The Supreme Court means business this term, even more than usual.
The Court’s 2009-2010 term begins today, the first for Justice Sonia Sotomayor. And for Sotomayor, who hails from New York’s corporate-heavy 2nd Circuit, the subject matter will be familiar. Of the 45 cases the justices selected to hear before they left for summer break, 24 are business-related. As Adam Liptak notes in his NYT Sidebar article today, that’s up from 16 of 42 last year.
Here’s a summary of four main cases.
- The most-watched corporate case is Bilski v. Droll (oral argument scheduled for November 9), which will address whether intangible “business methods” can be patented. The patent application at direct issue was for a method of hedging commodity risk. But, in denying that such a method could be patented, the circuit court ruled broadly, finding that an invention is not patentable unless it is 1) tied to a particular machine or apparatus and 2) transforms a particular article into something different. As Law.com points out, Sotomayor practiced IP law and will likely be less “hostile” to patents as her predecessor Justice Souter was.
- Jones v. Harris (oral argument scheduled for November 2) touches the ever-present corporate compensation debate, evaluating whether mutual fund investors may sue the fund for its advisors charging higher fees to in-house mutual funds. Both the district court and the 7th Circuit said the market should set the fees. Surprisingly, the libertarian-leaning Richard Posner dissented from that opinion, indicating the marketplace cannot be trusted to rein in executive pay. The Court will evaluate whether, under 1940’s Investment Company Act, a shareholder can allege that a fund’s investment advisor charged excessive fees without also alleging that the advisor misled the director’s who approved the fees. The plaintiffs in the case are investors in funds called Oakmark who claim that the funds overpaid their investment advisor Harris Associates. Oakmark paid Harris 1 per cent of the first $2 billion in assets, while independent clients only paid one half of 1% on the first $500 million, Liptak said in a discussion of the case August.
- When Enron collapsed, accounting rules were expanded and audit reviews increased, including the passing of the Sarbanes-Oxley Act, which created the Public Company Accounting Oversight Board. Free Enterprise Fund v. PCAOB (oral argument scheduled for December 7) will evaluate whether the oversight of the Board – it’s under the supervision of the SEC – violates separation of powers principles. Board members are selected and removed by the SEC, which, Liptak notes, keeps them insulated from both presidential oversight and political pressure. Experts say the ruling could impact the types of regulatory agencies – and the type of oversight structure – Congress creates in reforming the regulatory agencies.
- Finally, American Needle, Inc. v. National Football League (oral arguments not yet set) will probably garner the most national attention, if just because of its sports roots. It’s a potentially far-reaching antitrust case that poses the question of whether the NFL can act as a single entity when it signs headwear contracts on behalf of all teams. The lower and circuit courts held that NFL teams share a common economic interest in licensing such property and that there was no Sherman Act violation. While the smaller question is if the rights of apparel company American Needle, which had licensing deals individual NFL teams, were violated, a broader ruling could exempt the NFL from various antitrust laws. If the NFL is a single entity, licensees, networks and fans would be dealing with a single giant entity, rather than 32 competing teams. As the WSJ Law Blog pointed out earlier this month, that can lead to all sort of labour conflicts, giving the leagues an upper hand in labour negotiations. Some believe a ruling that classifies the NFL as a single entity could have a wide-ranging impact on joint ventures in general.
We’ll keep you up-to-date as the oral arguments occur.
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