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Another case I'll be watching to see if the Supreme Court decides to take up: Limelight v. Akamai. As noted in The Federalist Society's blog, "Akamai charged Limelight with infringement of its patent on a method for delivering video content to consumers via the Internet." By a one-vote majority, an en banc panel of the Federal Circuit overturned lower court decisions that, under traditional patent principles, Limelight was not infringing on Akamai's business-methods patent by partially but not wholly replicating its competitor's process (Limelight's technology leaves some of the work up to the end-user). An array of businesses (Google, Cisco Systems, Oracle, Red Hat, etc.) and the Solicitor General have filed briefs asking the Court to take up the case (the SG's brief was filed at the Court's request -- and both that fact and the brief's recommendation augur well).

I tend to agree with the companies and the SG's office that the Court should hear this one -- and with the proposition articulated in the SG's brief that the Federal Circuit's broad interpretation of business-methods patent infringement could lead to "a significant expansion of the scope of inducement liability (and a corresponding increase in burdensome litigation)." That's a bad thing, and an increasing problem, as I explained earlier this year in Trial Lawyers, Inc.: Patent Trolls:

[P]atent trolling has emerged as a big and growing business line for what the Manhattan Institute has dubbed Trial Lawyers, Inc., the subset of the plaintiffs' bar that behaves like the biggest of big businesses (with the exception that instead of selling products to willing consumers, the lawyers extract monies from unwilling defendants through their unique access to the courts). . . . The number of patent lawsuits filed by PAEs grew from 466 in 2006 to 2,914 in 2012, an increase of 526 percent in just six years[]. In 2011, 2,150 companies were forced to mount 5,842 defenses against NPE-initiated patent lawsuits--up from only 1,401 defenses in 2005.

See also Gary Shapiro's op-ed on the case at the Washington Examiner.

Postscript: The Supreme Court on Friday granted cert on Limelight. We'll have more to say on the case as it comes before the Court on the merits.


As I discussed in yesterday's Washington Examiner, at tomorrow's conference, the Supreme Court will decide whether to grant certiorari on a pair of companion cases -- Sears v. Butler and Whirlpool v. Glazer, which Ted has previously discussed (here, here, and here).

Both cases involve 21 varieties of energy- and water-efficient "front-load" washing machines manufactured by Whirlpool.

In 2001, Whirlpool released the first of this diverse group of washers that reduced water and energy use by more than two-thirds (cutting $120 from the average family's annual water and power bills).

Whirlpool's washers have been ranked among the best in their class by Consumer Reports and helped the company win multiple "sustainable excellence" awards from the federal Environmental Protection Agency.

Class-action attorneys have pounced on the fact that a small percentage of these washers, like all washing machines, can (if improperly maintained) emit "musty odors" from leftover laundry residues.

Such odors may be marginally more likely in these newer machines than in traditional, less water- and energy-efficient washers.

A decade of call center data from Whirlpool and Sears place the percentage of consumers facing such odors at two to three percent, and a more recent February 2010 examination by the Consumers Union estimates the problem rate at less than one percent.

I agree with Ted and others (e.g., ATRA's Tiger Joyce, Tim Bishop & Joshua Yount, the bulk of the business community filing amicus briefs asking for cert) that these cases have broad-ranging potential implications and that the Supreme Court should take them up to clarify the reach of Wal-Mart v. Dukes and Comcast v. Behrend:

The Supreme Court has taken significant interest of late in limiting the use of class-action remedies. In its 2011 decision in Walmart v. Dukes (involving a gender discrimination claim) and last year's decision in Comcast v. Behrend (involving an antitrust claim), the court has emphasized that for a class of plaintiffs to be approved, the facts have to show a common and specific cause of harm that "predominates."

The washing machine cases certainly fail the Supreme Court's predominance test for class-action litigation.

Let's hope that the Supreme Court decides to step in yet again, because the legal theory underlying these cases is worse than musty -- it stinks.

Update: The Supreme Court neither granted nor denied the cert petitions here -- we'll watch for it at the next conference.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

Ever so often, the Supreme Court hears a case that has ramifications for our very constitutional structure.These cases reach into the heart of our government to see what strictures remain between the founding generation and our own.

The Court is currently hearing oral arguments in Bond v. United States, a case dealing with fundamental issues of federalism and separation of powers. Specifically, the issue deals with the extent to which Congress can abrogate state police powers pursuant to the mandates of Congress's treaty obligations.

But in a larger sense, this case speaks to the validity of the framework of analysis the Court has employed since its inception. The presumption of constitutional analysis has always begun on the side of federalism and separation of powers; that is, the Constitution created certain enumerated powers to delegate to the federal government and left the majority to the states, so we begin our analysis from where the nexus of the power was meant to lie. In other words, our underlying premise is always to begin with federalism, and inch towards increasing federal power as circumstances might necessitate.

The Bond court has a chance to take another step towards maintaining the presumption of our Constitution by reaffirming the states' role in criminal prosecutions.

The Wall Street Journal has further details on the salient issues here, and the New York Times has more on the oral arguments here.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

A couple of weeks ago, the California Supreme Court decided a potentially very impactful case dealing with the enforceability of arbitration agreements made between companies and their consumers/employees.

In Sonic-Calabasas A, Inc v. Moreno, the court ostensibly agreed with the U.S. Supreme Court's rulings in Concepcion and Italian Colors Restaurant that federal preemption applied over any state rulings that attempted to control the scope of consumer arbitration agreements under a specific formulation of the unconscionability doctrine.

However, the Sonic court then opened up the door to the potential introduction of a new unconscionability standard that would be substantively similar to the previously-discredited standard.

In the prior U.S. Supreme Court rulings, the Court specifically overruled the Discover Bank rule, which mandated that consumer arbitration agreements that did not include clauses allowing for class action suits were effectively unenforceable. The Supreme Court has held that the Federal Arbitration Act's mandates apply, regardless of any state "substantive or procedural policies to the contrary," including any any specific state standards for arbitration applicability.

Andrew J. Pincus and Archis A. Parasharami of the Mayer Brown law firm have written an op-ed discussing the various issues involved.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

Floyd Norris, author of the High & Low Finance column for the New York Times, writes about two cases the Supreme Court has decided to hear dealing with fee-shifting in patent infringement cases. The outcomes could potentially deter future, frivolous infringement suits.

Businessweek on class actions
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Businessweek mentions the pending CCAF Marek v. Lane Facebook cy pres certiorari petition (on the calendar for tomorrow) in a larger article about how the Supreme Court is supposedly squelching the class action by issuing rulings against abusive class-action certifications. Public Citizen got to Businessweek apparently, with the author warning that a cert grant could be bad for consumers. It's hard to see how consumers could be made worse off than a $0 settlement; such settlements hurt consumers by raising their costs without any corresponding benefit. Defense attorney John Beisner tells me of being on an American Constitution Society panel and asking the audience to identify a consumer class action where the consumers got more than the attorneys, and no one being able to name one.

One quote stands out as especially poor analysis, though:

Reliable data on class actions are in regrettably short supply because courts don't track them. The only helpful gauge over time measures just a slice of the relevant cases: federal securities fraud claims. The economic consulting firm Cornerstone Research says in the first six months of 2013, 74 securities class actions were filed in U.S. district courts. That's down 22 percent from the 16-year average from 1997 to 2012 and off 42 percent from the peak in the second half of 1998.

The problem here is that the Supreme Court has consistently ruled in favor of plaintiffs in securities cases in the last few years. If securities filings have gone down, it's because the stock market has gone up in the last four years, and securities filings go up and down in inverse correlation to the market direction—which does a lot to demonstrate that securities lawsuits tend to be less about fraud than about rent-seeking. In any event, the direction of securities class actions tells us nothing about the direction of consumer class actions.


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

This week, the Supreme Court is considering a potentially-transformative case that could alter the range of free speech protection granted under the First Amendment. In McCutcheon v. FEC, the Court must decide whether aggregate limits on the amount a person ($48,600 for direct contributions to candidates; $74,600 for donations to non candidate-affiliated political committees) can donate during an election cycle is constitutionally permissible.

Specifically, the Court's constitutionally-relevant precursor here is Buckley v. Valeo, which held that contributions could be limited due to the fear of perpetuating corruption by allowing a donor to make unlimited donations to a single candidate in exchange for political favors. Ostensibly, this appears to be a legitimate concern, possibly even to the extent of allowing for a qualified restriction on political free speech.

But in a larger sense, the specific principle laid out in Buckley cannot been extended out to encompass an area in which the Court's reasoning does not logically extend. The end as stated in Buckley is to subvert potential political corruption, through the means of restricting the amount an individual can donate to candidates for federal office. If we extend this logic to McCutcheon, the stated proposition would stand as: If we restrict the amount of money an individual can give as an aggregate to various candidates, then we are furthering the end of subverting potential political corruption.

Now, the Federal Election Campaign Act already restricts individual donations to a single candidate to $5,200 ($2,600 for primary; $2,600 for general election). Using the Buckley logic, these means can seem to be tailored towards preventing political corruption by preventing a candidate from being beholden to a donor rather than an idea. However, this logic falls apart when we try to say that a limit on the aggregate amount a donor can make furthers this same end. By this extension, a donor could be restricted from donating even nominal amounts to a candidate if the donor has already hit the aggregate ceiling. In oral arguments, Chief Justice Roberts addressed this exact point:

"The concern," Chief Justice John Roberts noted, "is you have somebody who is very interested, say, in environmental regulation, and very interested in gun control. The current system, the way the anti-aggregation system works, is he's got to choose. Is he going to express his belief in environmental regulation by donating to more than nine people there? Or is he going to choose the gun control issue?"

An aggregate cap stands as a forced rationing of political thought as expressed, ironically, through the Buckley proposition that money in service of political speech is protected by the First Amendment. Because the latter statement is a long-standing legal fact, the logical disconnect becomes more apparent.

Moreover, because we are dealing with First Amendment protections, the means must be given "strict scrutiny" examination. The Buckley court seemingly found donor limits to individual candidates to be narrowly-tailored means to the end of rooting out potential quid pro quos.

In order to extend that to McCutcheon, the Court would have to say that the additional burden on political speech created by aggregation caps is either 1) still narrowly-tailored to the anti-corruption end or 2) come up with a new justification for the aggregation caps that can pass strict scrutiny.

Finally, because Super PACs are largely funded by wealthier donors, the aggregate caps would destroy the influence and impact of smaller donors in a variety of political arenas, while allowing larger donors to increase their influence in the political process; this would abrogate the intention of campaign finance laws in the first place. Considering these legal and policy implications, the Court should take this opportunity to clear the way for free expression of political thought.


Facebook and (disappointingly) Public Citizen tell the Supreme Court that there's no dispute about cy pres in the courts that merits Supreme Court intervention. (Earlier.)

I wish the district courts knew that. In EasySaver, the district court thought nothing about awarding $3 million to local universities (including class counsel's alma mater) in a national class action, even though the class was receiving only $225,000 and worthless coupons.

And just this summer, a district court made an appalling cy pres award in BankAmerica Corp. Securities Litigation. Though the class of shareholders received less than a nickel on the dollar for their alleged damages (and claimants ended up being paid less than a dime on the dollar), the Missouri district court refused to distribute $2.7 million to the class, instead ordering that a local legal aid society that serves only the St. Louis area get the money. CCAF wasn't involved at the district court level, but the class representative retained us as appellate counsel, and last week, we filed a brief in the Eighth Circuit appealing the decision. If the law of cy pres were clear, this wouldn't be remotely a close case, but the district court rejected the correct result out of hand.

At least Cato filed a strong amicus brief in the Facebook case. And some district courts are getting it right: the Northern District of California refused to approve problematic cy pres in a problematic settlement; a Kansas federal court demanded that cy pres recipients be identified in the class notice—something the Third Circuit refused to do in Baby Products.


We've previously discussed the problems of the Obama administration's theory of disparate impact in housing law: e.g., Sep. 2012; Nov. 2011; July 2011; May 2011. A pending Supreme Court case, Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., squarely addresses the issue whether color-blind laws like the Fair Housing Act are actually race-conscious quota laws barring "disparate impact." CEI, Cato, and PLF argue no in an amicus brief. Hans Bader has details.

More: Overlawyered; Shapiro @ Cato.


There are many reasons why the left's allegation that the Supreme Court is unfairly pro-business is a myth. Richard Epstein provides some more.



 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.