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In three key business rulings handed down Wednesday, the Supreme Court continued its trend toward freeing companies from the conflicting regulation of 50 different states in favor of one federal regime. The Court favored federal pre-emption over state laws and state court remedies in the areas of medical device regulation, interstate shipping of tobacco, and arbitration of contract disputes. In announcing one of the cases from the bench, Justice Antonin Scalia said the day’s decisions made it clear that “we consider it part of our business” to sort out the balance between federal and state law. But it was not a clean sweep for business Wednesday. In LaRue v. DeWolff, Boberg & Associates, the Court ruled that employees can sue employers under the Employee Retirement Income Security Act for mismanaging their 401(k) retirement plans. “Companies are no longer protected from these claims,” said employee benefits specialist Jeff Russell of Bryan Cave. Business groups had argued that the law does not allow for individual claims. James LaRue sued his employer DeWolff, Boberg, a Dallas consulting firm, claiming that the company failed to carry out his investment instructions for his 401(k), resulting in a loss of $150,000 in the value of his plan. Justice John Paul Stevens, writing for a unanimous Court, said the law does allow for lawsuits to recover “fiduciary breaches that impair the value of plan assets” in individual accounts. Of Wednesday’s pre-emption cases, Riegel v. Medtronic may have the broadest impact. The Court ruled against the estate of Charles Riegel, who died after a catheter made by Medtronic malfunctioned during heart surgery. Riegel sued in federal court, invoking New York state common law to argue for liability and damages. Like lower courts, the Supreme Court ruled that the federal Medical Device Amendments of 1976 specifically precludes states from imposing their own requirements on the makers of federally regulated medical devices. Justice Ruth Bader Ginsburg dissented from the opinion authored by Scalia. Ginsburg called the ruling a “radical curtailment” of state law remedies that Congress did not intend when it passed the law. Jon Haber, head of the American Association for Justice, the organization for trial lawyers, criticized the ruling and said it “should be narrowly viewed as applying only to certain medical device cases and should not serve as precedent for cases involving drugs and other consumer products.” The other two pre-emption rulings were: •

Rowe v. New Hampshire Motor Transport Association, in which the Court said the state of Maine could not impose its own legal requirements on delivery companies aimed at preventing the shipment of tobacco products to minors. Justice Stephen Breyer wrote the decision for a unanimous Court, asserting that to allow Maine to regulate tobacco shipment would “severely undermine” federal regulation. • Preston v. Ferrer, resolving a dispute between Alex Ferrer, who goes by the name “Judge Alex” on a syndicated television show, and Arnold Preston, an entertainment industry lawyer. The issue before the high court was whether a contract dispute between the two should be governed by state law or the Federal Arbitration Act. Ginsburg said that when parties agree in advance to arbitration, the federal law supersedes state law. Justice Clarence Thomas dissented, arguing, as he has in the past, that the Federal Arbitration Act does not apply to proceedings in state courts.

Tony Mauro can be contacted at [email protected].

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