SCOTUS’s Role Reversal

PIllars in front of the Supreme Court
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With its latest rulings, the U.S. Supreme Court has upended relationships between the branches of government. So what does that mean—pragmatically—for companies?

Did business win big at the U.S. Supreme Court in 2024? Or is it a case of the dog that finally caught the car?

Only time will tell. But in a landmark decision, the high court reshuffled the roles of all three branches of government, handing more power to judges and elected officials and diminishing the power of the administrative state. This represents a victory for conservatives who have been engaged in a decades-long project to dismantle the Roosevelt-era system of supposedly independent agencies that make the rules the rest of us play by. But it also means more litigation and uncertainty as business on one side and environmentalists, consumer activists and the executive branch on the other slug it out in court over what regulations actually mean.

PECULIAR INTERPRETATIONS

These forces were unleashed with the court’s decision in Loper Enterprises v. Raimondo, striking down so-called Chevron deference, in which courts were supposed to defer to an agency’s interpretation of ambiguous laws. Citing The Federalist Papers and the U.S. Constitution, the Supreme Court said the “interpretation of the laws” is “the proper and peculiar province of the courts.” 

The practical effect of this decision will be to give businesses more opportunity to challenge regulations they consider excessive or unsupported by underlying law. But it also gives activists more opportunity to use the courts to enforce regulations they like. After all, Chevron deference emerged during the Reagan administration and was supported by none other than conservative Justice Antonin Scalia because it directed the courts to stand aside as agencies loosened environmental regulations. With its demise, expect environmental activists to challenge every attempt by a Republican president to relax or eliminate regulations enacted by a prior Democratic administration.

Another decision that might backfire on business was Harrington v. Purdue Pharma, which struck down the common practice of bankruptcy courts to release non-debtors from liability in exchange for cash to settle mass-tort litigation. The decision opened Purdue’s founding Sackler family to billions of dollars in opioid claims. But it also ended tactics like the “Texas two-step,” in which companies bundled their tort liabilities into special-purpose entities that streamlined the settlement process. Johnson & Johnson tried to use bankruptcy to end litigation over alleged asbestos-contaminated talcum powder, and 3M tried it to settle lawsuits over allegedly defective military earplugs.

STALLING SETTLEMENTS 

Now businesses will have a harder time negotiating settlements with lawyers representing thousands or even millions of individual claimants recruited through television and Internet advertising to file personal injury lawsuits. Without the authority of a bankruptcy judge to order everybody to the bargaining table, holdouts can stall the settlement process,  and defendant companies can’t easily obtain the certainty of a global release from liability. 

Don’t despair, however: Plaintiff lawyers like to get paid as much as anybody else, and time is money. So both sides in the mass-tort litigation game will likely work toward another mechanism for settling large numbers of lawsuits as quickly as possible. As the Supreme Court noted in the Purdue decision, nothing in the opinion prevents parties from negotiating their own settlement agreements, including releases for the third parties who supply the money to get these deals done. It will just be a lot harder for everybody involved.


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