Supreme Ct. to focus on business cases in October term
NEW YORK (CNNMoney.com) — The U.S. Supreme Court may be in recess until the fall, but Corporate America is already keeping a close eye on a number of influential business cases on the high court’s docket for next term.
Corporate appeals were long neglected by the Supreme Court, leaving the business world to rely on the sometimes vague rulings of the lower appeals courts.
But under Chief Justice John Roberts – once a corporate attorney himself – the high court has again shined a spotlight on corporate concerns, granting review to over a dozen business-related appeals since last term.
And while legal observers are hesitant to call the Supreme Court’s decision to take on such a caseload “pro-business,” there is a feeling that the court’s sudden interest in business litigation will help shape the direction for corporations going forward.
All eyes on punitive damages ruling
One case, in particular, is already generating buzz and could impose stricter limits on punitive damages, easing the liability burden for corporations, said Richard Samp, chief counsel at public interest law firm Washington Legal Foundation.
In Philip Morris v. Williams, Mayola, the high court will decide whether a jury overstepped its authority by ordering tobacco giant Philip Morris – a unit of Altria (Charts) – to pay plaintiffs $79.5 million in punitive damages due to the smoking-related death of Jesse Williams, a three-pack-a-day smoker.
According to a 2003 State Farm ruling by the high court, punitive damages should be reasonable and proportionate to the actual damage incurred, but didn’t specify a set ratio between punitive and actual damages for determining what would be considered excessive.
Williams’ family sued the company in Oregon, citing misconduct in the way the tobacco industry marketed cigarettes to the public and sought to undermine concerns about the dangers of smoking. Claimants were awarded $800,000 in compensatory damages but punitive damages were almost 100-times that amount.
That hefty award raises the issue of whether a company’s conduct can be considered so reprehensible that a court can award punitive damages that are far in excess of the actual compensatory damage incurred by an individual.
The Philip Morris case could help clarify for lower courts what factors may be used to determine punitive damages and set a standard for awarding damages to plaintiffs.
“There is little doubt that this is the most important case before the Supreme Court,” Samp said.
Judging the “duh” factor among patents
But one pending patent law case is also expected to have a broad implications for the business community.
KSR v. Teleflex tackles an age-old question plaguing the patent industry – when is an invention so obvious that it doesn’t warrant a patent?
The Supreme Court will determine whether the Federal Circuit erred when it said that Teleflex, which patented a gas pedal design, could sue Canadian-based company KSR for patent infringement – even though KSR claimed that the patent was so obvious that anyone could have come up with the idea.
Currently the Federal Circuit, which was created in 1982 to specifically deal with patent cases, says that challengers must prove that others of ordinary skill could have come up with similar ideas based on the “teaching, suggestion or motivation” of prior inventions.
But that standard has long been criticized because it makes it too difficult to prove that an invention is obvious and allows inventors to obtain patents for ideas and creations that may not deserve to be patented.
“If the Supreme Court determines that the standards are too high right now, it would raise the bar of patentability,” said Sharon Barner, a partner at law firm Foley & Lardner. “You would have fewer patents coming out (and) it would impact investment in innovation.”
Barner said patents that were already granted could be struck down for not truly being innovative, and that would make corporations that were heavily invested in research and development think twice before funding certain projects or ideas.
In turn, that could impact industries such as biotech and software, which are heavily reliant on patents.
Antitrust cases on the docket
Antitrust cases figure prominently on the agenda, with legal observers keeping a close watch on a lawsuit that claims some of the nation’s major telephone carriers conspired to carve up the market amongst themselves in order to create mini-monopolies that worked against consumers.
Bell Atlantic Corp. v. Twombly will test whether the high court sides with lower courts in determining that a case can go forward into the discovery stage of litigation even when there’s no direct evidence against the defendants.
The consumers bringing the case against the carriers cited “parallel conduct,” or similar practices, in the way the phone companies, which include AT&T (Charts), Verizon (Charts) and Qwest (Charts), conducted business and set prices. They asked the courts to allow them discovery in order to build a case.
The tussle between the telephone companies and consumers has the potential to be huge for companies because it could determine what criteria a plaintiff needs in order to sue, said Jeff Lamken of law firm Baker Botts.
“There is a fair amount of concern that if you allow someone to say ‘I think there’s a conspiracy’ without a sufficient reason to derive an inference, you could end up with massive amounts of litigation over cases that are frivolous,” he said. “When you’re talking about millions of documents during the discovery procedure, going through litigation can be ruinously expensive.”
Another antitrust case has raised concern from the business community, as well as the Bush administration, which asked the Supreme Court to weigh in on whether Weyerhaeuser violated antitrust laws by engaging in “predatory buying.”
In Weyerhaeuser v. Ross-Simmons Hardwood Lumber, Ross-Simmons Hardwood – a now defunct saw mill – claimed that Weyerhaeuser paid more to hoard alder saw logs in order to create a monopoly on the timber and drive competitors out of business.
Lower courts awarded Ross-Simmons $78.7 million in damages but legal experts expect the Supreme Court to overturn that verdict.
Washington Legal Foundation’s Samp said a previous case case called Brooke Group v. Brown & Williamson Tobacco Corp., created a two-part criteria for predatory pricing which shows that the company accused of having a monopoly lost money in the short-term from lowering its prices and would have to raise the price of a product significantly down the road to make up for the loss – a practice which would damage consumers.
But in Weyerhaeuser’s case, the company paid a higher price to buy the raw materials but continued to make a profit. Without direct proof that the company paid more specifically to drive out competition, Samp said he believed the high court will likely overturn the lower court’s verdict.
And that has broad implications for what constitutes a violation of antitrust law.
The Supreme Court traditionally returns to session on the first Monday in October.
By Shaheen Pasha, CNNMoney.com staff writer July 11 2006: 1:15 PM EDT