The Supreme Court: Courting Big Business
Overturning Roe v. Wade and further erosion of our civil liberties are two reasons the U.S. Supreme Court should be central to the presidential election. There is a third. With a string of decisions siding with Big Business — "deregulation by judicial fiat" — the Supreme Court has declared open season on your wallet. Roe is (barely) still standing. You can always stay off that wiretapped phone. But don't sit by while your heart valve explodes, your home loan balloons and Wall Street steals you blind.
Last term, five conservative justices (sometimes a few others) issued a dozen pro-business decisions, imposing roadblocks to securities fraud, civil rights and antitrust cases; overturning punitive damages; and pre-empting states from regulating mortgages. Business lost just twice.
This term, the court is again off to a fast start. In Riegel v. Medtronic Inc., Justice Antonin Scalia held that Food and Drug Administration approval of medical devices later found dangerous barred victims' products liability suits. Juxtapose that premise against recent headlines about contaminated beef, tainted toys and toxic spinach. Next up, whether that same rule applies to pharmaceuticals — like the 80% of our drugs now being manufactured in India and China. What happened to states' rights? The 14-year-old Exxon Valdez punitive damages award sounds as though it's history, based on the oral argument. And the court just decided to decide whether Big Tobacco could be sued over "safer" light cigarettes. "The court is taking so many important business cases," said Robin Conrad of the National Chamber Litigation Center, "[it] seems to understand the impact of these issues on the global economy." Indeed.
But perhaps the decision that most shows the court's hand is Stoneridge v. Scientific-Atlanta. There, a five-justice majority gave its blessing to backroom collaboration by third parties enabling others to defraud their own shareholders. Smacking of Bush v. Gore, the ruling demonstrated a willingness to stretch legal principles to achieve a pre-ordained result. While Wall Street bankers are dancing in their boardrooms, the actual impact remains to be seen. But, beyond cavil, the decision has important implications, including in the growing body of litigation over subprime mortgage loans.
An atmosphere of excess
Most troubling, the high court's actions have encouraged the atmosphere of excess that sadly characterizes our new gilded age — whether the WorldCom "ponzi scheme" or worthless paper behind the current mortgage meltdown. Eventually, such a free-for-all catches up with the economy. Unchecked predatory lending brought the massive mortgage defaults that are shaking the U.S. economy, now with the collapse of Bear Stearns and with other major banks on the brink. When candidate John McCain proudly promises the next Scalia or John G. Roberts Jr., it should send chills down the spines of those who lost their pensions to HealthSouth, their homes to Countrywide or their jobs to monopoly power. Former Treasury Secretary Robert Rubin recently urged that such "excesses leading to disruptions are just the way our markets work." Perhaps. But we have laws to deter their worst form and remedies for their innocent victims. When jurists fail to enforce those laws, we lose more than the rule of law. We lose our way.
Back to Stoneridge. Free from civil liability, could two television equipment makers conspire with retail sellers purposely overpaying for advertising to defraud investors? The question would seem to answer itself; our securities laws are intended to protect investors against such "fraudulent schemes."
Everyone knew the case was important. Treasury Secretary Henry Paulson lobbied President Bush, who ordered Solicitor General Paul Clement to back Wall Street. The Securities and Exchange Commission (SEC) was prohibited from filing in support of investors. The Roberts majority (the chief justice "unrecused" himself) went with the White House, holding that since the fraud took place in the marketplace of goods, not investments, it was "too remote" to justify investor reliance on honest dealing. Another rationale rang more clearly: Otherwise "overseas firms . . . could be deterred from doing business here . . . This, in turn, may raise the cost of being a publicly traded company under our law and shift securities offerings away from domestic capital markets."
So justice is bad for business. Actually, it's not. Enforcing "liability for those who violate [securities laws] will not harm American competitiveness," said Justice John Paul Stevens in dissent. "The fact that our markets are the safest in the world has helped make them the strongest in the world." Not anymore. What prevents fraud now? A neutered SEC? Honest bankers? The power of prayer?
With corporate influence on the rise, our courts provide the last safe haven. Congress is atrophied, government regulators asleep, business honesty oxymoronic. Now we are at risk of losing the judiciary. Keep that in mind this November, so long as the election is not stolen.