shareholders cannot sue such third parties unless investors directly relied on the parties’ statements or representations when making investment decisions.

“This is an extraordinarily important case,” Dan Himmelfarb, a lawyer in private practice who often argues before the court, told a Washington Legal Foundation briefing.

After that ruling, the justices rejected an appeal by Enron Corp investors who sought to proceed with a $40 billion class-action lawsuit against investment banks that put together financing deals for the now defunct energy trader.

EMERGING TREND

Businesses also benefited from an emerging trend as the court has increasingly ruled that federal regulatory laws trump state laws.

The court said the makers of federally approved medical devices cannot be sued under state law by patients who say they suffered injuries from a defective device. The ruling was a victory for Medtronic Inc.

Robin Conrad, who heads the Chamber of Commerce’s national litigation center, calculated that it won eight cases while it lost seven in the term that ended last week. The previous term, it had its best record in its 30-year history, winning 13 of 15 cases.

Many of the defeats this term stemmed from a series of pro-employee rulings on workplace discrimination and retaliation.

The court’s pro-business approach could continue in its upcoming term that begins in October, legal experts said.

It has agreed to hear two appeals by Philip Morris USA, a unit of Altria Group Inc.

One appeal seeks to overturn a $79.5 million punitive damages award won by the widow of a longtime Oregon smoker while the other involves whether federal law bars state court lawsuits against tobacco companies over alleged deceptive advertising of “light” cigarettes.

Since many of the court’s business rulings have been with only two or three justices dissenting, the November presidential election will be less crucial than in areas where the court has been closely divided, like abortion and race.

Presumptive Republican president nominee John McCain has promised to appoint justices like Roberts and Alito.

Democratic presidential candidate Barack Obama has praised Justices Stephen Breyer, Ruth Bader Ginsburg and David Souter. While liberals on social issues, Breyer and Souter often side with businesses, and Souter wrote the Exxon Valdez ruling.

(Editing by Brian Moss)

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