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From the environment to securities to trademarks to taxation, a wide array of cases with significant legal and financial implications for the nation’s business community are lined up for the justices during the 2004 – 2005 U.S. Supreme Court term. Whether it’s business vs. business, or business vs. private individuals, these high court challenges primarily involve interpretation, not of the Constitution, but of federal laws and regulations — the basic foodstuff of a Supreme Court term. “Those cases are not always the kind of cases that create headlines, but they keep the federal government national and uniform,” says Court scholar Thomas Baker of Florida International University. Two years ago the Supreme Court agreed to decide a key and lingering question under the Age Discrimination in Employment Act (ADEA), which prohibits employers from discriminating against workers older than 40. The case asked whether workers could bring claims based on disparate impact, which does not require proof of intentional discrimination. But after the case was argued, the justices dismissed the writ of certiorari without explanation. Lawyers believe that it is not likely to happen with Smith v. City of Jackson, Mississippi. In Smith, a group of older police officers sued the city and police department, charging that a new pay policy favoring officers with less than five years of experience discriminated against the older workers and was designed to force them to retire. The plan, facially neutral, disproportionately affected older officers who generally had more than five years of service, they charged. A divided panel of the U.S. Court of Appeals for the Fifth Circuit agreed with the city that disparate impact claims cannot be heard and determined under the ADEA. The circuits are badly split on this question. The Fifth is joined by the First, Seventh, Tenth, and Eleventh. But taking the opposite position are the Second, Eighth, and Ninth circuits. If the high court holds that the disparate impact claims cannot be brought under the ADEA, “that will set off a firestorm within AARP,” predicts labor law scholar Charles Craver of George Washington University Law School. “To say disparate impact is not there for older people when it is there for gender, race, and disability claims would make the ADEA the only modern civil rights law not to cover such claims.” Securities cases have been taken up only infrequently by the high court in recent years. As with the ADEA challenge, the upcoming Dura Pharmaceuticals Inc. v. Broudo will pose a fundamental question. Dura counsel William Sullivan of Los Angeles’s Paul, Hastings, Janofsky & Walker summarizes it this way: Must a securities fraud plaintiff who contends that a company misled a market plead and prove a causal connection between the alleged fraud and the stock’s subsequent price drop? Dura’s stock fell 47 percent in one day after it announced in 1998 that it expected lower revenues because of slower than expected sales of its antibiotic Ceclor CD. Investors who bought before the announcement sued, claiming that the company misled them about sales of the drug. The Ninth Circuit held that the loss causation element had been shown because “the misrepresentation touches upon the reasons for the investment’s decline in value.” Sullivan, whose petition for certiorari was supported by the Bush administration, says the appellate court took the loss out of causation. “The Ninth Circuit laid out what is a very lax standard for any analysis of loss causation,” he contends. “It would lend itself to a greater number of cases and more limits of the ability of defendants to get rid of the cases that don’t have any merit.” Because this type of case is the mainstay of securities litigation, says Mark Levy of Atlanta’s Kilpatrick Stockton, the issue is very important and “will significantly affect how easily these cases can be brought and won by plaintiffs.” An environmental challenge lies ahead for the high court this term too. Cooper Industries Inc. v. Aviall Services Inc. should have sweeping ramifications for the cleanup of polluted sites throughout the nation. The justices will decide if a company that is potentially liable under the federal Superfund law and voluntarily undertakes cleanup must wait until it has been sued under that law before it can seek contribution from other jointly responsible parties. The battle here is over language in the Superfund law (the Comprehensive Environmental Response, Compensation and Liability Act). “For 25 years, the universal understanding has been that contribution suits can be filed once the first dollar has been spent,” says Michael Steinberg of Morgan, Lewis & Bockius, who filed an amicus brief supporting Cooper on behalf of the Superfund Settlements Project. “The statute was never interpreted to require a company to wait for someone to sue you first. That’s a surprising and unproductive way to look at the Superfund statute.” But the solicitor general contends that allowing a company to sue for contribution before it has been ordered to clean up would result in numerous contribution suits and would force judges to pick through the very time-consuming and factually complex cases. Federal preemption of state tort law will be addressed by the justices once again this term in Bates v. Dow Agrosciences. The Court will decide whether the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) preempts state tort claims by a group of farmers charging that Dow’s herbicide damaged their peanut crops. Among other state law claims, the farmers alleged false advertising, fraud, and design flaws. FIFRA requires pesticide manufacturers to submit their goods to the Environmental Protection Agency for registration and approval of their product labels. The Bush administration is supporting Dow. Preemption cases are very important to the business community, says Levy. The analysis used by the justices in the Dow case will have immediate application to a wide range of preemption cases, not just those involving FIFRA. Other business-related cases to watch this term include CIR v. Banks and CIR v. Banaitis, which ask whether the portion of a damages recovery paid to a taxpayer’s attorney under a contingency fee agreement is included in the taxpayer’s gross income. Business and public interest groups have weighed in, claiming that including the contingency fees in the taxpayer’s gross income would amount to double taxation because both the attorney and client would pay tax on the same dollars. They also argue it would increase the cost of settlements in employment litigation. But the government argues that the entire taxable amount of litigation proceeds is includable in the taxpayer’s gross income, regardless of whether he has directed a portion to be paid under a contingency-fee agreement. And keep an eye out for whether the justices agree to review what the Institute for Justice, a libertarian public interest law firm, calls one of the most important property rights cases in 50 years. Kelo v. New London, brought by the institute, asks whether the government can use eminent domain to take private property and give it to a developer who will generate more tax revenue. A version of this story originally appeared in The National Law Journal, a sibling publication of Corporate Counsel.

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