American Enterprise Institute

October 27, 2008

[Edited transcript from audio tapes]

4:15 p.m.	Registration
4:30	Panelists:	Michael S. Greve, AEI
		Andrew J. Pincus, Mayer Brown
		Catherine M. Sharkey, New York University Law School
		Mark T. Stancil, Robbins, Russell, Englert, Orseck, Untereiner, & Sauber LLP
	Moderator:	Ashley C. Parrish, Kirkland & Ellis
6:30	Adjournment and Reception

Proceedings:

Ashley C. Parrish:  Thank you all for coming.  If I can start the panel, welcome to AEI’s panel on the Supreme Court, its annual review and preview of the current term and the term that just went by.  We have a distinguished panel here today that will focus on, as usual, that part of the Court’s docket that although perhaps less controversial in the public sphere in many minds is maybe the most important part of that docket, and what I’m referring to, of course, is the business cases.  As the Court’s docket continues to shrink a little bit, this term to 67 cases, these business cases continue to play a major and important role in the types of cases that the Court is deciding.

I’m not going to say too much today but really get on to the panel.  The structure will be fairly straightforward.  Each of the panel members will say a few words about some of the interesting cases of last term, some predictions about the coming term, and some other thoughts on the Supreme Court generally.  And then we will be open for questions, and we hope to save some time for questions.  If you will see the packets that are available at the front desk when you came in, it will give a full bio of each of the panelists.  I’ll just give a quick overview and if I have this right, here is the order that everyone who is going to talk today.

We are going to start with Mark Stancil who is three over from me here.  Mark is a former Supreme Court clerk and an appellate litigator at Robbins, Russell here in town.  And then second, we will be going to Catherine Sharkey who is sitting to my immediate left here.  Cathy is also a former Supreme Court clerk and a specialist in a number of areas such as preemption and punitive damages and things like that, and will have a lot to say in some of the cases that were decided this term.  After that, Michael Greve who is the John G. Searle Scholar here at AEI, and then lastly, Andy Pincus will wrap up everything.  He is a Supreme Court specialist over at Mayer Brown.  With no further ado, Mark, I’ll pass it to you.

Mark T. Stancil:  Well, thank you very much.  I would like to start with a standard lawyerly preface which is that I’m going to talk about a couple of cases or a couple of issues that my firm and my clients are involved in.  These opinions are mine alone, and you will see why people are not eager to share them.  I’m going to talk about three things which I think will be of interest to the business community.  The first is a case from last term called Stoneridge, which I think everybody has read a fair bit about.  The second is an issue that is actually related to Stoneridge and it deals with recusal and specifically what the Supreme Court has said about recusal of its own members and of other members and may say in the future.  The third would be to talk very briefly about the financial crisis with which we are all very familiar what the Supreme Court’s role in that might be and just a couple of observations about that.

So starting with Stoneridge, just to bring you back up to speed back to last January when the Court decided this case.  It is a case about the Private Right of Action under Section 10(b) of the ‘34 Act, which is the principal vehicle for private litigation against publicly-issued companies.  The specific question at issue in Stoneridge was whether the private right of action under 10(b) could be applied against entities who - I have to be careful how it is phrased - agreed to arrangements that allowed the company with which they did business to mislead their auditor, and thereby to mislead investors in the company.  That will make a little more sense if I tell you what actually happened in the case.

So Charter Cable who was a cable company that needed a lot of set-top boxes, you know, the old cable boxes.  They had a revenue shortfall until they entered into agreements with two suppliers: Scientific-Atlanta and Motorola.  In order to fill the revenue shortfall, Charter agreed with them to basically what were alleged to be roundtrip transactions whereby Charter would overpay for the cable boxes - then by $20 a box, they would overpay Motorola or Scientific-Atlanta - and then the box-maker would advertise on Charter.  Charter gets to book that as revenue, the share price, benefits accordingly.  The other way they did it was - this is with Motorola specifically - they entered into an agreement where they said with Motorola, “Well, we will pay you liquidated damages of $20 for every box that we order but do not actually purchase.”  And as predicted, they ended up not purchasing just as many boxes as they needed to overpay Motorola so that Motorola would then have enough money to advertise back on Charter.

The allegation in the case was that they did this with the explicit purpose of misstating their financial reports.  They also alleged that Motorola and Scientific-Atlanta knew that this was the purpose of these transactions.  The question was not whether you could go against Charter, which undoubtedly you could, for its false financial statement, but whether you could go against Motorola and Scientific-Atlanta for participating in this arrangement. 

The Court held by essentially a five-to-four vote that you could not and the case turned basically on whether you need reliance on a specific statement made by the target of the lawsuit.  And the Court held that you did not need reliance and this is Justice Kennedy writing joined by the Chief Justices Scalia, Thomas and Alito.  I do not think that the result was particularly surprising for most people who watched the Court although it would have been a significant decision had it come out the other way.

Here is what the Court basically said.  They said: you have to have reliance; it has to be a specific statement that is an essential part of the cause of action under 10(b).  They were particularly concerned with preserving a case called Central Bank, which said that under the private right of action, there is no aiding and abetting liability.  So they basically said, “Well, you could not go against other parties for aiding and abetting a primary violator so you cannot go against other parties who were alleged to participate in a scheme to help a primary violator.”

There were a couple of policy arguments that Justice Kennedy offered, which I think are interesting, one of which was simply that he said, “Well, this would discourage foreign investment in the United States if we allowed this sort of liability to attach to secondary actors.”  And he also said, “Well, there is sort of a qualitative difference between contracts among purchasers and sellers as opposed to pure securities transactions,” which he called the financial realm.

I do not think the result here is particularly surprising but I think it does suggest a couple of lessons about this Court, and the point I guess I would like to get across today is, I think there is a tendency to overstate what this Court tries to do with business cases.  And I think there is a tendency to oversimplify what it means to be a conservative justice or what the Court’s predisposition is.  And to put that in perspective, I think you have to go back to where the Court got in this business in the first place, and that is, in a 1971 case in which they held that Congress - this bothers the linguists among you but - implied a private right of action under 10(b).  10(b) does not say that, but the Court said that well, they must have meant to have a private cause of action to remedy this wrong.

That proposition is largely unchallenged or has not been successfully challenged in the 30-plus years since the Court decided it.  Since then, there have been just a series of cases that deal with whether that right of action is extended, and that is really how you need to look at Stoneridge; at least, that is how I look at Stoneridge.  The Court refused to extend a private right of action to reach another class of defendants but the Court really did not do anything, I think, to significantly limit the state of exposure today.  That is interesting for a couple of reasons but I think you have to understand that Stoneridge if it is a victory for the business community, it is only that it avoided dramatically expanding liability beyond the current scope.

I think that is the principal way in which people overestimate or overstate the Court and how it interacts with the business community.  The Court does not, in my experience, generally retreat significantly from decisions involving the business community.  They may decline to expand or they may move incrementally but they generally do not change propositions of law that have been settled and accepted at least by the business community at large.  I think that is actually consistent with how you characterize not only the Roberts Court in the brief time we have - we have been exposed to it - but also the Rehnquist Court before that.  I think if people were looking for a counterrevolution by conservative judges, I think that - I would not say discredited but certainly - has not been born out in large measure.

One of the other things that I think this points out, or that Stoneridge could be used to illustrate, is how the Supreme Court specifically interacts with business cases.  This is a relatively small portion of the problem.  If there is a problem for the business world under 10(b), it is not as much with secondary liability; it is with the relatively low standards up until recently for getting private rights of action into the courts and the ability to bring these cases and to pursue them into coerced settlements. 

The Court takes a look at a very small subset of a legal issue and addresses it in a very fact-specific way but there is a lot of attention, particularly in recent years with nominations and confirmations, a lot of attention about, is this going to be a business-friendly Court?  Well, it is but only in the very small - what I describe to my wife as the - law-dorky way that the Court works.  The Court does not really move in broad strokes and it is important to bear in mind that I think most business people interact with the Court only at the margins.  The Court reaches things very slowly and very specifically.  And I think that is going to be relevant to the third thing I want to talk about today.  I’m going to get to that.

Another interesting fact about Stoneridge was: who was on the bench by the time the case was decided?  This was fairly well publicized at the time but, initially, both Chief Justice Roberts and Justice Breyer had recused themselves from deciding the case.  It left the Court with seven members; those are significant voices on the Court.  Chief Justice Roberts eventually divested of whatever financial holding was presumably disqualifying him in the first place, and the Court decided the case with eight justices.  Now, it ended up not affecting the outcome.  It was a five-to-three decision with Justice Breyer not participating.  But in another case, who knows if the Court had ended up in a four-four split.  That, of course, results in affirming the judgment below without a rationale.  The Court actually does not get its job done.

I think that it was interesting and it has come up in several contexts in several cases that the justices have a lot of stockholdings that seem to - worth less now, Andy points out - be causing the problems.  The three current members of the Court who have run into this more often than the others are the Chief Justices Justice Breyer and Justice Alito; Justice O’Connor in her day had a few.  It always seemed to be those that lined up with cases that she may not have been particularly interested in, but there is actually a story about a court of appeals judge who deliberately kept at least one share of stock from a couple of large corporations within that jurisdiction just to avoid sitting on those cases.  I do not think that is why they have these particular holdings, but it has been a problem, and I think it has been something that the justices are increasingly sensitive to.

Recent press reports, if they are to be believed, suggest that all three of them are in the act of divesting their holdings, which I think you would have to applaud.  It is troubling to me, as an outside observer, that a justice would even need to hold stock in an individual company, particularly when everything you read suggest that is not really an important part of being financially stable.  Everything I read suggest that only the truly bold will go out and pick individual stocks, so it is a mystery to me how people who decide business cases for a living, why they need to hold shares in an individual company, particularly when Congress has given them the out in the federal recusal statute of saying a mutual fund does not count with respect to other things that they hold.

I think it is good that the justices are moving to divest.  It is again puzzling that they have not done it before, and it is a little troubling to me that it came to a head.  That brings me to the other issue about recusal that I think is of interest, and it is currently in the Court’s docket.  There is a certain petition pending before the Court in a case called Caperton v. A.T. Massey.  A.T. Massey is a coal company in West Virginia.  You all probably read something about this but they had a $50 million jury verdict against them in West Virginia State Court.

After that jury verdict had been rendered, there was an election for one of the seats on the West Virginia Supreme Court and the CEO of Massey Energy, Don Blankenship - this is all according to the cert petition - contributed $3 million to the election campaign for Justice Brent Benjamin.  It is $3 million of the total $5 million in support of Justice Benjamin’s campaign.  He won.  The case came up to the West Virginia Supreme Court, granted the discretionary review, and then overturned the jury verdict three-to-two.

Shortly after that, photos surfaced that showed the chief justice - a different justice - vacationing in the French Riviera with the CEO, with Blankenship.  Then the chief justice recused another justice who had actually been in the dissent in the original case.  He recused because in the course of these squabbles, he had said some rather unflattering things about Mr. Blankenship.  Benjamin continued to refuse to recuse.  The Court reheard the case, Benjamin appointed the two replacements for the justices who had recused, and they again affirmed the jury verdict.

There is a cert petition that Ted Olson filed over the summer that is pending before the Court.  As of this morning, the Court has not acted on it; in fact, they have re-listed it twice, and re-listing simply means that the Court did not take any action on it at the first two conferences in which it came up.  Now, we are tea leaf-reading but what that suggests is the Court is probably not going to grant cert.  I always end up looking bad when I predict what the Court is going to do, but they are probably not going to grant cert and suggest that someone is more than likely writing an opinion regarding the denial of cert.  At least, that is the assumption for today because you all do not know any better than I do.

If the Court denies cert in the West Virginia case, that suggests to me a couple of things and a couple of things that I think are, at least, of concern.  First, I guess at one level, at a superficial level, it favors the business community that business interest would be able to play a fulsome role in judicial elections, but I think we can agree that is probably a bit oversimplified.  Thirty-nine states elect at least some of their judges -- the idea that this financial influence could play a role, but not merit or not rise to the level of a due process, which should be of interest to the business community. 

My personal view is that the business community would very much like to have the Court overseeing rather than simply leaving it to the individual state supreme courts to police their own members.  I could be wrong.  The Court actually may well grant cert or take some reaction reversing the judgment below, but I think it highlights the Court’s sensitivity to recusal issues and their oversensitivity, if you will, to confronting some very real concerns that people may have about what influence justices may be subject to, or more importantly, what the appearance of that may be.

That sort of brings me to the last issue I was going to talk about which is the current financial crisis.  I say that it sort of brings me there because it does not really relate, but I think it suggests that, to the extent people have financial interests at stake, the financial interests are very much a topic of debate in the legal community today.  I want to talk a little bit about and just give you a window into what I think is one way that the courts might be asked to rule on legal issues that arise out of the current financial crisis.

So Congress, as you might have read, passed a large bailout bill that allocated something like $700 billion of your money to buy various distressed assets.  There is a provision that appears in the statute which is known as EESA, the Emergency Economic Stabilization Act, that has the effect of making certain exclusivity agreements unenforceable.  You probably have not read about it yet, but this is the kind of thing that may well percolate through the courts in the near future. 

What it basically says is if you have a certain type of transaction that involves Section 11 or 13 of a banking statute, and if there is an exclusivity agreement that is executed in connection with that type of transaction, that is void.  So the instruments that businesses typically use to complete their acquisition process - they lock up each other in an exclusivity agreement before they sign a merger agreement - those are invalid.  Well, this ends up being directly at issue in the Citigroup, Wachovia, Wells Fargo litigation that is floating through various courts at various times.

This is the kind of thing that by the time the Court gets to it could very well be a very significant - if the Court gets to it - factor in how the business community is treated under the statute.  And this is just one; I’m sure there are probably dozens of issues that could crop up.  But if I would relate it back to the first thing that we talked about which is just the pace and the limited scope with which the Supreme Court addresses these issues. 

I would just note that by the time an issue like this, if it ever went to the Court, gets there, most of the significant events will be long since passed.  Because the Court only deals in drips and drabs, particularly with respect to the business community, the mergers will either have happened or not happened, banks will have failed or not failed.  The Court really is not, I guess, the significantly influential figure in how the broad strokes of a law like this is going to be interpreted.

I guess that would be my closing suggestion.  It is that while it is certainly legitimate to focus a lot on the Supreme Court and what they do with respect to the business community, I think there is surprisingly little attention paid to how those judges are selected, what influences they are under, and what they do with respect to the business community.  Because I think in the end, at least what I see in looking at these particular cases, they have far more impact day-to-day over the business community than the Supreme Court ever will.  And I think it would be wise for the community to focus on the more efficient or at least more productive use of their resources and influencing or if not influencing, in the proper selection of those judges. 

Catherine M. Sharkey:  I’m going to talk about punitive damages and federal preemption of state tort law, and I have a pretty simple thesis, which is that there has been a process of federalization of the regulation of products, particularly regulation of health and safety.  And I want to just argue that the U.S. Supreme Court has been, one, complicit in this process of federalization and, two, cautious in this process of federalization.

So with respect to punitive damages, it is pretty easy to make the case that they have been complicit starting earlier, but I want to focus on a start in 1996 with BMW v. Gore for a particular reason.  Because there is where the Court first suggested that not only would there be procedural due process review of the procedures in place in states to review the excessiveness of jury awards of punitive damages, but also suggested a substantive due process limit as well on the overall size of these awards.  The Court then, as most people are aware, took up a small series of cases next in line with State Farm and then the Williams case, Philip Morris v. Williams, which the case itself is back this term, but we will get to that in a minute because I think that comes in our story a little bit of the cautiousness.

So before we get there though, the basic thing that the U.S. Supreme Court did was basically set out federal guidepost for the review of the excessiveness of jury awards and punitive damages, suggesting that these include reprehensibility, these include the ratio of the punitive damages to the harm in the case.  And the harm in the case, compensatory damages was used as the proxy for the harm in the case.  This is what has become the ratio factor that many lower courts have looked to, just the ratio of the amount of punitive damages to compensatory damages.  And then finally, alternative sanctions that they could look to legislative sanctions in particular.  So the Court basically, I would argue, in State Farm reiterated these initial three federal guideposts.

And then in Williams, is where I start to, I guess, turn this story a little bit to the cautiousness because there, what I found significant in the case is the Court did reverse and remand a large punitive damages ratio, 100:1 ratio.  Justice Breyer writes the lead opinion, and it is focused exclusively on the procedural due process limits in that case.  And the Court does not entertain the question on whether the size of the award violated substantive due process.  To me, that seems significant, and it still seems significant, I would argue with respect to the Williams case back on the docket because the cert petition raised two separate issues.

The first issue was just, did the Oregon Supreme Court when it received the Williams case back and was told to apply the constitutional standard, and the constitutional standard in that case had to do with whether or not the jury’s award had been infected or tainted by evidence that applied to individuals other than the plaintiffs before the case.  And the rationale of the Court was not that there had to be any particular way that states had to deal with it.  They just needed some kind of process whereby they made sure that any consideration of evidence as to harm to others came in only with respect to considering reprehensibility of the defendant’s conduct and not at all with respect to punishing the particular defendant in the case but they were going to leave it to state procedures to decide how to rein in this particular problem.

So the Oregon Supreme Court decided instead to just reinstate its initial opinion and did so saying that there was a default in that this issue had not been raised appropriately and it was decided on state law grounds.  So the U.S. Supreme Court is now granted cert in this case to decide whether that was appropriate for the state court to do this on an issue - raised state issue - of procedural default raised for the first time.  But decided not to grant cert on the second time reiterated question of substantive due process review, which I think is significant because I do think that the Court, while it is definitely very serious about the business of reining in punitive damages, is extremely wary about any kind of expansion of substantive due process grounds.

This leads to the final case that I want to talk about in the punitive damages realm.  It is, of course, the Exxon Shipping Company v. Baker, a case decided last term.  Well, there are many things that are interesting to me about this case, including the fact that I think beforehand, a lot of people, particularly people who are somewhat obsessed with punitive damages had relegated this case because it was rising under federal maritime laws, having less significance.  And yet, in hindsight, I think if you read this opinion, which was authored by Justice Souter, while it is true that doctrinally it is holding, which again reiterates various means for reining in punitive damages -- doctrinally it is limited to federal maritime which is very distinct in the fact that they can, as a Court, decide a federal common law so they do not have to do a constitutional kind of review.  So they can get more justices on board for various strategies of reining in awards.

This was a five-three decision.  It relates to one additional example of the recusal at issue but it was five-three.  They did not split four-four here.  Justices Stevens, Ginsberg and Breyer pretty much thought that state courts and juries were basically doing their jobs, and the other justices were obviously perturbed by the fact that the Ninth Circuit had left a $2.5 billion punitive damages award in the case that arose from the oil spill in Prince William Sound.  So they reversed and they lowered this award to the exact amount of the compensatory damages which was $507.5 million.

What is interesting to me though is that this case shows that some of the cautiousness at least when they are in the realm of federal common law is a little bit relieved.  Here is a case where the Court decided that they could, I think, in a sense, sit as an exemplar because state courts by and large are going to be sitting in this same posture as a common law court.  In the Supreme Court, it is relatively rare; and in the punitive area, it is distinguished from the other line of cases that I talked about.  And yet, they could go through and talk about various ways that we could decide to restrain these awards.

The other interesting footnote - and it is indeed a footnote in the case - footnote 17 is of particular interest to me and actually the text accompanying the footnote is interesting too.  Justice Souter goes, for a Supreme Court opinion, into a fairly lengthy review of empirical and experimental research that has been conducted in this area.  I have taken it upon myself, because it is an area I’m interested in, to look back, and the Court has been - this is probably Exxon -- this case was probably the case in which the least amount of this type of experimental and empirical research was put before the Court.  A lot more of it has been put forward in previous cases, in the constitutional cases, and the Court has cited some of it but not been as moved.

Here, it is interesting.  It is a bit of a paradox what the Court did with some of this literature.  They basically looked at it to make the point that state juries are not giving these runaway punitive damages awards in a way that we might expect, and actually, the studies that rely on large case samples of data seem to show relative stability, no increase in frequency with which punitive damages awards are given relatively modest medium ratios, actually of about 0.62, in other words, less than even one-to-one compensatory damages, usually being larger than the punitive damages at issue.  And the Court uses this actually in an interesting way to suggest that the real problem with punitive damages therefore is the unpredictability because even though on average, this is not really a problem that what it shows is that the variation or the spread in these awards.  In other words, the real concern is with outlier punitive damages awards.

But what is interesting, if you are familiar with this research, is that they actually cite the authors who generally, in this kind of empirical fight, stand for the proposition that the Court should not get involved in the punitive damages review, that there is no real problem here, everything seems to be okay.  They cite those kind of studies in the majority opinion and then relegate to this curious footnote that has then dismissed the authors of studies that have actually generally argued the outlier punitive damages are a real problem, and it is why the Court should be engaged in this business.

One might wonder why they did that, and the Court has this explanatory note that says, “Because this research was funded in part by Exxon, we decline to rely on it.”  It has created, at least, in the academic community and I think beyond that, in the business community, some discussion that what the Court really meant by that footnote - writ large, it could actually implicate - there is just no way you can do large amounts of empirical research if someone does not fund it.  And almost any funding, you can do various things – RAND seems takes its funding, and seems to mix it altogether, so you cannot know exactly where various parts are coming from; other organizations like Exxon who just give money out, but specifically, have agreements whereby the scholars have complete freedom - they are not tethered in any way, shape or form.

So I guess I just want to propose that I think that probably the best read of this footnote is in a narrower sense, namely that the courts are going to be wary about research funded by a party in the case before it, as opposed to that it is going to now be incredibly wary of any kind of empirical or experimental research that has been funded by any entity that happens to align more readily on one side of the v. or another. 

And there are a few reasons for that.  One, some of the studies that were funded by Exxon have been cited in previous Supreme Court opinions; Cooper Industries is one example there.  The other thing is that if you look, there are a variety of studies that the Court has relied on positively that are also funded by outside entities.  In any event, to me, that was kind of an interesting spark that has gone through both the academic and business community.

The next thing that I want to talk about is federal preemption of state tort law, which I’ll try to do relatively briefly.  Let’s see.  How am I going to do that?  So the complicity, I think we can skip over.  There have been a bunch of pro-preemption decisions coming from the Court and at least an oversimplified view is to suggest that this is showing a tilt towards federalizing areas of the law that were previously the realm of state tort law.

The cautiousness, I think, is a little bit more interesting.  One, on this, I would argue that the Court is really focused on expressed preemption as opposed to implied preemption.  There is just going to be an innate cautiousness with respect to trying to emphasize wherever possible if there is language in the statute on which it can hook its various arguments.  It did this in Regal - the case from last term - about medical devices even though there were a lot of broad statements about various other factors that might have mattered.  In that case, I think the focus on the statutory text allowed the majority to come to an eight-to-one decision in that kind of case.

In Exxon, interestingly enough, there was actually a preemption argument about whether the Clean Water Act preempted punitive damages and federal maritime law, and the justices were unanimous on that portion that the text did not support such an argument.

Altria which has been argued this term - there is no decision yet.  Altria v. Good, the case about allegedly deceptive advertising in the cigarette context with the use of the monikers “low tar.”  It was interesting reading the transcript of oral argument where Ted Olson basically all but abandoned any kind of argument on implied preemption and mostly because the expressed preemption argument seemed to be resonating with the justices.  It is also a curious case because the solicitor general who intervened in the case on the side of the smokers decided only to intervene on the implied preemption argument, arguing that it should not be impliedly preempted but was silent on the expressed preemption argument and got a lot of heat, I would call it, from the Justices about its inability to state a position on expressed preemption.  I think the Court very much wants to decide that case on expressed preemption grounds.

When you move into implied preemption, we are not going to have the statutory hook.  I think that is where the issue becomes a lot more complicated for the justices.  So the first example would be last term’s Warner-Lambert v. Kent where the Court did split four-four.  One of the results of this recusal policy, and therefore left standing an underlying judgment in the pharmaceutical context which was the only sole implied preemption case before the Court last term, and one that seemed to be a bit of an outlier from the rush of pro-preemption decisions.

So I do think that that is significant and shows that this Court is not all of one mind in that area, which brings me finally to the big implied preemption drug case pending, Wyeth v. Levine.  And there, like it or not, the Court is going to have to face the implied preemption argument because unlike in medical devices, there is no statutory text on which they can place their hook.  I think there are a variety of factors that are going to influence the Court that they have signaled before.  One is to really focus on the nature of the stringent federal regulatory review that is done.

If you look back to the Regal decision, you could insert the drugs or medical devices that are being discussed in numerous places with respect to the stringency of the review.  In fact, the ex ante review of drugs is arguably much more regressed.  There was actually an article that gets in today - I read it late on the web last night on the New York Times - a review, an argument about how the medical devices - there are too many devices - are coming in through substantial equivalence that do not go through this rigorous review unlike drugs where everything has to go through a rigorous review process.

I also think another factor that is going to be important is the position that the federal agency is arguing before it - I have argued in some of my previous writing - that when you look at the Supreme Court products liability cases, it turns out that factor is probably the most important factor in terms of predicting outcome of the Supreme Court’s cases in these areas.

The final thing that I’ll end on is that I think, too, this is an area where the justices are going to be torn between wanting to stick to statutory text arguments but then having predilections particularly in this area - predilections towards expert agency determinations and against common law juries.  A lot of this came out.  There were pretty definitive remarks by both Justice Scalia and Justice Breyer, and the liberal and the more conservative side that seemed to find it preposterous that you would rely on 12 lay persons’ judgments to override the determination of the federal agency.  So obviously, that is a big factor at issue there.  So with that, I will end.

Michael S. Greve:  When we divvied the cases up, I volunteered for the environmental cases of which there are five this coming term -- last term.  The reason why I did that was I thought, “Hey, I have not looked seriously at environmental cases in 15 years.” I used to, “so maybe it is fun to look at them again.”  I’m sorry to say, it is not fun because while I was looking away, the law has gone from bad to berserk.

I’ll make three points.  I’ll give you a brief summary of the cases and then make my three points.  First, I think the forces of sanity will prevail in most, if not all, of these cases.  Second, that is very little consolation because overall, there will be little gain stopping the bad stuff and making incremental gains and here I am entirely of one mind with what Mark said earlier.  That is not worth much if you then lose the big ones, and the big loser is global warming in Massachusetts v. EPA.  That was, of course, not last term but the term before it.  It will not be back this term but I’ll give you nonetheless a brief sketch.  Then third, I’ll try to say a few words of what the cases in these various areas - drugs, punitive damages, preemption, finances - have in common and why I think you should be very scared.

First, to the cases, and I’ll keep this very, very brief.  One of the cases is Burlington Northern v. The United States and Shell Oil v. The United States.  That is about so-called arranger liability under the Superfund statute.  And the question is: Do you apportion people’s liability to these?  Or, is it joint and several and if so, which is which and when is when?  The Ninth Circuit there rejected the district court’s decision to apportion damages.  That is probably in conflict with the Fifth Circuit holding. 

On the whole, this is a long overdue Supreme Court intervention in a field where circuits have gone every which way, and there has never been the Supreme Court ruling on these matters under the statute, unless you name gas eons ago and on a somewhat separate issue.  There is a lot of money at stake in this case but not a whole lot in terms of larger implications.

The second case is called Coeur Alaska v. Southeast Alaska Conservation Council.  That is, in a lot of ways, the least important of these cases, I think.  What is at issue there is the division of regulatory authority between the Corps of Engineers and the EPA with respect to certain environmental activities having to do with fill material, whether you need one permit and that is exclusive from the Corps or whether you need additional permit and there is some consensus from the EPA.  The Ninth Circuit has said yes.  The industry, the agencies, the state of Alaska have all said, “No, no, no, the Section 404 permit process,” - that is the permit process the court conducts - “is exclusive, and that will be the answer in this case.”

The other three cases, I think, are a little more interesting and consequential.  One of these is a case called - it is actually a set of three cases consolidated - Entergy v. EPA.  All these cases come from the Second Circuit as the Clean Water Act cases, having to do not with putting stuff into water but taking water out of a stream for cooling purposes.  And the statute here, the Clean Water Act says that with respect to location, design and construction, the EPA standards must reflect the best technology available for minimizing adverse environmental impacts - that is Section 316(b) if you absolutely have to know.

Then the question is, under that standard, best technology available, can the EPA take costs into account and set standards on a cost benefit basis?  The Second Circuit said, “No, you cannot short of standards that would ruin the industry as a whole.”  The court then remanded the particular standards at issue to the EPA to basically redo the rulemaking proceeding under that standard.  That is, by and large, also the environmentalist position in the case.  The United States government here holds that the statute is unclear as to whether you can or cannot use cost-benefit analysis.  But once the EPA has decided to do it, that is a reasonable agency interpretation and should therefore stand.  And the industry argues that, “No, no, no, the statute plainly permits if it not outright requires cost-benefit analysis.”

This is one of many, many proceeding cases that had posed this question: Can you or can you not do cost-benefit analysis under this particular statute?  The famous of this is of course the ATA v. Whitman case.  The general trend in the courts, both in the appellate courts and in the Supreme Court, has been to allow cost-benefit analysis except of course in Whitman itself.  In this particular case, the language and the structure of the Clean Water Act present some problems but so does the irrationalities that would flow, I think, from the Second Circuit and the environmentalists’ position.  I would be happy to explain that if more is needed.  I think the result in this case will probably be something close to the SG’s position in this case.

The fourth case - and I’m not doing this in the order in which they are being argued, it is my order - is called Summers v. Earth Island Institute and that is a standing case.  The standing questions in this case are intermixed with questions having to do with ripeness, mootness and scope of injunctive relief available in these kinds of cases.  Briefly, the Forest Service regulations that exempt projects that do not require environmental assessments or full-blown environmental impact statement from notice and comment proceedings under the APA and the Earth Island Institute and its plaintiffs have challenged that ruling, that regulation, in a project or site-specific context.  That particular project was then withdrawn and settled out, and so now, the plaintiffs tried to sustain this challenge as a facial challenge to the Ninth Circuit, except that that challenge let it stand and issued a nationwide injunction against a particular regulation at stake.

This is a replay of an earlier case called National Wildlife Federation v. Lujan except there was not so much mootness.  It had to do with finality requirements under the EPA.  There are basically three theories on which you can try to sustain standing in this case.  One is, you can say, “Well, it is a pure procedural injury which anybody ought to be able to challenge.”  I think that will not fly.  A second theory is that the plaintiffs could be allowed to say something like, “Look, this happens all the time.  The Forest Service does this all the time.  We are not alerted in good time, then they withdraw the project.  And we are the kind of people to whom this happens all the time, and so therefore, we should have standing.”

The third closely related theory is that there ought to be a lower standard for mootness than for standing.  That is to say, we ought to be somewhat flexible here, something like -although they do not call it this - if is capable of repetition, it will be repeated and evades review unless you grant our standing here.  I think these regulations will probably survive in part because the Forest Service has some informational policies even for these kinds of projects that are exempt from full-blown notice and comment, such as permits to chop down your Christmas tree in a federal forest, something that occupied the justices during oral argument, believe it or not.

The last case has attracted considerable press attention; it is called Winter v. NRDC.  It has already been argued.  There is a convoluted and instructive history to the case.  Basically, it has to do with naval submarine exercises off the coast of the Southern California.  The NRDC argues that these cannot be conducted without restriction because there would be damage to certain marine mammals, some of whom are endangered.  The damage is supposed to come from the sonar signals which disorients the animals and maybe fatal to them, so says the NRDC.  So therefore, you have problems with the Marine Mammals Protection Act, the Endangered Species Act with NEPA and the Coastal Zone Management Act about which more below.  The Navy issued an EA, that is to say an environmental assessment, but not a full-blown EIS and denies that there would be significant damage and it is said that the restrictions that the NRDC sought would undermine the entire mission.

There was a series of preliminary injunctions issued by the district court.  At some point in the proceeding, the executive sprung into action, tried to salvage these exercises so the President of the United States declared pursuant to the statute an emergency exemption from the Coastal Zone Management Act for these maneuvers.  The Council on Environmental Quality pursuant to regulations declared one of the injunctions issued by the district court, had created an emergency.  It created an alternative compliance mechanism, that is to say, let’s proceed on the basis of the EA doing EIS in the meantime.  This then went back to the district court up to the Ninth Circuit again which declared the emergency authorization by CEQ unauthorized.  It said that likely an EIS would be required; it sustained the preliminary injunction with respect to certain naval activities but then issued a partial stay pending the resolution of this case.  And quite probably, all of these will be somewhat moot de facto because these exercises are supposed to be scheduled in February of 2009.

There is an unusual posture as the case comes to this Court, namely -- the question is, the standards for preliminary injunction and so it could go off on something, well, that the district court and the Ninth Circuit, you balance the hardships to the parties correctly.  But there is also a slightly suppressed standing issue which is, one of the preliminary injunction standards is irreparable harm to one of the parties, and then the question is: Well, harm to whom?  To the NRDC?  To the mammals?  I think the Navy will clearly win this case.  The question in my mind is how.

Why sanity will prevail in these cases?  I just predict this on the basis of the atmospherics here.  First, four of these cases, all but the energy case come from the Ninth Circuit and so the reversal machine will spring into gear.  Second, all of the cases below were won by environmentalists against the government and the industry; the exception is the Superfund case I mentioned.  The Court generally does not take cases just to affirm them, and the SG does exceptionally well, so the odds, I think, are against the environmentalists.

And finally, these cases are relatively easy and contained.  There are hard cases out there that you can imagine under the Endangered Species Act, for example, Section 404 permitting.  In those cases, they are hard not because they are so complicated.  Legally, anybody can figure them out, except nobody can figure out which way Justice Kennedy would come down in these cases.  And the Court is split that way.  Here, these cases, you can be reasonably sure that Justice Kennedy will go with the “conservative majority.”  You may even pick up Justice Breyer’s vote in a case here or there.  And so that is why the Court is comfortable with those.

Now, why these cases probably will not mean much?  The first thing - and this is to echo what has been said before - much of this stuff the Supreme Court actually helped to create: citizen supervisions, like that.  There are other examples.  And it, now, has been continuously nibbling at the margins, and in all of these cases, the issues are far too circumscribed to herald anything like a revolution.

The second thing is that it is possible in all these cases to write very limited opinions.  You can split the baby in the Summers case, you can in the Winter case, and in the Navy case.  That is to say focus on the balance, not the standing issue and what that means is, “Look, courts out there, show a little more respect for the commanding naval officers and for the navy brass,” but the NRDC gets to play in another day and bring another lawsuit.  Same with the Entergy case -- we are doing the can-you- or can-you-not-do cost-benefit analysis, one provision, one statute at a time.

You will probably get separate Scalia opinions in some of these cases, and you get separate Scalia opinions in Summers and Winter - that is my prediction.  But he will not get a majority, and you may actually get Justice Breyer to write some opinions laying the groundwork for some more expansive notions of environmental standing and for pure procedural injury as a basis for standing.

These things do not matter, I said earlier, not if you lose the big one, and the big one is Massachusetts v. EPA, the global warming case.  The litigation there may no longer be very interesting because the new EPA will issue a waiver to California for its standards.  I do not doubt that for a moment.  The new NITSA will holy water California standards, but still, the litigation illustrates the dynamics because the way that case has been read in the lower courts to date is, there is a greenhouse gas exemption to every know principal of American administrative law.  I could give you examples, I would be happy to do that.  But that is what a real victory looks like, and none of these cases will be of that nature.

Finally, a few words on how this all hangs together and why you should be afraid, why we should all be afraid.  The central problem in American politics now, I think, is not bureaucratization.  The central problem is most emphatically not under-regulation.  The central problem is the proliferation of semi-autonomous policy centers which nobody can control, and the question is, should we have a legal system that contains that tendency or that promotes it?  And that is an issue in all of these areas.  That is the preemption issue.  Should we have an FDA monopoly or sort of second-guessing what juries and plaintiff’s lawyers and U.S. attorneys?  It is true in the financial sector.  Should we leave the regulation to the SEC and the financial authorities or to state AGs?  And it is true in the environment - that is a perfect example.

Four of these five cases are citizen suit cases, and no matter how many times people say, “Whoa, that is what participation and jury and process - that is all nonsense.”  What it is about is the delegation of priority setting to so-called stakeholders.  The fact that we now call them stakeholders is interesting.  We used to call them factions.

The Winter case is an interesting example how far that has gone.  If you know the Navy, in order to conduct one of these exercises, you have to comply with the Coastal Zone Management Act.  That means you have to comply with what California wants because they get to review whatever the federal government does under these things.  And of course, California thinks you should not be allowed to do anything that gets the soldiers out of San Diego.  You have to comply with the Marine Mammal Protection Act.  That means you have to consult with the Secretary of Commerce which implements the act for all cetaceans such as dolphins, all pinnipeds such as seals, except not for walruses.  For the walrus, you have to go to the eggman actually -- you have to go to the Secretary of the Interior who also deals with polar bears.  You then have to deal with the ESA; you have to deal with NEPA.  You have to do all of that before then you get in front of a district court handpicked by the Natural Resource Defense Council or one of a thousand other groups.

If the Navy cannot conduct its exercises in the middle of two wars or can do it only with emergency executive decisions, what do you think the odds are that Exxon is allowed to build a platform in the same area?  No way, no how.  And the same is true of the global warming area.  We have been told it is the most important problem facing mankind.  It is so important that Congress, the first time it gets a chance to decide on it, runs and scatters into every direction, and the decisions are then made by individual states and by the EPA in the dead of night.  That is how is that is going to go down.

Why did we build up a legal system like that?  The answer is, I think, prosperity.  A rich-growing country can afford to spread the wealth and to build institutions to that end.  This is why they are called consumer class actions.  That is why they are called citizen law suits.  These are oriented towards consumption values, not production.  So now that the bubble has burst, are we going to get serious and reverse course?  I think the answer is no.  Even if we were serious, we probably could not do anything about it because this stuff is now so entrenched, but we are not serious.  And the reality is that the only centrifugal institution in all of American politics, the only institution that has not gone completely populous is the United States Supreme Court.  I think that some of the justices actually sense that.  But my fear is that that will not be remotely enough.

Andrew J. Pincus:  I do not know if I could follow that or not, it is so depressing, maybe we should just go drink.  But let me try in this clean-up position to pull together a couple of ideas and add some of my own.  I do not think the Court is business-friendly.  I think it is friendly to some ideas that may also be of interest to business, and I think some people have touched on them here.  Stoneridge, for example, in full disclosure, I worked on that case for the defendants.  Although that is a case where the result, as Mark said, was positive or, at least, a big negative avoided for the business community, really, I think it has stemmed from two things.

First is the fact that this is a Court that does not believe that judges should be making up laws; they think that that is Congress’ job and so they were happy to leave a cause of action in place that earlier judges had put there, but they were not going to expand it.  And in fact, Justice Stevens’ dissent in the case is really all about how terrible it is that we do not have judicially implied causes of action anymore.

But the other principle I think that is reflective in that case, and Cathy alluded to it, this is not a Court -- and I think this is true to varying degrees of many of the Court’s members -- that has a lot of trust in juries or in the judicial system generally as the way to solve problems.  I think they see it as a very costly, inefficient, inaccurate process that has a lot of cost shifting to parties who, at the end of the day, probably should not have been sued at all.  And I think that they do see their role, to the extent that the legal framework gives them some play, is to try and address that, or their inclination, at least, is to try to address that whether it is through not recognizing new private causes of action or to being supportive of preemption in context where it arises, or being worried about punitive damages, again, to the extent they can in the context in which it arises.

I think it is a group of people that are very suspicious of the system, and I think at least from litigator’s vantage point, properly so.  I know in some quarters it is heresy to talk about comparing our judicial system with the rest of the world but in fact, if you represent - as I’m sure many of us have - foreign clients and you say to them, “Well you have just been sued and now, you have to spend some money to file a motion to dismiss.  And by the way, the way that gets decided is that the judge assumes that everything in the complaint is true even though you know, of course, that many of the things are totally preposterous.  And if that is denied, you have to spend a million with electronic discovery, maybe $10 million or $100 million defending yourself which you have no chance of getting back even if at the end of the day, you are quite confident that you are entirely innocent, not liable under wherever the claim is.” 

In most countries in the world, that is craziness but that is the system we have.  And I think the justices see that perspective and are to some extent, it motivates the way they perceive a lot of the issues that come before them.

The other thing I wanted to talk about just briefly was the recusal point.  This is another case that I worked on, so it is more a point of personal privilege.  But the sort of epitome of recusal this year was the apartheid case cert petition, which involved claims under the alien tort statute which is a remarkable piece of legislation passed in the 1700s, which creates a private right of action in favor of aliens for torts in violation of international law.  And it has been revived in the last 30 years to allow plaintiffs to bring a whole panoply of claims alleging torture and mistreatment of workers and all kinds of things in foreign countries against, in some cases, the government officials of those countries, but in most cases, multinational companies.  And it is a hugely costly area of litigation.

This was a case in which a number of claims, including class actions, were filed in the Southern District of New York on behalf of citizens of South Africa against that 40 multinational companies saying that the companies’ practices of doing business in South Africa during apartheid aided and abetted apartheid, which was a violation of international law and therefore, these companies should be liable to the tune of several billion dollars.  Even though, literally, all they did was do business in South Africa.  Somewhat remarkably, the Second Circuit upheld and reversed the dismissal of the complaint, a cert petition was filed.  There were a lot of companies in the case and it turned out that because of recusals, the Court could not get a quorum, which under the relevant statutes means that the Second Circuit’s decision was actually affirmed, although the affirmants do not have any presidential value.

I think that probably lit the fuse on a lot of stock sales up on Capitol Hill because I think it was quite embarrassing to the Court that in what was a very important case in which the solicitor general filed an amicus brief at the cert stage uninvited, which very rarely happens.  What does this say for our foreign relations?  This is South Africa, by the way.  The South African government has several times expressed itself to make clear that it is gravely insulted by the idea that the United States thinks of a place for claims relating to apartheid should be resolved in a United States Court as opposed to South Africa, which thinks it should be the one to decide how and the extent to which reparations are made available to its own citizens.  So I think that that case really made some of the justices face up to the fact that although it might be nice to be in the stock market, it is a real problem when there are cases like this that cannot be decided.

Let me talk for one minute about a couple of areas.  I should say one thing about the business docket of the coming term.  Many fewer business-related cases than in past years, which is some disappointment to some of us who practice in that area, but although the media has labeled this the business-friendly Court, there are many fewer business cases the Court has not granted any intellectual property cases.  I do not think it has granted any securities cases as of yet.  Pretty thin on antitrust.  There is just not a lot that is being taken.  And part of the problem is it can only take what comes down the pike.  It is not an institution that can set its own table and if there are no cases coming down, that if things are worth deciding, then it just is not going to decide them.

I think it is worth saying a word about the one antitrust case that is on the docket which is called Pacific Bell Telephone because it really continues a lot of cleanup work that the Court has been doing in antitrust law to really try to address some doctrines that have been lying around, call them the cobwebs in the corner of the antitrust closet.  As antitrust became more focused on economics and less focused on appeals to populism, the courts have brought the economic learning to bear in monopolization theory and in Section I, conspiracy theory, but especially in the monopolization area, there were a lot of old decisions that really did not apply a lot of rigorous thinking.

And the Court has begun to clean them up and really Section II, monopolization rules, have become much, much more rigorous in recent years.  The Court decided a case a couple of terms ago called Weyerhaeuser in which it applied predatory pricing rules to the predatory buying context and basically said looking at the economics of the situation, “We are not going to say that it is an antitrust violation for a buyer to bid up prices.  That is what the market is supposed to do, so unless you can show us that there is some predation involved, we are not going to allow that kind of claim to proceed.”

There is a similar issue before the Court this year in the Pacific Bell case.  This is a case about DSL sales.  AT&T sells DSL, internet access at wholesale to companies like the plaintiff in this case.  And it also, of course, competes in the retail market, and the plaintiff’s claim was that it could not make money because the wholesale rates and the retail rates impose the price squeezed upon it.  The plaintiff had no argument that it was entitled to deal, that AT&T was required to deal with it.  It was not an essential facility or any other situation where AT&T had some obligation to deal with the plaintiff. 

The claim just was there is a price squeeze here, and we cannot make money.  And as the claim comes to the Supreme Court, there is some skirmishing on remand.  There is no claim that any of AT&T’s pricing is predatory.  In other words, its prices in the downstream consumer market are not so low that they are below cost as the way to squeeze out its competitor.

The Court took this case; it probably took it to reversal though - no one knows.  The government filed a brief urging the Court to take it and saying that it should be reversed although, interestingly, a brief in which the Federal Trade Commission which usually joins the antitrust division and the solicitor general’s briefs in the Supreme Court, did not only not join it but issued a statement today that the brief was filed disassociating itself from the product and saying that it would take a different view and did not think the case was so worthy and did not think it was wrong.  So a little interesting intra-governmental skirmish between two agencies which have been getting along better recently but historically, it maybe have not seen eye to eye on the antitrust issues.

Another case that is useful, I think, to talk about because it illuminates some of the conflicting currents in the Court’s jurisprudence is a patent case.  And again, I’m involved in it, I’m not just talking about my cases but I think it is a good illustration.  This issue also comes up in preemption though.  You do have justices that are concerned about the tort system and concerned about juries but you also have some of those same justices - some of them are different - are very concerned about federalism and state’s rights.  In federalism, you have these conflicting impulses amongst some justices.  Cathy talked about it, the Exxon case took that out of the equation.  But even though some justices are horrified maybe by what juries are doing, they do not see their role as to impose federal rules on the states.

This patent issue is another situation - it is a case called Biomedical - and the question is: Are states that engage in patent infringement ever liable to the parties whose patents they infringe?  A few years ago, the Court in a series of Tenth Amendment cases said, “The patent statutes do not waive the state’s Tenth Amendment immunity.  We are not going to impose liability on the states.  Patent infringement only available in federal court, so states, there is no monetary remedy against states for patent infringement.”  Obviously, something very concerning to property rights advocates and people who are worried about innovation because states are big participants in the marketplace and if they can infringe patents and also copyrights with impunity; that is a big problem for inventors in terms of being able to recoup their funds.

Biomedical takes the case to the next level.  It involves a suit against California, which itself has a huge patent portfolio as a result of the work of the state universities and other entities, and is a big player in the patent litigation market in terms of filing lawsuits to defend its patents and to recover literally billions of dollars.  But at the same time, asserting Tenth Amendment immunity when anyone tries to recover patent infringement damages against it.  And the question in the case is whether even if as a general matter, states are immune, this sort of participation in the litigation system in using the remedy that Congress created is essentially a waiver that should allow others to use the same remedy against California.  Again, an interesting cross current of property rights and state rights which I think we will be seeing a lot of.

I thought maybe it would be interesting, given the time of year, to say a couple of words about the election and how it might affect the Court.  And not principally the usual ways that people talk about it which is appointments because no one has told me who they are planning to appoint, and I do not know of any justices -- no justices have told me that they are leaving.  So that is always the focus of speculation, but I think there actually will be some more immediate impacts depending on who wins and who gets some critical jobs.

First of all, the positions of the new solicitor general - as Cathy said, the SG's positions in the Court can be very influential in moving the Court in various areas, and the SG also has the power to authorize government in amicus filings and the Courts of Appeals to control to some extent the positions that the government takes in litigation.  And so who the SG is and what that person believes his or her mission is in terms of addressing some of these very contentious legal issues could be quite interesting and could be quite different from what we have seen in the last eight years I think no matter which of the two candidates wins.

Another interesting question is: How will a new administration that has a different view perhaps of regulation be treated by the Court?  We have had a lot of deference to agencies as people up here said in the last eight years.  Those have been agencies that to a large degree, not exclusively, have been taking actions more on the deregulatory than the regulatory side.  What will be the treatment of agency decisions that if they push more to the regulatory side, which again I think is a fair bet no matter which candidate becomes president.

Another interesting question is we had a break in the last couple of years from big - except for the one that Mark talked about - congressional enactments.  A lot of people speculate in fact that the reason that the Court’s docket has shrunk is that there have not been the big regulatory programs enacted in the last five or 10 years that have been working their way through the courts and provided grist for the Supreme Court to decide.  It seems almost certain that there are going to be new regulatory statutes that are going to have to be interpreted, again, no matter who wins, and how will the Court perceive that?  We had a Court under Chief Justice Rehnquist that had a reputation of being pretty interventionist in terms of striking down congressional enactments on constitutional grounds.  How will this Court which in some ways as the chief justice has said, believes in judicial minimalism, how will that interact with a more activist Congress and executive branch?

The last thing I guess I would talk about is the interaction between Congress and the Court.  Few of the Court’s decisions are - certainly not most of them - constitutional, many are statutory.  We have had again for the last several years, a federal government that when the Republicans controlled Congress, Congress was quite in sync with the Court’s views on a lot of the issues that we have been talking about.  And even in the last two years where that might have been less true, there was a White House that was in sync with the Court’s interpretation of legislation.  That may not be true again, no matter who wins.  And what will happen?  To me, at least, it is likely to be much more of -- I guess if you were a political scientist, you would call it a conversation --between the Court and the political branches about statutory enactments.

A few years ago, the Ledbetter case, dealing with statutes of limitations for Title VII and other discrimination claims hard for, 5-to-4 opinion, in which the business community side of the issue and the employer in that case won.  Justice Ginsberg wrote a strong dissent saying Congress should act.  Congress did act, the House passed the bill overturning the decision, and that bill has been in the Senate probably because the belief was that the Senate managed to act on it, the president was going to be told anyway, so not a lot of energy worth expending and doing that.

In a new administration, who knows how that will play out?  But I think there are a whole range of issues relating to arbitration, class action litigation, employment litigation where the Court has made decisions over the years that various interests have not liked but have not been able to overturn.  And there may be some pent-up demand for that kind of activity as well as on an ongoing basis since it does not look like the membership of the Court is changing imminently for some more of that interaction to take place.  So I’ll end there.

Ashley C. Parrish:  Thanks, everybody.  As moderator, I’m going to ask a couple of questions, but I hope people will be thinking of some questions.  We have a mic that will be coming around.  Just one question I had for all of the panelists that maybe Andy picks up on, what I see, a little bit of a tension between your comments and maybe Cathy, if I’m a little uncharitable here, something about what you are saying.  And then also what Mike and Mark pointed out earlier.

Here is the idea.  I agree with you that this idea that the Court is pro-business does not really carry much weight.  We never talked about all of the small business cases relating to age discrimination and so forth, but it is hard at least from the small business perspective to say this was a really pro-business Court.  And it also seems hard to find any real threads of logic that you say, well, this is consistently going to be pro-business, business is fighting each other.  And for that reason, Cathy, I guess I’m a little skeptical about federalization, although I agree with your two categories of cautiousness and complicitness, whether really federalism to the extent that they are federalizing these issues really is going to amount to much.

But then with that framework, here is my question.  Andy, you seem to be suggesting a ray of hope which is that, at least, in the areas of antitrust and intellectual property and patent law and things like that, you see the Court working around the edges to over time clean up doctrines and theoretically taking areas of the law that are messed up and making them more sensible.  At least as I see the cases that we have seen this term on the preemption and the punitive damages and even on Stoneridge, I think you see much more of what Mike is talking about in the environmental cases, which is that all the courts really are doing is policing sanity on the boundaries in a sense that although there are a lot of vested interest tied up in all these cases, I think if you take a look at the cases from a broader perspective not thinking about how you want them to come out in a particular situation, at least there is a strong driver that a lot of this stuff does not make any sense.  So someone has to step in and add sanity to it.

I guess the question is that, it seems that at least in punitive damages or preemption, it is much harder to find a theory or something that you could hold on to, while in these other cases like intellectual property and antitrust, arguably there is more of a developed body of law that they can build off of.  But should we be looking for, Andy, your hopeful perspective in some of these broader issues like preemption and punitive damages?  Or are we really, Mike, in your world of incrementalism and basically at the end of the day, the whole system shut?  So there is my question.

Andrew J. Pincus:  Well, I’m happy to go first.  I think part of it is if you look at these different areas, the Court feels that it has more leeway to act.  Antitrust is an area where Congress has given its common law.  It is like Cathy’s Exxon punitive damages under maritime law.  The Court has much more leeway to act as a common law court, certainly in the antitrust area and even to some extent in the intellectual property area, although a lot of what the work is doing there has been policing some bad decisions by the Federal Circuit.  But I think when you get to areas that involve being more activist - I do not want to use a loaded word - you have justices that are very concerned about reaching out to do those things because they do not necessarily see it as their role, for example, to construct a whole substantive due process edifice to control punitive damages.

Michael S. Greve:  I agree entirely with that characterization, and I think they are much more comfortable with areas where they think it is federal common law rightly or wrongly, and these niches where they feel quite comfortable doing it.  I think it is not just the comfort level; it is also the institutional consideration; they are going to get less plowback in those areas.  Nobody seriously believes that Congress will revamp the antitrust statutes that are hundred -- Lord knows how many years old.  They have become used to the idea on the Hill as well as the Supreme Court that those are more or less judge-made areas of the law.  That is completely different when you get to the Food and Drug Act and all the rest of it.  And there, the fear or the apprehension that Congress will hit them back is very, very well warranted and very, very real.

Andy mentioned briefly the employment area, that is very, very close to civil rights law, which, there is actually one area where you can get a prediction about what will happen.  Because what happened over quite some time is that the Supreme Court, first of all, would create private rights of action then it would do what Mark described which is curve them and clip them back at the margin.  And then Congress would pass something called the Civil Rights Restoration Act which would restore civil rights to what they have never been before.  That particular act actually overruled five or six Supreme Court decisions; all of them fairly minor but nonetheless, it is not good and it is not comfortable for the justices to be perceived as having cut back on something that was quite popular and then being reversed by the Court.

That will play itself out again in the labor context, in the civil rights context, the Ledbetter issues.  I strongly suspect that something like that will happen, although Cathy knows this field much, much better than I do.  I would pick the food and drug area next and I would be very surprised if that consideration did not already hang over the Wyeth case in some way, shape or form and might influence it even though you will not be able to read that in the opinions.  What happens when Congress then intervenes, the Court invariably gets the message.  It will then say, all right, we got it, let’s motor on.

Mark T. Stancil:  I guess I disagree with Mike in an important respect.  And this may be my own peculiar view of the Court but I understand it best as an institution of virtualized isolation.  In my experience, they see themselves as judges first and foremost, and the more time you spend on the bench, I think the more that sets in.  And the longer they are there, the more their judicial toolbox determines what they do.  They take precedent very seriously, several of them, and they have different philosophies about how they approach cases, but I think they see themselves very much as judges and judges only.

And while I think there are a number of instances in which there is back and forth between the Court and Congress, and I think actually, generally speaking, that is a good thing, I just do not think that the justices give that too much thought, at least, not many of them do.  I think by and large, they act as they think their job is to act and I think some of them actually take some pleasure in saying, “Well, I’m deciding this case.  If Congress needs to clean this up, so be it.”  But I really do not think they run from congressional response.  I think they are indifferent to it and that is not true in every case, but in most cases. 

I think more of these cases are explained by the feelings of responsibility they have to the institution and to these principles of judicial decision-making.  Like in Stoneridge, for example, they are not going to reverse a 1971 case that has been on the books and largely unchallenged for 30-plus years and so they are going to be nibbling around the edges.  I do not think that has much to do with a fear of backlashes.  What it does have to do with on the Court is a unanimous devotion to judicial decision-making either as a craft or however you would describe it.  But that is just my two cents.

Catherine M. Sharkey:  So I guess as an empirical matter, it will be interesting to see if things change because Mike and I have talked before.  One of the empirical studies that you did with John Klick in the preemption context was interesting because a Harvard student looked at it and noted and looked at two decades worth of preemption decisions and tried to find a number of instances in which Congress had overruled any of those decisions and came up with almost a nil set that there was one in there.  But this could change, and I do agree notwithstanding my read of a lot of these -- a lot of the areas I have looked at is notwithstanding the possible futility.  There are a lot of paeans to Congress to take action in these cases.

The quick point that I want to make -- of course, I do not want to abandon my federalization thesis, actually get stronger over time.  And the two quick points I guess I would look to is: one, in the Exxon case, really no reason that the Court had to use that as a kind of platform in the wide sense in which it did.  Again, could have decided that case much more narrowly confining itself to federal maritime law and used it, I think, as a very wide platform to be showing state courts how they should mimic this analysis.  There is a curious footnote - the last footnote - saying even though all of this is under federal common law, maybe the one-to-one ratio would be constitutionally required as well, just left down there like we want to make sure you are getting this broader message.

The second is just the courts granting cert in the Wyeth case.  Here is a case, they grant cert from the state Supreme Court in Vermont.  At the time they granted, there was a bunch of district court and state court decisions but not a single federal court of appeals had weighed in.  Now, the Third Circuit was quite unusual in a sense with respect to court that would like issues to percolate, et cetera.  The fact that it granted at the time, it had a non-decision in Warner-Lambert but at the time, it had this potentially nice sweep of an expressed preemption in medical devices and the fraud on the agency with Warner-Lambert then Wyeth.  I’ll limit my remarks to any claim of expertise in the products liability and regulation of health and safety.  And there, I just think, in these two areas of punitive damages and products liability preemption’ there have been a clear federalization, if not through the front door and overtly through the effect.

Ashley C. Parrish:  Someone want to follow up on that question?  I have lots more but -- sir?

Male Voice:  I’ll ask one.  Should be is the operative question.  Until Michael threw a big “coo ka choo” on the thesis, I was listening closely and I was particularly taken with something that Andrew said about recognizing the cause of discovery.  We have had the amendment to Rule 26, electronic discovery is immensely expensive and litigation is extremely drawn out.  And I thought it punctuated Professor Sharkey’s point about federalization where, at least in my view, you have the Court and preemption cases less applying supremacy principles and interstate commerce clause type of principles to state action.  You can look at Stoneridge in the aura of Bell Atlantic and Twombly, and even Ledbetter to say that the Court recognizes how diffused and time-consuming and expensive litigation is return us to a time when we had code rather than notice pleading.

And one can look at these cases as a pattern and say that at least some justices believe that.  But then Michael throws on top of that the argument that environmental cases are something different.  I agree with Mark that I think the justices do not view themselves as politicians in robes.  Indeed, they decided Ledbetter in the wake of having things occur, like the two civil rights restoration acts for the first time.  But the environmental area does seem to be an outlier to the idea that there is increasing federalization, that maybe some of it is drawn by the complexity of litigation, the need for business uniformity, the fact of international competition - all these things that we look at.  I’m just wondering what others of you might think about that.

Mark T. Stancil:  I think you hit it right on the head with the Court being sensitive to the costs of litigation.  I would go back to Stoneridge and make a point that I intended to make but did not.  If you look at Stoneridge -- I guess Andy said something that brought this to my mind.  Andy was in the case so I will try not to impugn his clients.  But on the facts as I read them in the pleadings, you had two entities who basically made up false documents so that the auditors would not --

Andrew J. Pincus:  Allegedly.

Mark T. Stancil:  Allegedly, of course.  All of my clients are innocent so I’m sure Andy’s are too.  It is this questionable business practice.  This is something that would, at least as alleged, be within the core of what would appear to be a deceptive device.  Well, I’ll say two points.  One, the Court is so concerned with the cost of litigation and just by recognizing a cause of action that it is going to step in and say, “No, this does not fall within the statute.”  In my opinion, they are less concerned with Scientific-Atlanta and Motorola as they are with the other 5,000 defendants whose conduct would not come anywhere close to what was alleged in that case but would still have to go through the cost of discovery and of the burdens of litigation.

At the same time, the Court does not really do anything and cannot because they respect his private right of actions being on the books, so to speak.  They cannot do anything to help the thousands and thousands of defendants who are alleged to be primary violators under the standard cause of action who settle these cases for millions of dollars every single day because discovery costs so much.  They are addressing the edge of the problem, preventing a huge problem on less than obvious facts, but they are really doing nothing to remedy what I think would be the big in terms of dollars and cents problem that most private defense face.  But I agree completely with that.

Michael S. Greve:  Just one addendum and I think it is a very interesting conversation.  I think the politics and the atmospherics are a bit more important.  And I think one of the differences between the environmental context on the one hand and the private litigation context on the other is this: it is undoubtedly true that private plaintiffs’ bar has taken it on the chin.  I mean, if you want to find a unifying theme, it is not so much pro-business.  They are definitely anti-plaintiffs lawyer.  But they are not anti-natural resources defense council there, “Whoa, concerned citizens -- ah, participation.”  Notions of “we have to have an orderly process of administration” come much more into play and they do not think of it in the same terms.

There was this wonderful exchange in the Summers litigation where Justice Breyer wanted to push the SG into the direction of saying, “Yes, there can be purely informational harms, at least so long as the statute come first” - those kinds of entitlements.  So it gives Ed Kneedler this hypothetical, well, supposed Congress says, “All right.  Here is the statute that gives standing to anyone who says, ‘Well, we are lawyers, we have handled tons of these cases and we intend to handle them in the future and anybody like that should have standing.’” 

Ed Kneedler shoots back and says, “Well, first of all, I think they cannot be lawyers.  It has to be an actual party.”  And boom - it is a window into the justices - how even very sensible justices think about this.  The lawyers are just there and they have a legitimate role to play in the political process.  It is that image that drives the environmental litigation, and that explains the difference to my mind, to the plaintiff’s mind which does not have remotely the same claim to legitimacy.

Ashley C. Parrish:  Larry [phonetic].

Larry:  I’m wondering how the Altria Group case fits into the federalization theory.  You have the Wyeth case of course, where the SG is arguing vigorously as he did in the Regal case that Congress designated the FDA, as the expert federal agency, to conduct its own product-specific balancing of risks and benefits, and that should not be second-guessed by a zillion juries around the country, and it is impliedly preempted at least in the prescription drug area. 

But on the other hand, in the Altria Group case, the SG is arguing on behalf of the FTC that the states are really the FTC’s friends.  You have the state consumer protection statutes, the state attorneys general, the NAAG people are particularly the FTC’s friends.  And really, these types of damages actions understate consumer protection statutes do not undermine the FTC’s activities at all unlike damages and suits involving medical devices and drugs which undermine the FDA’s actions.  Could you comment on that?

Catherine M. Sharkey:  I agree with you.  So as a descriptive matter of the federalization, I believe this is what explains the Court’s rather emphatic shutting down of even any discussion of implied preemption suggesting that they can find preemption in this case, under expressed preemption and they will tweak with prior things that they decided with the fraud exception in Chiappalone.  So I guess the federalization thesis, as I have identified, explains, as I mentioned, that the Court is complicit in this direction yet cautious, and so the hinge onto expressed preemption is not going to help them in, say, the Wyeth type case.  But I actually think it is supportive of the thesis to watch exactly -- Olson came back and had to say, “Well, I did not give up that argument,” but in essence, he thought it best not to say a word on it.

So what your comment to me raises though is a really more interesting issue that Michael, I think, alluded to or touched on a bit too, which is the cross-cutting currents in which strong deference to agencies, particularly you could think of it as a potentially myopic view of one thought that deference to agency would lead in the direction always of both federalization and not meaning more of a deregulatory twist as opposed to being able to go in different directions.  And the study that I have done of the previous Supreme Court products liability preemption cases, the decisions went in both directions, and not surprisingly under the Clinton administration, they tended to be agencies arguing against preemption and the Court following suit. 

Likewise, that switching in the Bush administration -- there is a case, Sprietsma, that lies outside of that which was the Coast Guard arguing against preemption that are conservative administration.  I think that the politics of preemption are much more complicated than arguing always in the uni-direction of federalization but actually think how the Court, at least, has signaled its views, and Altria is quite consistent with it.

Michael S. Greve:  Just to add to this, the empirical study that Cathy mentioned earlier, one of the striking findings is that when a Republican SG says to the Court there is no preemption, the Court will never find preemption.  There is no single case in modern history in which that has been the case.

Andrew J. Pincus:  Because it is like an admission against interest.

Ashley C. Parrish:  Anybody else from the audience that has a question?  Is there in the back?  Actually, can you just wait for the mic for just a second?  It will be right back there.

Female Voice:  [indiscernible] I’m a freelance reporter.  It is really about two cases which you have not discussed.  One of them is Crawford v. Metropolitan Government of Nashville about anti [audio glitch] actions.  And AT&T v. Hulteen, which involves pregnancy leave and whether [audio glitch] sort of credits for pension benefits or things along those lines are somewhat [audio glitch].  I do not know if you looked at those cases or [audio glitch] comments on those particular cases.

Ashley C. Parrish:  I think that is a no.  Sorry, we cannot help you with that.  Anyone else that would like to ask a question?  In that case, let me just jump in with one more.  I want to test a little on this federalization theory because--

Male Voice:  Cathy is upset.

Ashley C. Parrish:  I’m upset [sounds like]

Catherine M. Sharkey:  Can we do this outside?

Ashley C. Parrish:  We got 15 more minutes.  So here is the question.  It seems to me that any time the Court steps in, there is going to be an obvious argument in the weakest sense of the word that there is federalization going on.  To the extent that is what you are saying that the Court is setting forth some federal standards here that apply, but how much of it is the Court taking these areas of the law and saying, “We now want this to be governed by a major federal standard?”  Or how much is it the Court doing a slapping down of what it sees as being silliness based on these other concerns?  Yes, there is a federalization but it is setting forth boundaries that says, “Well, maybe it is a one-to-one, maybe it is not, but it certainly is not what we just saw come up.”  And then you could see this in why they are taking Williams again which is another state court that is being dogged in coming out with a result that it thinks it is really crazy.

Catherine M. Sharkey:  So I’ll push harder with the understanding that the complicit is coupled with a cautiousness, so I do not want to actually overstate but to forge disagreement, I will.  So take punitive damages, this is an area of law that until the Supreme Court, you could say they just got involved, but they federalized an area that was until then an area of state common law.  And by doing so, they did it gradually by setting up various procedural due process review components, then saying there is this substantive due process review. 

They are getting nervous about that, retracting a bit, but on the way, so to speak, setting up standards that were allegedly just about federal excessiveness review of punitive damages but basically became marching orders for states.  If you look at what has happened in states when they decide to set up new jury instructions, new procedural processes, et cetera, they looked to these standards of federal excessiveness review as marching orders for the transformation of the state common law.

So to me, that seems like a pretty overt area that was federalized.  Now, you could say in the area, it becomes a little bit more complicated in some of the products area where the truth of the matter is Congress has in a patchwork intervened in certain regulatory areas, governing medical devices and drugs, let’s say.  But to the extent that the Court there has a history starting in Chiappalone and then becoming more emphatic over time deciding, for example, that when Congress says the word requirements, that that means more than just state positive law but includes state common law, even though that is not what Congress had said originally.  And now, in Regal, Justice Scalia saying, “From now on, Congress knows that that is what you mean.”  That is the Court doing more, I think, than just kind of policing around the edges.

At the same time, the caveat of what I’ll say is that I do think this is a Court that does not want to be unrobed as being politicians.  And so, if you read Justice Scalia’s opinion in Regal, one might ask the question, if the text is so clear and all you need to decide this case is the text of the Medical Devices Amendments Act, then what is all this discussion about how we should trust federal agencies over laymen or over juries’ determinations while still obviously having a bit of nervousness about too much deference to agencies?  Perhaps for the very reason that there is a fear that agencies could go well over the map.  But to my mind, there is no question that even given the fact that a court, for example, the Supreme Court - to take Mark’s point - can only do so much in granting of cert cases.  It is doing a lot more at least in these two areas than just policing the margins a little bit.

Andrew J. Pincus:  I guess it is true that they federalize the area but it is like Seth saying that the commercial speech case has federalized the regulation of speech.  I think punitive damages was an issue -- was sort of before there was any intervention was this remarkable swamp of lots of outlier verdicts or at least the threat of them that was taking a lot of money from people who probably did not have to pay anything.  And I think the Court threw a series of cases that either they granted or they did not, saw that there was an issue there much like I think they did in the commercial speech area, see that there was an issue about state principally some federal regulation of speech that had to be addressed.

So I think it is true they have set up some standards but I wonder if it is as aggressive or looked at the wide range of things.  It just looked like some government taking some money without justification in a new guise but something that had to be addressed.

Catherine M. Sharkey:  It is New York Times v. Sullivan, right?  So I do not think we are in disagreement but it is federalizing an area of law that until that point was state common law, and I think it is quite remarkable when you put what is going on in punitive damages together with some of these preemption cases.

Mark T. Stancil:  It is a question maybe -- I do not know if your research has covered this but is it clear that it was a response to something in the state courts or is it simply something that the federal judiciary seized upon?  To me, whether you call it federalization in the sense of discovering that we forgot the Eleventh Amendment for a hundred years versus keeping what we perceived as rogue juries under check, has there been any research into whether from 1950 to 1990, verdicts were of a certain size and then they start to get out of control?  Or is it response to a problem or is it just a response to the status quo?  To me, the implications are very different.  Do not hold back though.

Michael S. Greve:  No.  I always hold back.  I agree with Cathy on this point.  I’m not sure about the term federalization, but I’m quite confident about the phenomenon and I even have a hypothesis as to where the caution comes back and where the impetus, the complicity comes from in the first place.  The orthodox position of the new dealers was Congress, Congress, Congress.  Let Congress govern the country, let Congress prevail.  We, judges, should have nothing to do with it.  So whatever problem then surfaced in preemption law, under the full faith and credit clause and on and on and on, that is a problem for Congress to fix.  That was the orthodox position from the get-go for the new deal up to Henry Friendly, up to Justice Scalia.  That is their position, okay.

Now, what do you do if it turns out that Congress is a completely pathological institution and simply cannot control these centrifugal forces out there?  It cannot control the trial bar, it cannot control the state attorneys general, it cannot even control its own U.S. attorneys.  Well, in that case, you slowly begin to revisit your new deal prejudices, and that is, I think, you can trace that ambivalence in Justice Scalia, and I’ll tell you one anecdote about a different justice where you can trace that also.

There was a case called the preemption case, as it turns out, in the banking area called Watters v. Wachovia, and there was a probe.  I worked with a nonprofit think tank that submitted a brief in the case on the pro-preemption side.  And the argument for the banks in that case against the State of Michigan was made by Bob Long of Covington & Burling, and so after the argument, we all surrounded Covington and lament how the oral argument went because the chief and Justice Scalia were just in his face like there was no tomorrow.  And you could not explain to them what disaster would befall Wachovia.  It is a disaster area anyhow, but would have befallen them even beforehand at the hands of the AGs.  I just cavalierly said, “I expected that from Nino but where was the chief coming from?”  And a very prominent Supreme Court lawyer and former SG who was in the room had followed the same thing said he clerked for Henry Friendly.  Bingo - and that is exactly where that came from.

That is the new deal attitude.  It is hard to get rid of, and that is what they are battling for.  That is why they are comfortable with areas where even the new deals said, “No, no, no, that is federal common law, right?”  That is maritime law.  That was always to one side and no one thought that belonged under the general rubric “let Congress do it.”  And so long as these guys do not get around to saying, “No, that is not the right position, this is a --.”  We have a problem that the Congress itself is partially responsible for and will emphatically not cure as long as they do not get over that attitude.  Everything out there will be, as Mark said and everyone, I think, agree completely.

Ashley C. Parrish:  I think that is a good way to finish it.  So if you could join me in thanking the panel for what I think has been an outstanding discussion.

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