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The Supreme Court Term in Review

Part 3- Businesses, the Environment, and Land Use Regulations

Perhaps one of the biggest criticisms of the Supreme Court under John Roberts as Chief Justice from liberals on and off the Court is the alleged “favoritism” shown towards business interests. Statistically speaking, this Court does take on a large number of cases that involve business. The main criteria used to determine the importance of these interests is how the US Chamber of Commerce performs before the Court. Although they are not direct parties in cases, they do file “friend of the Court” briefs (called amicus briefs). Some of these are at the petition stage. When their view is taken into account compared against the eventual outcomes, the Chamber of Commerce’s view prevails 69% of the time under Roberts. For the sake of comparison, the success rate was 56% under Rehnquist and 43% under Burger. In terms of just getting the Court to take a case, the Chamber has a one in three chance of success- by far the highest success rate of any private party interest when filing amicus briefs. Furthermore, the conservative wing of the Court sides with the Chamber 82% of the time while liberals side with them only 19% of the time.

While many can use these facts against Roberts, it was Justice Lewis Powell who urged business interests to argue their cases before the Court to “combat enemies of the free enterprise system.” The Chamber is simply heeding that call. Additionally, since they are the preeminent spokesperson for business and corporations and since businesses and corporations are parties to a dispute in a case in many instances, it would stand to reason that the Chamber would intervene. If they did not offer their opinion, they would be abrogating their stated mission.

A study by liberal Thinkprogress.org noted that Justice Alito and Chief Justice Roberts have the most pro-business opinions in the period from 1946 to 2012. However, Roberts’ level of agreement is about equal to that of Justices Robert Jackson and Charles Evan Whittaker. Scalia, whom many consider the most conservative Justice, has an agreement rate roughly equal to that of Felix Frankfurter and Lewis Powell. On the whole, they are not that far out of the mainstream as liberals would have us believe.

The two areas where business interests are most litigated is in the areas of arbitration and class action lawsuits. A little on these in a bit. There are cases of another nature that affect businesses also. For example, the two Title VII cases discussed in the earlier entry- Nasser and Vance- helped shield employers from discrimination and retaliation claims. The Kiobel decision made it more difficult for anyone to use American courts to litigate against corporations for actions on foreign soil.

There are also environmental cases that also affect business interests. For example, the Koontz decision and the American Trucking cases this term can be considered both pro-business and anti-environmental simultaneously (as well as the Georgia Pacific case, but that was more entailed and nuanced).

Regarding arbitration, the Court has increasingly turned to arbitration rather than court litigation to resolve alleged wrongs. First, arbitration certainly alleviates the workload of overburdened courts. From a business standpoint, arbitration is simply less costly than court litigation. These arguments against Roberts and his alleged “closing the courthouse door” in favor of arbitration was really the focal point of liberal rage a few terms ago in the ATT vs. Concepcion case. As is usual, the Left portrayed this is a battle of David versus Goliath with Concepcion on the hook for something like $37. Instead, the Court ruled that the service contract with ATT specified arbitration as the dispute resolution method. The ire of liberals this year is American Express vs. Italian Colors Restaurant because not only did the Court rule in favor of arbitration, it also blocked a class action lawsuit against the corporation.

Arbitration to a company is certainly cheaper than court actions, although it can be expensive to those allegedly wronged. Conversely, a court victory for a plaintiff costs both parties money with a potential payoff for the plaintiff at the end of the rainbow. Thus, plaintiffs can diffuse their individual costs of litigation by having a case class certified. That was exactly what Italian Colors sought to do and the lower courts agreed. The Supreme Court disagreed. While many view this as another example of closing the courthouse door, a more appropriate view is that the Court upheld the validity of a contract. The fact is that both parties entered into a contract and that contract specified arbitration for the resolution of disputes.

Another case involving class action was the Genesis Health Care case. Here, a woman sued the company for civil rights violations and had the case class certified. While the case languished in the courts, the company settled with the employee to her satisfaction. The question was should the class action suit continue? The Court ruled that the entire case should have been rightfully dismissed; that is, once the primary plaintiff settles, the class action becomes moot. And of course there was the Comcast decision which has been kicking around the lower courts for years. Here, the Supreme Court raised the bar for proving damages and liability on the part of the corporation thus making class certification more difficult in the future.

Many, many liberals are highly upset over the Monsanto decision this year, not because of any legal rationale, but simply because they despise Monsanto. In this case, a farmer purchased patented genetically modified corn seeds, sowed and harvested his crop, but held back some seeds from the genetically modified crop. The problem was that Monsanto had a licensing agreement with sellers of their seeds that they cannot be, in effect, recycled and used again. Once again, a little thing called a contract gets in the way of the liberals. Bowman, the plaintiff in this case, knew full well what he was doing which was basically circumventing patent laws.

Despite all this liberal hand-wringing, there are some very important considerations in all these cases. Yes, they look like the big bad corporations are running roughshod over consumers and employees. But, there are major points to be made. First, most of these cases involved either an explicit or an implied contract. If a contract specifies arbitration, that should be it. To the signers of contracts, they should be aware of what they are signing. Secondly, detractors make the assumptions that courts are always the better decision-makers than arbitrators. Third, and most importantly, all these cases do NOT involve constitutional issues, but are instead cases of statutory interpretation. Regarding arbitration there is the Federal Arbitration Act and regarding class certification, there are the Rules of Civil Procedure which all courts follow. Tangentially, the only thing approximating a constitutional question is that of procedural due process. That is, are people being denied “their day in court?” Congress made a very specific finding for various reasons after much thought and debate before passing the Federal Arbitration Act. Apparently, they did not write it that well (surprised?) since there are so many cases before the Supreme Court. But the solution is instead of whining and crying about the Court, change the law legislatively. Nothing is preventing Congress from amending the FAA or specifying the rules for class certification in federal courts.

In environmental cases, the general consensus among liberals is that the Roberts Court shies away from “writing” environmental law and well they should. Instead, they rely on the statutory text and generally defer to the federal government in this area. That was certainly the case in Massachusetts vs. EPA when they determined that greenhouse gases could be regulated by the EPA (in my opinion, along with Kelo, a really bad decision). In fact, of the four cases with environmental ramifications, the Court followed the lead of the federal government’s arguments three times- contrary to the views of environmental groups- and upheld EPA guidelines and interpretations of the Clean Water Act. In the other case- American Trucking Association vs. Los Angeles County- the Court ruled that federal law preempted the local regulations on trucks servicing the Port of Los Angeles and was running afoul of both the Commerce and Supremacy Clauses. Make no mistake- this was a business-friendly decision that was anti-environmental in that it relieved the trucking industry of costly local/state regulations.

There are two other cases that involve environmental law and the favorite ploy of environmentalists- land use regulations. The most important of these was the Koontz decision. Previous to this year, the Court ruled that land use regulations where the government exacts the transfer of property or a “fee” for the purpose of the regulation was acceptable provided that the transfer was proportional AND that it served the stated purpose. For example, if a regulation seeks to protect wetlands and a person owns 10 acres of land which are designated wetlands and wishes to develop one acre of that land, the government can seek an easement where the remaining nine acres remains undeveloped IF the value of those nine undeveloped acres approximates the value of the one developed acre. The government cannot, for example, exact an easement if the value of the developed parcel is $1 million and the undeveloped parcel is $15 million. That is not a proportional amount. Also, barring that, governments are free to negotiate, in the alternative, the land owner not to transfer an easement on the remaining 9 acres, but a “fee” to preserve comparable land elsewhere. In this example, they may simply decide that the value of the developed land is $1 million and they may require that the owner “purchase” land elsewhere for conservation purposes- sort of like plant a tree somewhere for every tree you cut down. Since the purpose of the law is to preserve wetlands, they cannot force an owner to develop an interstate interchange or to purchase some desert land elsewhere. Koontz was denied a permit. The law had been settled in the case of permit applications that were approved. This case asked about whether denials fall under the same scrutiny.

The Court decided that they do lend themselves to the same scrutiny. Hence, land use regulators must think twice and hard about the conditions they place on permit applications before approving or denying them. Justice Alito said it best: “Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation.” Koontz argued his case under the Takings Clause, but was rebuffed in the lower courts. This term, the rights of landowners took precedence over those of these regulators, no matter how good their intentions. Again, liberal websites are aghast at the decision saying it will set back environmental law years. However, in reality, the Court simply cleared the way for Koontz to have his day in court to determine what “just compensation” is in the first place. Kagan, in her dissent, said that the decision calls into question many state and local land use regulations. In other words, in the view of Kagan and company, local and state regulators will be inconvenienced. When inconvenience is confronted by a constitutional right, inconvenience must give way. Furthermore, nothing in this decision said land use regulations were unconstitutional. Everything in that opinion said that the government must (1) be careful and (2) make the exaction of a fee proportional and related to the purpose of the regulation. In effect, the Court ruling said that federal scrutiny applies even when the government asks a property owner to spend money in exchange for a permit without imposing directly on the property. Folks- under ordinary circumstances and contexts, this would be the classic definition of extortion: “Do this or pay that in order to get that permit.” Ironically, the Court said this extortion is fine provided there is that nexus and proportionality in what the government asks/demands.

The other case which went largely unnoticed this term was another Takings Clause case involving not a private citizen, but an entire state. In Arkansas Game and Fish Commission vs. United States, the Court ruled that a temporary flooding of state-owned property that had economic value by a federal flood water control program was a Taking and that the state could litigate the case in court. Note that the Court did not tell the government to pay Arkansas for their losses, but merely give Arkansas their day in federal court. Perhaps, this case was unnoticed because of the unanimous 8-0 decision written by a liberal, Ginsburg. But the case has ramifications not only for states but for private citizens when a government action distant from a property has an effect nevertheless on that property that denies the owner the use and economic advantages of that property. The periodic flooding designed to help farmers upstream inundated at regular intervals an Arkansas state forest used for fishing, hunting and timber. Essentially, the flooding, because it was intermittent the government contended, could not be a “Taking” in the truest sense of the word, but a unanimous Supreme Court disagreed. Like Koontz above being given his day in court, the Supreme Court cleared the way for Arkansas to have their day in court in order to exact “just compensation.”

These two cases illustrate what I believe to be very important victories for the rights of property owners, especially under the Takings Clause. Several terms ago when Sandra Day O’Connor was still on the bench, the Court issued perhaps one of their worst decisions in decades- the Kelo decision involving eminent domain. Hopefully these two decisions this year are the beginning of a roll-back of Kelo where the scales are tipped more towards the property owner instead of the government.

In the end, is the Roberts Court “pro-business?” Perhaps, that is the wrong question to ask. The better question would be: Is the Roberts Court “pro-free enterprise?” and to that question one would hope the answer is a “yes.” Without writing law, their statutory interpretations take advantage of loopholes in the text of those ill-written laws to thwart an increasingly regulatory state. Secondly, is the Roberts Court “anti-environmental?” Again, this may be the incorrect question to ask since they again base their decisions on statutory text and have in the past, like this term, deferred to the federal government’s interpretations. It just so happened that this term, the government’s views were at odds with those of the environmentalists who wanted the Court to greatly expand the scope of the Clean Water Act. Finally, is this Court “pro-property owner?” One would pray that they are, but nothing in the Koontz or the Arkansas decisions said that regulations are unconstitutional, only that they be fair and not extortionate. It is very ironic that on the day Obama announced his great commitment to the environment, the Supreme Court released their Koontz decision which has so angered the environmental community. Coincidence?

Next: the criminal law cases

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