THE SUPREME COURT:A look at the unique position of Chief Justice, and a preview of key cases to be decided in the October Term 2005
This summer marked an unusual time in American legal history. With the resignation of Associate Justice Sandra Day O'Connor and the death of Chief Justice William Rehnquist, two positions on the United States Supreme Court were simultaneously available to be filled.
The Role of the Chief Justice
This summer marked an unusual time in American legal history. With the resignation of Associate Justice Sandra Day O’Connor and the death of Chief Justice William Rehnquist, two positions on the United States Supreme Court were simultaneously available to be filled.
Technically, however, there were not two positions unfilled, since Justice O’Connor made her resignation effective upon the confirmation of her replacement. President Bush nominated Judge John Roberts of the United States Court of Appeals for the District of Columbia Circuit for Justice O’Connor’s seat. However, upon Justice Rehnquist’s death, President Bush nominated Roberts for the position of Chief Justice instead, thereby ensuring that Justice O’Connor would remain an active member of the Court for longer than she probably had anticipated.
Chief Justice Rehnquist’s death marked the first time since 1986 that the position of Chief Justice has been vacant. Exactly what is the role of the Chief Justice? The only federal judicial position created by the United States Constitution is the office of the Chief Justice — all other judicial offices have been created by act of Congress. Because of the uniqueness of the office of the Chief Justice, Congress has charged that office with oversight and administration of the judicial branch of the U.S. government. Accordingly, the Chief Justice oversees the preparation of proposed budgets for the federal courts, directs the collection and dissemination of statistics regarding the federal courts and plays a major role in allocating the limited resources of the judicial branch to various courts throughout the country. The Chief Justice selects the members of the Court who present the judicial branch’s budget request to Congress and who will testify regarding the same. The Chief Justice is required to provide an annual statement on the state of the federal courts to Congress. In essence, this task has provided the Chief Justice with an opportunity to express the concerns of the federal judiciary, such as low wages and insufficient staffing and other resources. In addition, the Chief Justice has often used this opportunity to influence political discussions regarding the role of the federal judiciary and its independence from the other branches of government.
If the Chief Justice has voted with the dissenters, he has the right to determine which justice shall write the principal dissenting opinion.
The Chief Justice also plays an important role in the workings of the Court itself. According to Supreme Court tradition, after the Court has heard oral argument and has initially voted on the outcome, the Chief Justice decides which Justice will write the opinion of the Court if the Chief Justice has voted with the majority. If the Chief Justice has voted with the dissenters, then he has the right to determine which Justice will write the principal dissenting opinion. In essence, this permits the Chief Justice to exert influence via the assignment of certain opinions to specific Justices, with the hope of garnering more votes for his position.
Before the death of Chief Justice Rehnquist, the Court had agreed to review a number of issues important to the business community.
And Then There Were Eight
Subsequent to Justice O’Connor’s announcement of her retirement but prior to the death of Chief Justice Rehnquist, the Court continued to operate with all of its positions filled: the constitutionally mandated position of Chief Justice and the eight statutorily created positions of Associate Justice. After Rehnquist’s death, because it was during the summer months and the Court was not in session, the Court continued to deal with requests by litigants to have their cases heard by the Court, known as petitions for a writ of certiorari, and with emergency matters such as requests to stay certain lower court orders. Any emergency matters that came before the Court were reviewed by the Justice responsible for overseeing such matters from the particular region of the country from which the emergency petition arose. As for petitions for a writ of certiorari, those matters were still reviewed by the Court as a whole, and no petition could be granted without the vote of at least four members of the Court. Thus, prior to the death of the Chief Justice, a petitioner to the Supreme Court needed the votes of four Justices out of nine to have his case heard by the Court. However, when the Court’s membership dropped to eight Justices with the death of Chief Justice Rehnquist, petitioners were required to receive the votes of four Justices out of only eight, a slight change in the odds that one’s case would be heard by the Court.
By statute, Associate Justice John Paul Stevens, by virtue of his being the most senior Associate Justice, immediately assumed the duties of Chief Justice until a new Chief Justice could be confirmed. Although not readily discernable to outsiders, this enabled Justice Stevens to exert slightly more influence over the Court during this interim period. By tradition, it could be expected that Justice Stevens led the discussions regarding pending petitions for a writ of certiorari and was the first to express his opinion regarding whether certain cases should be heard. Justice Stevens also was able to play a role in determining the Court’s oral argument schedule.
October Term 2005
Although recent events regarding the recomposition of the Supreme Court have proven to many to be very interesting from both a political and historical perspective, the Court’s substantive docket also deserves attention. Before the death of Chief Justice Rehnquist, the Court had agreed to review a number of issues important to the business community, some of which are summarized below.
Buckeye Check Cashing, Inc. v. Cardegna (Case No. 04-1264)
The Federal Arbitration Act generally requires federal and state courts to enforce arbitration provisions in contracts that affect interstate commerce. The Supreme Court has long held that arbitration provisions should be enforced but also has recognized that a claim that the plaintiff’s assent to an arbitration clause was fraudulently induced is not itself subject to the strictures of the Federal Arbitration Act and should not be referred to arbitration. This case presents the related issue of whether questions regarding the legality of a contract containing an arbitration clause are themselves subject to arbitration. In the case below, the Supreme Court of Florida held that the Federal Arbitration Act did not apply to the question of whether the underlying contract violated the usury laws of the State of Florida (if the contract were usurious, no provision of the contract could be enforced because the entire contract would be illegal). Specifically, the court concluded that any claim that a contract is illegal must be decided by a court before any dispute arising out of that contract may be referred to arbitration. The issue before the Supreme Court has the potential to create an added defense to the enforcement of an arbitration provision governed by the Federal Arbitration Act.
Domino’s Pizza, LLC v. McDonald (Case No. 04-593)
After the Civil War, Congress enacted 42 U.S.C. Â§ 1981, which guarantees each citizen the right to make and enforce contracts free from racial discrimination. Most courts have determined that someone who is not a party to a contract cannot claim that the terms or enforcement of the contract violates Section 1981 as a result of any alleged racially discriminatory effect. This case involves the sole shareholder of a company that had a contract with Domino’s Pizza. After Domino’s Pizza terminated its contract with the company, the shareholder filed an action against Domino’s Pizza alleging that the contract had been terminated because the shareholder was African-American. The shareholder alleged that he had suffered financial loss, emotional distress, mental anguish and humiliation as a result of the termination of the contract. The Court of Appeals for the Ninth Circuit held that even though the shareholder was not a party to the contract between his company and Domino’s Pizza, he had standing to assert a claim that the termination violated Section 1981 and that he had suffered damages for the violation. In essence, the Ninth Circuit concluded that the shareholder could assert a claim for his injuries separate and apart from any contract damages suffered by his company. This ruling will be the subject of the Supreme Court’s review.
Federal Diversity Jurisdiction
Lincoln Property Company v. Roche (Case No. 04-712)
The diversity jurisdiction of the federal courts is established statutorily in 28 U.S.C. Â§ 1332(a). In order for plaintiffs to rely on diversity jurisdiction to file an action in federal court, all of the plaintiffs must be citizens of states different from all of the defendants and the amount in controversy must exceed $75,000. Recurring questions focus on how to determine the citizenship of a defendant. A partnership is traditionally considered a citizen of every state in which one of its members is a citizen. In this case, the Fourth Circuit held that diversity of citizenship did not exist even though all of the defendants were citizens of states different from all of the plaintiffs. To reach its conclusion, the Fourth Circuit held that an entity not a party to the lawsuit was the real party in interest, i.e., the entity should have been a defendant in the action, even though no party had sought to name it as a defendant in the lawsuit. In order to determine that the unnamed entity, a limited partnership, destroyed diversity, the Fourth Circuit held that although the partnership did not have any partners who were citizens of Virginia — the state of citizenship of the plaintiff — the partnership would nonetheless be considered a citizen of Virginia because the partnership had a close nexus to the state. Although a somewhat similar test is often employed to determine the citizenship of corporations, it has never been applied to partnerships. If the decision of this case is affirmed, partnerships will be considered citizens not only of the states in which their partners are citizens, but also of any state in which the principal place of business for the partnership is located as well as potentially other states with which the partnership has a close nexus. Such a ruling could greatly reduce a partnership’s ability to avail itself of a federal forum.
It has generally been accepted that an institution can be defrauded even if its employees allowed or participated in the fraudulent practices.
Federal Diversity Jurisdiction
Wachovia Bank, N.A. v. Schmidt (Case No. 04-1186)
As discussed above, pursuant to 28 U.S.C. Â§ 1332(a), the federal courts can exercise jurisdiction over cases not based upon violations of federal law only if the parties are citizens of different states and the amount in controversy exceeds $75,000. Another federal statute, 28 U.S.C. Â§ 1348, specifically states that national banking associations are to be deemed citizens of the states in which they are located. In this case, Wachovia sought to bring an action in the United States District Court for the District of South Carolina against certain citizens of South Carolina. Because Wachovia has its principal place of business and main office in Charlotte, North Carolina, Wachovia believed that it had citizenship different from the defendants and could avail itself of federal court jurisdiction. However, the Fourth Circuit held that, pursuant to 28 U.S.C. Â§ 1348, a national bank is a citizen of every state in which it has a branch, effectively guaranteeing that neither Wachovia nor any other national banking association could ever bring a claim in federal court based on diversity jurisdiction against a defendant who is a citizen of any state in which the national banking association does business. This case has the potential to curtail drastically the availability of a federal forum for federally chartered banks.
Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. (Case No. 04-905)
As part of the antitrust laws of the United States, the Robinson-Patman Act, 15 U.S.C. Â§ 13(a), prohibits price discrimination between different purchasers of commodities when the effect of such price discrimination may be to lessen competition substantially. In this case, a distributor of Volvo trucks brought a claim against Volvo Trucks North America (“Volvo Trucks”) claiming that because Volvo Trucks had made an offer to sell certain trucks to it at a price higher than that quoted to another purchaser, Volvo Trucks violated the Act even though the distributor did not actually purchase any trucks at the higher quoted price. The distributor also claimed that Volvo Trucks had violated the Act by offering its products to other distributors at lower prices than those offered to it even though the other distributors were selling their trucks to different end purchasers and were not competing with the distributor in suit. The Eighth Circuit held that in order to make out a violation of the Act, the distributor did not have to show that it had actually purchased trucks at the higher price, but merely that it had previously purchased trucks. Further, the Eighth Circuit held that the distributor was required to demonstrate only that other distributors received a lower price, not that it actually competed with the other distributors who enjoyed the lower price. The issues in this case have significant implications for manufacturers and distributors in the pricing and distribution of their products.
Illinois Tool Works, Inc. v. Independent Ink, Inc. (Case No. 04-1329)
Section 1 of the federal Sherman Act prohibits a seller from offering to sell a certain product on the condition that the purchaser also purchase a tied product. In order to prevail on a Sherman Act claim, the purchaser generally must demonstrate that the seller exercised appreciable economic power in the tying product market such that the purchaser essentially had no option but to purchase both products. The Supreme Court previously has held that such appreciable economic power is presumed when the tying product is patented or copyrighted. In this case, on appeal from the Federal Circuit, the Supreme Court has been asked to reconsider this presumption. If the presumption is overturned, a purchaser would then be required to show actual appreciable economic power independent of the existence of a patent or copyright. A favorable outcome in this case could greatly alleviate concerns of Sherman Act liability for patent or copyright holders who do not necessarily possess market power.
Bank of China v. NBM, LLC (Case No. 03-1559)
The federal Racketeer Influenced and Corrupt Organizations Act (RICO) has long been a statute whose remedies have been sought by litigants — in particular, because a successful plaintiff can recoup treble damages. RICO requires, among other elements, that the plaintiff demonstrate that the defendant has engaged in certain predicate acts in violation of certain criminal laws of the United States. Often, a RICO plaintiff will seek to base his recovery on acts of wire or mail fraud. In most cases, the plaintiff alleges that acts of mail and wire fraud were used to carry out the criminal enterprise in violation of RICO even though the plaintiff may never have received, reviewed or relied on the materials transmitted in violation of the mail- and wire-fraud statutes. In addition, for purposes of RICO, it generally has been accepted that an institution can be defrauded even if its employees allowed or participated in the fraudulent practices. In other words, the entity is not presumed to know that its agents and employees are engaging in illegal acts and or to have ratified those acts. In this case, the Second Circuit held that a bank could not assert RICO claims premised on mail and wire fraud unless the bank could establish that it had reasonably relied on the information contained in the mail and wire transmissions. In addition, the court held that a bank could not be defrauded in violation of RICO if any of the bank’s employees were aware of the fraud or participated in it. The issues in this case have the potential to restrict greatly the ability of a RICO plaintiff to assert claims unless the plaintiff can demonstrate reliance on the communications comprising the underlying predicate act of mail or wire fraud, and the ability of a RICO plaintiff to assert claims if any of its employees participated in the fraud.