The Finance 202: Big business eyes more wins with padded conservative majority on Supreme Court

Yet the court is also primed to rule on a slate of issues pitting big-business interests against consumers and workers – with sweeping consequences for the balance of power between them.

This court already treats business interests more favorably than any in nearly a century, some scholars argue. In its 2017 term, the court returned pro-business decisions in more than 80 percent of the cases in which they were at stake, according to an analysis by Adam Feldman, author of the Empirical SCOTUS blog.

That was before Brett Kavanaugh replaced Anthony Kennedy on the court, advancing the court’s rightward shift. Trump’s pick is primed to cement that evolution. Per Feldman’s analysis, the late Ruth Bader Ginsburg was the least business-friendly justice from 2015 through 2017:

Adding another justice likely to side with the corporate agenda, public-interest lawyers who argue before the court say, will make it harder for consumer and worker advocates to convert a swing vote to their side or narrow the scope of business-friendly decisions.

“With a 5-4 court, where there’s more balance, a lot of issues are just one vote away. That becomes less true with a 6-3 court,” says appellate lawyer Deepak Gupta, founder of Gupta Wessler. The dynamic enabled by that close division played out in May 2019, when the court delivered a defeat to Apple in a case that enabled a major antitrust class action against the tech giant to advance. Justice Kavanaugh cited precedent in joining the four more-liberal justices to forge a majority.

There are several areas of the law where business interests could see breakthrough victories under the new margin. Here are some to watch:

The court is set to hear a case on the matter that will most likely be argued before a ninth justice is confirmed. It turns on two deadly car crashes involving malfunctioning Fords. The accidents occurred in Montana and Minnesota, and the plaintiffs want to sue the auto giant in those states; Ford contends because the cars were neither made nor sold in either place, it can’t be held liable in their courts.

“The main thing corporations seek from the Supreme Court is limitations on the ability to sue them,” says Allison Zieve, director of Public Citizen’s litigation group. “There have been significant limitations imposed or recognized over the last couple of decades, and they’ll continue to do that.”

Sidley Austin partner Jonathan Cohn agrees a 6-3 court is more likely to narrow a practice he calls “litigation tourism” — a particularly high priority for the pharmaceutical industry.

Another way corporations seek to limit their exposure to lawsuits is by keeping disputes out of the courts through private arbitration. The court will hear arguments this fall over the scope of those agreements in a case that involves an antitrust suit against dental equipment wholesaler Henry Schein. But public interest advocates say many more related cases are probably coming. “These cases have tended to produce 5-4 splits, with enormous implications for the ability of consumers to hold businesses accountable,” Gupta says.

Industry is seeking to circumscribe regulators’ authority, in part by challenging the constitutionality of agencies insulated from oversight by elected officials. The court in a 5-to-4 decision this summer struck down the single-director structure of the Consumer Financial Protection Bureau. But that ruling was a “sheep that comes in wolf’s clothing,” as former CFPB director Richard Cordray wrote, because it otherwise preserved the agency.

A similar challenge to the Federal Housing Finance Agency is pending, and more are probably on the way. “This is a long-term project: Justice Kavanaugh believes pretty strongly that the Constitution limits the arrangements for administrative agencies,” Gupta says. At stake, he says, is the government’s ability “to take important issues and delegate them to experts who won’t be captured by powerful industries and get the results they want.”

Companies are increasingly invoking the First Amendment to challenge costly or burdensome regulations.

The strategy has met with a mixed record. Last year, for example, the U.S. Court of Appeals for the D.C. Circuit said e-cigarette makers made a meritless argument when they contended a ban on the distribution of free samples violated their First Amendment rights. The Supreme Court declined to take up a challenge Spirit Airlines launched on free-speech grounds to federal rules governing how it advertises ticket prices and taxes to passengers. And the court rejected an appeal by the CTIA, the wireless communications industry group, aimed at striking down a Berkeley, Calif., ordinance that requires cellphone retailers to warn buyers of radiation risks.

Others have found success. Trade groups including the American Beverage Association convinced a federal appeals court last year that a San Francisco ordinance mandating warnings on sugary drinks violated the First Amendment.

Most significantly, big business won a landmark victory in 2018 when the high court ruled “it was unconstitutional to allow public employee unions to require collective-bargaining fees from workers who choose not to join the union, a major blow for the U.S. labor movement,” Robert Barnes and Ann Marimow wrote at the time. “The court, in a 5-to-4 decision, overturned a 40-year-old precedent, arguing that the rule could require workers to give financial support to public policy positions they oppose.” Justice Samuel Alito, writing for the majority, said the rule violated workers’ free-speech rights.

Court watchers say business interests may seek to bring more such cases, in which the argument would be more likely to find favor with a 6-to-3 conservative majority.

And they say a conservative majority doesn’t equate in all cases to a business-friendly one. “I don’t think the court is either business-friendly or not business-friendly,” says Helgi Walker, chair of Gibson Dunn’s administrative law and regulatory practice group. “If a Trump nominee is confirmed, you’ll have a court that is perhaps that much more likely to follow the law that Congress writes and let Congress make the policy decisions, which is how the separation of powers is supposed to work.”

But Cohn says it’s a reasonable conclusion. “I wouldn’t want to oversimplify it. But on balance, you could probably expect more of a reception to business-oriented arguments.”

Tech pressure continues to mount: “The Dow Jones Industrial Average closed 525.05 points lower, or 1.9 percent, at 26,763.13. Earlier in the session, the Dow was up 176 points. The S&P 500 slid 2.4 percent to 3,236.92 and the Nasdaq Composite pulled back by 3 percent to close at 10,632.99,” CNBC’s Fred Imbert and Maggie Fitzgerald report.

“Shares of Amazon and Netflix dropped 4.1 percent and 4.2 percent, respectively, to lead Big Tech lower. Facebook slid 2.3 percent. Alphabet closed 3.5 percent lower. Apple ended the day down 4.2 percent and Microsoft dipped 3.3 percent.” (Amazon CEO Jeff Bezos owns The Washington Post.)

• The S&P 500 is approaching correction territory. “The benchmark gauge of U.S. equities is poised for its first monthly slide since March,” Bloomberg’s Rita Nazareth and Sarah Ponczek note.

Executives say the economy is getting better but that the nation can’t afford to backslide: “Roughly 1 in 4 chief executives of some of the nation’s largest companies say their businesses have recovered or will have by year end, despite the lingering ill effects of the coronavirus recession, according to a survey,” Hannah Denham reports.

“Business Roundtable surveyed 149 members about projected sales, capital spending and hiring for the next six months. The CEO Economic Outlook Survey rose to 64.0 in the third quarter, the headline index’s first quarterly increase in nine quarters, according to a report released Wednesday. The index is up 29.7 points since last quarter but remains well below the historical average of 81.7, which dates to 2002.”

• Key quote: “Further major support from the federal government is necessary to prevent economic recovery from being derailed,” Joshua Bolten, president and chief executive of Business Roundtable said in a statement. “Failure to act, along with the lack of comprehensive and coordinated efforts to stop the spread of covid-19, would impose long term damage on the U.S. economy, hurting most the workers and small businesses least able to absorb the blow.”

Unemployment claims expected to remain high. “The number of workers in the U.S. applying for jobless benefits likely held at historically high levels last week as the labor market slowly recovers from the impact of the coronavirus pandemic,” WSJ’s Sarah Chaney reports. “Economists expect applications for jobless benefits ticked down to 850,000 last week from 860,000 a week earlier. Jobless claims are down significantly from a peak of near seven million in March but have stagnated at just over 800,000 in recent weeks.”

Fed officials are also maintaining calls for more spending: “The recovery would move along faster ‘if there is support coming both from Congress and from the Fed,’ Chairman Jerome Powell said during the second of three days of congressional testimony Wednesday,” the Wall Street Journal’s Nick Timiraos reports.

“Chicago Fed President Charles Evans told reporters that his projection that the unemployment rate would fall below 6 percent by the end of next year had been premised on around $1 trillion in additional fiscal relief … Powell and his colleagues said Congress and the White House, more than the Fed, had the power to hasten a faster recovery.”

• Fed policymakers vow to keep interest rates near zero: “Federal Reserve officials on doubled down on efforts to convince investors they will keep monetary policy easy for years to allow unemployment to fall, emphasizing that interest rates will stay near zero until inflation gets to 2 percent and stays there,” Reuters’s Howard Schneider, Ann Saphir, Jonnelle Marte report. “Both Fed Vice Chair Richard Clarida and [Evans] were adamant on Wednesday: Rates will not increase until labor markets recover fully from the economic downturn caused by the coronavirus, and prices hit the Fed’s target.”
• Goldman Sachs now says more stimulus isn’t coming this year. “We think it is now clear that Congress will not attach additional fiscal stimulus to the continuing resolution,” firm economists wrote in a note. They estimate “the withdrawal of fiscal support will reduce disposable income in Q4 to roughly the pre-pandemic level.” And as a consequence, they are cutting their fourth-quarter growth forecast in half, from 6 percent to 3 percent, on a quarterly annualized basis.

• Feared outbreaks in schools yet to arrive, early data shows: “Thousands of students and teachers have become sick with the coronavirus since schools began opening last month, but public health experts have found little evidence that the virus is spreading inside buildings, and the rates of infection are far below what is found in the surrounding communities,” Laura Meckler and Valerie Strauss report.
• Trump attacks FDA plan for tougher standards on emergency vaccine approval: “The president said he had ‘tremendous trust in these massive companies’ developing prospective vaccines and suggested that they, not federal regulators, could best determine when a vaccine should be made available to the American people,” Amy Goldstein and Laurie McGinley report.
• Fauci chides Sen. Rand Paul over herd immunity claims: “White House coronavirus advisor Anthony S. Fauci pushed back against Paul’s claim that New York has overcome the pandemic because it achieved herd immunity, telling the Kentucky Republican he’s ‘not listening,’” CNBC’s Noah Higgins-Dunn reports. See the exchange here:

• United Airlines, pilots union agree to delay furloughs until Oct. 30: “However, pilots will not be paid during the month of October if that deal does not pass, according to a memorandum of understanding between United and the union representing its 13,000 pilots that was seen by Reuters,” Tracy Rucinski reports.
• Disney pushes some of its biggest blockbusters well into 2021: “The studio, which is the driver of a large share of theatrical moviegoing around the world, is postponing its biggest films to at least May, with one being postponed until December 2021,” Steven Zeitchik reports. The delays also mean that for the first time since 2009 there will be no new movie in the Marvel Cinematic Universe, the highest-grossing film franchise of all-time.
• The world’s largest hedgefund is operating out of tents in a Connecticut forest: “Out among the pine trees across from Bridgewater Associates’ headquarters in Westport, Conn., sit as many as 50 employees who help manage the $140 billion in assets of the world’s largest hedge fund,” Fortune’s Jen Wieczner reports.
• Trump insists protesters are throwing Bumble Bee tuna cans, in the midst of pandemic tuna shortage: “There have been no media reports about police being hit by cans of tuna. Since the start of the pandemic, tuna fish has been in high demand,” Laura Reiley reports.

This is a historic shift for a state that helped create car culture: “Facing a record-breaking wildfire season as well as years of heat waves and droughts exacerbated by climate change, the Golden State is seeking to accelerate the shift away from combustion engines on its roads, which account for more greenhouse gas emissions than any other source,” Dino Grandoni, Faiz Siddiqui and Brady Dennis report.

“The plan would give industry until 2045 to make sure medium- and heavy-duty vehicles are zero-emissions when feasible. Transportation currently accounts for the largest source of emissions in the state, outpacing the industrial, agricultural and residential sectors combined … Because of its market muscle, California’s move could have ripple effects across the country and propel automakers to ramp up production of electric vehicles. Thirteen other states and the District of Columbia already follow California’s fuel efficiency standards, and auto manufacturers have long built cars to meet its more stringent specifications.”

Wells Fargo CEO apologizes after blaming shortage of Black talent for the bank’s lack of diversity: “Charlie Scharf apologized in a memo to the entire company ‘for making an insensitive comment reflecting my own unconscious bias,’ ” Hamza Shaban reports.

“The Wells Fargo controversy comes as protests of police brutality and racism have swept across the country, drawing pledges from corporate America to fight racial inequality. It also comes as Wells Fargo, one of the country’s largest banks, continues to struggle to repair its image after a series of consumer abuse scandals, including admitting that it had opened millions of fake accounts customers didn’t want.”

JPMorgan set to pay nearly $1 billion in spoofing penalty: “The bank is set to pay nearly $1 billion to resolve market manipulation investigations by U.S. authorities into its trading of metals futures and Treasury securities,” Reuters’s Lawrence Delevingne and Abhishek Manikandan report.

“The large fine would lift a regulatory shadow that has hung over the bank for several years and mark a signature victory for the government’s efforts to clamp down on illegal trading techniques, such as spoofing, especially in the precious metals markets.”

Eric Trump had claimed he’s too busy for a deposition: “A state judge ordered Eric Trump to be deposed no later than Oct. 7 in the New York attorney general’s examination of the Trump Organization’s financial practices, rejecting a protest by Trump’s son, who has said he is too busy to meet with investigators until after November’s election,” Shayna Jacobs reports from New York.

“The judge also ordered that the Trump Organization and related business entities that were withholding documents and claiming attorney-client privilege proceed with producing records to the attorney general. The probe is a civil matter, not a criminal one. James’s office has said the Trump Organization potentially misled lenders and duped tax authorities.”

The changes address one of SEC Chairman Jay Clayton’s top priorities: “Commissioners voted 3-2 to pass a final rule requiring shareholders to hold $25,000 of stock for a year, up from $2,000 currently, in order to submit such proposals. That threshold will fall to $15,000 after two years of ownership and to $2,000 after three years, setting a sliding scale that gives priority to longer-term shareholders,” WSJ’s Paul Kiernan reports.

“Clayton and the two Republican commissioners who supported the change said it would discourage so-called gadfly investors from buying stocks simply to pressure companies to advance their personal beliefs … Critics of the move said it was the Trump administration’s latest effort to stymie Wall Street’s growing focus on environmental, social and governance—or ESG—issues, which are the subject of most shareholder proposals.”

Such a bill is extremely unlikely to pass before the election: “The proposal advances two main goals the Trump administration and the department outlined in June: encouraging online platforms to actively address illicit conduct and manage content on their sites in fair and consistent ways,” WSJ’s Ryan Tracy and Brent Kendall report.

“The department refined its proposal in the intervening months based on feedback from market participants and other stakeholders such as victims’ rights groups. As a result of that process, the department made some changes, including clarifying that internet companies would have immunity when they take down material that promotes violent extremism or self-harm …”

• “Sen. Ron Wyden (D., Ore.), who helped write the legal protections targeted by the administration’s proposal, said Republicans are trying to ‘work the refs ahead of the election’ by threatening social media companies with retribution if they censor or fact-check content.”

Trump won’t commit to a peaceful transfer of power:

University of Michigan economist Justin Wolfers calls the statement “terrible for the economy.”

As we noted here last week, stock market investors are growing increasingly nervous about the prospect that an extended and contested result will inject more volatility into the market.

Trump’s remarks also drew a rebuke from Sen. Mitt Romney (R-Utah):

• Powell and Treasury Secretary Steven Mnuchin testify before the Senate Banking Committee for the quarterly Cares Act update.
• The Labor Department reports the latest weekly jobless claims.
• A House small-business subcommittee holds a hearing on the Paycheck Protection Program.
• Costco, Darden Restaurants, CarMax, Rite Aid and BlackBerry are among the notable companies reporting their earnings.

• A House Ways and Means subcommittee holds a hearing on restaurants during the pandemic.