People For the American Way Foundation

Edit Memo: The Supreme Court vs. Individual Americans in the Citizens United Era: What’s on Tap for the Coming Supreme Court Term


Contact: Miranda Blue or Justin Greenberg at People For the American Way

Email: [email protected]

Phone Number: 202-467-4999

From: Paul Gordon, People For the American Way Foundation
To: Interested Parties
Date: October 3, 2011
Re: The Supreme Court vs. Individual Americans in the Citizens United Era: What’s on Tap for the Coming Supreme Court Term

Every year, on the first Monday in October, the Supreme Court of the United States begins its new term. In previous years, everyday Americans could look to the Court as the protector of their rights. When the powerless had their rights trampled upon in violation of the Constitution or other federal law, the Supreme Court more often than not made sure that the law of the land was enforced.

But during the Citizens United era, extreme right-wing ideology has too often trumped the law. The Roberts Court has again and again bent the law beyond recognition to find a way to rule in favor of the most powerful – especially corporations – and against everyday Americans whose rights have been violated. We certainly saw this in the last term, as PFAW Foundation Senior Fellow Jamie Raskin has written. This desire to prevent ordinary Americans from holding those who hold power over us accountable comes on top of the conservative Justices’ well-known zeal to dilute church-state separation, enhance the power of the state to engage in warrantless searches, restrict abortion rights, and insulate the government from all manner of lawsuits.

So during the Citizens United era, it is with trepidation and not hope that defenders of the Constitution and the rule of law look at the dawn of a new Supreme Court term. Here are a few of the cases we’ll be keeping an eye on in the coming months.

CompuCredit Corp. v. Greenwood: When does “you have the right to sue” mean “you don’t have the right to sue?”

This is the latest case where large corporations are alleged to have illegally victimized their customers, then have turned to the Roberts Court to protect them from being held accountable in court or by any type of class action. This case involves CompuCredit, a “credit-repair company” that used e-mail and Internet solicitations to market a subprime credit card to consumers with bad credit. Its pitch and the credit agreement said that no deposit was required and that customers would get $300 in credit upon issuance of the card. However, in small print separate from the “no deposit” promise, it disclosed that it would charge $185 in fees immediately and $257 in fees over the first year. The customers filed a class action lawsuit on behalf of others who were taken in, saying that CompuCredit violated the federal Credit Repair Organization Act (CROA).

However, CompuCredit had required its customers, as a condition of getting the credit card, to sign away their right to sue in a court of law or to engage in any type of class action, forcing them to agree to one-on-one binding arbitration instead. So the company demanded that the class action suit be thrown out of court.

The question is whether CompuCredit had the right to impose such an agreement on its customers, an issue that circuit courts have disagreed on. CROA requires credit providers to specifically tell customers in writing that “you have a right to sue,” a requirement that CompuCredit had met. In addition, CROA specifically prohibits any contractual provisions that waive a customer’s rights under the statute. So the customers argue that their agreement to forego anything but one-on-one arbitration is void.

In contrast, the company argues that the “right to sue” only means the right to bring a claim of some sort in some kind of forum, not necessarily in court. CROA has no provisions specifically giving consumers the right to sue in court; requiring credit repair companies to disclose a “right to sue” does not, by itself, create that right.

When the ordinary person sees the phrase “right to sue,” it is unlikely that anything but a courtroom enters their mind. When you yell in anger, “I’m going to sue you,” you aren’t threatening mediation. So when Congress required credit repair companies to inform potentially vulnerable and desperate customers with bad credit that they have a “right to sue,” did it really mean to trick those consumers into thinking they could protect their rights in a court of law when they really have no such right?

We’ll see how the Roberts Court answers that question this term.

Kurns v. Railroad Friction Products: Can railroad equipment manufacturers get away with exposing railroad employees to asbestos?

George Corson worked for the Chicago, Milwaukee, St. Paul, & Pacific Railroad for more than 25 years. Much of his job involved removing insulation from locomotive boilers and putting brake shoes on the locomotives, tasks performed while the rail cars were not in operation. After he retired, he developed a disease whose only known cause is asbestos exposure. Under state tort law, he sued the companies that manufactured the brake pads and engine valves he worked with regularly for designing dangerously defective products and for failing to warn him about the dangerous nature of their products. (Having died while the case went on, he is now represented by his family and his executor.) The trial court threw his case out, a ruling that was upheld by the Third Circuit. The court ruled that the federal Locomotive Inspection Act (LIA) preempted the state tort law, and that a subsequent federal law – the Federal Railway Safety Act (FRSA) – did not narrow that preemption.

The lower court acknowledged that this is not a case where a federal law expressly preempts conflicting state law, or where it is impossible to comply with a state law without violating a federal law. Rather, it classified this as a case of “field preemption,” where a state law intrudes upon a field reserved for federal regulation.

The Supreme Court held long ago that the LIA regulates the field of trains in use and requires equipment that makes trains safe to operate. However, as the deceased employee’s family argues, trains out of service for maintenance as in this case are clearly not “in use.” Nevertheless, the companies argue that the field of regulation occupied by the LIA encompasses all aspects of the design, construction, and safety of railroad equipment, parts, and appurtenances – characteristics that remain the same regardless of whether a train is “in use.”

Long after the LIA was adopted, Congress passed the far more comprehensive Federal Railroad Safety Act (FRSA), which empowers the Secretary of Transportation to regulate every aspect of railway safety. FRSA specifically allows state laws relating to aspects of railroad safety until the Secretary issues a regulation covering that subject matter. However, no federal regulations have been adopted relating to safety and health hazards at railroad maintenance facilities. Thus, while Congress has authorized federal preemption of state product liability and failure-to-warn laws, such preemption has not taken place.

Caraco v. Novo Nordisk: Can name-brand drug companies be held accountable when they mislead the federal government about the scope of their patents to prevent consumers from having access to generic versions of the drug for non-patented uses?

Prescription drugs can have any number of FDA-approved uses. The developer of a medication may receive a patent for one particular use of that drug, but not necessarily for all uses. For instance, a pharmaceutical company’s patent on using a well-known drug for urological purposes is separate from its patent for use of the exact same drug for male pattern baldness. The FDA maintains a list of patents associated with particular drugs, which generic drug makers rely on to determine if they have the right to market a drug for a particular use. However, the patent information is provided by the brand-name drug companies themselves, and the federal body charged with keeping the information lacks the expertise to monitor those filings for accuracy.

In this case, a brand name manufacturer (Novo Nordisk) is alleged to have falsely described one of its patents as being broader than it actually is, in order to block competition from generic manufacturers such as Caraco. Caraco sued to correct the information, under a counterclaim provision of the Hatch-Waxman Act adopted in 2003. However, the Federal Circuit Court ruled that Caraco could not file its counterclaim. It gave two reasons. First, it interpreted the statutory reference to a patent that “does not claim … an approved method of using the drug” to apply only when the patent does not claim any approved method of using the drug. Second, it said that because the patent holder is required to file only the patent number and expiration date, that inaccuracies in voluntarily provided descriptions of the patent’s scope cannot be filed against.

Rep. Henry Waxman, one of the bill’s principal authors, filed an amicus brief arguing that the Federal Circuit’s interpretation strains logic and goes against congressional intent to encourage rapid marketing of generic drugs for non-patented use. Adoption of the Federal Circuit’s interpretation “would enable brand companies to improperly delay generic competition for years, costing consumers and the health care system dearly.”

Pacific Operations v. Valladolid: Can oil and gas workers injured or killed on the job be denied workers’ compensation because of where the injury occurred?

This case involves the Outer Continental Shelf Lands Act (OCSLA), a federal law that extends workers’ compensation benefits for employees involved in oil and gas work for disability or death “resulting from any injury occurring as the result of operations (emphasis added) conducted on the outer Continental Shelf.” The question is whether the injury itself has to occur on the OCS.

Juan Valladolid worked for Pacific Operations Offshore and did about 98% of his work on their offshore drilling platforms on the OCS. However, one of his duties was to travel to his employer’s onshore oil processing facility to consolidate scrap metal from the drilling platform, a task done roughly once every two years. At the onshore facility, he was crushed by a forklift. His widow’s request for death benefits under the OCSLA was denied on the grounds that the accident did not occur on the OCS.

However, the Ninth Circuit looked at the plain language of the statute and found no requirement that the accident must occur on the OCS. The language makes clear that the geographic requirement applies to the operations, not the accident. Therefore, according to the Ninth Circuit, as long as there is a substantial nexus between the injury and the offshore operations, then the statute extends workers’ compensation benefits. The court remanded the case to determine whether such a nexus exists, but Pacific Operations and its insurance provider appealed the ruling to the Supreme Court.

Valladolid’s widow, as well as the Department of Labor’s Office of Workers’ Compensation Programs, urge the Court refrain from imposing a restriction, not in the statute, that accidents must occur on the OCS in order to trigger the OCSLA’s workers’ compensation provisions.

Credit Suisse Securities v. Simmonds: Should corporate insiders who are required to surrender profits from certain trades be rewarded for hiding those trades?

This case involves whether and how to toll a statutory two-year limit on enforcing a certain insider trading provision. To prevent the unfair use of inside information, Section 16(b) of the Securities and Exchange Act requires corporate insiders to surrender back to the company any trading profits from the purchase and sale (or vice versa) of corporate equity that occur within a six-month period (“short swing” transactions). The statute allows the corporation itself to bring a cause of action for surrender of the short swing profits. If the corporation does not act within 60 days, the statute empowers any stockholder to sue the insiders to compel them to surrender the profits.

Critically, Section 16(b) states that “no such suit shall be brought more than two years after the date such profit was realized.” In this case, the short swing trades occurred in 1999-2000, but plaintiff did not initiate her lawsuit until 2007. The Supreme Court will decide if the statutory two-year period can ever be tolled.

Short swing transactions by corporate insiders must be reported to the SEC. In this case, they never were. The Supreme Court has previously held that, in general, when a defendant has misrepresented or wrongfully concealed material facts essential to the plaintiff’s cause of action, a statutory time limit is tolled. Otherwise, the law rewards those who engage in deception in order to avoid accountability.

Nevertheless, the corporate insiders in this case argue that under no circumstances can the period be tolled: After two years, no matter what, even if the insiders unlawfully keep their short swings secret, no one can file suit for them to surrender their profits. Perhaps not surprisingly, the U.S. Chamber of Commerce has filed an amicus brief fully backing this interpretation. This would not only create an incentive for insiders to hide reportable but legal transactions, it would also create an incentive for them to engage in those discouraged transactions in the first place.

Far more reasonably and consistent with longstanding statutory interpretation, the Second and Ninth Circuits, as well as the Obama Administration in an amicus brief, all agree that the two-year period can be tolled for equitable reasons. While they differ significantly on exactly what circumstances trigger the tolling, they all firmly reject the position taken by the corporate officials in this case.

Hosanna-Tabor Church v. EEOC: How far should the “ministerial exception” protect religious entities from lawsuits against them for engaging in illegal employment discrimination?

For the first time, the Supreme Court will address the existence and scope of the “ministerial exception,” a judicially recognized legal doctrine that has been misused by courts to improperly shield religious employers from unlawful employment practices. Except when federal funding is involved, religious entities may lawfully discriminate on the basis of religion. Otherwise, they are subject to the same anti-discrimination laws as everyone else. They may not lawfully discriminate on bases such as race, sex, and disability.

At the same time, because of the First Amendment, cases involving religious employers can have constitutional implications not applicable to other entities. The Free Exercise Clause protects the right of religious organizations to decide issues of faith, doctrine, and church governance for themselves free from government interference. In addition, the Establishment Clause prohibits excessive entanglement between government and religion. Therefore, 40 years ago, a federal appellate court created the “ministerial exception,” a narrow exception to federal prohibitions against employment discrimination, intended to prohibit judicial review into substantive ecclesiastical matters involving a church and its minister.

However, the intervening four decades of jurisprudence have resulted in religious organizations receiving seemingly absolute deference in contested employment decisions that involve neither substantive ecclesiastical matters nor ministers. Because of this inappropriately high degree of deference, the ministerial exception has been extended far beyond its original scope, essentially shielding religious organizations from anti-discrimination laws that apply to all.

In this case, Cheryl Perich was fired from her job as a teacher from the Hosanna-Tabor Evangelical Lutheran Church and School. She claims that the firing was done in retaliation for her having complained about prohibited discrimination that violated the Americans with Disabilities Act. This was a commercially operated school where she taught secular subjects. She also taught a religion class, which the school did not require be taught by a Lutheran. She was not an ordained minister. She started without a title and with a one-year renewable contract. However, she eventually became a “called” teacher, holding a title of “commissioned minister,” which the church bestows upon any teacher who takes a course of study and is offered open-ended (as opposed to one-year renewable) teacher contracts. The school’s non-Lutheran teachers (and contract teachers) had the same duties, and performed the same functions, as called teachers.

People For the American Way Foundation has submitted an amicus brief in this case in support of Perich, pointing out that courts must be able to determine whether a religious justification for an employment decision is simply pretext for a secular and prohibited discriminatory purpose. Courts can do this without threatening First Amendment rights, and they should not be prevented from doing so.