Corporations and the Supreme Court

A Banner Year for Business as the Supreme Court’s Conservative Majority Is Restored | October Term 2017

Chief Justice Roberts and his conservative colleagues may see themselves as umpires, but their calls seem to depend on which team is at bat.

In Brief

The U.S. Chamber of Commerce went 9-1 at the Supreme Court in the 2017-2018 Term, its best record in six years. Since 2006, the Chamber has won more than 70% of its cases at the Supreme Court, compared to 43% and 56% during comparable periods of the Burger and Rehnquist Courts.
Since 2006, the five conservative Justices have given the Chamber more than 3/4 of their total votes, while the four moderate-to-liberal Justices have given the Chamber roughly half. This Term, Justices Alito, Gorsuch, Kennedy, Roberts, and Thomas cumulatively voted for the Chamber’s position 86% of the time.
President Trump is making little pretense that Judge Brett Kavanaugh, nominated to replace Justice Kennedy, will keep an open mind when deciding cases in which corporations have a strong interest. CAC is reviewing Kavanaugh's record and we'll provide our analysis in coming weeks.

Summary

The restoration of a five-Justice conservative majority on the Supreme Court after the confirmation of Justice Neil Gorsuch meant that the U.S. Chamber of Commerce (which we began analyzing in 2010 as a proxy for big business interests at the Court) enjoyed a stunning rate of success this past Term—prevailing almost entirely in its efforts to ensure that companies can skirt regulation and legal accountability. Indeed, this Term’s business docket was marked by the consistency with which conservative Justices voted to loosen the reins on corporate America. The Court has been steadily reshaping the law for many years to favor corporate power. With the nomination of Judge Brett Kavanaugh to replace Justice Kennedy, the Court may be poised to ramp up that effort dramatically.

Introduction

President Donald Trump’s nomination of Judge Brett Kavanaugh to replace retiring Justice Anthony Kennedy on the U.S. Supreme Court has focused renewed attention to the Court’s docket of cases affecting business interests. In these critically important cases, the Court has been steadily reshaping the law for many years to favor corporate power. And with this nomination, the Court may be poised to ramp up that effort dramatically.

President Trump is making little pretense that Judge Kavanaugh will keep an open mind when deciding cases in which corporations have a strong interest. Immediately following Trump’s announcement of Kavanaugh’s selection, the “White House was touting Kavanaugh’s record battling ‘overregulation’ in a document sent to industry stakeholders.” In this document, “the White House wrote that Kavanaugh has overruled federal regulators 75 times on cases involving clean air, consumer protections, net neutrality and other issues.”

Reports also conclude that “[a]dvocates for business interests would find comfort in a would-be justice [Kavanaugh] who could move the court from reliably pro-business to more resoundingly so.” One labor attorney described the nomination in stark terms: “This court will go from a reliably pro-business court to being solidly pro-business. It will be an uphill battle for employees to win many cases, if he gets confirmed. He looks for ways to rule for employers.”

Given the exceedingly high stakes of this nomination, we will soon take a close look at Judge Kavanaugh’s approach to the types of cases that make up the Court’s business docket. This report sets the stage by reviewing the Supreme Court Term that concluded in June, in light of this critical vacancy and also the addition of President Trump’s first pick for the Court, Neil Gorsuch, who just completed his first full Term as a Justice.

Overview of This Year’s Business Cases

All too predictably this Term, the restoration of a five-Justice conservative majority on the Court meant that big business enjoyed a stunning rate of success—prevailing almost entirely in its efforts to ensure that companies can skirt regulation and legal accountability. Indeed, this Term’s business docket was marked by the consistency with which conservative Justices voted to loosen the reins on corporate America.

The Supreme Court’s business cases, which tend to involve complex technical and procedural questions, often fly under the public’s radar. And with hot-button social controversies returning to the Court this Term—abortion, gay rights, the Muslim travel ban, and voting rights among them—it was especially easy for decisions about business regulation to get lost in the shuffle. Yet those decisions have massive implications for the ability of individuals and their government to prevent corporations from harming people and to hold them accountable when they do.

Again and again this Term, the Court narrowed the scope of laws meant to restrain corporate excess and protect the public, while broadening rules that immunize businesses from accountability. Along the way, Justice Gorsuch established himself as corporate America’s most reliable ally on the Court. And now that President Trump will have an opportunity to fill a second vacancy, prospects are dim for a reversal of the Court’s pro-business trajectory.

Corporate Victories, By the Numbers

We have long monitored big business’s success in the Supreme Court by tracking cases in which the United States Chamber of Commerce submits friend-of-the-court briefs to advance its deregulatory agenda. The Chamber filed briefs in ten cases decided this Term, and it prevailed in nine of those cases.[1] This remarkable 90% victory rate is the Chamber’s highest in six years.

All told, since Justice Samuel Alito joined Chief Justice John Roberts on the bench in 2006, the Chamber has won over 70% of its cases. That commanding record before the Roberts Court stands in sharp contrast to the Chamber’s 56% success rate before the late Rehnquist Court (1994 to 2005) and its 43% success rate before the late Burger Court (1981 to 1986).[2]

It’s no mystery why business interests now fare so well before the Court. Its conservative Justices share an ideology that prizes limited government over regulation and the ability to vindicate individual rights. And that translates into a thumb on the scale for corporate interests in case after case.

Consider the figures from this Term. Justices Alito, Gorsuch, Kennedy, Roberts, and Thomas cumulatively voted for the Chamber’s position 86% of the time. By contrast, the more liberal bloc made up of Justices Breyer, Kagan, Ginsburg, and Sotomayor voted for the Chamber’s position 50% of the time. And this trend has endured throughout Chief Justice Roberts’s tenure. Thus, the five conservative Justices now on the bench have given the Chamber more than three quarters of their total votes (77.2%), while the four moderate-to-liberal Justices have given roughly half (50.5%).

Chief Justice Roberts has famously likened judicial decision-making to an umpire’s task of calling balls and strikes. But ironically, the figures above suggest that it is the Court’s more liberal members—not Roberts or his conservative brethren—who are living up to this model of neutrality in business cases. The conservative Justices cast a total of 50 votes in the Chamber’s cases this Term, for instance, and 43 of those votes favored the Chamber’s position. Just as tellingly, conservative Justices cast only two dissenting votes in all nine cases that the Chamber won this Term.[3] In other words, when business interests prevail before the Court, the conservative Justices almost never disagree with the result. Roberts and his colleagues may see themselves as umpires, but their calls sure seem to depend on which team is at bat.

As for the voting records of individual Justices, Neil Gorsuch has quickly supplanted his colleagues as corporate America’s most stalwart ally on the Court. For years, Justice Alito held that distinction, siding with the Chamber’s position 75% of the time. His longtime conservative colleagues have just barely lagged behind him, with Justice Kennedy at 74%, Chief Justice Roberts at 73%, and Justice Thomas at 71%. In last year’s report, we noted that Gorsuch sided with the Chamber in all five cases in which he participated (a worrisome sign consistent with his pro-business record as a lower court-judge), but we cautioned that it would be premature to infer too much from this small sample size.

A year later, however, it’s clear that Justice Gorsuch has been a sound return on investment for the business interests that cheered and bankrolled (often anonymously) the campaign for his confirmation. Of the 15 Chamber cases in which he has participated, Justice Gorsuch sided with the Chamber in 14, meaning that he has supported the Chamber with 93% of his votes. By comparison, the figures for the Court’s more liberal members range from Justice Ginsburg’s 46% up to Justice Kagan’s 55%. Plainly, the corporate lawyers predicting last year that Gorsuch would advance the Court’s “pro-business conservative trajectory” have been proven right—and then some.

Rolling Back Corporate Accountability

Statistics don’t tell the whole story. The Chamber’s victory rate this Term was matched by the Court’s readiness to embrace far-reaching and dubious legal arguments to shield business interests from liability. Indeed, accountability—or a lack thereof—was the name of the game in this Term’s most significant business cases.

The Term’s most consequential business decision was likely Epic Systems Corporation v. Lewis. Splitting 5-4 along ideological lines, the Court held that companies can force their employees to agree that any disputes arising from their employment—such as claims of unpaid overtime—must be resolved in binding one-on-one arbitration instead of in court or in group arbitration. The Court sanctioned this result even though federal labor law guarantees workers the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

In an opinion by Justice Gorsuch, the Court’s conservative majority concluded that federal labor law must yield to the Federal Arbitration Act (“FAA”), which generally requires the enforcement of arbitration agreements. But as the dissent explained, the FAA was enacted in the 1920s “to enable merchants of roughly equal bargaining power” to agree to arbitrate commercial disputes, thus avoiding the “[g]rowing backlogs in the courts” by steering their disputes into arbitration. Beginning in the 1980s, however, the Supreme Court has radically transformed the FAA into a weapon for corporations to use to shield themselves from lawsuits by their employees and customers. Take-it-or-leave-it arbitration agreements are now a standard part of consumer purchases and employment contracts. And although no one has any option to negotiate or decline such terms, the Court has declared that they must be enforced nevertheless. In Epic Systems, the Court went even further by allowing companies to force their employees to surrender their right to proceed as a group in arbitration or in court, notwithstanding contrary federal law meant to protect workers from exploitation.

Thanks to Epic Systems, companies will have greater license to illegally withhold wages from their employees, or harm them in other ways, without fear of being held accountable. That is because wronged employees can no longer count on joining forces in class-action lawsuits, or even in group arbitration proceedings, to recoup what was unlawfully taken from them. Instead, each individual employee must go it alone, committing the time and expense of pursuing his or her own arbitration proceeding, instead of benefitting from pooling their efforts. “The inevitable result,” as Justice Ginsburg’s dissent noted, “will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

Epic was not the Court’s only decision this Term that chipped away at the rights of employees. In Encino Motorcars v. Navarro, the same five-Justice majority concluded that a particular class of auto dealership employees—service advisors—are shut out from the overtime protections of the Fair Labor Standards Act, even though the Act does not clearly exclude them. Two things about this decision stand out.

First, this is one of several decisions this Term in which self-professed “textualists” on the conservative wing of the Court had no qualms about essentially amending federal law as requested by business interests. As the dissent (again by Justice Ginsburg) concisely put it, “Congress explicitly exempted from the Fair Labor Standards Act hours requirements only three occupations: salesmen, partsmen, and mechanics. The Court today approves the exemption of a fourth occupation: automobile service advisors.”

Second, beyond the impact of this decision on one particular class of employees, the conservative majority made a more far-reaching change in how the Fair Labor Standards Act will be interpreted in future cases. For half a century, the Court has insisted that any exceptions to the Act’s protections for workers should be construed narrowly—a principle that furthers the Act’s purpose of shielding employees from abuse. In Encino Motorcars, however, the Chamber of Commerce submitted a brief devoted entirely to persuading the Court that it should discard that longstanding principle. The Court obliged. And now countless future cases throughout the federal courts will be decided without that important principle, enhancing companies’ ability to shortchange their workers.

While the impact of Jesner v. Arab Bank may be smaller, no decision better exemplifies the Court’s pro-business tilt and willingness to shape federal law accordingly. There, the conservative Justices ruled that foreign corporations cannot be sued under the Alien Tort Statute, which authorizes federal courts to hear suits over human rights abuses and other international law violations. Thus, while individuals who participate in terrorism, genocide, or similar offenses can be haled into court and forced to compensate their victims, a corporation that does the same is immune from suit.

Like many of the Court’s pro-business rulings, this one was unnecessary. The Justices could have resolved the case under existing precedent requiring a stronger factual connection to the United States than was present in Jesner. That option would have been more faithful to Chief Justice Roberts’s preferred maxim that “if it is not necessary to decide more, it is necessary not to decide more.”

And like the decisions discussed above, in Jesner the Court undermined the intentions of the political branches in service of corporate interests while purporting to honor those intentions. Nothing in the text of the Alien Tort Statute distinguishes corporations from individuals or says anything at all about what kinds of defendants may be sued. While the majority claimed its rule was needed to avoid friction with foreign nations, the Court has been told exactly the opposite by the Trump Administration, the Obama Administration before it, and members of Congress. As Justice Sotomayor’s dissent observed, the majority never provided a reason that corporations, as a group, should be categorically immune from liability for human rights abuses, “however egregious they may be.”

Conclusion

Other decisions this Term hewed to the same basic pattern as those discussed above. Laws designed to regulate big business or ensure that corporations can be held accountable for wrongdoing were given narrow interpretations that reduced their scope. Meanwhile, laws that immunize corporations from accountability, such as the Federal Arbitration Act, were expanded through broad interpretations not required by their text.

Not all of these cases divided along ideological lines. But as we have observed before, the majority coalitions behind them “nearly always included all of the Court’s conservative members. What differed from case to case was simply how many of their moderate-to-liberal colleagues joined them.” This pattern will no doubt continue with the Court’s conservative majority now restored—potentially to be entrenched, or even strengthened, for years to come through President Trump’s second opportunity to fill a vacancy. If Trump is successful, corporate America can be expected to become even more aggressive in its attempts to shed constraints and accountability.

Over the coming weeks, we will examine Judge Kavanaugh’s record and approach to business cases and provide our analysis of what it would mean if he were to join the Supreme Court.

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[1] Two other cases in which the Chamber submitted briefs, Leidos Inc. v. Indiana Public Retirement System and United States v. Microsoft Corporation, were dismissed without a ruling on the merits.

[2] During these two periods, the Court had no changes in membership.

[3] Justices Alito and Thomas dissented in Marinello v. United States, a case in which the Court held that a federal law that makes it a felony to “corruptly or by force . . . obstruct[] or impede[] . . . the due administration of” the Internal Revenue Code covers only “specific interference with targeted governmental tax-related proceedings, such as a particular investigation or audit.” Notably, Justices Alito and Thomas typically vote against criminal defendants, and their dissent in Marinello aligned them with the government and against the criminal defendant who was challenging his conviction in that case. In Cyan Inc. v. Beaver County Employees Retirement Fund, the only case this Term in which the Chamber was on the losing side, the Court unanimously rejected the Chamber’s argument that state courts lack the power to adjudicate certain securities class actions. The Court simply could not square the Chamber’s reading with the text of the statute, which “says what it says—or perhaps better put here, does not say what it does not say.”