Oral arguments completed and sticky D.C. summer months looming, the Supreme Court begins Tuesday its dash toward completion of October Term 2013. In a little over a month, the term will be over and the Court’s opinions issued. This term features no single case that has captured the popular attention—no ObamaCare, no gay marriage. But for those interested in the Court’s business docket, there remain several consequential cases yet to be decided. Here are three of the more noteworthy business-related disputes still pending:
Halliburton Co. v. Erica P. John Fund: The Halliburton case has the potential to effect dramatic changes to the legal regime for securities fraud class actions. The dispute there centers on the so-called “fraud on the market” presumption the Supreme Court adopted in 1988’s Basic v. Levinson decision, the legal presumption that each potential class member in a securities fraud class action relied on the allegedly fraudulent statements at issue. Premised on the idea that securities prices reflect all available information, Basic’s presumption eases the way for plaintiffs to obtain class certification. It was born of a four-justice majority and has always been controversial, both legally and empirically, and Halliburton seeks to overturn it.
Although much of the commentary in the lead-up to the Halliburton oral argument addressed whether the Court would do away with the fraud-on-the-market presumption entirely, the argument’s focus was elsewhere. The justices spent the majority of the argument exploring whether the presumption should be modified—not tossed out—and if so, how. They seemed particularly interested in whether they should alter the procedure for certifying a class to address whether the alleged misstatements affected the relevant stock’s price: Should plaintiffs be required to show that the supposed misstatements moved the stock’s price, or should defendants be allowed to offer evidence that there was no such price impact?
Neither of these procedural modifications would have the sweeping effect that elimination of the fraud-on-the-market presumption would, but either could change the balance of power in securities fraud class actions because they could make class certification more difficult to obtain. Vanishingly few securities fraud class actions ever go to trial—almost all of them are settled once a class is certified—so the class certification decision is the whole ball game for settlement purposes. Making class certification marginally harder to obtain would make big class action settlements marginally harder to obtain. Although predicting results based on oral argument is always fraught with peril, that seems to be where a majority of the Court is heading. (Full disclosure: My colleagues and I filed an amicus brief in Halliburton on behalf of former Senator Alfonse D’Amato and others involved in negotiating the terms of relevant legislation.)
NLRB v. Noel Canning: The recess appointments power—the president’s constitutional power to appoint judges and senior executive branch officials without Senate confirmation “during the Recess of the Senate”—has rarely garnered much public attention. But as a matter of institutional prerogatives, that power has long been the subject of tension between the White House and the Senate, regardless of which party held each. In 2007, Senate Democrats came up with a tactic to thwart President Bush’s ability to make recess appointments by keeping the Senate from going into recess: Even when all but a couple of Senators had left town, the Senate would convene “pro forma sessions” every three days, gaveling into session, conducting no business, and immediately gaveling out of session. This tactic became standard operating procedure, giving the Senate an uneasy advantage in the recess appointments tug-of-war.
That appeared to change in 2012, though, when President Obama asserted that he was using the recess appointments power to appoint three members of the National Labor Relations Board even though the Senate was holding pro forma sessions. In support, the Justice Department’s Office of Legal Counsel—the executive branch’s in-house legal department—opined that the Senate was in fact in recess notwithstanding these fleeting sessions.
The new appointments meant that the previously quorum-less NLRB now seemed capable of functioning, and it immediately set to work. The case before the Court arose from a board decision against a Yakima soft drink bottler, which challenged the decision on the ground that the board lacked a quorum of constitutionally appointed members. The D.C. Circuit agreed, and oral argument at the Supreme Court did not suggest the Court would reverse. Justice Kagan noted that the recess appointments power was initially for dealing with Senate absence—during periods when Senators were gone from the capital for months at a time—but it is now used to deal with Senate intransigence. In general, the justices seemed troubled by the notion that the White House should have the power to tell the Senate that the Senate is in recess when the Senate says it is not. There was little said at oral argument that would give the Obama White House any comfort that the president will regain the use of the recess appointments power in the face of the Senate’s pro forma sessions.
The direct effect of a decision overturning the Obama administration’s appointments would be limited to those entities that were the subject of NLRB decisions during the period when, absent the recess appointments, the board lacked a quorum. The indirect effects would be much broader, as the ability of presidents of either party to fill top-level positions in their administrations despite Senate inaction would be curtailed.
Utility Air Regulatory Group v. EPA (greenhouse gas emissions challenges): Under the Clean Air Act, the Environmental Protection Agency regulates greenhouse gas emissions from “mobile sources”—cars and trucks. These consolidated cases address whether EPA was within its rights to conclude that that regulation of mobile sources automatically authorizes EPA to regulate greenhouse gas emissions from stationary sources as well.
If so, then the scope of the EPA process requiring permits for building new facilities or refurbishing old ones—already applicable to major emitting facilities such as steel mills and power plants—would expand dramatically. Due to the host of stationary sources that emit greenhouse gases in amounts sufficient to trigger the EPA’s permitting process, the U.S. Chamber of Commerce asserts that the disputed regulatory regime could be “the costliest, most intrusive regulatory program the nation has yet seen.” At oral argument, the Court appeared deeply divided. Stay tuned.