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The U.S. Supreme Court on June 18 and June 21 issued the following opinions: •In an a class action filed by investors, the justices ruled, 7-1, that federal antitrust laws do not apply to underwriters and institutional investors who allegedly manipulated the initial public offering market. Credit Suisse First Boston LLC v. Billing, No. 05-1157. A group of 60 investors filed two antitrust class actions in a New York federal court against 10 investment banks, claiming that, from 1997 to 2000, a period of rising stock prices, the banks had acted as underwriters, forming syndicates to manipulate the initial public offerings (IPO) market. The banks had allegedly imposed harmful conditions upon potential investors, such as requiring them to pay charges above the agreed-upon IPO share price plus underwriting commission. The court dismissed the suit, saying that antitrust laws didn’t apply to the banks’ conduct. The 2d U.S. Circuit Court of Appeals reversed, ruling that the plaintiffs could pursue their suit because Congress and the U.S. Securities and Exchange Commission (SEC) had not explicitly immunized the conduct at issue. The justices reversed. Writing on behalf of the court, Justice Stephen G. Breyer said there is no need for an antitrust suit since the SEC actively enforces rules and regulations that forbid market manipulation. Moreover, “there is a serious risk that antitrust courts, with different nonexpert judges and different nonexpert juries, will produce inconsistent results . . . .[T]here is no practical way to confine antitrust suits so that they challenge only the kind of activity the investors seek to target, which is presently unlawful and will likely remain unlawful under the securities law.” Breyer said. Chief Justice John G. Roberts Jr. and justices John Paul Stevens, Antonin Scalia, David H. Souter, Ruth Bader Ginsburg and Samuel A. Alito Jr. concurred. Justice Clarence Thomas dissented. • CONSTITUTIONAL LAW The justices held unanimously that a car passenger, like a driver, can challenge the constitutionality of a traffic stop under the Fourth Amendment. Brendlin v. California, No. 06-8120. Bruce Brendlin was convicted of drug possession after a sheriff’s deputy stopped a car in which he was a passenger. At trial, Brendlin sought unsuccessfully to suppress the evidence of drugs, claiming it was obtained through an unconstitutional seizure, since the police lacked probable cause or reasonable suspicion to make the traffic stop. An intermediate California appellate court ruled the traffic stop was illegal, and reversed. The California Supreme Court reversed, ruling that Brendlin, as the passenger, wasn’t the target of the traffic stop and thus not the one seized. The justices reversed. Writing on behalf of the court, Souter said that the way to tell if a seizure has taken place is whether, in light of all the circumstances, a reasonable person would believe he is not free to leave. Brendlin was seized because no reasonable person in his position would have believed himself free to “terminate the encounter” between the police and himself. A traffic stop necessarily curtails a passenger’s travel just as much as it halts the driver. • CIVIL PRACTICE The justices held, 7-2, that a federal appellate court has no jurisdiction to hear an appeal on when a foreign company doing business in the United States is to be treated as a foreign sovereign. Powerex Corp. v. Reliant Energy Services, No. 05-85. After the California energy crisis of 2000 and 2001, state and individual energy consumers filed suit in California state court against Reliant Energy and other California generators of power, alleging conspiracy to fix electricity prices. Reliant and others filed cross-claims seeking indemnity from some of the plaintiffs as agencies of the U.S. government, and some as agencies of the Canadian province of British Columbia. The cross-defendants removed their case to federal court, arguing that, as government agencies, they were both entitled to removal and immunity from suit. The district court ruled that all but Powerex Corp. were immune from suit, and remanded the case to state court. Powerex appealed, arguing that as a wholly owned subsidiary of a corporation wholly owned by British Columbia, it was a foreign sovereign under the Foreign Sovereign Immunities Act of 1976 (FSIA). The plaintiffs said the appeal was jurisdictionally barred by 28 U.S.C. 1447(d), which provides that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” The 9th Circuit held that Section 1447(d) did not preclude it from reviewing substantive issues of law that preceded the remand order, but affirmed as to Powerex’s not being a foreign sovereign. The justices reversed. Scalia said that Section 1447(d) bars appellate review of the remand order and the FSIA claim. The district court’s remand had been based on lack of subject-matter jurisdiction. Review of the district court’s characterization of its remand order should be limited to whether there was an argument in support of the district court’s rationale: “Lengthy appellate disputes about whether an arguable jurisdictional ground invoked by the district court was properly such would frustrate the purpose of [Section] 1447(d) quite as much as determining whether the factfinding underlying that invocation was correct.” • BUSINESS LAW The justices ruled, 8-1, that, to qualify within the meaning of Section 21D(b)(2) of the Private Securities Litigation Reform Act of 1995, a strong inference of criminal intent to defraud must be more than merely plausible or reasonable, it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent. Tellabs v. Makor Issues & Rights, No. 06-484. Shareholders filed a class action in an Illinois federal court, alleging that Tellabs and its CEO, Richard Notebaert, had engaged in securities fraud. Tellabs moved to dismiss the complaint on the ground that the shareholders had failed to plead their case with the particularity the Private Securities Litigation Reform Act of 1995 (PSLRA) requires. The court dismissed the complaint without prejudice. The shareholders then amended their complaint, adding specific allegations as to Notebaert’s mental state. The court again dismissed, this time with prejudice. The shareholders had sufficiently pleaded that Notebaert’s statements were misleading, but they had insufficiently alleged he acted with intent to defraud. The 7th Circuit reversed, holding that the shareholders had sufficiently alleged that Notebaert had acted with the requisite state of mind. The justices reversed. Writing on behalf of the court, Ginsburg said that Congress did not merely require plaintiffs to allege facts from which an inference of a criminal intent could rationally be drawn. Instead, Congress required plaintiffs to plead with particularity facts that give rise to a “strong” inference. To determine whether the plaintiff has alleged facts giving rise to the requisite “strong inference,” a court must consider plausible nonculpable explanations for the defendant’s conduct, as well as inferences favoring the plaintiff. The inference of criminal intent must be at least as compelling as any plausible opposing inference one could draw from the facts alleged.” • SCHOOLS AND EDUCATION The justices decided unanimously that it does not violate the First Amendment for a state sports group to enforce a no-recruiting rule on athletes. Tennessee Secondary School Athletic Association v. Brentwood Academy, No. 06-427. The Tennessee Secondary School Athletic Association (TSSAA) regulates sports among Tennessee’s public and private high schools. The association sanctioned Brentwood Academy because its football coach sent eighth-grade boys a letter that violated its rule prohibiting members from using “undue influence” in recruiting middle school students for their athletic programs. Brentwood filed suit in a Tennessee federal court under 42 U.S.C. 1983, claiming violations of the First and 14th amendments as well as the due process clause of the U.S. Constitution. The court granted Brentwood relief, but the 6th Circuit reversed, holding that a private voluntary association does not act under color of state law. In 2001, the high court reversed, and the district court again ruled for Brentwood on remand. The 6th Circuit affirmed, holding that the anti-recruiting rule is a content-based regulation of speech that is not narrowly tailored to serve permissible purposes. The justices reversed. Writing on behalf of the court, Stevens said that enforcing a rule that prohibits high school coaches from recruiting middle school athletes does not violate the First Amendment. An athletic league’s interest in enforcing its rules may warrant curtailing the speech of its voluntary participants. The association can impose only those conditions that are necessary to managing an efficient and effective high school athletic league. “No empirical data are needed to credit TSSAA’s commonsense conclusion that hard-sell tactics directed at middle school students could lead to exploitation, distort competition between high school teams, and foster an environment in which athletics are prized more highly than academics,” Stevens wrote. • CRIMINAL PRACTICE See Page 6 for a story on the justices’ ruling that a sentence within the Federal Sentencing Guidelines may be presumed to be reasonable when the case is on appeal. Rita v. U.S., No. 06-5754.

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