On March 20, 2013, the Supreme Court heard argument in the third takings case of the term, Horne et al v. Department of Agriculture, a case in which the government assessed a $700,000 fine against a California raisin farmer who refused to give the government 30 to 48 percent of his raisin crop as required by the Agriculture Department’s marketing order.  Mr. Horne claimed that the government’s requirement and the fine were both unconstitutional takings, and that he could assert this defense in the administrative fine hearing.  But the Ninth Circuit held that Mr. Horne lacked standing to challenge the fine on Fifth Amendment grounds, and that Mr. Horne must first pay the fine and then sue for just compensation in the Court of Federal Claims in Washington, D.C.

Although many thought the argument would be a showdown on obscure procedural issues involving Agriculture Department administrative law — the grounds on which the Ninth Circuit had dismissed Mr. Horne’s claim — the Solicitor General shocked the Court by announcing that the case should, in fact, be remanded for determination of the merits.  The government continued to argue, however, that those merits did not include the Fifth Amendment — that Mr. Horne must first pay the fine and then file his takings claim in the Court of Federal Claims.

The lively argument leapt from the constitutionality of agricultural marketing orders to whether a monetary fine could be a taking to who actually owned the raisins of which the government took possession without compensation.  The decision in the case will likely have significant ramifications for takings law, as well as challenges to the constitutionality of federal fines for regulatory non-compliance.

Featuring:

• Hon. Roger J. Marzulla, Partner, Marzulla & Marzulla
• Moderator: Mr. David C.F. Ray, Associate Director of Practice Groups, The Federalist Society

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On this previously recorded conference call, Prof. J.W. Verret discusses three interrelated dimensions of the Supreme Court case Amgen v. Connecticut, which held that shareholder class actions under the 10(b)-5 anti-fraud rule do not need to establish that alleged misstatements are material to use the fraud on the market presumption (which allows them to meet the reliance requirement in those actions) in obtaining class certification.  
 
On one level this case appeared to be a victory for the plaintiff's bar.  Since nearly all securities class actions either settle or are dismissed, a heightened pleading standard to obtain class certification could have significantly limited the settlement value of these suits.  
 
On a second dimension, some of the Justices joining the opinion signaled their willingness to abandon the fraud on the market presumption, and its underlying assumption of market efficiency, altogether.  The fraud on the market presumption assumes that all publicly available information is incorporated into stock price, and therefore essentially obviates the need for thousands of class action plaintiffs to demonstrate their reliance on particular fraudulent information and instead allows them to merely demonstrate their reliance on the stock's price.  In that sense, this opinion may portend a future and major victory for the defense bar.  
 
Yet on a third dimension, if the Court begins to relax the efficient markets assumption which underlies judicial doctrine in 10(b)-5 and the securities laws themselves, this may have unintended consequences for cost-benefit analysis in disclosure rule making by the Commission and for adjudication of other elements of 10(b)-5.

Featuring:

• Prof. J.W. Verret, George Mason University School of Law
• Moderator: Mr. Dean A. Reuter, Vice President & Director of Practice Groups, The Federalist Society

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On April 17, 2013, the Supreme Court decided Kiobel v. Royal Dutch Petroleum Co., holding that the Alien Tort Statute does not have extraterritorial reach.  This halts the recent trend of parties being hauled into United States courts for alleged torts that occurred in another country with no connection to the United States.  This teleforum discusses the implications of this landmark decision.

Featuring:

• Prof. Chimène Keitner, University of California Hastings College of the Law
• Prof. Julian G. Ku, Professor of Law and Faculty Director of International Programs, Hofstra University Maurice A. Deane School of Law
• Moderator: Mr. Dean A. Reuter, Vice President & Director of Practice Groups, The Federalist Society

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In American Express Co. v. Italian Colors Restaurant, the Supreme Court considered an important question regarding the enforceability of arbitration agreements that contain class action waivers.  In 2011, the Court held in AT&T Mobility LLC v. Concepcion that state law purporting to invalidate class action waivers in arbitration agreements is preempted by the Federal Arbitration Act.  In Italian Colors, however, which involves a Sherman Act class action brought by retailers against American Express for alleged tying violations relating to its credit card agreements, the Second Circuit held that the “federal substantive law of arbitrability” invalidated the class action waiver provision in American Express’s arbitration agreements with merchants that accept its credit cards.  The court of appeals reasoned that the class action waiver provision was invalid under federal law because it would “effectively preclude any action seeking to vindicate the statutory rights asserted by” the plaintiff class, given the prohibitive expense of trying to prove an antitrust claim on an individual basis.  The Second Circuit concluded that Concepcion was inapposite, because there had been no showing there that “the practical effect of the enforcement would be to preclude [the plaintiff class’s] ability to vindicate their statutory rights.”  The Supreme Court will now decide whether its Concepcion decision really did vindicate the ability of business defendants to enforce class action waivers in arbitration agreements, or instead whether plaintiffs can escape such provisions whenever they can show that individual litigation of federal claims would be prohibitively expensive.

Our expert, Thomas G. Hungar of Gibson, Dunn & Crutcher, attended the oral argument and then provided his analysis of the merits of the case and the possible outcomes in light of the oral arguments.

Featuring:

• Mr. Thomas G. Hungar, Partner, Gibson Dunn & Crutcher LLP
• Moderator: Mr. Dean A. Reuter, Vice President & Director of Practice Groups, The Federalist Society

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