Last week at the Court in Plain English

By Lisa Tucker
on Mar 28, 2011 at 7:38 am

As I discussed two weeks ago when explaining recent Supreme Court opinions, some cases just do not grab the public’s attention in the way that others do.  Perhaps that is because their facts seem unlikely to occur in the ordinary world; perhaps it is because the legal theories and arguments are dense, to say the least.  But some cases do really resonate with ordinary Americans, and not just because they are Court headliners.  No, they are probably meaningful to the general public because the disputes, the problems, the legal issues at stake have happened in the course of very ordinary lives, lives that took a dramatic turn when a problem occurred.

Sure, on a larger scale, all of the Court’s decisions affect Americans.  They matter because they tell us how the Constitution and federal laws apply to situations that might intersect with people’s everyday existences.  But, let’s face it, when the Court decides a case about admiralty or the tax code, not that many people see it as relevant to them.

But last week’s cases are exactly the opposite.  Last week, the Court decided two cases and heard arguments in several more that will resonate with regular people, because they involved situations that most of us have experienced.

For example, if you have ever had a stuffy nose or invested your hard-earned cash in the stock market, the facts of  Matrixx Initiatives Inc. v. Siracusano will probably disturb you.  A nose spray called Zicam was responsible for the vast majority of Matrixx’s revenues, and investors loved the company because the nasal remedy sold well.  The stock price soared, but then the company learned that Zicam had caused some users to lose their sense of smell.  As it turned out, only about ten users had reported the adverse side effect (called “anosmia”); the company, concerned that the news would lead to a loss in sales, had not reported the rare side effect to investors.    The company’s reasoning?  The side effect was not the kind of “material” information that securities laws would require it to disclose because it was not statistically significant when considered in the context of the many, many patients who had used the drug.

The problem for Matrixx arose when  national news got wind of the anosmia side effect and reported it (leading to FDA warnings and Matrixx’s decision to take the drug off the market), causing stock prices to fall.  So investors sued the company, saying that the undisclosed information was indeed “material” and might have caused them to make a different decision about whether to buy Matrixx stock.

The Supreme Court agreed.  In a unanimous opinion by Justice Sotomayor, it made clear that the word “material” does not equate with “statistically significant.”  Instead, the Court said, the important consideration is what information a reasonable investor would regard as relevant to the decision to buy stock; such an inquiry would include questions about the source and reliability of the information.  While not all reports to authorities about side effects would be material under this test, the Court held, those about the Zicam side effect would have been, because they came from medical experts.

Relevant to everyday Americans?  Sure.  Why?  For several reasons.  First, lots of Americans use nose sprays and other over-the-counter remedies, and many of those people will be glad to know that drug companies must disclose information about side effects.  Second, many Americans invest in companies to increase their personal wealth; the decision in Matrixx will go a long way towards making sure that companies fully disclose material information to potential investors, to allow them to make informed decisions about where to invest their assets.  Third, the decision will affect the way companies do business.  And finally, Matrixx will make it a bit easier for investors to bring lawsuits; the case requires only that allegations be “plausible” – that is, possible .  The allegations that investors make do not need to be probably correct, meaning that courts will be less likely to dismiss such lawsuits before, for example, discovery as to the truth of allegations can take place.

In its other opinion this week, the Court also decided an issue that many Americans consider central to their lives:  fair working conditions and standards.  The Fair Labor Standards Act makes it possible, in part, for employees to report illegal working conditions or practices without being afraid that their employers will retaliate against them.  At issue in Kasten v. ­­­Saint Gobain Performance Plastics Corp., though, was what kind of complaint qualified for protection under the Act, which referenced “fil[ing]” a complaint.  Is an oral complaint formal enough to be considered “filed”?  Or would an employee have to memorialize his complaint in writing?  And to whom would he have to complain?  To his employer?  Or to a court or government agency?

The Court majority held that a complaint could indeed be “filed” orally, using several different tools of statutory interpretation to reach that result.  It pointed out that the dictionary definitions of the word “filed” varied, but that the purpose of the Act – to protect employees with legitimate complaints – would be undermined if the Act required all complaints to be in writing.  What’s more, the agency charged with administering the FLSA regarded oral complaints as falling under the Act.  To the majority, however, the other issue – to whom the claim should be made to qualify for statutory protection – was not properly before the Court, because the issue was not raised in the lower courts.

But Justices Scalia and Thomas dissented.  Yes, they said, the question of to whom the complaint should be made is properly before this Court, and the answer is plain:  the word “filing” suggests formality, indicating that some type of legal action is involved.  Because they did not agree that a complaint to an employer merited protection under the wording of the Act, they did not discuss the issue of whether a complaint had to be in writing.

This case is of obvious interest to working Americans.  If I see something illegal going on at work, they might think, how can I let someone know?  To whom should I complain?  What do I have to do to make sure my job is protected?  The Kasten rule, allowing employees to make oral complaints to their employers (and declining to require a higher level of formality), means that FLSA protection will be available to more employees than it would have been had the dissenters’ view prevailed.

Several commentators have noted that the Court has been very friendly to employees in business cases recently.  While the Roberts Court is known for being pro-business, cases like Kasten demonstrate that the Justices are willing to do what all good judges must:  consider a case before them on the facts and the law, not on ideology.  While a large body of literature about the Court has established over the years that Justices do consider ideology and outcome when making their decisions, Kasten shows that plain old legal analysis usually leads the day.

Several of this week’s six oral arguments also addressed issues of concern to ordinary Americans, especially those who find themselves involved in the criminal justice system.  For example, in two cases, the Court considered the application of the “exclusionary rule,” or the rule that evidence which police obtain illegally cannot usually be used in court against a criminal defendant.  In another, the Court heard arguments about when the police should read a juvenile his Miranda rights.  Still another argument addressed whether a defendant who cannot pay an attorney is entitled to a court-appointed attorney if he may be sent to jail for violating an order of the court.  When the opinions in these cases come down, I’ll discuss them all . . . in Plain English.