Big business's big Supreme Court term.

The law, lawyers, and the court.
March 5 2008 6:05 PM

Big Business's Big Term

Victories for the Chamber of Commerce at the Supreme Court.

The high court struck down rules to prevent kids from getting cigarettes online
The high court struck down rules to prevent kids from getting cigarettes online

With the Supreme Court term moving past the halfway mark, corporate America's long-term investments in the federal judiciary are yielding impressive returns. The U.S. Chamber of Commerce's Robin Conrad gushed about a "hat trick" of Supreme Court victories one day in February, telling the Legal Times, "I don't think I've ever experienced a day at the Supreme Court like that."

Thirty-seven years ago, future Justice Lewis Powell, then a lawyer in private practice, penned a now-famous memorandum alerting the Chamber of Commerce to a "neglected opportunity in the courts." Powell explained that "the judiciary may be the most important instrument for social, economic and political change," and he urged the chamber and its corporate benefactors to invest heavily in this "vast area of opportunity." In the wake of Powell's memo, the business community seeded a vast body of scholarship and created a nationwide network of pro-business legal organizations. This investment has quietly borne fruit for decades—and, this term in particular, landed corporate America the wins that thrilled Conrad, and more besides.

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On that hat-trick day in February, the court issued three pro-business decisions, striking down state rules designed to prevent children from receiving cigarettes via the Internet ( Rowe v. New Hampshire Motor Transport Association), blocking state courts from holding manufacturers liable for the harms caused by defective medical devices ( Riegel v. Medtronic), and using a federal arbitration statute to protect corporations against state jury trials in contract disputes ( Preston v. Ferrer). These were all "pre-emption" decisions, which means that the court found a conflict between a federal law and a state statute or decisions reached by state courts. In such a conflict, federal law trumps, and this led the court in these three cases to free corporations from state limits on their conduct.

Earlier this term, the court gave the chamber another win when it ruled broadly against "scheme liability" lawsuits, which hold accountable everyone involved in an effort to defraud securities investors. As a direct result of that case, Stoneridge v. Scientific-Atlanta, the financial institutions that enabled Enron to perpetrate the largest corporate fraud in U.S. history won the dismissal of a $40 billion lawsuit brought by the investors in Enron whose retirement security was decimated by this fraud.

It's not just particular cases that the chamber is winning, but also foundational issues that set the course of the law. Stoneridge is what lawyers call a "cause of action" case; it was about whether the plaintiffs could get into the courthouse to ensure the enforcement of the obligations that the federal Securities Exchange Act of 1934 imposes on corporations. Decades ago, the court ruled that the Exchange Act necessarily implied that victims of corporate misconduct could sue corporations for flouting the clear legal obligations that this law imposes. But starting in 1975, the court began a steady retreat from the idea that judges could "imply" a cause of action, forcing Congress to state clearly that it wants people to be able to sue. In Stoneridge, the court took this a big step further, saying in effect that people cannot sue companies to enforce an obligation under the Exchange Act that the court has not approved in a prior case. This ruling essentially freezes the enforceability of the Exchange Act.