Sotomayor on Discrimination, Class-Action and Securities Litigation

Posted by: Theo Francis on May 26

by Theo Francis and Steve LeVine

Since David Souter said he’d leave the Supreme Court, we’ve made the case that business law doesn’t follow the usual right-left split, and that President Obama’s nominee to replace him, Sonia Sotomayor, looks like the same sort of business pragmatist he has been.

On the business-pragmatist front, we’ll take a look in a minute at her record on securities and class-action cases.

But first, a digression: We’ve also made the case that business law isn’t usually sexy enough make much of a public mark in the nomination and confirmation process. And there, as it turns out, we may have overstated the case.

That's because employment discrimination cases are manifestly important to business, and, as a judge on the Second Circuit Court of Appeals, Sotomayor's stand in a thorny case out of Connecticut could feature prominently in her confirmation hearings.

Indeed, at Newsweek’s The Gaggle, Katie Connolly suggests that one of the main targets of conservative weaponry will be a reverse discrimination case involving white firefighters in New Haven, Connecticut. The firefighters sued when the city threw out the results of a promotion exam when no blacks scored high enough to be promoted. The Second Circuit Court of Appeals, including Sotomayor, ruled against the firefighters. Now, the U.S. Supreme Court has agreed to hear the firefighters’ appeal. It may rule next month, before the Senate’s confirmation hearings.

The case is getting much attention on the Internet.

At Slate, Emily Bazelon calls it “a hard case with bad facts.” At the National Review, Ed Whelan signals that conservatives will attack the case as an “unwillingness to give a fair shake to parties whose claims she evidently dislikes. Hardly the mark of a jurist worth serious consideration for the nation’s highest court.”

At AkinGump’s SCOTUSblog, Kevin Russell points out that the Appeals Court did not release a written opinion, opening itself up to charges that perhaps
its reasoning was thin. However the current high court decides the case could then have some bearing on how Sotomayor is viewed. “And now that it knows that its opinion will have an affect on the confirmation proceedings, the Court may well write its opinion differently, out of deference to what in all likelihood will be a future colleague or out of a desire to avoid seeming political entanglements,” Russell writes.

Class-action and securities litigation

When it comes to class-action lawsuits and securities-fraud cases, Sotomayor’s record holds as a pragmatist.

Although she wrote a 2001 opinion establishing a lower threshold for certifying class-action lawsuits, five years later she sat on a panel that unanimously tightened that standard. This year, Sotomayor sat on a three-judge panel that found that American Express couldn’t prevent businesses from filing a class-action claim against part of its merchants’ contract, because doing so would “effectively preclude” the merchants from “seeking to vindicate the statutory rights” they claimed.

But a smaller constellation of rulings in cases alleging stock fraud, Sotomayor has been more given companies facing investor lawsuits the benefit of the doubt. In 2007, writing for the Second Circuit, Sotomayor said a lower court was right to throw out a lawsuit accusing the New York Stock Exchange of failing to prevent fraud by the exchange’s stock specialists. Sotomayor wrote that the exchange’s role as a stock-market regulator gave it immunity even were it to knowingly abet fraud. And at times, Sotomayor has accepted even modest or oblique disclosure by companies as protection against allegations that they failed to disclose fraudulent behavior, Roger W. Kirby, a securities-law plaintiffs’ attorney in New York, told M&P.

On balance in such cases, Sotomayor “seems to want to give small investors or consumers or merchants their day in court,” Kirby says. “But once they get into the courthouse, she seems to be slightly biased in favor of dismissing the case.”