Although many a disappointed litigant has threatened to appeal its case “all the way to the Supreme Court,” review of any case by the United States Supreme Court is hard to come by. This difficulty in obtaining Supreme Court review in turn serves to heighten the significance of any opinion rendered by the Court.

What the Supreme Court Does

Under Article III of the United States Constitution, the Supreme Court exercises the ultimate judicial power of the United States. Since its earliest days, the Court’s power of judicial review has made it an important arbiter for defining individual rights and checking governmental authority.

The Supreme Court reviews decisions of the federal courts of appeal and the state supreme courts. Many of its more newsworthy decisions address issues of criminal procedure and individual liberties. However, as the role of federal law in economic and business affairs has expanded, the Court’s role in construing acts of Congress has also grown in significance.

**Cases Heard by the Court **

Except in a few very unique circumstances, no party has a legal “right” to review by the United States Supreme Court. A disappointed litigant must present the Court with an application, called a petition for writ of certiorari, to request to have its case reviewed. While the Supreme Court receives over 7,000 such requests every year, it considers the merits of only about 130 to 150 cases per term.

Under the Supreme Court’s own rules, it will grant review only “for compelling reasons.” In other words, in seeking Supreme Court review, a party must do more than argue simply that a state supreme court or a federal court of appeals “got it wrong.” The most fertile grounds for convincing the Supreme Court to review a case are (1) that the federal or state courts have issued conflicting decisions on an issue of federal law or constitutional interpretation; or (2) that the case presents an important question of federal law that should be resolved by the Supreme Court. In the latter circumstance, the legal issue might be one that has recurred frequently in the lower courts or raises significant economic or public policy issues.

The nine Supreme Court justices cannot personally review all 7,000 of the requests for consideration the Court receives. They rely upon their law clerks, recent graduates from top law schools, to screen the petitions and summarize them. When the Court is in session from October to June, the Court holds conferences every Friday. The Justices discuss the petitions at those conferences and vote on whether to consider each case on its merits. An affirmative vote from four of the nine Justices is required to grant review. The Court subsequently announces which cases it will consider. If the Court grants review, the parties file briefs on the merits and the Court hears oral argument.

Because of the difficulty of obtaining Supreme Court review, a party that believes it has a case genuinely meriting Supreme Court consideration should consider retaining a Supreme Court specialist. A small group of lawyers, generally residing in Washington, D.C., devote their practices to representing clients before the Supreme Court. Given the reputations and skill of these specialists, the Court is more likely to take seriously a petition for review in which one of these lawyers participates.

October Term 2004 Cases To Watch

For the October Term 2004, the Supreme Court has granted review and assigned for oral argument the following cases of particular interest to the business community. All of them will be decided by the end of June 2005.

Age Discrimination
Smith v. City of Jackson, MS

The Court will decide whether the Age Discrimination in Employment Act of 1967 (the ADEA) provides a cause of action for “disparate impact.” At issue is a pay plan that the petitioners–police officers and public safety officers–contend resulted in pay increases to officers under 40 years of age that, when subjected to statistical analysis, were four standard deviations higher than the raises received by officers over 40. While the ADEA recognizes claims for “disparate treatment”–that is, policies as to which age actually motivated the employer’s decision–the courts of appeals are divided as to whether the ADEA also recognizes claims for “disparate impact”–that is, where a policy is facially neutral in its treatment of different groups but in practice falls more harshly on one group than another and cannot be justified by business necessity. This case is significant given the large number of individuals who are 40 years and over in today’s workplace, as well as the fact that the “disparate impact” theory of discrimination under the ADEA has already spawned a significant amount of litigation in those circuits that have recognized the theory.

Tax Treatment of Contingent Fees
Commissioner of Revenue v. Banks; Commissioner of Revenue v. Banaitis

In these cases, consolidated for oral argument, the Court will decide whether attorney’s fees paid by a taxpayer to his lawyer pursuant to a contingent fee agreement are taxable as gross income to the taxpayer. The courts of appeals are divided on this issue, primarily because they have looked to how the underlying applicable state law treats contingent fee arrangements. Where the state law creates a property interest (i.e., a lien) in the lawyer’s favor, the courts have not included the attorney’s fee portion of a recovery in the taxpayer’s gross income. Conversely, where state law does not confer an ownership interest upon the lawyer, the contingent fee arrangement is considered an “anticipatory assignment of income,” which results in the lawyer’s portion of a recovery being taxable as gross income to the taxpayer. As the analogy frequently used in these cases goes, the question is whether the taxpayer may be viewed as having “transferred some of the trees from the orchard, rather than simply transferring some of the orchard’s fruit.” By granting the Commissioner’s petitions for certiorari, the Court likely intends to use the opportunity to state a uniform rule on the federal tax treatment of a contingent fee arrangement that is not dependent on individual state law.

Interstate Alcohol Sales
Granholm v. Michigan Beer & Wine Wholesalers Ass’n; Michigan Beer & Wine Wholesalers Ass’n v. Heald; Swedenburg v. Kelly

In these three cases, consolidated for oral argument, the Court will decide the constitutionality of state statutory and regulatory schemes that permit in-state wineries to ship alcohol directly to consumers, but restrict the ability of out-of-state wineries to do so. The plaintiffs in each case–wine consumers, wine journalists and out-of-state wineries–claim that such statutory systems violate the “dormant” Commerce Clause of the Constitution, which limits the authority of the states to enact legislation affecting interstate commerce, and provides an unconstitutional advantage to in-state wineries. The defendants–state officials, wholesale distributors and trade associations–contend that the regulatory schemes constitute a proper exercise of state authority under the Twenty-First Amendment, which prohibits the transportation or importation of alcohol into a state “in violation of the laws thereof.” The various defendants contend further that state regulation of sales into the state by out-of-state wineries is necessary for tax collection and prevention of the sale of alcohol to minors and that overturning such regulations would create “import alcohol anarchy.” The issue to be decided in these cases is particularly significant in view of the ease with which consumers can purchase wine from out-of-state wineries via the Internet unless prohibited by laws such as those at issue in these cases.

Bankruptcy Treatment of IRAs
Rousey v. Jacoway

Here, the Court will decide whether Individual Retirement Accounts (IRAs) are exempt from a bankruptcy estate. In general terms, a debtor in bankruptcy retains property that is subject to an exemption, while the remainder of his non-exempt assets are divided among his creditors. On the issue of IRAs, the courts of appeals have taken three different approaches. Some circuits have interpreted the Bankruptcy Code to permit exemptions for all payments from IRAs. Another circuit (the Eighth Circuit) has held that IRAs are not exempt. The Third Circuit has taken yet another position: “present payments”–that is, payments received by persons who have already reached the statutory age (59-1/2) that entitles them to withdraw funds from their IRAs–are exempt, while “future payments” are not. Given the large number of American households (more than 40 percent) holding an IRA, coupled with the large number of individual bankruptcy petitions filed in the United States (more than 1.1 million in 2003), this case will have significant financial implications for a substantial portion of the American public.

Contribution for Environmental Cleanup
Cooper Industries, Inc. v. Aviall Services, Inc.

The issue in this case is whether a private party that has not been the subject of a civil action for either an administrative abatement order or recovery of the cost of cleanup can nevertheless bring an action seeking contribution pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). In this particular case, the plaintiff buyer of four contaminated industrial facilities sought contribution from the defendant seller. The buyer spent millions of dollars to clean up the purchased property, but was never the subject of any federal or state enforcement action or litigation. The Fifth Circuit held that despite CERCLA’s pronouncement that a person may seek contribution “during or following” a civil action for abatement under section 106 of CERCLA or for recovery of cleanup costs under section 107(a), a “savings clause” in the same statute authorizes suits against potential responsible parties without regard for whether the party seeking contribution was itself ever the subject of a civil suit for abatement or cost recovery. The case obviously has significant implications for the allocation of financial responsibility for environmental cleanup, and for the expenditure of funds to conduct voluntary cleanup in the first place.

“Fair Use” Defense to Trademark Infringement
KP Permanent Make-Up, Inc. v. Lasting Impression, Inc.

The Court will resolve a circuit split as to whether the classic “fair use” defense to a trademark infringement claim requires the party asserting the defense also to prove the absence of likelihood of confusion. At issue in this case is the parties’ competing use of the term “micro color” to describe permanent makeup used to hide scars. The alleged infringer prevailed on summary judgment when the district court concluded that its use of the term was protected by the “fair use” defense of the federal Lanham Act, which is applicable when the alleged infringer has used a term only to describe his own product and not the trademark holder’s product. The Ninth Circuit disagreed, holding that “there can be no fair use if there is a likelihood of confusion.” Among other things, the trademark holder argues that the “likelihood of confusion” test is necessary to protect consumers from unwittingly purchasing inferior or unsafe products as a result of confusion as to the source of a product.

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The information contained in this overview was compiled from the opinions of the lower courts, petitions for certiorari, the parties’ briefs on the merits, and information contained on the Court’s Web site.