Terror Case May Be Biggest On Supreme Crt's Business Docket
June 26 2009 - 10:03AM
Dow Jones News
A dark horse U.S. Supreme Court ruling focused on national
security may end up as the most significant decision for business
in the court's 2008-2009 term.
Ashcroft v. Iqbal, released in May, will make it harder to bring
a lawsuit without specific factual evidence, raising the threshold
for moving a case into expensive litigation and possibly saving
companies millions of dollars in legal fees. The case was
overshadowed by other business rulings on consumer lawsuits,
environmental and employment law and other matters in a term set to
end on June 29, but legal experts said it may be the most
important.
"It's the case that will be cited more than any other by a
factor of 100," said Tom Goldstein, partner at Akin Gump, calling
the ruling "an unexpected gift for the business community."
In the case, a Pakistani named Javaid Iqbal sued government
officials over his detainment after Sept. 11, 2001. The Supreme
Court ruled that Iqbal did not have sufficient factual evidence to
proceed with his discrimination claims.
"While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations," Justice
Anthony Kennedy wrote in the 5-4 opinion. He cited the 2007
decision in Bell Atlantic Corp. v. Twombly, an antitrust case that
outlined what plaintiffs must assert to make it through initial
court proceedings.
As a result of the Iqbal ruling, businesses may find it easier
to fend off lawsuits by convincing courts to dismiss complaints
early in litigation.
"Lawyers were citing it within days and putting it in their
motions to dismiss," said Jane Willis, partner with Ropes &
Gray. "Everyone saw it's a new touchstone."
The decision translates most easily to business cases that list
not only a single company, but also its parent company and
affiliates, Willis said. The court did not allow Iqbal to assert
that government officials had "supervisory liability" for the
orders that resulted in his arrest.
More broadly, the opinion clarifies that the Twombly ruling
applies beyond antitrust cases. It also makes it harder to press a
lawsuit without making more substantive, factual allegations.
Businesses will face the same hurdles if they choose to file a
lawsuit, said Robin Conrad, executive vice president of the U.S.
Chamber of Commerce's litigation center. "It puts the burden on the
person filing the complaint and that applies to businesses too,"
she said.
Notable in the Iqbal case was a dissent by Justice David Souter,
who wrote for the 7-2 majority in the Twombly opinion. Souter said
the Twombly decision did not require the court to decide early on
if the facts are true, as was decided in Iqbal.
"We made it clear, on the contrary, that a court must take the
allegations as true, no matter how skeptical the court may be," he
said in the dissent.
Other notable business developments from the term include:
- The Supreme Court - in cases involving Altria Group Inc.'s
(MO) Philip Morris unit and Wyeth (WYE) - made it easier for
consumers to sue companies over pharmaceutical drug labeling and
tobacco advertising in a pair of split opinions that said federal
laws don't prevent those lawsuits in state courts. Businesses have
used a legal argument known as preemption - that federal statute
trumps a state-level proceeding - to beat back consumer lawsuits.
The court on Monday will release the outcome of a third preemption
case involving New York authorities trying to investigate mortgage
lending at national banks.
-Businesses scored a series of wins in environmental law cases,
including holdings that made it easier for power plants to avoid
expensive upgrades, limited Superfund liability for manufacturers
that made toxic products but didn't pollute, upheld a mining waste
permit for a unit of Coeur d'Alene Mines Corp. (CDE) and rejected
third party challenges to proposed salvage timber leases on
national forest lands.
-On the employment law front, the court last week gave
businesses a stronger hand in deflecting claims from older workers
who allege they were discriminated against because of their
age.
-Other opinions of note upheld Federal Communications Commission
rules that punish broadcasters for airing obscene language and
rejected claims by Internet service providers that sued a unit of
AT&T Inc. (T) over the wholesale prices it was charging for
access to the company's phone networks.
-By Kristina Peterson, Dow Jones Newswires; 202-862-6619;
kristina.peterson@dowjones.com.
(Mark H. Anderson contributed to this report.)