We spend plenty of time analyzing the actions of the first, second, and fourth branches of government, as the SEC and its fellow agencies are known. But it’s worth remembering that those spectators in black robes at the State of the Union can have as much sway over the law affecting issuers as the guy with the hair at the podium. And indeed, with a full complement of justices, the U.S. Supreme Court (SCOTUS) put a blockbuster slate of cases on its 2017-18 calendar, including some big business disputes.
With the Supreme Court’s current term nearing the midway point, it’s a good moment to remind ourselves of the major cases argued and those still to come. Some of these won’t get all the attention of hot-button appeals like those involving political gerrymandering and a baker who refused to bake a wedding cake for a same-sex couple. And some appeals with significant repercussions for business don’t appear below, including at least one major patent case. But the following should all be on the radar of issuers:
Cases already argued
Digital Realty Trust v. Somers
The White House and Congress already have their eyes on Dodd-Frank. This appeal, meanwhile, asks SCOTUS to join in and circumscribe its protections. At issue is whether the anti-retaliation provision for “whistleblowers” in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (which shields those who make disclosures required by Sarbanes Oxley) extends to internal whistleblowers, or whether it only protects individuals who report to the Securities and Exchange Commission. As amicus, the U.S. Chamber of Commerce said that the Ninth Circuit’s reading, which favors internal whistleblowers, would “open the door to countless suits that Congress never intended Dodd-Frank to cover.”
Ernst & Young LLP v. Morris; Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA
This is one of several huge employment cases being decided this term, including one over mandatory union membership. Here, the justices are taking on an issue that could potentially end employee class actions against employers. The question is whether requiring employees to forgo class actions and instead take their complaints to individual arbitration is an illegal labor practice, or enforceable under the Federal Arbitration Act.
Merit Management Group, LP v. FTI Consulting
This appeal involves the safe harbor provision of the Bankruptcy Code for settlement payments, which has big implications for securities traders. Bottom line: it will determine whether it will be possible to “claw back” settlement payments made from failed brokerages or banks (for example, Bernard L. Madoff Investment Securities, LLC) or to reverse payouts to shareholders in failed leveraged buyouts (LBOs). Disputes over 546(e) have been increasing in number and value in recent years.
Cyan v. Beaver County Employees Retirement Fund
The question here is simple: Did the Securities Litigation Uniform Standards Act of 1998 remove state courts’ jurisdiction to hear class action lawsuits brought under the Securities Act of 1933? The answer is not simple at all. States and lower federal courts have landed all over the map—until now.
Not yet argued
United States v. Microsoft Corp.
In late February, the court will hear argument on this appeal determining whether a business must obey a warrant for electronic data stored outside the United States. For lawyers, this one poses fascinating questions about the ability of U.S. law to reach beyond our borders. For businesses, it could force them to violate the privacy laws of countries where their data is stored in order to comply with U.S. warrants.
South Dakota v. Wayfair, Inc.
By taking this case, the Supreme Court signaled that it is ready to reconsider its rule that retailers must have a “physical presence” in a state before it is liable for sales tax. It’s a potentially big—if overdue—change in the retail landscape.
Lucia v. SEC
Speaking of the fourth branch, this case raises the possibility that the SEC’s administrative law judges have been deciding cases without constitutional authority. The Constitution requires that “inferior offices” be appointed by the president, the courts, or “heads of departments.” ALJs are not appointed by the president or the SEC commissioners, but rather commission staff—putting their authority in question if they are determined to be “inferior officers.”
There’s plenty to watch from now until June, when all of the above questions will be decided one way or another.