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WASHINGTON -- The U.S. Supreme Court will revisit some critical risk management and employee benefits issues during the session that begins next Monday.
This term, the legal territory before the court will include such issues as standards for expert testimony, the definition of what constitutes an acceptable class in class action suits; the extent of the McCarran-Ferguson Act's pre-emption of federal insurance actions; and the rules for amending certain types of pension plans.
Many of the business-related cases that the high court has already agreed to review fall into the category of what one attorney called "settler" cases.
Clifford Sloan, a partner in the Washington office of Wiley, Rein & Fielding, differentiated between "pioneer" cases -- in which the justices review a question for the first time -- and "settler" cases, where they review questions that have arisen from cases already decided.
Mr. Sloan spoke during a Supreme Court preview at the National Chamber Litigation Center last week. The NCLC handles litigation for the U.S. Chamber of Commerce.
In addition to the approximately 20 business-related cases it has agreed to review, the high court also will no doubt agree to review additional cases that deal with critical risk management and benefits issues later in the term. One of the most important cases of the past term, for example -- Beth Ann Faragher vs. the City of Boca Raton, Fla. -- wasn't accepted by the high court until last November (BI, Nov. 24, 1997). Justices later used that case to spell out the liability of employers for the sexually harassing actions of supervisors (BI, June 29).
One of the most closely watched cases now before the court -- Kuhmo Tires vs. Carmichael -- takes up a question tackled by the high court in its 1993 decision in Daubert vs. Merrell Dow Pharmaceuticals.
Daubert set standards for the admission of expert scientific testimony, and basically directed district court judges to act as "gatekeepers" who would determine whether testimony met the standards.
The question presented by the Kuhmo case is whether those standards also should apply to testimony that is non-scientific but technical. The 11th U.S. Circuit Court of Appeals held that the Daubert standards did not
apply to a mechanical engineering expert's testimony in a product
liability case brought against a tire maker because the testimony was technical rather than scientific.
Two insurer trade groups filed a brief supporting the use of Daubert standards to technical issues with the high court in late August (BI, Sept. 14). Insurers hold that making broader application of those standards would have implications for liability associated with Year 2000 computer litigation as well as product liability cases.
A legal expert speaking at a Supreme Court preview sponsored by the Washington Legal Foundation earlier this month hinted that the court might grant the insurers their wish. The high court "will probably be reluctant" to draw distinctions about the standards governing different types of expert testimony, said David G. Leitch, a partner in the law firm Hogan & Hartson L.L.P. in Washington.
The Washington Legal Foundation -- a pro-free market non-profit legal and policy center -- filed its own brief in the case, also urging the justices to apply the Daubert standards broadly. "An un-checked expert can be a dangerous roadblock to the jury's search for the truth," said the WLF in its brief.
Another issue of considerable interest to employers -- mass torts -- will be dealt with by the high court as it reviews Ortiz vs. Fibreboard Corp. That case revolves around determining who can belong to a class for purposes of settling a mass tort. The court ruled last year in Amchem Products et al. vs. Windsor et al. that Rule 23 of the Federal Rules of Civil Procedure did not allow the certification of a class for purposes of a global settlement of future asbestos-related claims (BI, June 30, 1997). But the 5th U.S. Circuit Court of Appeals held in Ortiz that a federal court could certify a somewhat similar asbestos-related class action despite an absence of what would typically constitute commonality.
Mr. Leitch said that if the high court reverses the 5th Circuit's decision in Ortiz, the decision would "obviously be a kind of impediment to global settlements" and could lead to legislation to deal with the issue.
"Whatever the court decides in this case, it probably won't be the last word," said Mark Levy, a partner in the Washington law firm Howrey & Simon who also spoke at the NCLC preview.
The justices could also weigh in on a different aspect of class actions if they agree to review State Farm Mutual Automobile Insurance Co. vs. the Honorable John Speroni, Tammy Snider and Michael Avery. This Illinois case revolves around a provision in most State Farm auto insurance policies that the insurer can require the use of so-called "non-OEM parts" -- or parts not made by the car's original manufacturer -- when adjusting claims for damage to insured vehicles. Two Illinois citizens sued in state court, alleging the provision violates state anti-fraud law, and sought to maintain the suit as a class action on behalf of 5 million State Farm policyholders who had received non-OEM parts, even though the majority of those policyholders aren't covered by Illinois law.
A Illinois state judge, however, agreed to apply the state law to the entire class. The WLF has filed an amicus brief with the Supreme Court asking it to review the case on, among others, the ground that courts should never certify a class so large that notice could not be provided to all members.
The last property/casualty related case concerns the scope of the McCarran-Ferguson Act, which grants states rather than the federal government the right to regulate the business of insurance. In Humana Inc. vs. Forsyth, the 9th U.S. Circuit Court of Appeals ruled that applying the federal Racketeer Influenced and Corrupt Organizations Act in a Nevada dispute over managed care copayments did not interfere with the state's ability to regulate insurance. A U.S. district court judge had earlier ruled that McCarran-Ferguson trumped RICO in the case.
Mr. Sloan said that the Supreme Court's decision in Humana could have a "very major impact on the insurance industry" because it could affect how the McCarran-Ferguson Act would apply to other federal statutes.
The employee benefits-related case before the high court that stirs the most interest among employers involves how surplus assets in a contributory defined benefit pension plan are treated when an employer converts the plan into a non-contributory plan. In Hughes Aircraft Co. vs. Stanley I. Jacobson et al., a group of Hughes retirees claimed that by amending the contributory plan, Hughes actually terminated it. The 9th U.S. Circuit Court of Appeals said that the retirees could pursue a suit under the Employee Retirement Income Security Act to lay claim to at least some of the plan's surplus, which would be their right in a plan termination (BI, May 4).
In Wright vs. Universal Maritime Services Corp. et al., which the court agreed to review, the justices have a chance to determine whether employers can be required to go through binding arbitration of statutory discrimination claims -- in this case, a claim that was made under the Americans with Disabilities Act -- under a collective bargaining agreement.
The NCLC has also asked the justices to review Duffield vs. Robertson Stephens & Co. to determine whether employers can force employees to waive their rights for a judicial hearing for claims brought under Title VII of the Civil Rights Act by requiring agreements to arbitrate as a condition of employment. The high court has not yet decided whether to hear that case.
In addition, the justices will review a case of interest to the aviation industry in El Al Israel Airlines vs. Tseng. The case involves whether a passenger may sue an airline under a domestic law for an alleged injury that is within the scope of the Warsaw Convention -- which governs the liability of international carriers -- but for which the convention does not allow recovery.