Four Corporate Power-Grabs That Got the Thumbs Up from Federal Courts
November 30, 2012 |
Court-awarded corporate power is growing beyond the world of campaigns and elections, often at the expense of individual rights and Americans' ability to bring businesses to court.
A handful of recent decisions highlight this less-watched area of corporate clout. In two rulings this year, federal courts have concluded that secular for-profit businesses have First Amendment religious rights. In another ruling, a business that challenged its inclusion in a federal consumer product complaint database won and then successfully sealed federal court records, with the judge saying that protecting the firm’s economic reputation was a higher constitutional priority than keeping court records public.
In other instances, federal courts have upheld arbitration agreements that customers must sign for a range of services that include daily necessities, blocking people from going to court when disputes arise. And in the patent law arena, a range of individuals -- from farmers who want to protect their seed stock to health advocates concerned about privatized cancer research -- have been losing to corporations that have patented seeds and even human genes.
These four developments go beyond the universe of corporate political speech, which the U.S. Supreme Court expended in its 2010 Citizens United ruling. They also go beyond recent commercial speech cases, where pro-business judges have rejected government efforts to label milk containing man-made hormones, replace text warnings in cigarette boxes with graphic images and place radiation warnings in cellphone packaging.
1. Corporate Religious Freedom?
In early November, a U.S. District Court judge in Detroit became the second federal judge this year to rule that a secular, profit-making business did not have to include coverage for birth control in employee health plans, as required by the Affordable Care Act because of the business owner’s religious beliefs. A similarruling was made by a federal district judge in Colorado this past July, who wrote, “Can a corporation exercise religion?” He concluded that it could, under some circumstances.
Courts have long held that religious organizations can exercise religious beliefs under the First Amendment. But at least until the early 1990s, the U.S. Supreme Court said people in the secular world had to follow most laws regardless of their religion. But Congress disagreed and in 1993 passed the Religious Freedom Restoration Act, which set a new and higher legal threshold for laws that burden religious beliefs. Fast-forward to today and the three-dozen lawsuits filed by individuals, businesses, hospitals and universities challenging Obamacare’s contraception requirement, and what emerges is a deepening legal battle over exercising religious rights in the workplace.
“It represents an ominous legal trend,” wrote the Atlantic’s Wendy Kaminer, after the Colorado ruling. “If the rights of diverse empoylees in a secular enterprise are subject to the beliefs of their employers, then religious people will not simply be laws unto themselves; they’ll determine, in part, laws governing the rest of us.”
The issue is hardly settled, as two other U.S. District Courts this year rejected religious freedom arguments from businesses. In one one of those rulings, a St. Louis case, Judge Carol Jackson said that company owners “remain free to exercise their religion, by not using contraceptives and by discouraging employees from using contraceptives.”
“Can a corporation have religious beliefs?” asked Timothy Jost, a specialist in health law at Washington and Lee University School of Law, who wrote about the Colorado ruling for healthaffairs.org. “I don’t think so. But others will disagree.” Indeed, conservative legal scholars are already doing that. “Failure to recognize the religious liberty rights of the business corporation means failure to fully recognize the religious liberty rights of flesh-and-blood human beings,” concluded Ronald Colombo, Hofstra University School of Law professor, in a recent academic paper. “For without the recognition of such corporate rights, authentically religious for-profit institutions could not exist.”
The dividing lines on secular corporations claiming religious rights are now being drawn. With two federal district courts saying yes to these claims—and two saying no—it’s only a matter of time before this question arrives at the U.S. Supreme Court.
2. Secret Courts For Consumer Products?
If you thought that secret court proceedings only belonged in the cloak-and-dagger world of national security, you would be wrong. In mid-October, a federal district court judge in Maryland issued a ruling that read like a CIA document from the Cold War: lines and paragraphs were blacked out to hide the identity of an anonymous company that sued the federal Consumer Products Safety Commission after the CPSC included a complaint about that firm’s products in its online consumer complaint database.
The case, Doe v. Tanenbaum, was decided in the anonymous company’s favor “after nine months of proceedings conducted out of public view and without opportunity for public participation,” said an October press release from Public Citizen, Consumer Federation of America and Consumer’s Union, all of whom vowed to appeal. Trade associations, such as this one representing sport equipment makers, cheered, saying consumer complaints made to the CPSC database could be fabricated, vindictive and harm their reputations.
“The challenged report is materially inaccurate, injurious to Plaintiff’s reputation, and risks harm to Plaintiff’s economic interests. To obviate such harm, Plaintiff sought, and successfully obtained, an injunction evermore enjoining the report’s publication,” wrote Judge Alexander Williams, Jr., in a July 31 decision that was released on October 22.
The consumer groups said that contrary to the judge’s opinion, the public has a right to know what company was involved and on what basis the court found that a complaint filed with the CPSC was groundless. But beyond those issues, Scott Michelman, the Public Citizen attorney representing the consumer groups, said that potential economic impacts have never been a basis for censoring federal court records.
“A granting of a motion to seal based on harm to [for-profit] corporate reputation—it’s not just rare; it has never been done,” said Michelman. “The public has a right under the First Amendment to access judicial records. That interest yields to the most compeling of interests from the other side, even national security. I.e., thePentagon Papers… I’m not sure corporate reputation has ever been a sufficient interest to seal judicial records.”
The business lobby has long complained about frivolous lawsuits and has sought to cap court damage awards, especially in medical malpractice cases. That has lead to the third area where for-profit corporations are gaining legal clout at the public’s expense: the growing use of arbitration agreements to block access to suing in court.
3. Denied: Your Day In Court
This week, the U.S. Supreme Court slapped down a ruling by the Oklahoma Supreme Court where that state’s highest court tried to undo an employee-employer arbitration agreement because it concluded it was unfair and poor public policy. The U.S. Supreme Court found the Oklahoma court “ignored a basic tenet” of the Federal Arbitration Act and declared, “The decision must be vacated.”
That was the third time this year the U.S. Supreme Court bluntly overturned a state court on arbitration, which is a non-judicial process where contract disputes must be settled out of court. The other cases involved a medical malpracticelawsuit against a West Virginia nursing home, and Florida investors who were ripped off by Bernie Madoff and sued KPMG, the large accounting firm that audited Madoff’s activities.
“They’re really counting on people either to do nothing, give up, or do the arbitration and lose,” said Thomas Ferguson, a University of Massachusetts political scientist specializing in politics and economics. “The whole of American business is beginning to act like the investment sector, which has been using arbitration agreements for years.”
Arbritration agreements are increasingly common whenever a consumer signs a contract for services including telecommunications, consumer banking and credit, student loans, consumer electronics, nursing homes, home building, gift cards, e-commerce, investment advisors and brokers and employment agreements. They do not affect a customer who buys something over-the-counter and the product is defective or causes an injury.
“You have really diverse examples of this kind of corporate domination,” said Christine Heinz, an attorney for Public Citizen, pointing to the dozens of well-known corporations that insist consumers sign arbitration clauses. “It is a form of tort reform. It’s a corporation’s way of getting around Congress [which has not capped court-awarded damage awards] and the Supreme Court has rubber-stamped it.”
According to Ferguson, these agreements also are increasingly common in business-to-business contracts in manufacturing, where they are used not only to pressure firms with low-wage workers to meet untenable production quotas but also to keep workplace abuses out of court and away from regulators. “It’s a business model,” he said.
According to a new report from the Pew Safe Checking In the Electronic Age Project, two-thirds of the county’s 100 largest banks require arbritration agreements. “Of the 92 account agreements Pew was able to obtain, 64 percent restricted dispute resolutions in one or more of the following ways: mandatory arbitration, class action bans, jury trial waivers, restrictions on damages, and shortened statutes of limitation,” Pew said.
“A checking account is the most widely used financial product in the United States, and many bank customers become bound by a mandatory arbitration agreement when they open their account,” said Susan Weinstock, project director. “Consumers were not aware that their right to go to court is often limited if they have a dispute with their bank.”
4. Patent Rulings Also Extending Corporate Clout
For generations, the U.S. patent system has been used to protect an inventor’s ideas and encourage innovation. While legal fights over who-invented-what are nothing new, the emergence of patents on biotech products are creating a collision between long-held indvidual rights and newly created intellectual property or its byproducts.
One of the most egregious cases involving “patent bullies,” as Daniel B. Ravicher of the Public Patent Foundation put it, is Monsanto suing farmers whose fields have become contaminated from seeds Monsanto has sold to other farmers. In early 2012, a federal district court judge dismissed a suit brought by a consortium of organic farmers in response to Monsanto suing farmers for non-licensed use of its seeds. The farmers wanted to invalidate Monsanto’s patents. The companyclaims that it only sues farmers who replant its seeds without paying for them on an annual basis.
This November, the U.S. Department of Agriculture told farmers to buy insurance if they didn’t want to get sued by Monsanto. The lawsuit is headed to a federal appeals court in Washington in January, but highlights the tension between property rights tied to one’s land and corporate intellectual property privileges created by the patent system.
The Monsanto case is not alone in challenging the “closed universe” of corporate patent law. In September, the American Civil Liberties Union, together with the Public Patent Foundation, petitioned the U.S. Supreme Court to review a case that sought to invalidate patents awarded to a biotech company, Myriad Genetics, Inc., which gave it exclusive rights to control medical testing tied to two human genes that can be used to detect breast and ovarian cancer.
The ACLU said the patents allow Myriad to control the cost of medical tests and prevent women from getting second medical opinions about test results. Other researchers are blocked from even studying these genes, said the ACLU, which sued on behalf of several doctors, researchers and women’s healthcare advocates. The first question the ACLU asked the Supreme Court was, “Are human genes patentable?” (On Friday, the Supreme Court announced it would hear the case.)
“The Federal Circuit was very uncomfortable with the fact that we saw this as a civil rights case—not as a battle between two businesses,” ACLU Attorney Chris Hansen told Law.com in October. “The patent bar has been a closed universe, and it couldn’t understand us because we came to it with an entirely different perspective.”
It’s not just the patent bar that’s been a closed universe, seeing public-interest claims as having little place in the corporate universe. A range of pro-corporate federal jurists have been enlarging powers granted to private businesses while taking away power and legal options from individuals. And this is outside the world of corporate political activity that the Supreme Court enlarged in Citizens United.
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