26 de julho de 2023 • 3 minute read

US Supreme Court round-up: Key decisions for in-house counsel to know

The US Supreme Court had an eventful 2022-2023 term, with decisions addressing a broad range of issues, from civil procedure – personal jurisdiction, post-trial motions and stays of pre-trial and trial proceedings – to federal regulatory authority, IP rights, religious accommodations, and affirmative action. Below we summarize key decisions and their potential implications and preview what’s ahead.

2022-23 term

Interlocutory appeals of denials of motions to compel arbitration automatically stay district court proceedings

In Coinbase, Inc. v. Bielski, the Supreme Court held that a district court must stay its pre-trial and trial proceedings when a defendant appeals the denial of a motion to compel under the Federal Arbitration Act. This ruling eliminates a pressure point that was often employed by plaintiffs’ counsel: pushing forward with litigation, including costly discovery, to try to extract a settlement. The Court’s rationale also provides support for a defendant who seeks a stay of further proceedings when an interlocutory appeal is certified on a forum selection issue.

Consent to jurisdiction statute in Pennsylvania does not violate the due process clause

In Mallory v. Norfolk Southern Railway Co., a fragmented majority of the Supreme Court held that a Pennsylvania statute requiring non-Pennsylvania corporations to consent to general personal jurisdiction in Pennsylvania as a condition of registering to do business in the Commonwealth does not offend the constitutional right to due process but did not agree on a single legal rationale for the decision. The Justices’ disagreement suggests that Mallory is unlikely to be the last word on so-called “consent to jurisdiction” statutes, and that corporate defendants who might suddenly find themselves haled into unfamiliar state courts should take a wait-and-see approach before reconsidering their registration status.

Supreme Court holds "purely legal" issues decided at summary judgment are preserved for appeal

In Dupree v. Younger, a seemingly niche prisoner-rights case, a unanimous Supreme Court addressed a much bigger procedural issue, holding that a post-trial motion under Rule 50 of the Federal Rules of Civil Procedure is not required to preserve for appellate review a purely legal issue resolved at summary judgment. Nonetheless, given the difficulty of distinguishing between what is factual versus purely legal, it is still prudent for a party to include in its post-trial motion all rejected summary judgment arguments that the party may wish to appeal.

Supreme Court affirms government’s broad authority to dismiss False Claims Act suits

In United States ex rel. Polansky v. Executive Health Resources, Inc., the Supreme Court resolved (8-1) a circuit split concerning the circumstances in which the government can seek dismissal of a relator’s False Claims Act (FCA) suit. The majority held that the government does not relinquish its right to dismiss an FCA suit, even after initially declining to intervene in the action, and that the ordinary standard governing voluntary dismissal under Federal Rule of Civil Procedure 41 applies. In concurring and dissenting opinions, three Justices raised broad questions about the constitutionality of qui tam suits, making it more likely that FCA defendants will raise such arguments in future suits.

Supreme Court holds section 11 liability is limited to investors who can trace their securities to a challenged registration statement

In Slack Technologies LLC v. Pirani, the Supreme Court unanimously held that liability under section 11(a) of the Securities Act of 1933 extends only to investors who can “plead and prove that [they] purchased shares traceable to” a registration statement that includes an alleged misstatement or omission of material fact. The decision puts to rest any debate about the applicability of the tracing requirement for section 11 claims and, in the longer run, could be cited for the more general proposition that the liability provisions of the Securities Act should be construed narrowly.

Supreme Court affirms RICO liability where award debtor seeks to avoid enforcement of award in United States

In Yegiazaryan v. Smagin, the Court held that the Racketeer Influenced and Corrupt Organizations (RICO) Act may be used to impose liability on award debtors engaging in racketeering activity to avoid enforcement of a foreign arbitral award against assets in the United States. The Court’s decision hands non-US award and judgment creditors a new enforcement tool for dealing with truly recalcitrant debtors seeking to hide their US assets from execution.

Supreme Court decision ending affirmative action in admissions could impact employer diversity initiatives

In Students for Fair Admissions v. University of North Carolina and Students for Fair Admissions v. Harvard University, the Supreme Court held that both universities’ admissions programs violate the Equal Protection Clause of the Fourteenth Amendment. While the majority decision does not expressly concern laws applicable to private sector employers, it is anticipated that the decision could lead to greater scrutiny of workplace diversity and inclusion initiatives.

Supreme Court clarifies meaning of “undue hardship” in religious accommodation cases under Title VII

In Groff v. DeJoy, a unanimous Supreme Court clarified the meaning of “undue hardship” in its 1977 Trans World Airlines, Inc. v. Hardison case, holding that Title VII requires an employer who denies a religious accommodation to show that the burden of granting an accommodation would result in “substantial increased costs in relation to the conduct of its particular business.” In doing so, the Court rejected a widely adopted interpretation in the lower courts that an undue hardship exists if an employer is required to bear “more than a de minimis cost.” The Court’s decision represents a potentially significant shift for employers.

Supreme Court holds overtime is due to high-earning oil worker

In Helix Energy Solutions Group v. Hewitt, the Supreme Court held that an employee earning more than $200,000 a year was eligible for overtime pay under the Fair Labor Standards Act (FLSA) because he was paid on a daily basis and not a salary basis. Companies should be mindful that when utilizing the FLSA exemptions, it is critical that employees are paid on a salary basis, even when they are highly compensated.

Supreme Court upholds right of website designer to refuse to create expressive wedding designs for same-sex couple

In 303 Creative LLC v. Elenis, the Supreme Court held that the First Amendment prohibits Colorado from forcing a website designer to create an expressive wedding site for a same-sex couple. While the Court’s decision is based on the First Amendment, which does not apply to private employers and their employees, it nevertheless may have an impact in the workplace.

Supreme Court opens door to challenging FTC and SEC in district court

In Axon Enterprise Inc. v. Fed. Trade Comm’n, the Supreme Court unanimously held that respondents in separate enforcement actions initiated by the FTC and SEC could bring claims in district court seeking to enjoin the proceedings against them on constitutional grounds and were not required to bring their respective challenges through the agencies’ “in-house” administrative processes. The potential implications of this decision are significant – respondents in agency proceedings may proceed directly to challenge the constitutionality of the agencies’ adjudicative proceedings and even the constitutionality of the agencies themselves. Affected agencies are likely to commence new actions in federal court rather than proceeding administratively.

Supreme Court’s Warhol decision clarifies limits of copyright fair use

In Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith et al., in a 7-2 majority opinion by Justice Sonia Sotomayor, the court handed a decisive victory to the copyright owner Lynn Goldsmith in her dispute with the Andy Warhol Foundation over the use of her original photograph of the artist Prince. The decision both narrowed the copyright fair use defense and rejected proposals to expand this defense considerably, bolstering copyright owners’ ability to enforce their rights against an increasingly common form of copying. Warhol reaffirms the need to evaluate “purpose” objectively and to carefully consider whether the claimed fair use would impair the copyright owner’s derivative right.

Supreme Court curbs parody, narrows defenses to trademark claims

In Jack Daniel’s v. VIP Products, a case involving booze, dog toys, and puns galore about canine bodily functions, the Supreme Court unanimously held that the judge-made Rogers v. Grimaldi First Amendment defense for the use of others’ trademarks in “artistic” works does not apply to cases where the accused infringer uses the trademark to identify the source of its own goods or services. It further held that a parody of another’s trademark does not automatically qualify for the “noncommercial use” defense to the federal trademark dilution statute. The decision will fundamentally alter how federal courts apply the Rogers test and impact strategic decision-making surrounding trademark prosecution and portfolio management. Companies that routinely find themselves on both sides of the “v.” in trademark litigation will need to consider the tradeoffs between the benefits of registration to a plaintiff and the risk of having to “eat one’s own words” as a defendant.

Supreme Court limits reach of trademark law to domestic infringement

Resolving a circuit split about the foreign reach of the Lanham Act, the Supreme Court held that two provisions governing infringement, 15 U.S.C. 1114(1)(a) and 1125(a)(1), “are not extraterritorial” and “extend only to claims where the claimed infringing use in commerce is domestic,” vacating a $96 million award. The Abitron Australia GmbH, et. al., v. Hetronic International, Inc. decision arguably creates an obstacle for brand owners to enforce their rights and creates uncertainty when foreign activity is involved.

US Supreme Court strikes down federal student loan forgiveness program

In Biden v. Nebraska, a 6-3 majority held that the Biden Administration’s decision to forgive $10,000 (and in some instances $20,000) in federal student loans for most borrowers exceeded the statutory authority granted by Congress to the Executive. As an alternative holding, the majority held that the loan forgiveness program failed to meet the clear congressional statement requirement of the “major questions doctrine” adopted by the Court last year. This confirms that the Court majority has embraced the doctrine, if not its precise contours, and may apply it to a range of agency actions.

Unanimous Supreme Court clarifies False Claims Act scienter standard in landmark case

In U.S. ex rel. Schutte v. SuperValu Inc. and U.S. ex rel. Proctor v. Safeway Inc., the Supreme held that the FCA’s scienter requirement looks to the defendant’s “knowledge and subjective beliefs – not what an objectively reasonable person may have known or believed.” The Supreme Court’s decision may have significant implications for companies that operate in highly regulated industries that routinely defend FCA lawsuits. The focus on each defendant’s subjective intent may allow more FCA lawsuits to get past motions to dismiss or for summary judgment unless a defendant can demonstrate a pattern and record of good-faith subjective belief.

What’s ahead

As of June 30, 2023, the Supreme Court has agreed to hear nineteen cases during its October 2023 term. The Court’s decisions may have significant implications for companies. In particular, in Loper Bright Enterprises v. Raimondo, the Court is expected to address whether it should overrule its decision in Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), or “at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency." Several members of the Court have been critical of the Chevron doctrine, which broadly requires courts to defer to a federal agency’s interpretation of a statute it administers when that statute is ambiguous or leaves a gap for the agency to fill, so long as the agency’s interpretation is considered reasonable. The Court’s decision in Loper Bright Enterprises may impact how federal agencies conduct rulemakings, as well as their ability to successfully defend rules and adjudications based on their interpretations of arguably ambiguous statutes.

On the heels of this term’s decision in Axon Enterprise Inc. v. FTC, the Court will again consider the constitutionality of the SEC’s administrative process and the agency’s use of Administrative Law Judges (ALJs) in Securities and Exchange Commission v. Jarkesy. Questions presented include whether statutory provisions that empower the SEC to initiate and adjudicate administrative enforcement proceedings seeking civil penalties violate the Seventh Amendment; whether statutory provisions that authorize the SEC to choose to enforce the securities laws through an agency adjudication instead of filing a district court action violate the nondelegation doctrine; and whether Congress violated Article II by granting for-cause removal protection to ALJs in agencies whose heads enjoy for-cause removal protection. Parties who may face SEC administrative enforcement actions should carefully consider their strategy for preserving constitutional claims as this case proceeds.

The Court will also address several employment cases. In Laufer v. Acheson Hotels, LLC, the Court will consider whether “a self-appointed Americans with Disabilities Act ‘tester’" has Article III standing to challenge a place of public accommodation's failure to provide disability accessibility information on its website, even if they lack any intention of visiting that place of public accommodation. The Court’s decision next year could stem the tide of Title III lawsuits filed against businesses by serial plaintiffs. In Murray v. UBS Securities, LLC, the Court granted certiorari on the issue of whether a whistleblower must prove his employer acted with a “retaliatory intent” or if “retaliatory intent” is part of the affirmative defense on which the employer bears the burden of proof. In another case, Muldrow v. City of St. Louis, the Court will consider whether Title VII prohibits discrimination in transfer decisions absent a separate court determination that the transfer decision caused a significant disadvantage.

We will continue monitoring these cases and more in the coming year. In the meantime, please contact the authors of the alerts linked above or to your DLA Piper partner if you have questions about how the Supreme Court’s decisions this term or next term may impact your business and workforce.