If you’ve thought about filing a business lawsuit in federal court or you have one underway already, you’ll probably want to read about two still-in-process studies by Columbia University and Harvard University law school professors on how the U.S. Supreme Court under Chief Justice John Roberts (2005-present) has treated business lawsuits, and how that treatment has resulted in a more arduous, expensive process for businesses.
On April 4, draft papers on the topic by Columbia’s Scott Hemphill and Harvard’s John Coates were subjected to scrutiny at the Institute for Law and Economic Policy’s 20th annual conference. On the panel, Duke’s Jim Cox stood in for Coates, who had a conflict. Also on the panel were Robert Jackson Jr. of Columbia, law professor Barak Orbach of University of Arizona and Lawrence Norden of NYU’s Brennan Center. I rounded out the group.
Hemphill’s work focused on antitrust cases, and his outline highlighted the largely pro-defendant record of the Roberts Court in this arena. It recounted the four wins versus 10 losses by plaintiffs, but noted that the victories all came after 2009. Hemphill said that the rulings reflect skepticism about class actions (Twombly and Comcast) as well as the ongoing influence of economic theory on the substantive scope of liability (Weyerhaeuser, Leegin and Actavis). He pointed to the latest ruling, in Actavis, as cabining “patent triumphalism” in antitrust.
Orbach said decisions from the Roberts Court have lacked any meaningful analysis. Of the 14 antitrust cases it’s ruled on, eight were on substantive matters and six on procedural issues. “The most obvious pattern in these decisions is hostility to private enforcement,” he said.
Orbach pointed out that in his confirmation hearing in September 2005, Chief Justice Roberts emphasized the value of private antitrust enforcement. Specifically, he stated, “I do think that the system established under the Sherman Act of private antitrust enforcement—and of course the opportunity to recover additional damages and attorneys’ fees and other aspects—has been an effective tool in enforcing the law.” Thus far, Orbach noted, the Roberts Court has been very consistent in dismantling this antitrust tool.
The scholars on the panel repeatedly circled back to one overriding concern: the Roberts Court lacks any business litigators, and thus is making uninformed decisions in these cases.
“I am equally troubled by the credit the Court receives for its use of economic lingo, suggesting it endorses economic principles,” Orbach continued. “I simply don’t see any meaningful analysis in antitrust decisions. The lingo is used to justify very simple decisions, but the decisions are not necessarily coherent.”
Criticism of the Roberts Court’s handling of business cases continued as the panel moved to cases involving securities fraud, which was the focus of Coates’s work. His paper aimed at grading the Roberts Court by tallying securities fraud cases that it deemed “expansive” versus those it assessed as “restrictive.” It concluded that the Court has not gone very far either way. It also attributed what it perceived as the Court’s gradualism to Roberts’s background as an appellate lawyer, rather than a transactional one who would tend to prefer bright-line rules.
The NYU Brennan Center’s Norden spoke about Citizens United, which struck down limits on corporate funding of PACs, and the brand-new McCutcheon ruling, which lifted the cap on total contributions to all federal candidates. Like Orbach, Norden believes the Roberts Court has been labeled “pro-business” inaccurately: “. . . [W]hat Professor Coates’ work and methodology require us to do is look past the Court’s rhetoric and image to what is actually happening in the cases—and what is interesting to see is that even in the high-profile lottery cases, the Court demonstrates a similar lack of understanding about how business and corporations work.”
While the members of the Court may have pro-business instincts, Norden said, “they don’t have a deep substantive understanding of how businesses work.”
Columbia’s Jackson agreed, stressing that the Roberts Court lacks any business lawyers, and therefore they don’t really understand what businesses want from the Court and often make mistakes that actually make the law tougher on those they’d like to help. So, while the Court may want to be pro-business, it is decidedly not.
As a member of the panel, I focused my assessment on the Court’s strong tendency to make business litigation more costly. I cited Chief Justice John Marshall’s dictum, “the power to tax is the power to destroy.” The tendency continues a trend that started in the 1980s with Celotex (on summary judgment) and continued in the 1990s with Daubert (expert opinion evidence), the 2000s with Twombly and Iqbal (pleading a claim), and the 2010s with Dukes and Comcast (class certification).
Each layer of procedure tightens the filter, presumably in the hope that it will catch and eliminate any “false-positive” results (cases that plaintiffs win but, in a metaphysically objective way, should lose). But it has the effect of multiplying the number of false-negative results (cases that plaintiffs should win but don’t, either because the filter is substantively too demanding or makes pursuing the claim too costly).
The obsession with false positives and use of procedure to banish them has perverse results. The Court’s majority often cites the great expense of business litigation, but in truth the growth in cost has largely resulted from the vast increase over the last three decades in the number and complexity of procedural devices that defendants may deploy to postpone or avoid a judgment on the merits.
Class certification, for instance, no longer occurs (if at all) early in a case. Instead it takes place (again, if at all) almost simultaneously with summary judgment motion practice shortly before trial. Tightening the filter increases the cost, and that in turn increases the cost and therefore justifies another tightening of the filter. We have a system that ferrets out almost every false positive (and promotes false negatives), but at a price that only the wealthy can afford. No wonder people try cases so seldom these days!
We ended by pointing to a June 2013 story by New York Times Supreme Court reporter Adam Liptak. He noted that “[t]he price of victory today for liberals . . . can be pain tomorrow.”
He had in mind a 2007 precursor to 2010’s Citizens United, a modest ruling in which Roberts laid the rhetorical groundwork for the vastly more far-reaching decision in the sequel. But he could as well have meant what happened to Twombly, the 2007 case that Justice David Souter authored. Two years later, in 2009, Justice Souter found himself dissenting, in Iqbal, which took Twombly to a new level. He said in dissent that “there is no principled basis” for the majority’s application of Twombly. Thus seeds grow into poisonous bushes.
In 1955, a British journalist wrote an essay on bureaucracy for The Economist magazine. The correspondent, Cyril Parkinson, put in the first sentence what we now know as Parkinson’s Law. It posits, roughly, that work expands to fill the time available to do it.
What held for bureaucrats in 1955 holds for lawsuits today.
In 2014, you rarely see a commercial case that gets to trial until the number of docket entries climbs above 400. You find motions to dismiss under Twombly and Iqbal, to compel arbitration under Stolt-Nielsen and Italian Colors, to enforce a forum-selection clause under Atlantic Marine Construction, for summary judgment under Celotex, to strike expert reports under Daubert, to decertify a class under Dukes and to review class certification under Rule 23(f).
The same impulse that prompts lawyers to use every available procedural device also persuades them to include a multitude of grounds. Thus a motion to dismiss asserts not only that the statute of limitations has run but also that laches, equitable estoppel and waiver bar the claim. A Daubert motion attacks not just the expert’s credentials, her methodology, the reliability of the data she used, the timeliness of her report and the possibility of gaps in her reasoning; it also recounts every time a judge has said something uncomplimentary about her work.
These efforts cost a bundle—for the clients. Not all of them have the same likelihood of success, but who will demand restraint? Using all of them wastes the time—and tests the patience—of judges, whose goodwill and trust you will need sooner than you think, but how often do lawyers cite that as a consideration when advising clients about strategy?
By increasing the size of the copious supply of defensive procedural weapons, the Roberts Court has created many new ways to expend resources—money, credibility, reputation. But lawyers should select the one, two or at most three devices whose skillful deployment will give their clients the best chance of winning. That requires restraint. We need a lot more of it.
Barry Barnett is a partner at boutique litigation firm Susman Godfrey. His practice focuses on high-stakes commercial litigation across a wide range of practice areas, particularly antitrust, patent/intellectual property and energy. He’s argued appeals before the Third, Fifth and Tenth Circuits and taken a class action to the U.S. Supreme Court. He can be reached at email@example.com.