Supreme Court Means Business

In honor of the Supreme Court opening its October 2009 term, the American Enterprise Institute (AEI) hosted a panel of law experts on October 2nd to discuss the court’s key, upcoming business cases.

“It’s shaping up to be a good term for business cases,” declared John Elwood, a partner at the Washington, D.C. office of Vinson & Elkins. Elwood specializes in appellate and Supreme Court practice.

Elwood claimed that Free Enterprise Fund (FEF) v. Public Company Accounting Oversight Board (PCAOB) hinges on an issue of separation of powers and government regulation. The PCAOB agency was created out of the Sarbanes-Oxley Act of 2002, which expanded government regulation of corporation management. It has the authorization to do whatever “may be necessary or appropriate in the public interest or for the protection of investors,” according to its website. Ilya Shapiro of The Cato Institute, in a brief of the case, said that “Unlike with an ordinary ‘independent agency,’ the president has no power whatsoever to appoint or remove PCAOB officials,” who can only be removed “for cause” by the Securities and Exchange Commission (SEC).

According to George Mason University law professor Jeremy Rabkin, another panelist, this case is “rather technical and formalistic” but will still get media attention because it will call to mind the style of the Obama Administration; the Obama Administration does inspiring speeches and big media while the “czars” do the “big government” tasks. This case will, said Rabkin, who spoke at Accuracy in Academia’s last author’s night, cause people to ask of the czars: To whom are they accountable?

In Jones v. Harris, the Supreme Court will address what role courts play in regulating investment advisor fees.

The case was unanimously dismissed by the three-judge panel of the United States Court of Appeals for the Seventh Circuit in Chicago in May 2008, which asked, according to the New York Times on October 4th, “whether the markets could be trusted to set executive compensation.” Chief Judge Frank Easterbrook, according to Elwood, affirmed this sentiment, preferring the final court decision to be more attuned to today’s markets.

Elwood noted that there are at least five members of the Supreme Court who appreciate what a burden litigation can be on businesses.

Brian Brooks, who heads the Washington, D. C., office of O’Melveny & Myers, claimed that the “sleeper case” of the term is Hertz Corporation v. Friend, a class-action suit that could potentially redefine corporate citizenship,. Hertz Corporation was sued in California, where it does a large portion of its business, although its headquarters is in New Jersey. Section 1332(c)(1) of Title 28, a federal code, states that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where as it has its principal place of business.” The disagreement here is how to define “principal place of business,” and whether the Court will adhere to the traditional definition of corporate citizenship as being determined by a company’s headquarters.

In Connecticut v. American Electric Power Co., a group of states wanted to sue power companies on the grounds that they are emitting carbon dioxide and that those emissions are contributing to global warming, said Rabkin. He sarcastically stated the sentiment of the states, saying that these electric companies, by doing their normal, everyday activity of making power, are contributing to rising sea levels. “If this is a valid cause of action then it would be entirely reasonable for states to sue Hollywood companies” for encouraging teens to engage in sexual activities, mocked Rabkin, or, giving another example, for states to sue food companies for making sugary foods which contribute to obesity and thereby increase Medicaid costs. Rabkin predicted that this case will be judged in favor of American Electric eventually but that it might take a while.

Sarah Carlsruh is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.