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The Hands-Off Rehnquist Court


The Rehnquist Court has bestowed many valuable gifts on Big Business. Over the past 18 terms it has, among other things, placed strict limits on punitive damages, curtailed the ability of plaintiffs' lawyers to exploit questionable "junk" science, granted greater commercial free speech protection to marketing, and prevented the Americans with Disabilities Act (ADA) from becoming a financial nightmare. The amount of money these decisions have saved Corporate America is enormous -- certainly in the high billions, possibly even the low trillions.

So it's surprising to hear business attorneys griping about the high court. But they actually complain a lot. The main grievance: The justices too rarely venture into vital areas such as antitrust, environmental, intellectual-property, securities, and tax law. The Supremes haven't heard a merger case, for instance, since 1974. As a result, key corporate law issues remain ambiguous. Different courts apply divergent legal standards to similar scenarios -- creating uncertainty for executives, headaches for their lawyers, and forum-shopping opportunities for plaintiffs' attorneys. "A lot of businesspeople feel that there are plenty of important [corporate] cases that the court is turning down in favor of some refinement of search-and-seizure law," says appellate specialist Andrew L. Frey, of the New York office of Mayer, Brown, Rowe & Maw, who has argued 62 cases before the Supreme Court.

CLASS-ACTION WOES

Nor has the Rehnquist Court shown much interest in what is arguably the business community's most pressing legal problem: costly class actions. Despite several opportunities, the justices have refused to put substantial hurdles in the way of the plaintiffs' attorneys who file these cases. "This court just doesn't get business litigation," says Mark K. Moller, editor-in-chief of the conservative Cato Institute's Supreme Court Review. "Nobody on the court has the practical experience of seeing how these lawsuits play out in real life."

This oft-heard criticism suggests that while social conservatives will view Chief Justice William H. Rehnquist as a hero, the business community will be far more ambivalent about his legacy. This assessment may be premature, since the 81-year-old jurist, who was hospitalized on July 12, is still on the bench. But clearly the Rehnquist era, which began when Warren Burger stepped down as Chief Justice in 1986, is drawing to an end. The stable lineup of nine judges who have sat continuously since 1994 is breaking up with the imminent departure of Sandra Day O'Connor. And there's little doubt that Rehnquist and 85-year-old John Paul Stevens will be leaving soon.

Why hasn't the Rehnquist Court heard more business cases? Only the justices know for certain. But outsiders -- some of whom, to be sure, are high-priced lawyers who are frustrated that they can't win a spot on the docket -- believe it's because the justices do not have much business law experience.

The court's two leading intellectuals, Antonin Scalia and Stephen G. Breyer, both built their reputations as law school professors specializing in regulatory law. Before donning judicial robes, O'Connor and Clarence Thomas spent most of their careers in government. Ruth Bader Ginsburg achieved fame as general counsel for the American Civil Liberties Union. Rehnquist, Anthony M. Kennedy, and David H. Souter all worked for small to midsize firms that did not do much high-profile legal work. Ironically, the only member of the court who was a well-known corporate attorney is its most liberal: antitrust expert John Paul Stevens, who stopped practicing in 1970.

This collective lack of relevant recent business experience has many corporate attorneys hoping President George W. Bush will choose one of their own to replace O'Connor. Favored candidates include John G. Roberts Jr. and Edith Hollan Jones -- two federal appeals court judges who worked at major corporate law firms. The thinking is that both would understand the strong yearning among antitrust, securities, and intellectual-property lawyers, among others, for more detailed guidance from the high court.

A prime example of the legal confusion that the Supreme Court has allowed to fester involves the law that Congress passed in 1995 to protect companies from frivolous securities-fraud suits. Under the Private Securities Litigation Reform Act (PSLRA), plaintiffs' attorneys were forced to meet a higher "pleading standard" -- that is, to come up with more facts to support their initial filings. But various federal appeals courts differ on how much proof is necessary for a case to go forward. Despite complaints from both the plaintiffs' lawyers that bring these suits and the corporate attorneys that defend against them, the Supreme Court has passed on an opportunity to clarify the law.

PUNITIVE DAMAGES

The justices also have refused to hear several cases that could have restricted broad class actions. In 2002, for example, Visa International and MasterCard International asked the court to toss out a class action against them brought by "all persons and entities" that had accepted the two cards over the past decade. That amounted to millions of retailers. The case gave the court an opportunity to tighten a key standard for granting class actions in the first place -- and many corporations and business groups wanted the justices to take the case.

But the Supremes did not deem the issue worthy of addressing. "If you were to talk to foreign businesses about what scares them the most about the U.S. judicial process, they would say class actions and punitive damages," says Carter G. Phillips, of the Washington office of Sidley Austin Brown & Wood, who has failed to convince the court to hear a half-dozen class-action appeals. "The Supreme Court has helped on the punitive damages issue, but it has done nothing about class actions."

Of course, business advocates aren't the only lawyers frustrated by the Rehnquist Court's selectivity. One of the Chief Justice's main legacies has been to reduce the court's workload. The justices decided 80 cases during the last term, about half as many as was typical in the 1960s and 1970s. Rehnquist & Co. are applying higher standards than ever before in deciding which cases they are willing to hear. That has made it harder for litigants of every stripe to win an audience with the high court.

But there is an another factor that has made reaching the Supreme Court even more difficult for business: Rehnquist's preference for constitutional issues. That tends to favor disputes involving, for example, states' rights, federalism, free speech, or criminal procedure. In contrast, business disputes often do not raise fundamental constitutional issues. Instead, they frequently revolve around the interpretation of vague federal statutes such as the ADA, the PSLRA, the Securities Exchange Act of 1934, or the Sherman Antitrust Act.

The next Chief Justice will have an opportunity to steer the court in a different direction. Strange as it may seem, that could be good news for the business community -- despite its victorious record before the Rehnquist Court.

By Mike France in New York


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