United States Senator
July 23, 2008
Statement of Senator Patrick Leahy
Chairman, Senate Judiciary Committee
"Courting Big Business: The Supreme Court's Recent Decisions on Corporate Misconduct and Laws Regulating Corporations"
July 23, 2008
This is our second hearing in as many months to highlight how the Supreme Court's decisions affect Americans' everyday lives. As the economy continues to worsen, many Americans are struggling to put food on the table, gas in their cars, and money in their retirement funds. Few of them are aware that recent decisions handed down by the Supreme Court have not protected them from financial injuries.
At last month's hearing, I noted the tragic decision in Lilly Ledbetter's pay discrimination case. This Supreme Court overturned her jury verdict and created a bizarre interpretation of our civil rights laws. Her employer will never be held accountable for its illegal actions and the Court's ruling tells other corporations that they can discriminate with impunity, so long as they keep their illegal actions hidden long enough.
The Supreme Court has demonstrated its increasing willingness to overturn juries who received the factual evidence and weighed the arguments. Nothing is more fundamental to the American justice system than our trust in the wisdom and judgment of ordinary Americans who serve on juries. Life and death decisions are made by American juries. The function of juries is at the core of the Constitution, the fundamental charter of our freedoms. Most Americans know the Sixth Amendment's guarantee to a speedy, public trial in criminal matters before "an impartial jury." Juries are also a fundamental guarantee of justice in civil cases through the Seventh Amendment's guarantee that in civil action, "the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any Court of the United States."
Today, we will consider a few recent Supreme Court cases that have rewarded big business. In the Stoneridge case, the Supreme Court held that pension funds and other investors in companies ruined by fraudulent managers, like Enron, cannot recoup the money they lost from those who knowingly facilitated the fraud. Justice Stevens' dissent criticized the majority for thwarting the intent of Congress because we passed the law "with the understanding that federal courts respected the principle that every wrong would have a remedy." With this ruling, the Supreme Court has left everyday Americans with no where to go for redress.
More than a decade ago, the Exxon Valdez was run aground by a drunk captain, leading to one of the worst - and preventable - environmental disasters to reach American shores. A jury determined that Exxon Mobil knowingly and repeatedly allowed a relapsed alcoholic to operate a ship filled with oil through Prince William Sound. The jury found that for destroying the livelihood of thousands of Americans, Exxon should be punished by paying at least a small fraction of its annual profits.
For more than a decade, Exxon Mobil paid its cadre of well-trained lawyers to appeal the decision, stalling and fighting against having to pay for the injuries it caused. This term, the Supreme Court provided Exxon Mobil the reward it was seeking. The Supreme Court did so by relying on its cases that read into the Constitution a protection for corporations that simply does not exist in its text or intent.
In his powerful dissent, Justice Stevens concluded "that Congress, rather than this Court, should make the empirical judgments" contained in the Court's decision that slashed the jury award by $2 billion--that is just one-tenth of one percent of Exxon Mobil's revenue in one year. It is the equivalent to an ordinary American paying the cost of a parking ticket, but this for an egregious environmental disaster. If Congress had wanted to cap punitive damages for disasters that impact thousands of Americans, it could have, but it did not. Justice Stevens is correct when he observes that by not limiting the remedy of punitive damages for such blatant corporate misconduct, Congress has, in fact, made that judgment on remedies.
This ruling is yet another in a line of cases where this Supreme Court has misconstrued congressional intent to shield large corporations from accountability. This Supreme Court decision, like those in Ledbetter and in Stoneridge, has real world consequences on the livelihoods and lives of thousands of Americans. Unfortunately, it will not have any impact on the corporation that should be punished. Sadly, I fear it will also lead to future misconduct since the consequences of reckless conduct has been reduced merely to a small cost of doing business.
For all the talk about judges who purport to be "strict constructionists," a majority of the Supreme Court has repeatedly failed to credit the fact that the right to a civil jury trial is enshrined in our Constitution. One would expect that, in particular, those justices who claim to be "originalists" would uphold the Framers' emphasis on the role of the jury. Ironically, there is no mention of corporations anywhere in the Constitution.
Another way the Supreme Court has eroded the role of civil juries and shielded corporations from accountability is through arbitration decisions. When Congress passed the Federal Arbitration Act, it was thought to provide sophisticated business interests an alternative venue to resolve their disputes. It was not intended to preempt state law or become a hammer for corporations to use against its individual customers, but that is what has happened. It certainly was not intended to apply to employment cases. In Circuit City v. Adams, the Supreme Court expanded the law to this setting. The Supreme Court has gone so far in its blind devotion to corporation arbitration schemes that it has upheld the enforcement of arbitration as the exclusive remedy even when the purpose of the contract was criminal. (Buckeye v. Check Cashing)
Large corporations have benefitted from these expansive rulings and have inserted binding mandatory arbitration clauses in nearly every contract they draft. As a result, millions of Americans are being found to have "waived" their constitutionally guaranteed Seventh Amendment right to a jury trial--many without a choice or without even knowing it.
Business Week magazine did a cover story on how arbitration is one-sided in the credit card industry entitled "Banks vs. Consumers - Guess Who Wins?" There are no juries of one's peers in the arbitration industry. There is no appellate review. There is no transparency and some would argue, therefore, there is no justice.
A jury found for the victims of the Exxon Valdez disaster. A jury found for Lilly Ledbetter. But the Supreme Court displaced those judgments with its own. In doing so, it has removed the compensation initially awarded to those victims and it prevents other victims from redress.
These recent Supreme Court decisions will do nothing to deter future corporate misconduct. In fact, I expect they will encourage it by taking away the one incentive that big corporations tend to understand - significant financial consequences.
I look forward to the testimony of our witnesses and thank them for traveling to be with us today. I also note that several others affected by the Exxon Valdez disaster have come here today. I welcome them as well.
# # # # #