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Corporations Find a Friend in the Supreme Court

The U.S. Supreme Court Justices.
Tim Sloan | AFP | Getty Images
The U.S. Supreme Court Justices.

NOT long after 10 a.m. on March 27, a restless audience waited for the Supreme Court to hear arguments in the second of two historic cases involving same-sex marriage. First, however, Justice Antonin Scalia attended to another matter. He announced that the court was throwing out an antitrust class action that subscribers brought against Comcast, the nation's largest cable company.

Almost no one in the courtroom paid attention, despite Justice Scalia's characteristically animated delivery, and the next day's news coverage was dominated by accounts of the arguments on same-sex marriage. That was no surprise: the Supreme Court's business decisions are almost always overshadowed by cases on controversial social issues.

But the business docket reflects something truly distinctive about the court led by Chief Justice John G. Roberts Jr. While the current court's decisions, over all, are only slightly more conservative than those from the courts led by Chief Justices Warren E. Burger and William H. Rehnquist, according to political scientists who study the court, its business rulings are another matter. They have been, a new study finds, far friendlier to business than those of any court since at least World War II.

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In the eight years since Chief Justice Roberts joined the court, it has allowed corporations to spend freely in elections in the Citizens United case, has shielded them from class actions and human rights suits, and has made arbitration the favored way to resolve many disputes. Business groups say the Roberts court's decisions have helped combat frivolous lawsuits, while plaintiffs' lawyers say the rulings have destroyed legitimate claims for harm from faulty products, discriminatory practices and fraud.

Whether the Roberts court is unusually friendly to business has been the subject of repeated discussion, much of it based on anecdotes and studies based on small slices of empirical evidence. The new study, by contrast, takes a careful and comprehensive look at some 2,000 decisions from 1946 to 2011.

Published last month in The Minnesota Law Review, the study ranked the 36 justices who served on the court over those 65 years by the proportion of their pro-business votes; all five of the current court's more conservative members were in the top 10. But the study's most striking finding was that the two justices most likely to vote in favor of business interests since 1946 are the most recent conservative additions to the court, Chief Justice Roberts and Justice Samuel A. Alito Jr., both appointed by President George W. Bush.

The study was prepared by Lee Epstein, who teaches law and political science at the University of Southern California; William M. Landes, an economist at the University of Chicago; and Judge Richard A. Posner, of the federal appeals court in Chicago, who teaches law at the University of Chicago.

In the Comcast case, subscribers seeking $875 million in damages charged that the company had swapped territory with other cable companies to gain market power and raise prices. But the legal issue before the court was technical. It concerned the sort of evidence needed to allow two million subscribers in the Philadelphia area to band together as a class. (Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com.)

(Read More: Supreme Court Rejects Class Action Suit Against Comcast)

Justice Scalia said the plaintiffs' evidence was not enough to allow them to proceed as a class. They could still, he said, pursue their complaints individually. But the difficulty of mounting such suits over insignificant sums would not make them very attractive to most lawyers.

The decision, however, went far beyond the Comcast subscribers. By reaffirming Wal-Mart v. Dukes, a 2011 blockbuster case in which the court threw out a large employment sex discrimination class, the Comcast case limited class actions more broadly.

The question of whether plaintiffs have enough in common to sue as a class is different from whether they deserve to win. The first question is generally resolved early in the case. The second one may await trial.

But the Wal-Mart and Comcast decisions said the two questions often overlap and may call for an early answer. The decisions essentially required early scrutiny—by a judge, not a jury—of the ultimate legal question in high-stakes cases, sometimes before all the relevant evidence has been gathered. This delighted business groups, which have pushed to limit class actions.

"The court is telling lower courts across the country they really do have to fulfill their gate-keeping function and keep these meritless classes out of the courts," said Kate Comerford Todd, a lawyer with the litigation unit of the United States Chamber of Commerce.

Justices deeply unhappy with a decision sometimes read their dissents from the bench. It happens perhaps three times a year. Justice Scalia, in remarks at George Washington University in February, said such oral dissents were a way to call attention to a grave misstep.

"I only do it in really significant cases," he said, "where I think the court's decision is going to have a really bad effect upon the law and upon society, a really, really big case."

By that standard, the dissenters thought the Comcast decision was very bad indeed. It gave rise to two oral dissents, from the two senior members of the court's liberal wing, Justices Ruth Bader Ginsburg and Stephen G. Breyer.

Justice Ginsburg accused the justices in the majority of unseemly judicial gamesmanship. She said they had reframed the legal issue in the case so they could rule for Comcast. "Thus the plaintiffs had no unclouded opportunity to brief and argue with precision the issue the court decides against them," she said. "And that's not cricket."

THE Supreme Court decides one case at a time, and its jurisprudence is the sum of incremental and sometimes inconsistent rulings driven by quirky facts and shifting judicial alliances.

The law, that is to say, does not always move in a straight line, and the Roberts court's decisions have not all favored corporations. Employees suing over retaliation for raising discrimination claims have fared quite well, for example. Nor has the court always been receptive to companies claiming that state rules and injury awards from state juries should be struck down because they are in conflict with federal laws.

But the court's general track record, particularly in low-profile but important procedural rulings, has been decidedly pro-business, said Arthur R. Miller, a law professor at New York University. The upshot, he said, is that businesses are free to run their operations without fear of liability for the harm they cause to consumers, employees and people injured by their products.

"The Supreme Court has altered federal procedure in dramatic ways, one step at a time, to favor the business community," he said, by, among other things, "increased grants of summary judgment, tightening scientific evidence, rejecting class actions, heightening the pleading barrier and wholesale diversions into arbitration."

In a despairing overview published last month in The New York University Law Review, Professor Miller criticized many rulings from the Roberts court, including the Wal-Mart decision, which rejected a class of some 1.5 million female employees, and AT&T Mobility v. Concepcion, which allowed companies to escape class actions by insisting on one-by-one arbitrations, even over trivial amounts, in standard-form contracts.

Jason M. Halper, a lawyer at Cadwalader, Wickersham & Taft in New York, said the collective message of those and related cases was clear: "When you take all of them together, the effect is certainly to make the use of class actions much more difficult."

It is easy to understand why companies hate class actions. Once a class is certified, the damages sought are often so enormous that the only rational calculation is to settle even if the chances of losing at trial are small. The costs of litigation—for lawyers, experts and the exchange of information—are also far larger in class actions. And it is not always clear that the plaintiffs, as opposed to their lawyers, receive very much in the settlements.

Plaintiffs' lawyers, on the other hand, say class actions are the only way to vindicate small harms caused to many people. The victim of, say, a fraudulent charge for a few dollars on a billing statement will never sue. But a lawyer representing a million such people has an incentive to press the claim.

"Realistically," Professor Miller wrote, "the choice for class members is between collective access to the judicial system or no access at all."

So the Supreme Court's rulings making it harder to cross the class-certification threshold have had profound consequences in the legal balance of power between businesses and people who say they have been harmed.

Arbitration, in which the two sides agree to resolve disputes outside of court using informal procedures, is more complicated.

Depending on how they are structured, arbitrations can offer benefits in speed and cost to both sides, though the car rental companies or cellphone stores that have customers sign nonnegotiable contracts presumably do not have their best interests at heart.

Minor claims in arbitration raise harder questions. In theory, there is no reason that consumers and others could not join together in a mass arbitration, just as they file class actions in court.

But the AT&T Mobility decision limited that recourse for consumers. The case was brought by a California couple who objected to a $30 charge for what was presented as a free cellphone. They had signed a "take it or leave it" form that required them to resolve disputes through arbitration and barred them from banding together with others, whether in arbitration or in court.

The Supreme Court said the contract was lawful, and in doing so it gave businesses a powerful tool.

"The decision basically lets companies escape class actions, so long as they do so by means of arbitration agreements," Brian T. Fitzpatrick, a law professor at Vanderbilt University, said on the day of the decision. "This is a game-changer for businesses. It's one of the most important and favorable cases for businesses in a very long time."

The central legal issues in the Wal-Mart, AT&T Mobility, and Comcast cases were decided by 5-to-4 votes. In each, the justices in the majority were appointed by Republican presidents and the dissenters by Democratic ones.

Since World War II, the Minnesota Law Review study found, "justices appointed by Republican presidents are notably more favorable to business than justices appointed by Democratic presidents." Indeed, it said, "on the current court, no Republican-appointed justice is less favorable to business than any Democrat."

That does not mean that the Roberts court's pro-business decisions are always decided by 5-to-4 votes. They are often lopsided or unanimous.

That is a consequence, Judge Posner said in an e-mail, of broader trends: "American society as a whole is more pro-business than it was before Reagan and this is reflected in the votes of Democratic as well as Republican Supreme Court justices."

In March, for instance, the court unanimously rejected an attempt by class-action lawyers in Arkansas to keep their case out of federal court by promising that their clients would accept less money than they might deserve. (The case had been filed in Miller County, Ark., where courts, according to business groups, are notorious for coercing large settlements from out-of-state defendants.)

But sometimes unanimity masks division. The most important business decision of the current term, Kiobel v. Royal Dutch Petroleum, severely limited human rights suits against corporations based on charges of complicity in abuses abroad. All nine justices agreed that the particular suit before them had to be dismissed, largely because every significant aspect of the case was foreign: the plaintiffs were Nigerian, the companies they sued were based in England and the Netherlands, and the atrocities the companies were said to have aided took place in Nigeria.

Yet the court split 5-to-4 along the usual lines about how far to leave the door open to similar suits. Chief Justice Roberts, writing for the majority, suggested that it would be the rare case indeed that was proper. Certainly, he said, it should not be enough that a multinational corporation does business in the United States. "Corporations are often present in many countries," he wrote, "and it would reach too far to say that mere corporate presence suffices."

Justice Breyer, in dissent, said such suits could play an important role in bringing to justice "torturers and perpetrators of genocide."

THE Minnesota Law Review study did not rely on the common political science technique of coding each Supreme Court decision as conservative or liberal. To draw its main conclusions, it relied on a simpler formula, looking at cases with a business on one but not both sides. (The adversary might be an employee, job applicant, shareholder, union, environmental group or government agency.)

A vote for the business was counted as a pro-business vote.

By that standard, the study found, "the Roberts court is indeed highly pro-business—the conservatives extremely so and the liberals only moderately liberal." Justices Ginsburg and Breyer, who spoke up in the Comcast case, were only slightly less likely to vote for business than the median justice in the survey but were in the bottom six for such votes in 5-to-4 decisions.

The arrival of Chief Justice Roberts in 2005 and Justice Alito in 2006 seem to have affected the behavior of the justices already on the court. The probability that the other three more conservative members of the court—Justices Scalia, Anthony M. Kennedy and Clarence Thomas—would vote for business grew to 56 percent from 52 percent. And the probability that Justices Ginsburg and Breyer would do so dropped to 32 percent from 38 percent.

Scholars who look at doctrine rather than data also say there is something distinctive about the current court.

"The Roberts court is the most pro-business court since the mid-1930s," said Erwin Chemerinsky, the dean of the law school at the University of California, Irvine. "I think this helps understand it far more than traditional liberal and conservative labels."

Others are wary of generalizations. Jonathan H. Adler, a law professor at Case Western Reserve University, said the Roberts court was "not particularly welcoming to efforts by plaintiffs' lawyers to open new avenues of litigation, but it has not done much to cut back on those avenues already established by prior cases."

Business groups have been enthusiastic litigants in the Roberts court. Adam D. Chandler, a recent Yale Law School graduate and a Justice Department lawyer, published a new study along these lines on Scotusblog (noting that his views were not those of his employer). Looking at friend-of-the-court briefs supporting petitions seeking Supreme Court review over a roughly three-year period ended in August 2012, he found that pro-business and anti-regulatory groups accounted for more than three-quarters of the top 16 filers.

"My data indicate that, as the court shapes its docket, it hears conservative voices far more often than liberal ones, and the disparity is growing," he wrote.

He found that the Chamber of Commerce was "the country's pre-eminent petition pusher," with 54 filings in the period. It also had an enviable success rate: the court grants one out of every hundred petitions; for ones supported by the chamber, it granted 32 percent.

Ms. Todd, the chamber lawyer, said her group would continue to be active. The aftermaths of the Wal-Mart and AT&T Mobility decisions, on class actions and arbitration, "are really where a lot of our focus and resources are going right now," she said.

"These cases have a huge impact on the business community and on the American economy more broadly," Ms. Todd said.

The Comcast decision is just over a month old. But lower courts have already relied on it to reject class actions contending harm from defective trucks, poisoned drinking water, discrimination against disabled workers, misrepresentations in insurance policies and improperly docked wages.

Some of the plaintiffs in those cases will now pursue their claims in individual suits. But many will not, and the businesses accused of wrongdoing will, thanks to the Roberts court, breathe a little easier.