New legal ground is expected to be broken this year in areas of importance to companies and their directors, officers and executives. We see those developments coming from around the globe and defining the litigation landscape in 2013.
The U.S. Supreme Court is poised to rule on numerous cases — ranging from class actions and tort litigation to government enforcement and intellectual property — that will significantly affect the business community. In addition to examining these cases, we focus on the myriad issues that continue to linger after 2011 and 2012 Supreme Court and appellate court rulings, including those affecting class actions, product liability disputes and securities litigation.
Meanwhile, government enforcement activity on both sides of the Atlantic likely will exceed its intensity level in 2012. The U.S. Department of Justice, Securities and Exchange Commission and other authorities will vigorously pursue enforcement priorities under the Foreign Corrupt Practices Act, with respect to insider trading, and in response to increasing numbers of whistleblower complaints. All indications are that these same levels of enforcement intensity will define activity outside the U.S. in 2013.
On the antitrust front, we predict a continuation of the ambitious enforcement agenda witnessed over the last four years. U.S. regulatory authorities are expected to maintain their focus on issues at the intersection of intellectual property and antitrust, as well as criminal enforcement. We expect EU officials to concentrate on matters affecting the pharmaceutical, financial services, and high technology industries.
We also discuss developments in international litigation and arbitration, including jurisdictional challenges to cross-border arbitration proceedings, continuing disputes over sovereign debt and cross-border judgment enforcement; patent and technology issues; and ongoing consumer and government actions in the e-commerce sector.
The US Supreme Court Term: Business Cases to WatchThe Supreme Court is poised to rule on numerous cases in 2013 — ranging from affirmative action and class actions to tort litigation, government enforcement and intellectual property — that will significantly affect the business community. In addition, the Court will rule in marquee cases on the Voting Rights Act and same-sex marriage.
Affirmative Action
On October 10, 2012, the Supreme Court heard argument in Fisher v. University of Texas at Austin, presenting the issue of whether the 14th Amendment’s Equal Protection Clause prohibits the University of Texas at Austin (UT) from using race in undergraduate admissions decisions.
Under UT’s admissions policy, race sometimes is a factor in the evaluation of applicants. Nine years ago, in a 5-4 decision in Grutter v. Bollinger, the Court upheld the University of Michigan Law School’s use of race as one of a number of factors in its admissions policy. In the Fisher case, the litigant challenging the UT policy argues that it is invalid under Grutter — and, alternatively, that Grutter should be overruled. The author of the Grutter opinion, Justice Sandra Day O’Connor, retired and was replaced by Justice Samuel Alito. This shift in Court personnel could affect how the Court considers and resolves the case.
The Fisher case is important to the business community because businesses recruit extensively from UT and other public universities. A group of 57 leading American companies filed an amicus curiae brief supporting UT. The companies explained that they “are directly affected by the admissions policies at UT and similar colleges and universities” and that they “care deeply about what kind of education and training those institutions offer their students” (see Regulatory/”Affirmative Action in Employment”).
Class Action Litigation and Arbitration
The Court has granted certiorari in five cases that significantly could impact class action litigation and arbitration.
Two cases address issues involving class action arbitration. In Oxford Health Plans v. Sutter, the Court will consider the authority of arbitrators to order class arbitration — an event with profound implications for the dynamic of the dispute. In a prior case, the Supreme Court held that class action arbitration is so fundamentally different from bilateral arbitration that a party cannot be compelled to submit to it unless there is a contractual basis for concluding it has agreed to do so. The U.S. Courts of Appeals have split over whether broad contractual language requiring arbitration is sufficient to infer consent to class action arbitration. In American Express Co. v. Italian Colors Restaurant, the Court will examine a U.S. Court of Appeals for the Second Circuit ruling invalidating an arbitration agreement that barred class arbitration because the court believed individual arbitration of the plaintiff’s federal law claim would be economically infeasible.
Two other cases will allow the Court to provide additional clarity on the requirements of class action litigation in light of its decision in Wal-Mart Stores, Inc. v. Dukes (2011). In Dukes, the Court emphasized a plaintiff’s burden in proving commonality in the class before obtaining class certification. Now, in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, the Court will decide whether, before certifying a class in a securities case, plaintiffs relying on the fraud-on-the-market theory must prove that the misrepresentation was material. And, in Comcast v. Behrend, the Court will address whether a district court may certify a class without first resolving whether the plaintiff has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a classwide basis (see below “Securities Litigation: Recent and Upcoming Supreme Court, Appellate and District Court Developments”).
The fifth class action case concerns the Class Action Fairness Act of 2005 (CAFA), a federal statute that created new safeguards against abusive class actions in federal court. In The Standard Fire Insurance Co. v. Knowles, the Court will decide whether a plaintiff in a putative class action can avoid removal to federal court under CAFA by stipulating that he seeks damages for the class of less than the $5 million jurisdictional minimum for CAFA removal. The question before the Court will be whether such a stipulation improperly undermines the federal removal provision of CAFA and violates the due process rights of absent class members (see below “Class Action Outlook: A Busy Year Ahead”).
Extraterritoriality of Alien Tort Statute
In the last three decades, plaintiffs have used the previously obscure Alien Tort Statute (ATS), which was first enacted in 1789, to sue corporations for alleged complicity in human rights abuses in other countries. In Kiobel v. Royal Dutch Petroleum, the Court will decide whether these causes of action may be brought for claims regarding conduct outside the United States involving foreign plaintiffs and foreign defendants.
In Kiobel, plaintiffs from Nigeria are seeking to sue foreign oil companies in U.S. courts alleging that the companies violated international law in aiding torture by the Nigerian government. Last term, the Court heard argument on the scope of the ATS, including whether corporations can be sued under the statute. At oral argument last February, it became clear that a number of justices were troubled by a fundamental question — whether Congress intended the ATS to apply to conduct outside the United States. The Court ordered the parties to address this threshold issue and heard re-argument in the case in early October.
If the Court decides that the ATS does not apply to such extraterritorial claims, it will dramatically narrow plaintiffs’ use of the statute in litigation against corporations.
Statute of Limitations in Government Enforcement Cases
The statute of limitations for government enforcement actions is fundamental to the initiation and resolution of many government cases. In Gabelli v. Securities and Exchange Commission, the Court will consider the default five-year statute of limitations applicable to civil penalty actions brought by the federal government (28 U.S.C. § 2462). In Gabelli, the SEC seeks penalties for alleged unlawful conduct that occurred more than five years before the SEC filed suit. The Court will review the Second Circuit’s holding that the five-year limitations period does not begin until the SEC discovers or should have discovered the claim. The case will have important implications for the permissible timing of government actions for claims sounding in fraud, both in SEC actions and in other contexts.
Intellectual Property
The Court will consider three intellectual property cases of significance to companies that own patents, copyrights or trademarks.
The first case involves so-called “reverse-payment agreements” between brand-name drug manufacturers and potential generic competitors.1 The case is of enormous significance to the pharmaceutical industry. In many instances, brand-name manufacturers have sued potential generic competitors under the Hatch-Waxman Act for patent infringement. In Federal Trade Commission v. Watson Pharmaceuticals, Inc., the Court will determine whether, as the government contends, federal competition law renders settlements of Hatch-Waxman litigation presumptively unlawful if the settlement includes a payment from the brand-name manufacturer to a generic competitor as well as an agreement on the date the generic competitor will enter the market. In contrast, most U.S. Courts of Appeals have held that such Hatch-Waxman settlements are lawful if (1) the settlement agreement does not exceed the exclusionary scope of the patent, (2) the litigation to enforce the patent was not a sham, and (3) the patent was not procured by fraud. The second case raises a question at the...
