With D.C. Circuit Judge Brett Kavanaugh's fate as the ninth justice still hanging in the balance, the U.S. Supreme Court kicks off its new term Monday without a case of blockbuster proportions. But there are several bread-and-butter business issues filling out the docket, including an antitrust attack against Apple, a dispute over liability in securities fraud actions and a case that could undo how some class settlements are structured.
Petitions to Track
Several certiorari petitions could emerge as the term's most closely watched cases — that is, if the Supreme Court decides to hear them. Two cases have the potential to expand who's protected under Title VII of the Civil Rights Act, which bars employment discrimination based on several factors, including "sex."
One case — Altitude Express Inc. et al. v. Melissa Zarda, as executor of the estate of Donald Zarda et al. — has to do with whether the law prohibits discrimination based on workers' sexual orientation. The en banc Second Circuit in February revived a gay skydiving instructor's bias suit against his former employer.
The U.S. Department of Justice and the U.S. Equal Employment Opportunity Commission filed opposing amicus briefs in the case over the scope of Title VII, with the DOJ supporting the employer and the EEOC backing Zarda.
Another case, R.G. & G.R. Harris Funeral Homes Inc. v. EEOC et al., raises the question of whether transgender workers have rights under Title VII.
The Sixth Circuit held in March that the funeral home violated the law by firing its director after she informed the owner that she was transitioning from male to female and wanted to dress in women's clothing at work. It also rejected that the employer was shielded by the Religious Freedom Restoration Act, which sometimes blocks the government from enforcing neutral laws against religious groups or individuals.
In the meantime, the Supreme Court's docket is about halfway full, and with only eight justices, the court may continue to accept cases slowly and hold off on wading into more high-profile contentious legal clashes that could result in a 4-4 tie.
"For cases already set for argument in October, an eight-member court certainly has the potential for deadlock," said R. Reeves Anderson, an appellate partner at Arnold & Porter Kaye Scholer LLP. "In those cases, the justices might look for narrow rulings that can forge a majority. Sometimes, the court schedules a second argument after the vacancy is filled to allow a tie-breaking vote."
An eight-member bench also is going to affect what cases the Supreme Court decides to hear. Not only will it be tougher for cases to win certiorari since it is mathematically harder to get the four votes necessary for certiorari with eight justices instead of nine, but the justices also may favor cases that can be decided with clear majorities, according to Anderson.
While attention is focused on who will fill the seat left open after Justice Anthony Kennedy retired this summer, one current justice to watch in the upcoming term is Neil Gorsuch, who joined the high court in April 2017 and whose influence is still unfolding.
"When Justice Gorsuch came on the court, there was only a small handful of decisions he wrote or voted on that term, but he was in perfect alignment with Justice [Clarence] Thomas," said Timothy Droske, co-chair of Dorsey & Whitney LLP's appellate practice. "But this past term, we're starting to see Gorsuch find his own voice. … It will be interesting to see how his jurisprudence evolves, and once another justice joins the bench, what dynamic that addition brings."
Here are the top cases at the high court to watch this term:
Apple v. Robert Pepper et al.
The Advocates
A proposed consumer class action brought in 2011 alleges Apple Inc. has illegally monopolized the market for apps for its phones by forcing developers to sell only on Apple's app store platform and collecting a 30 percent commission.
The Lower Court's Take
A district court dismissed the case, noting that because developers pay the commission, consumers are barred from suing under the high court's 1977 Illinois Brick Co. v. Illinois ruling, which held that only direct purchasers can seek damages under federal antitrust law. But the Ninth Circuit in 2017 revived the suit seeking treble damages under the Clayton Act, finding that Apple acts as a distributor from which the buyers directly purchase services. The ruling conflicts with an Eighth Circuit holding.
The Question
Can consumers file suit for antitrust damages against anyone who delivers goods to them, even if they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense?
What's at Stake?
If the court affirms the Ninth Circuit, it could open up companies to more expansive antitrust actions brought by plaintiffs who have no direct contractual relationship with them. The case has broad implications for the e-commerce market, and a ruling could affect other tech companies, like Amazon.com Inc., Google Inc. and eBay Inc.
The Tea Leaves
The court has shown a willingness to rethink jurisprudence in light of emerging technologies, like in South Dakota v. Wayfair in June, where it allowed states to collect tax from online and other remote retailers. But the court may be more inclined to rule for Apple, which has received backing from the federal government and several others in amicus briefs arguing that while the tech platforms may be new, the Illinois Brick rule still applies best.
The case is Apple Inc. v. Robert Pepper et al., case number 17-204.
Helsinn Healthcare v. Teva Pharmaceuticals et al.
The Advocates
Helsinn Healthcare accused Teva Pharmaceuticals of patent infringement over its planned generic version of nausea drug Aloxi. Teva argued the patent was invalid because Helsinn signed a license deal with MGI Pharma more than a year before filing the patent, and under the on-sale bar, sales of an invention that occur more than a year before a patent filing are prior art for invalidation purposes.
The Lower Court's Take
The district court found the patent was valid and would be infringed by Teva's generic version. Under the America Invents Act, which was signed into law in 2011, patents are barred if the claimed invention was "in public use, on sale or otherwise available to the public" a year before the patent filing. The court noted that while Helsinn's deal was public, MGI had to keep the invention details confidential. The Federal Circuit in 2017 reversed, holding that it was enough that the existence of the sale was public, even if the invention details weren't disclosed, and therefore, the agreement between Helsinn and MGI was known and, as a result, invalidated the patent.
The Question
Under the AIA, when an inventor sells an invention and requires the invention be kept confidential, does that sale qualify as prior art for purposes of determining the patentability of the invention?
What's at Stake?
Helsinn has argued that the Federal Circuit's decision "casts substantial doubt on countless patents," and one major patent group, the Pharmaceutical Research and Manufacturers of America, has contended that allowing the ruling to stand could "destabilize the entire U.S. patent system."
The Tea Leaves
Before the AIA, the law was that a patent was barred if the invention was "in public use or on sale in this country, more than one year prior to the date of application." Courts had long held that confidential sales triggered the on-sale bar. The question before the justices is whether the language in the AIA changed the rule. Because the Supreme Court has often corrected the Federal Circuit's interpretation of statutes, it's likely to reverse. Helsinn also has the backing of key supporters — the U.S. Patent and Trademark Office and Rep. Lamar Smith, R-Texas, a lead sponsor of the AIA.
The case is Helsinn Healthcare SA v. Teva Pharmaceuticals USA Inc. et al., case number 17-1229.
Lamps Plus et al. v. Frank Varela
The Advocates
A Lamps Plus Inc. employee filed a proposed class action alleging the lighting retailer handled workers' data carelessly ahead of a 2016 phishing attack. Lamps Plus sought to compel individual arbitration based on an employment agreement the employee signed that covered "all claims or controversies" he had with the company.
The Lower Court's Take
The district court agreed that the employee had entered into an arbitration pact, but found that the agreement's language was broad enough to encompass class and individual claims. In a split ruling, the Ninth Circuit in 2017 upheld that the expansive language authorized class arbitration. Lamps Plus' petition argued that decision defies the high court's 2010 ruling in Stolt-Nielsen SA v. AnimalFeeds International Corp., which said parties can't be forced into class arbitration "unless there is a contractual basis for concluding [they] agreed to do so."
The Question
Does the Federal Arbitration Act foreclose a state-law interpretation that would authorize class arbitration based solely on general language commonly used in arbitration agreements?
What's at Stake?
This is one of several corporate arbitration cases granted by the high court after its blockbuster pro-arbitration ruling in Epic in May. It shows the justices' continued interest in defining the parameters of the FAA, and the business community's persistence in pressing the Supreme Court to rein in lower courts that refuse to enforce arbitration agreements as companies see fit. If it affirms the Ninth Circuit, businesses warn it would undermine tens of thousands of arbitration agreements.
The Tea Leaves
If the Supreme Court doesn't punt the issue based on a question over standing, it is likely to stick to precedent and find that the generalized language isn't enough to constitute a contractual basis that parties agreed to class arbitration. And if it rules that parties must explicitly agree to "class arbitration," that would give employers an easy road map to avoid such a scenario. However, a pro-business ruling could be tougher to reach with eight justices, and a possible deadlock can't be ruled out.
The case is Lamps Plus Inc. et al. v. Frank Varela, case number 17-988.
Theodore Frank et al. v. Paloma Gaos et al.
The Advocates
Google reached an $8.5 million settlement to resolve class claims accusing it of violating users' privacy rights by sharing their search histories. Under the deal, $2.1 million would be split among class counsel and the rest would go to charities. The so-called cy pres award — an arrangement that distributes funds to third parties rather than class members when the size of the class makes distribution impossible or impractical — drew objections as improper.
The Lower Court's Take
The district court approved the settlement, and the Ninth Circuit affirmed in a 2017 split ruling. The objectors appealed, arguing that settlements awarding absent class members no relief for their claims aren't "fair, reasonable and adequate." Class counsel has argued that the cy pres deal makes sense because otherwise, the settlement — without accounting for attorneys' fees and costs — would be divided among 129 million class members and yield just 4 cents per person.
The Question
Does a cy pres award that provides no direct relief to class members support class certification and comport with the "fair, reasonable and adequate" requirement, and if so, in what circumstances?
What's at Stake?
If the justices find for the objectors, it could subject cy pres awards to greater scrutiny and make the approval process more challenging — or eliminate them altogether. Some businesses view cy pres deals as a less expensive way to resolve class actions, but objectors argue that they require more judicial scrutiny and that the Ninth Circuit's ruling essentially encourages litigation that largely benefits plaintiffs counsel.
The Tea Leaves
The federal government has raised doubts about the plaintiffs' standing to pursue their claims, so there's a possibility the high court won't get to the merits. But if it does, given that several justices have tried to cut back on class action remedies in recent years, a majority may be inclined to put more limits on these settlements, especially if it thinks it could deter potentially abusive class actions.
Objector Theodore Frank of the Competitive Enterprise Institute is representing himself, the first petitioner to argue pro se at the Supreme Court in the 21st century, a CEI spokesman said. Frank was a litigator for 10 years until he won a "sizable windfall" from the 2004 World Series of Poker, according to his online bio. This will be Frank's first argument before the court.
The case is Theodore H. Frank et al. v. Paloma Gaos et al., case number 17-961.
Francis Lorenzo v. SEC
The Advocates
An investment banker is contesting a U.S. Securities and Exchange Commission finding that he's primarily liable for fraud for passing on his boss' messages that were meant to induce investors to buy bonds from a struggling energy company. The high court's 2011 ruling in Janus Capital Group Inc. v. First Derivative Traders held that the maker of a misstatement must have ultimate authority over it, and the banker argues that he can't be considered the "maker" of fraudulent statements for merely copying and pasting messages.
The Lower Court's Take
In a split decision, the D.C. Circuit mainly sided with the SEC in 2017. In a dissent, Judge Kavanaugh warned the SEC has been trying to erase a distinction between primary and secondary liability "to expand the scope of primary liability under the securities laws." The D.C. Circuit's holding that a misstatement standing alone can be the basis of a fraudulent scheme claim aligns with the Eleventh Circuit, but conflicts with three other circuits.
The Question
Does a misstatement claim that doesn't meet the elements under Janus be pursued as a fraudulent scheme claim?
What's at Stake?
If the court finds that the banker is primarily liable, it could expand the scope of suits brought not just by the SEC, but also private parties. The petitioner has claimed that such a result would render the Janus decision meaningless.
The Tea Leaves
This decision could end up being divided along party lines, with conservative justices holding they don't want to create the potential for more private actions and liberal justices holding otherwise. Justices Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan dissented in Janus and may be fine with a decision that ultimately weakens it. If the bench still only has eight members, a 4-4 split remains a possibility here.
The case is Francis V. Lorenzo v. Securities and Exchange Commission, case number 17-1077.
Merck v. Doris Albrecht et al.
The Advocates
Merck faces failure-to-warn litigation by patients who took Fosamax and suffered femoral fractures before the U.S. Food and Drug Administration changed the osteoporosis drug's label in 2011 to warn of atypical hip fracture. The FDA in 2009 rejected the company's proposal for a strengthened warning about fracture risk, but the patients say that the FDA would've changed the label if the proposed warning had been worded differently.
The Lower Court's Take
The district court found the claims were preempted, noting there was clear evidence the FDA would have rejected a different label. The patients appealed, arguing the FDA rejected Merck's proposed warning because its use of the term "stress fracture" didn't represent the injuries allegedly sustained by Fosamax users, not because of a lack of evidence that the drug causes atypical femoral fractures. The Third Circuit in 2017 revived the multidistrict litigation, finding there was a valid argument that Merck could've received warning approval if it had described the fractures in a different way.
The Question
Is a state-law failure-to-warn claim preempted when the FDA rejects the drug manufacturer's proposal to warn about the risk after being provided with the relevant scientific data?
What's at Stake?
Merck says the plaintiffs are trying to attack the high court's 2009 decision in Wyeth v. Levine, which shields drug companies from being sued for a failure to warn when there's "clear evidence" the FDA considered a proposed warning but rejected it for inadequate data. If Merck is able to shift the burden of proof onto the plaintiffs, these types of cases could become increasingly difficult for the plaintiffs to win and may foreclose them from being filed.
The Tea Leaves
This case could have implications not just for drug companies, but for regulated industries across the board. Because the court is going to look at the FDA's actions and its interpretations of its own rules, this case could provide an opportunity for some of the more conservative justices to raise administrative agency deference issues more broadly.
The case is Merck Sharp & Dohme Corp. v. Doris Albrecht et al., case number 17-290.
Henry Schein v. Archer and White
The Advocates
Dental equipment distributor Archer and White filed an antitrust suit accusing manufacturer Henry Schein Inc. of conspiring to limit Archer's sales territories. Henry Schein sought to compel arbitration based on a clause in Archer's distribution agreements, but the plaintiff claimed the contract precluded arbitration of disputes seeking injunctive relief.
The Lower Court's Take
The district court denied Henry Schein's arbitration bid, holding that the court had the authority to rule on the arbitrability question and that the claims at issue weren't arbitrable. The Fifth Circuit affirmed in 2017. Four circuits have held that courts may resolve disputes over arbitrability in some circumstances, even if the agreement delegates that question to arbitrators, while two other circuits have held that issue must be decided by arbitrators.
The Question
Does the FAA permit a court to decline enforcing an agreement delegating questions of arbitrability to an arbitrator if the court concludes the claim of arbitrability is "wholly groundless"?
What's at Stake?
A decision siding with Archer would give more discretion to federal courts to decide whether claims should be arbitrated or not at the threshold stage. Such a ruling could give courts power to decide a wider range of threshold issues, including key determinations that arbitrators could later be bound by.
The Tea Leaves
A majority is expected to find for Henry Schein that courts can't take the decision of arbitrability away from the arbitrator when it was previously agreed upon. However, because arbitration disputes tend to be close calls that split along party lines at the court, there's still a chance of a 4-4 tie that affirms the lower court's ruling.
The case is Henry Schein Inc. et al. v. Archer and White Sales Inc., case number 17-1272.
New Prime v. Dominic Oliveira
The Advocates
New Prime Inc. faces a proposed class action alleging it failed to pay truckers-in-training a proper minimum wage. New Prime claimed the plaintiff, a former apprentice, couldn't sue because of an arbitration clause in a contract he signed to be an independent contractor. And an independent contractor doesn't qualify as a transportation employee under an FAA exception for workers engaged in interstate commerce, according to the company.
The Lower Court's Take
The First Circuit in 2017 affirmed the denial of a bid to compel arbitration, holding that the applicability of Section 1 of the FAA — exempting from arbitration "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" — is always a question for the court and that "contracts of employment" should include independent contractor deals. New Prime says the decision conflicts with rulings from the Ninth Circuit, the California Court of Appeal and several U.S. district courts.
The Question
Must a dispute over applicability of the FAA's Section 1 exemption be resolved in arbitration based on a valid delegation clause? Is that exemption inapplicable to independent contractor agreements?
What's at Stake?
Whether independent contractors here are insulated from arbitration is the thornier question, particularly as more people work for companies as independent contractors and as worker groups raise concerns that companies are undermining workers' rights by misclassifying them as independent contractors. A decision extending who falls under this exemption could place a bigger litigation burden on employers.
The Tea Leaves
Like the other arbitration disputes before the Supreme Court, the petitioner has garnered support from the U.S. Chamber of Commerce and other industry groups. Also like the other cases, it could cut along party lines, and a 4-4 tie is a possibility.
The case is New Prime Inc. v. Dominic Oliveira, number 17-340.
Law360 received input for this story from the following attorneys: Carolyn Shapiro of Chicago-Kent College of Law; David Garland of Epstein Becker & Green PC; Elaine Goldenberg of Munger Tolles & Olson LLP; John Elwood of Vinson & Elkins LLP; Jonathan Franklin of Norton Rose Fulbright US LLP; Mary-Christine Sungaila of Haynes and Boone LLP; R. Reeves Anderson of Arnold & Porter Kaye Scholer LLP; Robert Peck of the Center for Constitutional Litigation PC; Stephen Wermiel of American University Washington College of Law; and Timothy Droske of Dorsey & Whitney LLP.
Erin Coe is a feature reporter for Law360. She last wrote about associates displaced by the 2008 financial crisis and how they are faring 10 years later. Editing by Jocelyn Allison and Rebecca Flanagan.
Correction: A previous version of this article displayed an incorrect photo of Robert Heim of Meyers & Heim. The error has been corrected.
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