Alison Frankel

Last week, after the U.S. Supreme Court issued its deeply divided 5-to-4 ruling in Comcast v. Behrend, the antitrust class action bar breathed a sigh of relief. Lawyers had been worried the court would rule broadly that in order to be certified, classes must show that they are “susceptible to awarding damages on a classwide basis,” which was the question the Supreme Court had asked Comcast counsel to address. The majority, in an opinion written by Justice Antonin Scalia, seemed to answer the somewhat different question of whether trial and appellate courts may delve into the merits of the plaintiffs’ damages theory before certifying the class. Antitrust plaintiffs’ lawyers told my Reuters colleague Andrew Longstreth that the Comcast decision would have little impact on class certification because they could tailor damages allegations to match their theories of liability.

But yesterday the Supreme Court signaled that, at the very least, class action lawyers – and not just those in the antitrust bar – will have to address the Comcast opinion if they’re going to win certification rulings. In two different cases, one involving consumer product defect claims against Whirlpool, the other over alleged wage-and-hour violations by Charter One bank, the justices granted certioriari, vacated class certification rulings by the federal circuits and sent the cases back to the appellate courts for reconsideration in light of Comcast. The dissent in Comcast, written jointly by Justices Ruth Ginsburg and Stephen Breyer, said that the majority’s holding “should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable ‘on a class-wide basis,’ (since) recognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal.” Nevertheless, it’s now going to be up to the federal circuits to confirm the Comcast dissenters’ reading of the majority opinion.

The Whirlpool case, which comes out of the 6th Circuit Court of Appeals, is precisely the sort of class action the dissent was concerned about. The trial court, and then the appeals court, certified a statewide class of about 200,000 Ohio consumers who purchased front-loading Whirlpool washing machines that are allegedly prone to develop mold or emit a moldy smell. (The litigation is part of a much broader consumer offensive against makers and sellers of supposedly defective washing machines, as Whirlpool discusses in its petition requesting Supreme Court review.) The class contains some members who claim that their machines developed mold or a moldy smell and others whose machines are still fine, so obviously there are disparities in the damages class members may ultimately be entitled to. The trial judge dealt with that issue by certifying the class only for the purpose of determining whether Whirlpool’s machines are defective. Damages, he said, would be determined individually after any finding of Whirlpool’s classwide liability. The class affirmed by the 6th Circuit, in other words, is a liability-only class, though the appeals court said that all Whirlpool buyers could show injury, and thus standing to sue, if they paid a premium price for a defect-prone product.

Whirlpool’s lawyers at Mayer Brown and Wheeler Trigg O’Donnell argued in the company’s cert petition that the class was wrongly certified since plaintiffs who have not suffered any injury do not have standing. And in a supplemental brief submitted after the Supreme Court’s ruling in Comcast, the company said that the 6th Circuit, like the 3rd Circuit in the Comcast case, erred because it did not require plaintiffs to show that common evidence would resolve questions of injury and damages. Whirlpool urged the justices to grant review in order to extend Comcast’s reasoning on damages to their theory of standing.

Class counsel at Lieff Cabraser Heimann & Bernstein, along with Supreme Court counsel of record Samuel Issacharoff of New York University Law School, countered in their opposition brief that Whirlpool washing machine buyers were injured even if their machines didn’t develop mold because they didn’t get what they paid for, a routine interpretation of standing, according to the class. Nor is there anything unusual, according to the brief, in the certification of a liability class that includes members with different damages. The class’s supplemental brief on Comcast argued that damages calculations weren’t part of the record at the 6th Circuit, though class counsel also said that the 6th Circuit plainly believes all class members have been damaged if they’ve purchased a defective washing machine.

Controversy follows U.S. Supreme Court Justice Antonin Scalia like Pig Pen’s cloud of dirt. You’ve probably heard that on Monday night, when the justice was speaking at Princeton, a gay student confronted him about his dissent in the 2003 case of Lawrence v. Texas, in which the majority struck down a state law banning same-sex sodomy. Scalia’s dissent discussed the legitimate state interest in legislating morality, and warned that the majority’s holding called into question “state laws against bigamy, same-sex marriage, adult incest, prostitution, masturbation, adultery, fornication, bestiality, and obscenity.” He also called the opinion “the product of a Court, which is the product of a law-profession culture, that has largely signed on to the so-called homosexual agenda, by which I mean the agenda promoted by some homosexual activists directed at eliminating the moral opprobrium that has traditionally attached to homosexual conduct.”

In responding to the brave Princeton student, Duncan Hosie, who asked about his comparison of homosexuality to bestiality, Scalia was characteristically unrepentant. “If we cannot have moral feelings against homosexuality, can we have it against murder?” Scalia said, according to the Los Angeles Times. “Can we have it against other things? I don’t apologize for the things I raise.” (MSNBC did an extended segment on the flap, featuring Hosie and Georgetown University law professor Jonathan Turley.)

It’s safe to say that Scalia, an avowed Catholic, is not likely to receive huzzahs at his local Gay Pride march. But does his apparent approval of “the moral opprobrium that has traditionally attached to homosexual conduct” mean that he should not be part of the court that decides the constitutionality of gay marriage?

Are the high seas the legal equivalent of foreign soil?

According to a new U.S. Supreme Court brief by the victims of alleged state-sponsored violence on an oil rig in Nigeria, they are indeed. The brief, filed in a case that will determine the role of the United States in international human rights litigation, argues that the very first Congress enacted the Alien Tort Statute in 1789 to establish federal-court jurisdiction over piracy cases. The sort of robbery on the high seas that Congress had in mind, the brief said, clearly took place off the shores of the United States. So it doesn’t make sense to presume, more than 200 years later, that Congress intended the Alien Tort Statute to apply only to alleged wrongdoing inside U.S. borders, especially because in all those intervening years Congress has never redefined the scope of the statute.

The brief, filed by Paul Hoffman of Schonbrun DeSimone Seplow Harris Hoffman & Harrison in the case known as Kiobel v. Royal Dutch Petroleum, is the opening salvo in the Supreme Court’s reshaping of the Kiobel case. As you may recall, the justices first heard oral argument in Kiobel in February, when lawyers on both sides addressed the issue of whether corporations can be held liable under the law. (The 2nd Circuit Court of Appeals had ruled in Kiobel that they can’t be, in a split with several other circuit courts.) Argument had hardly begun when Justice Anthony Kennedy asked a broader question prompted by Royal Dutch amici: Why was this case, which involved Shell’s alleged complicity with the Nigerian government in the torture and killing of Nigerian nationals, even in a U.S. court? In an extraordinary order issued days after the Kiobel oral argument, the Supreme Court essentially said it had been looking at the wrong question in the case. The justices called for all new briefing on “whether and under what circumstances the Alien Tort Statute allows courts to recognize a cause of action for violations of the law occurring within the territory of a sovereign other than the United States.”

Underlying that issue, of course, is the high court’s 2010 ruling in Morrison v. National Australia Bank, which held that U.S. laws should not be presumed to apply to conduct outside our borders. As I’ve reported, no federal appeals court has decided an ATS case based only on a Morrison analysis of extraterritoriality, though both the 9th Circuit and the District of Columbia Circuit have addressed whether the ATS applies overseas. (Majorities in both circuit court rulings concluded that it does, despite Morrison and dissenting opinions.)

In March, when the U.S. Supreme Court ruled unanimously that Prometheus Laboratories was not entitled to a patent on a diagnostic process because it’s a law of nature, On the Case (and many others) predicted the justices would subsequently call for reconsideration of Myriad Genetics’ patents on breast cancer genes, since genes are, of course, also natural phenomena. Within a week we were all proven right. But the second case the Supreme Court has remanded to the Federal Circuit Court of Appeals in light of the Mayo ruling – which involves a patent on viewing copyrighted content on the Internet – suggests the justices want greater scrutiny of a wide array of patents, not just biotech IP.

Mayo addressed Section 101 of the Patent Act, which holds that “laws of nature, natural phenomena, and abstract ideas” are not patentable. That seems simple, but in interpretation it’s not. If patent seekers can show their invention involves a unique application of an abstract idea or law of nature, they’re entitled to a patent, so analysis of Section 101 patentability has focused on what constitutes an application. In Mayo, the justices unanimously agreed that a diagnostic test based on how patients respond to autoimmune drugs is not a patentable process under Section 101. But the cases the Supreme Court cited to reach that conclusion involved patents far removed from the human body: a process for molding rubber and a process for monitoring the catalytic conversion of hydrocarbons. Both processes relied on math and science formulas, which aren’t patentable. The rubber molding system, however, transformed a non-patentable law of nature into a patentable process, while the alarm system for catalytic converters did not.

That reasoning leaves plenty of room for cases that have nothing to do with diagnostic procedures to be re-evaluated under Section 101. “The basic analysis the Supreme Court lays out isn’t limited by subject matter,” said Gregory Garre of Latham & Watkins, who represents an online game company called WildTangent in the case the Supreme Court remanded to the Federal Circuit on Monday. WildTangent was one of three defendants sued by a company called Ultramercial, which holds a patent on a process for distributing copyrighted material on the Internet. Hulu and YouTube settled out of the patent infringement litigation in federal court in Los Angeles. But WildTangent continued, through both U.S. District Judge Gary Klausner‘s finding that Ultramercial’s patent was impermissibly abstract and the Federal Circuit’s restoration of the case last September. A three-judge appellate panel headed by Chief Judge Randall Rader held that Ultramercial’s patent – which calls for online viewers to watch an ad before being permitted access to copyrighted content – was not excluded by Section 101 because it described “the application of an abstract idea to a ‘new and useful end,’” which the Federal Circuit said was “the type of invention that the Supreme Court has described as deserving of patent protection.”

Corporations, as Mitt Romney famously reminded us this summer in Iowa, are people under the laws of the United States. Just take a look at the U.S. Supreme Court‘s 2010 ruling in Citizens United v. Federal Election Commission. The five justices in the majority (you know who they are) held that corporations are entitled to the same First Amendment right to free speech as regular old people, so Congress’ attempt to ban corporate electioneering was unconstitutional.

When are corporations not people in the eyes of the Supreme Court? When they’re accused of torturing or killing real live human beings. Last week, in Mohamad v. Palestinian Authority, all nine justices agreed that when Congress enacted the Torture Victim Protection Act in 1991, it restricted causes of action to those against “an individual” — and individuals aren’t organizations or corporations. The court looked at the dictionary definition of the word individual, as well as the legislative history of the anti-torture law, to conclude that Congress intended the law to apply only to “natural persons.” The opinion said it’s notable that lawmakers used the word “individual” instead of “person” in defining potential torture defendants because “‘person,’ as we have recognized, often has a broader meaning in the law than ‘individual.’”

Right. Corporate “persons” have First Amendment rights to unlimited Super PAC spending but corporate “individuals” don’t exist. I’m sure the relatives of Azzam Rahim, the naturalized U.S. citizen who was kidnapped, tortured, and killed by the Palestinian Authority in the case that gave rise to the Supreme Court’s ruling, were compelled by the high court’s parsing of the distinction between a “person” and an “individual.”

There’s no question what Congress intended when it passed a pair of laws requiring producers of sexually-explicit materials to keep records on the age of the people engaged in sex acts (or simulated sex acts): curb child pornography. Lawmakers had already banned commercial child porn, but producers hired actors who were of age but looked young, making it tough to enforce the ban. In frustration, Congress passed a 1988 law that imposed specific record-keeping demands on porn producers, who must verify that performers are of age, maintain records to back the verification, and provide the location of those records in labels affixed to the sexually-explicit products. The law said that producers must maintain age records at their “business premises,” and must make the records available for government inspection, or else face a stiff fine and a prison sentence. A 2006 amendment to the law set the same record-keeping, labeling, and inspection requirements when sex is only simulated (albeit with a carve-out demanded by non-porn movie studios).

Because much child porn trafficking takes place underground, via private channels, the Justice Department said it would enforce the laws broadly, targeting not just porn-movie makers, but non-commercial producers of sexually-explicit material as well. The government did promise, however, that it would only prosecute those who intended to sell or trade the material.

The porn industry, as is its wont, brought constitutional challenges to the record-keeping laws, claiming that they violated the First, Fourth, and Fifth Amendments (specifically, free speech, equal protection, self-incrimination, and search and seizure provisions). In 2009, the 6th Circuit Court of Appeals sided with the Justice Department on the First Amendment question, in an 11-to-6 en banc ruling that held the record-keeping laws don’t unconstitutionally target porn producers and have only a collateral effect on free speech that’s justified by the government’s interest in protecting children from exploitation.

In a stunning order Monday, the U.S. Supreme Court essentially said it had been looking at the wrong issue in an Alien Tort Statute case called Kiobel v. Royal Dutch Petroleum. It called for new briefs that reframe Kiobel as an examination of the extraterritorial application of the ATS. Given the justices’ reluctance to extend U.S. jurisdiction beyond our borders, expressed so fatefully in their 2010 ruling in Morrison v. National Austrialia Bank, the recasting of Kiobel has the potential to devastate U.S. human rights litigation based on overseas conduct.

The comparatively narrow question Kiobel originally presented to the Supreme Court was whether corporations can be held liable under the ATS, a once-obscure 1789 law that human rights advocates revived in the 1980s to address international atrocities against non-U.S. citizens. The 2nd Circuit Court of Appeals had ruled in Kiobel that corporations are immune under the ATS; three other federal appeals courts had held otherwise. The Kiobel merits briefing by Shell and the Nigerian claimants (available here) mostly addressed the corporate liability question.

But barely had Kiobel oral arguments begun last Tuesday when Justice Anthony Kennedy interrupted plaintiffs lawyer Paul Hoffman of Schonbrun DeSimone Seplow Harris Hoffman & Harrison to point out that the United States appears to be the only country in the world to “exercise universal civil jurisdiction over alleged extraterritorial human rights abuses to which the nation has no connection.” (Kennedy was reading from an amicus brief Chevron filed in support of Shell.) Other justices picked up and amplified Kennedy’s point. Justice Samuel Alito put the question most bluntly, asking Hoffman, “What business does a case like this” — a suit by foreign nationals against a foreign-based corporation for its alleged complicity in state-sponsored torture and murder in Nigeria — “have in the courts of the United States?”

The Solicitor General’s office of the Department of Justice is home to some of the smartest lawyers in the country. These are the people who represent the views of the United States in the most important public policy cases at the U.S. Supreme Court. They go on to head appellate practices at prestigious law firms — or to their own seats in the federal judiciary. Lawyers in the SG’s office are accustomed to deference.

Jed Rakoff, however, isn’t much for deference.

In a Feb. 7 ruling on a claim of attorney-client privilege in a Freedom of Information Act dispute, the Manhattan federal court senior judge conceded that when the Solicitor General’s office makes a representation to a court, “trustworthiness is presumed.” But Rakoff said that when he dug into the SG’s justification for an assertion in a 2009 case at the Supreme Court, he couldn’t find anything aside from some emails exchanged amongst lawyers in the office. “It seems the government’s lawyers were engaged in a bit of a shuffle,” the judge said.

He cited a Peter Finley Dunne aphorism — “Trust everybody but cut the cards” — but might just as well have quoted Ronald Reagan’s famous “Trust, but verify” (itself an adaptation of a Russian proverb favored by Vladimir Lenin). Because Rakoff couldn’t verify the SG’s assertion in the Supreme Court brief, except in emails over which the Justice Department was claiming privilege, he said privilege doesn’t shield parts of the emails.

The National Labor Relations Board stood up staunchly for the rights of employees Friday. In an 18-page ruling in a case called D.R. Horton, Inc. and Michael Cuda, the NLRB chairman and two members of the board held that a company may not cut off employees’ rights to collective action through private arbitration agreements. The ruling does not say employees are always entitled to litigate claims via class actions, but concludes that “employers may not compel employees to waive their [National Labor Relations Act] right to collectively pursue litigation of employment claims in all forums, arbitral and judicial.”

Early reports on the Horton decision have called it a repudiation of the U.S. Supreme Court’s June 2011 decision in AT&T Mobility v. Concepcion, which isn’t quite right. Concepcion upheld AT&T’s right to compel consumers to submit to arbitration even though a California state law seemed to permit them to bring a consumer class action. Shrewd employment lawyers subsequently pounced upon Concepcion (in combination, of course, with Wal-Mart v. Dukes) to make headway in employment class actions against their clients; according to a just-released study on employment class-action litigation by Seyfarth Shaw, Concepcion had already been cited in 215 judicial rulings by the end of 2011. But according to Cliff Palefsky of McGuinn, Hillsman & Palefsky, who advocated for employees’ rights in the Horton case, the NLRB correctly drew a distinction between the issues in Concepcion and the real issue confronting employment litigators: an apparent conflict between labor laws and the Federal Arbitration Act, which empowers corporations to enforce private employment-related arbitration agreements.

In D.R. Horton, the NLRB concluded that employees’ federal rights under the National Labor Relations Act and its predecessor, the Norris LaGuardia Act, include the absolute right to collective action — either through a consolidated arbitration or a class action. It’s important to remember that in the D.R. Horton arbitration agreement at the heart of the case, Horton employees had to agree to adjudicate claims through binding, individualized arbitration and to waive any right to bring class action claims. The board balanced Horton’s rights under the Arbitration Act against its employees’ rights under the NLRA, and found that public policy and accommodation analysis favor employees.

On Tuesday, Manhattan federal judge Jed Rakoff agreed to decide whether Irving Picard’s $267 million clawback case against ABN Amro and related defendants belongs in federal court rather than in Manhattan bankruptcy court, where the Bernard Madoff bankruptcy trustee filed it as an adversary proceeding. That’s bad news for Picard and his team at Baker & Hostetler. So far, Judge Rakoff has decided that he has jurisdiction over at least part of every Madoff case he’s considered, and he’s proceeded to decimate Picard’s recovery theories in his HSBC and Mets rulings.

What’s intriguing about the ABN Amro withdrawal motion, though, is that the bank’s lawyers at Latham & Watkins, as well as Morrison & Foerster on behalf of co-defendant Rye Portfolio, are pointing to a June 23 U.S. Supreme Court opinion involving Anna Nicole Smith’s claim to part of her billionaire husband’s estate. Sadly, neither the former Playboy Playmate nor the stepson she sued to recover more than $400 million lived to see the high court’s ruling. But the Supreme Court’s opinion in Stern v. Marshall could turn out to be the most important legacy of the onetime tabloid darling Anna Nicole Smith, or, as she’s known to the Justices, Vickie Lynn Marshall.

The Supreme Court’s controversial 5-to-4 decision isn’t one of those rulings whose implications are immediately evident, like, say, Morrison v. National Australia Bank. Indeed, to call the facts underlying Stern v. Marshall idiosyncratic would be sort of like saying Anna Nicole was buxom. Here’s a highly abbreviated version of the story: Anna Nicole’s billionaire husband (of a little more than a year) left her nothing in his will. She filed for bankruptcy. Her stepson, Pierce Marshall, filed a claim in the bankruptcy, alleging that Anna Nicole defamed him when she said in state probate court that he fraudulently induced his father to disinherit her. Anna Nicole responded to her stepson’s bankruptcy court claim with a counterclaim for tortious interference. After a bench trial, the bankruptcy court agreed with Anna Nicole and entered a $400 million judgment against Marshall.