On August 8, 2009, Justice Sonia Sotomayor was sworn in to serve on the U.S. Supreme Court. We reviewed opinions of panels on which this nominee participated while serving as a Judge on the U.S Court of Appeals for the Second Circuit that mentioned 501(c) organizations or trade associations and determined that these opinions do not demonstrate a strong leaning for or against nonprofit organizations. However, a possible pattern does exist.
In some opinions, when trade associations challenged official action or statutes, Justice Sotomayor’s appellate panel ruled against the trade associations’ challenges. First, the New York State Restaurant Association (NYSRA) challenged the constitutionality of a provision of the New York City Health Code that required roughly ten percent of restaurants in New York City to post calorie content information on their menus and menu boards. The NYSRA alleged that the regulation was unconstitutional because it was preempted by federal laws and infringed on member restaurants’ First Amendment rights. The Second Circuit held that the regulation survived both of NYSRA’s challenges. Second, American Charities for Reasonable Fundraising Regulation, Inc. (American Charities) and the Bill of Rights Foundation challenged the Connecticut Unfair Trade Practices Act, the Connecticut sweepstakes law, and implementing regulations, claiming that these measures violated the First Amendment by chilling their ability to communicate their message and raise funds. The Second Circuit denied the challenge due to lack of standing. Third, the National Electrical Manufacturers Association (NEMA) challenged the enforcement of a Vermont labeling statute as it applied to manufacturers of mercury-containing light bulbs. NEMA asserted that the statute violated its members’ rights under the First Amendment and the Commerce Clause. The District Court had enjoined the enforcement of the statute but the Second Circuit vacated the injunction because NEMA had not demonstrated a likelihood of success on the merits of either constitutional challenge.
In other opinions, however, when trade associations challenged other private parties, Justice Sotomayor’s appellate panel ruled in favor of trade associations. A group of corporations who operated businesses that contracted with American Express as well as the National Supermarkets Association (NSA) sought to lead a class action against American Express under the antitrust laws. American Express moved to compel arbitration and enforce a class action waiver pursuant to the terms of the Card Acceptance Agreement. The Second Circuit held that, in the instant case only, the class action waiver provision was unenforceable, thereby handing the NSA and the other plaintiffs a victory.
Based on the foregoing mix of cases, it is unclear at this point, how trade associations would fare before Justice Sotomayor. However, trade associations should be wary of court action involving public, rather than private, parties.