Federal Courts and Nominations

A Right-Leaning Court Will Tackle Some Big Business Cases. The Outcomes Aren’t Obvious.

President Donald Trump appears poised to cement a supermajority of conservative justices on the nation’s highest court. On Saturday he nominated Amy Coney Barrett, a federal appeals court judge, to fill Ruth Bader Ginsburg’s seat. Senate Republicans aim to confirm her before or after the election in November.

The battle over Trump’s nominee is likely to consume Washington over the next few weeks, stalling other legislative action, including another coronavirus relief package. The markets have grown skittish at the prospect of a fight that could extend past the election. And President Trump has said he wants a new justice to weigh in on the results. Chaos isn’t good for Wall Street, but if there’s good news for businesses, it’s that the court is likely to be friendlier to free enterprise—chipping away at regulatory powers, restraining consumer rights to sue, and handing victories to companies on a host of issues.

The court’s next term, starting Oct. 5, includes a high-profile battle between Alphabet (ticker: GOOGL) and Oracle (ORCL) over software copyright: Oracle claims Alphabet owes it $9 billion for code that Google used in its Android operating system; Alphabet says it doesn’t owe Oracle anything, partly due to “fair use” legal principles.

Also on the docket: Facebook (FB) is defending itself over potential fines for robocalls. Ford Motor (F) says it shouldn’t face liability for a car crash in Montana. Cargill and Nestlé (NESN.Switzerland) are co-defending claims that they abetted child slave labor in Africa, addressing corporate liability for human rights abuses outside the U.S.

The government’s capacity to levy fines for corporate wrongdoing is also being challenged. And the Affordable Care Act faces another test. The court is scheduled to hear arguments over the law’s controversial “individual mandate” that every American must have health insurance. Some legal experts see the ACA’s survival dimming without the mandate. Chief Justice John Roberts was the swing vote that kept the mandate alive in 2012, but he may be on the dissenting side with one less liberal in the fold.

Beyond this term, the court’s new makeup could have a major impact on the tech industry. The Department of Justice may be close to filing an antitrust case against Alphabet. A suit against Facebook may be coming, and antitrust probes are underway against Amazon.com (AMZN). Apple (AAPL) is also on the defense, after the court allowed a class-action case to proceed involving claims of anticompetitive pricing at its App Store.

Court rulings are unpredictable, of course, and the breakdown isn’t always between conservatives and liberals. President Trump’s last two appointees split in the Apple case, with Brett Kavanaugh joining the liberal wing and Neil Gorsuch dissenting.

“A conservative philosophy doesn’t necessarily mean a pro-business outcome,” says William Jay, a partner at law firm Goodwin and a former clerk for Antonin Scalia. “Business cases don’t divide the court the way that high-profile 5-4 decisions on constitutional or social issues do, and there are cases in which conservative justices vote against business interests.”

Nicole Saharsky, a veteran Supreme Court litigator, doesn’t expect a sea change in decisions with another Trump appointee. “Would a conservative justice rule for business more than Ginsburg? Yes, but it probably won’t make a difference in outcomes,” she says.

But ideological divides are likely to harden on the court, impacting not just rulings, but also the critical wording of opinions, and petitions for cases to be heard. Barrett is known as a reliably conservative judge; she clerked for Scalia and advocates a “textualist” approach to statutes, avoiding expansive interpretations. She came out against the ACA in a 2017 law review article, criticizing Roberts’ vote to save the law’s individual mandate.

Conservatives such as Barrett tend to be more skeptical of regulatory powers and aim to roll back “deference” to federal agencies—the practice of granting them latitude to interpret laws and impose remedies and fines. That deference, stemming from a 1984 Supreme Court case involving Chevron (CVX), has been challenged repeatedly by conservative groups. Antitrust claims may also face steeper hurdles since conservatives tend to set a higher bar for proving economic harm, according to Joel Mitnick, an antitrust expert at law firm Cadwalader.

Adding another conservative to the bench could solidify those principles, says Dennis Kelleher, head of Better Markets, an investor advocacy group and a former senior staffer to Senate Democrats. He expects the justices to hear more cases that could chip away at the postwar “administrative state” framework that evolved out of FDR’s New Deal laws from the 1930s. “This is the big sleeper issue that is going to prevail in the coming 6-3 court and change the contours of not just the law, but of American life itself, in a way not seen since the New Deal,” he says.

Conservative attorneys say a drift to the right is what’s needed to remedy decades of regulatory overreach. “What you’re seeing—and this should be good news for everyone—is that justices are trying to be careful not to write legislation, which isn’t their job,” says Elizabeth Papez, a partner at law firm Gibson Dunn and former clerk for Justice Clarence Thomas. The Facebook case, she says, is a prime example of the government potentially exposing corporations to billions of dollars in fines and litigation, based on a few ambiguous words in a 1991 consumer-protection law. “Whether or not Ginbsurg was on the court, you’d have a majority saying that wasn’t the intent of this statute,” she says.

Nonetheless, one big winner could be the Chamber of Commerce. Ginsburg ruled in favor of the Chamber’s positions 46% of the time—less than any other justice—versus 86% for Gorsuch at the other end of the spectrum, according to the Constitutional Accountability Center, a liberal think tank.

Even if another conservative only cements rulings with a larger majority, the court may be more inclined to take up cases advocated by the Chamber and other business-friendly groups, says Adam Feldman, author of the Empirical Scotus blog. “If the middle gets pushed to the right, the court may structure opinions that don’t cater as much to left-leaning causes,” he says.

Moreover, another conservative may be more inclined to overrule precedents than Roberts, who tends to favor limited rulings. “Opinions will look different with a justice who’s more business-friendly,” Saharsky says.

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