Preview of Major Business Cases in Supreme Court's 2009-2010 Term

Posted by: Brian Burnsed on September 24

It looks to be a busy term ahead for business-oriented cases before the Supreme Court. When the Court commences its next session on October 5th one of the most closely watched decisions will be Citizens United v. Federal Election Commission, which could loosen long-standing limits on corporate campaign contributions. While that decision will certainly draw the biggest headlines, numerous others will affect the business and economic landscape. In a briefing at the U.S. Chamber of Commerce on Sept. 23rd, attorneys Cliff Sloan, partner at Skadden, Arps, Slate, Meagher & Flom, Andrew Pincus, partner at Mayer Brown and Robin S. Conrad of the Chamber highlighted some of the most critical decisions looming for the business community. Below, a quick summary of what’s ahead:

* Bilski v. Kappos: A major patent case that involves a dispute over whether a financial process, rather than an actual device, can be patented, this could be one most important decisions of this session. Bilski's application for a patent on a commodities trading risk management tool he created was denied on the grounds that the creation was not a “machine or apparatus”; nor did it produce or transform any current object. Those are the two tests that courts use to determine if something warrants a patent or does not. Bilski argues that while his creation may not produce anything tangible, it still warrants a patent. The Court will decide the controversial question of whether business methods are patentable.

* Free Enterprise Fund v. Public Company Accounting Oversight Board, et al.: The Free Enterprise Fund, a non-profit advocacy group, claims that the Public Company Oversight Board, which was created by Congress as a provision of Sarbanes-Oxley to oversee audits of private companies, is unconstitutional. They claim that because the board is not appointed by the President, it violates the Appointments Clause of the Constitution; as an independent agency the President is supposed to exercise direct authority over such nominations. Instead, the board is appointed by the Securities and Exchange Commission, whose members are appointed by the President. Depending on the court’s ruling, some of the oversight powers created by Sarbanes-Oxley could be repealed.

* Black et al. v. United States: In 2007, Conrad Black, former chairman and CEO of Hollinger International, was found guilty of mail and wire fraud. Black and other convicted Hollinger executives have appealed. They argue that their goal was to achieve “private gain” by reducing their tax liabilities in Canada, but that they did not not intend to cause financial harm to their company or investors . Under current law, fraud is defined as an action that is carried out not only for private gain, but also to cause financial harm to others by not providing honest services. The lower courts rejected the appeal by Black and the others, arguing that intentional damage and dishonest services—or fraud—go hand in hand: “The question is, is there really a mail fraud charge that doesn’t involve some scheme to inflict economic injury on the alleged victim of the fraud?” notes Pincus. With the rash of financial scams that have been uncovered over the past year, the Black ruling could have a major impact on how broadly frauds are defined in court and punished upon conviction.

* American Needle Inc. v. NFL, et al.: In 2000, the National Football League formed an exclusive partnership with Reebok that made the Canton (Mass.)-based company the sole producer of official NFL uniforms and merchandise. Prior to this agreement, American Needle, a sports equipment manufacturer, had individual deals with several NFL teams, which were nullified by the Reebok deal for exclusive rights. American Needle sued, claiming the NFL violated anti-trust laws, but the NFL claimed that it could act as a single entity along with its individual teams. The decision will help make clear what constitutes a single entity and what does not. That could have major anti-trust implications not only in the sports world, but for any group of businesses claiming to act as a single entity.

* United Student Aid Funds, Inc. v. Espinosa: In bankruptcy filings student loans cannot generally be discharged, with one exception. If repayment causes a debtor “undue hardship”, he or she may forgo loan payment, but only after first taking steps to prove this hardship prior to filing bankruptcy. The plaintiff in the case, Francisco Espinosa, took out student loans and then tried to have them discharged in a subsequent bankruptcy filing, without first trying to demonstrate that the loans were causing him undue hardship . The case will determine whether student loans should face a continued higher level of scrutiny or whether they can be discharged like other debts. Lenders will watch this closely, as the court’s ruling could make it more difficult for them to collect when debtors file bankruptcy.

* Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company: Shady Grove, a Maryland-based group of orthopedic surgeons, attempted to file a federal class action suit against Allstate, but New York state law prohibited Shady Grove from bringing its claim to federal court. The federal courts respected the state’s rule, but Shady Grove has sought to overturn the prohibition by appealing those rulings. The case “involves a very important question as to whether state law limits on class action suits will be enforced in federal court,” says Sloan. The Supreme Court’s decision will determine whether plaintiffs will gain broader rights to press class actions in federal courts, or whether state laws will continue to limit them.

* Hemi Group, LLC, et al v. City of New York: New York City alleges that online cigarette makers dodged millions in tax payments and has sued, claiming violations of the Racketeer Influenced and Corrupt Organizations Act(RICO). This case will determine whether city governments can sue corporations under RICO, by claiming that a company harmed the city’s business or revenues by avoiding their taxes. If a firm is found to have violated RICO, it would potentially owe damages three times that of its initial offense, which could serve as a major deterrent for firms with similar sales strategies.

* Graham County Soil and Water Conservation Dist v. ex rel. Wilson: After a 1995 storm battered North Carolina, government contracts were awarded for cleanup. Karen Wilson, an employee of the Graham Conservation District, felt she had evidence from an audit that some of the contracts were dubious and filed a complaint under the False Claims Act. The Act is intended to encourage private citizens to uncover potentially dubious government contractors, by rewarding whistle blowers with a percentage of the damages they help to prevent. However, part of the Act says that individuals can’t use public information to make a claim. Graham County argues that information gleaned from an audit is public information. “The whole theory of the statute is that we’re incentivizing people to dig up fraud, act on it, and bring it to the attention of the government,” says Pincus. “We don’t want to just be paying out money to people that discovered the fraud with publicly available information.” Such claims are banned on the federal level but not on the state level—the court will decide whether the ban should extend to states as well.