The Supreme Court began its 2007 term in October. In recent years, the Court has reduced the number of cases it accepts for review. As a result, there are fewer cases the Court has agreed to hear that have implications outside the realm of criminal law. That being said, the following is a collection of civil cases that are likely to have a significant impact on our clients and their business practices.

Commerce Clause

Department of Revenue of the Commonwealth of Kentucky v. Davis (Case No. 06-666)

The Commerce Clause of the United States Constitution vests in Congress the sole power to regulate interstate commerce. The Supreme Court has held that this provision limits the states’ ability to regulate activities that involve interstate commerce and has specifically prohibited the states from discriminating against out-of-state commercial activity in most contexts. Davis raises the question of whether a state violates the Commerce Clause when it taxes the interest earned on bonds issued by other states but not on bonds it issues itself. The Court of Appeals for Kentucky determined that Kentucky’s decision to tax extraterritorially issued bonds but not domestic bonds constituted a per se violation of the Commerce Clause.

Supremacy Clause

Rowe v. New Hampshire Motor Transport Association (Case No. 06-457)

The United States Constitution states that federal law shall be supreme over the laws of the states. The Federal Aviation Administration Authorization Act of 1994 specifically limits the states’ ability to regulate motor carrier operations, including airlines and express delivery companies, in order to ensure that there is a uniform system of legal restrictions for the industry. The State of Maine enacted legislation that placed limitations and requirements, not required by federal law, on companies with respect to the delivery of tobacco products in order to restrict deliveries to minors. The Maine statute required, for example, that packages that contain tobacco be marked accordingly. This case requires the Court to determine to what extent a state may regulate the activities of a motor carrier in light of the federal statute.

ERISA

LaRue v. DeWolfe, Boberg & Associates, Inc. (Case No. 06-856)

The Employment Retirement Income Security Act (ERISA) governs the administration of various retirement and pension plans. It states that “a civil action may be brought … by a participant … for appropriate relief” against “a fiduciary with respect to a plan who breaches any … duties imposed upon fiduciaries [who] shall be personally liable to make good to such plan any losses to the plan resulting from each such breach.” It generally has been recognized that a plan participant may bring a claim against a plan fiduciary to recover losses suffered by the plan as a whole. This case addresses whether an individual may bring a claim against a plan fiduciary for losses suffered only by the participant. The Fourth Circuit’s decision that the plan participant could not bring a claim for the losses suffered by his personal account conflicts with the decisions of the other courts of appeals that have addressed the issue.

Evidence

Sprint/United Management Co. v. Mendelsohn (Case No. 06-1221)

Under the framework created by the Supreme Court to determine whether an employer has violated federal discrimination laws, the evidence usually focuses on the actions and motivations of the actual individual who took the adverse employment action against the plaintiff. In this particular case, the United States Court of Appeals for the Tenth Circuit held that the lower federal court committed per se reversible error when it excluded the testimony of other former employees regarding their dismissal from the employer. The potential witnesses were prepared to testify that individuals employed by the employer, other than the decision maker in the case at hand, had discriminated against them but could offer no evidence that the plaintiff had been the victim of illegal discrimination. The Supreme Court will determine whether such evidence must be excluded, whether it must be admitted, or whether it may be admitted by the trial court on a case-by-case basis.

Arbitration

Hall Street Associates, L.L.C. v. Mattel, Inc. (Case No. 06-989)

The Federal Arbitration Act places specific limitations on a federal court’s ability to overturn or alter the decision of an arbitrator. Because arbitration is a creation of contract, it is not uncommon for the parties to the contract to state in exacting detail the scope of the issues subject to arbitration and how any arbitration will proceed. Many parties also state contractually the scope of judicial review of any arbitrator’s decision. This case involves the issue of whether the parties to a contract can provide for judicial review greater than that permitted under the Federal Arbitration Act. The United States courts of appeals disagree on the permissibility of such agreements.

Age Discrimination

Federal Express Corporation v. Holowecki (Case No. 06-1322)
Under the Age Discrimination in Employment Act, a plaintiff must first file a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) in order to perfect her right to bring a judicial action for age discrimination. Often, a potential plaintiff will fill out a questionnaire but not complete the formal charge document with the EEOC. The Court of Appeals for the Second Circuit determined that the plaintiff in this case satisfied the charge requirement when she completed an intake questionnaire with her local EEOC office even though the EEOC did not consider the questionnaire to constitute the required charge of discrimination and did not serve the questionnaire on the employer as required by the statute. This case asks the Court to determine what constitutes a charge of discrimination as required by the statute.

Securities Fraud

Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. (Case No. 06-43)

The Supreme Court has long recognized that a claim for securities fraud may be based upon false or misleading statements, but it has not limited claims merely to misstatements. The Supreme Court also has held that an individual may not be found liable for simply aiding and abetting securities fraud committed by another. This case addresses the intersection between the two concepts to determine what constitutes a direct securities fraud violation. Section 10(b) of the Securities Exchange Act prohibits an individual from engaging in “any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” Rule 10b-5, prescribed by the Securities Exchange Commission, explicitly prohibits false or misleading statements. Rule 10b-5, however, also bans the use of “any device, scheme, or artifice to defraud” and “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. …” The plaintiffs in this case, who were shareholders in a publicly traded company, alleged that the defendants entered into manufactured transactions with the company that resulted in no revenue to either the defendants or the company but that enabled the company to increase its published revenues. Thus, the plaintiffs claimed that the defendants directly engaged in securities fraud. The Supreme Court must determine whether such acts constitute a fraudulent scheme and whether Rule 10b-5 permits direct recovery from the defendants, who were not the publicly traded entity.