The U.S. Supreme Court recently ended its term, with the justices now enjoying a much-deserved vacation. The Court decided several high-profile cases, with many decisions impacting New York and New Jersey businesses.
The Court’s decisions during the 2018-2019 term addressed a wide range of legal issues, including arbitration, intellectual property and employment suits. Below is a brief summary of several key decisions:
Lamps Plus, Inc. v. Varela: By a vote of 5-4, the majority held that, under the Federal Arbitration Act (FAA), an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. “Under the Federal Arbitration Act [FAA], an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to a class arbitration,” the Court held. “Like silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to ‘sacrifice the principal advantage of arbitration.’ This conclusion aligns with the court’s refusal to infer consent when it comes to other fundamental arbitration questions.” As a practical result, courts will likely be reluctant to compel class arbitration unless expressly agreed upon by the parties.
Henry Schein, Inc. v. Archer & White Sales, Inc.: The Court unanimously held that courts may not disregard an arbitration agreement that delegates threshold arbitrability questions to an arbitrator, even in cases where the argument in favor of arbitration is “wholly groundless.” According to the Court, the “wholly groundless” exception is inconsistent with the FAA and Supreme Court precedent. “The act does not contain a ‘wholly groundless’ exception, and we are not at liberty to rewrite the statute passed by Congress and signed by the president,” Justice Brett Kavanaugh wrote. “When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.” The ruling is in line with the Court’s commitment to upholding the FAA and its preference for arbitration.
Fort Bend County, Texas v. Davis: The Court unanimously held that Title VII’s charge-filing requirement is a non-jurisdictional claim-processing rule, which means that employers must promptly raise an administrative exhaustion defense or risk losing it. “We hold that Title VII’s charge-filing instruction is not jurisdictional, a term generally reserved to describe the classes of cases a court may entertain (subject-matter jurisdiction) or the persons over whom a court may exercise adjudicatory authority (personal jurisdiction),” Justice Ruth Bader Ginsburg wrote on behalf of the Court. “Prerequisites to suit like Title VII’s charge-filing instruction are not of that character; they are properly ranked among the array of claim-processing rules that must be timely raised to come into play.” Thus, under the Court’s decision, the failure to timely raise an employee’s failure to satisfy the EEOC’s exhaustion requirements can be held to waive the right to raise that defense.
New Prime Inc. v. Oliveira: The Court first held that a court should determine whether the FAA’s Section 1 exclusion for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” applies before ordering arbitration. The justices went on to conclude that the FAA exception applied to truck driver Dominic Oliveira’s operating agreement with New Prime Inc., even though he was an independent contractor. Thus, the Supreme Court’s decision makes it clear that the Section 1 exclusion applies to contracts with both employees and independent contractors.
Kisor v. Wilkie: The Court declined to overrule Auer v. Robbins and Bowles v. Seminole Rock & Sand Co., under which deference is given to an agency’s reasonable reading of its own genuinely ambiguous regulations. While Auer deference was upheld, the Court’s decision makes it clear that the possibility of deference can arise only if a regulation is genuinely ambiguous. “If uncertainty does not exist, there is no plausible reason for deference. The regulation then just means what it means—and the court must give it effect, as the court would any law,” Justice Elena Kagan wrote. The Court also emphasized that not every reasonable agency reading of a genuinely ambiguous rule should receive Auer deference. Rather, in applying Auer, a court must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight. So while the Court upheld Auer, it made it clear that the doctrine is not without limits.
Food Marketing Institute v. Argus Leader Media: The Court held that the term “confidential” in Exemption 4 to the Freedom of Information Act (FOIA) applies when commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy. “Where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within Exemption 4’s meaning,” Justice Neil Gorsuch wrote on behalf of the Court. In so ruling, the Court rejected a test established by several federal courts of appeal under which a party seeking to rely on the exception must establish substantial competitive harm would result from disclosure.
Lorenzo v. SEC: The Court held that the dissemination of false or misleading statements with intent to defraud can fall within the scope of Securities and Exchange Commission Rules 10b–5(a) and (c), even if the disseminator did not “make” the statements. In reaching its decision, the majority relied largely on the plain language of the regulation. “It would seem obvious that the words in [Rule 10b-5(a) and (c)] are, as ordinarily used, sufficiently broad to include within their scope the dissemination of false or misleading information with the intent to defraud,” Justice Stephen Breyer wrote. The Court’s decision broadens the scope of primary liability under Rule 10b-5. More specifically, it confirms that individuals can’t avoid primary liability for securities fraud under Rule 10b-5 by claiming that the false statements were “made” by another person.
Helsinn Healthcare S.A. v. Teva Pharmaceuticals, Inc.: The Court unanimously held that the passage of the Leahy-Smith America Invents Act (AIA) did not alter prior precedent regarding the on-sale bar, a long-standing principle of U.S. patent law providing that an invention is ineligible for patent protection if it has been offered for sale for over one year prior to the patent filing. Accordingly, “a commercial sale to a third party who is required to keep the invention confidential may place the invention ‘on sale’ under the AIA,” the Court held.
Iancu v. Brunetti: The Court struck down the Lanham Act’s prohibition on the federal registration of “immoral” or “scandalous” trademarks, holding that it violated the First Amendment. Citing its decision in Matal v. Tam, the majority similarly concluded that the “immoral or scandalous” bar discriminates on the basis of viewpoint and, therefore, runs afoul of the Constitution. “It distinguishes between two opposed sets of ideas: those aligned with conventional moral standards and those hostile to them; those inducing societal nods of approval and those provoking offense and condemnation,” Justice Elena Kagan wrote on behalf of the majority. Much like Tam, the Court’s decision in Brunetti clear the way for registration of trademarks that would have previously been refused by the U.S. Patent and Trademark Office.
Rimini Street, Inc. v. Oracle USA, Inc.: The Court clarified that the award of “full costs” to a party in copyright litigation under 17 U.S.C. § 505 of the Copyright Act does not expand the categories of expenses that may be awarded as “costs” as enumerated in the general federal cost statute. According to the Court, the Copyright Act “does not explicitly authorize the award of litigation expenses beyond the six categories specified in §§1821 and 1920.” It further found that “§§1821 and 1920, in turn, do not authorize an award for expenses such as expert witness fees, e-discovery expenses, and jury consultant fees, which were expenses encompassed by the District Court’s $12.8 million award to Oracle here.”
What’s on Deck?
The justices will return to the bench in October. The docket for the new term already includes several cases that will be closely watched by the business community. Of particular interest to employers, the justices have agreed to review several cases involving whether Title VII prohibits employment discrimination against LGBTQ individuals.
Scarinci Hollenbeck will continue to track the status of Supreme Court cases impacting New York and New Jersey businesses and post our analysis on this website. You can also find coverage on the Constitutional Law Reporter.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Robert Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.