After nearly an hour of finely detailed arguments, time was running out for three lawyers trying to sway opinions at the U.S. Supreme Court. Deputy Solicitor General Malcolm Stewart, the last to speak, minced no words. "[C]ertainly the consequences are potentially dramatic," he responded to Justice Elena Kagan, who had asked him how individual investors would be affected if the Court upended a seminal, 26-year-old case at the core of many securities class actions.
But on this clear, chilly day in March, the courtroom was packed with far more corporate lawyers than individual investors. The certiorari petition the Court had granted was brought by the Halliburton Company and supported by such powerful amici as the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable. At issue was whether the fraud-on-the-market theory of liability outlined in Basic, Inc. v. Levinson
(485 U.S. 224 (1988)) should be overturned altogether - tossed aside as a relic of another time. (See Halliburton Co. v. Erica P. John Fund, Inc.
, 718 F.3d 423 (5th Cir.) cert. granted, 134 S.Ct. 636 (2013) (pending as No. 13-317).)
In its cert-level amicus brief, the chamber's in-house law firm - the National Chamber Litigation Center (NCLC) - had argued, "[T]he approach courts have taken to the fraud-on-the-market theory has provided securities fraud plaintiffs with a free pass to class certification in many cases, leading to excessive litigation and in terrorem
Echoing that language at oral argument, Halliburton
attorney Aaron M. Streett said that the Court had recognized again and again that once a case achieves class certification, "there is an in terrorem
effect that requires defendants to settle even meritless claims."
However the Court rules in the case, the Chamber once again left its mark. Led by its charismatic tough guy - president and CEO Thomas J. Donohue - the national trade group has been targeting class action securities litigation on three fronts: in Congress, where its cumulative lobbying expenditures recently passed $1 billion; in the public eye, where its Institute for Legal Reform publishes studies on "the real costs" of securities class action lawsuits and lobbies at state capitals; and in the courts, thanks to the NCLC, whose lawyers are among the most pedigreed in Washington, D.C.
In the vast, tentacled world of the U.S. Chamber of Commerce, its elite litigation unit - with a budget of less than $5 million - is a tiny and technically separate entity. But in the specialized world of appellate litigation - and within that, practice at the Supreme Court - the Litigation Center has become a major player. Last year its small team, working with top outside litigators, submitted 107 amicus briefs on behalf of the U.S. Chamber to federal agencies and in state and federal courts. In 2013 the chamber was also a plaintiff, petitioner, intervenor, or counsel for an individual litigant in 18 cases, in many instances seeking appellate review of rulings by state and federal regulators.
But it is the NCLC's extraordinary success with cert-stage amicus work that has put the Chamber on the legal landscape. As SCOTUSblog
put it in April 2013: "[T]he Chamber has cemented its status as the country's preeminent petition-pusher." And not just in the number of cert petitions filed, but also in their rate of acceptance by the Court.
"The effort to overrule Basic
in the Halliburton
case is emblematic of the larger chamber docket," says Tom Donnelly, counsel for the Constitutional Accountability Center, a Washington, D.C., think tank and law firm. "There's not only an aggressive move to overturn previous precedent," he says, "but [also] an effort to pursue cases that undermine the ability of plaintiffs to hold companies accountable for alleged wrongdoing." The NCLC's success, according to Donnelly, is "aided, in part, by a combination of having a nice brand name of the best lawyers at Mayer Brown or Jones Day, and having a nice brand name of the Chamber."
Carter G. Phillips - an NCLC board member, Supreme Court litigator, and chair of Sidley Austin's executive committee in D.C. - says the Chamber has more influence on cases accepted for Supreme Court review than any group except the U.S. Solicitor General's office. "They're getting more and more requests to participate on the cert side," he says. "And it almost certainly means that it will expand, to some extent."
In the past year the NCLC has greatly broadened its purview to include more filings in federal appellate and state courts: It filed 27 briefs in state courts last year, up from 16 in 2011.
"People used to joke that all bad law starts in California, so we've always kept an eye on California," says Stephen A. Bokat, who ran the NCLC for 25 years and now serves on its board. "This goes much further beyond."
Two new hires were brought on in 2013: Steve Lehotsky, a WilmerHale lawyer and former attorney-advisor in the George W. Bush Justice Department who had clerked for Justice Antonin Scalia, and Tyler Green, a Gibson, Dunn & Crutcher lawyer and former clerk for Justice Clarence Thomas. They joined two senior hires from 2011 - Rachel L. Brand, who had clerked for Justice Anthony Kennedy and was the assistant attorney general for legal policy in the Bush administration, and Kate Comerford Todd, another former Thomas clerk who was an associate counsel in the Bush White House - and Sheldon Gilbert, who joined in 2008. Another lawyer, Warren Postman, was added in April (he clerked for Justice David H. Souter and Ninth Circuit Judge William A. Fletcher). Four of those attorneys graduated from Harvard Law School.
"You need people who are strategic, you need people who know the Supreme Court, you need people who are good litigators, and you need people who believe in the mission," says Lily Fu Claffee, the NCLC's top lawyer and general counsel of the U.S. Chamber. That mission, she says, is writing briefs that further the Chamber's three goals: free enterprise, job creation, and economic growth.
"It's a bit of a specialized practice - litigation in particular, court work." Claffee says. "But you also have to have people who are policy-minded. That's why the center was created: a unit that has a little bit more of a policy specialty that has an eye on litigation."
The U.S. Chamber was filing amicus briefs on behalf of members or as a litigant itself, at least sporadically, even before the National Chamber Litigation Center was founded in 1977. But the numbers are certainly up: In its first 20 years, for example, the NCLC participated in fewer than 400 cases in total, according to an archived copy of the Chamber's website. Today, the center takes part in more than 100 cases a year.
At the moment, there is no better place to effect business-friendly change than the courts - at the trial and appellate level, in federal and state jurisdictions, and all the way to the Supreme Court. The reason is straightforward enough: Congress is paralyzed by partisan politics. And with President Obama promising to issue more executive orders that require no congressional approval, the justice system is increasingly viewed as the most effective place to challenge laws and federal regulations.
"You go to places [where] you can get a decision, for better or worse," says John Endean, president of the American Business Conference, whose members are primarily midsize, high-growth companies. "And the good thing about taking on regulation in court is that you are going
to get a hearing. There's not a lot of confidence in democratically elected officials doing much of anything."
Not to mention the generally sympathetic view the conservative majority on the Roberts Court has for "business" issues, another reason to be a frequent filer.
Donohue, who became group vice president of development at the U.S. Chamber in 1976, returned as president in 1997 after a stint at the American Trucking Associations. He quickly roused what had become a somnolent trade group into one of the country's most aggressive, infusing it with his pugnacious attitude and conservative views. Today the Chamber bills itself as the world's largest business federation; it has 300,000 members and represents an additional 3 million companies and professional organizations indirectly.
One of Donohue's first moves was to launch the Institute for Legal Reform in 1998. It lobbies in Congress and state legislatures, funds studies on a host of issues involving the civil justice system, and runs an extensive media outreach program. Within three years, says James Wootton, president of the institute at the time, it was a $46 million operation.
Donohue expanded the Chamber's membership and quintupled its budget to around $250 million, while steering it sharply to the right with positions on hot-button issues like climate change, tort reform, and the Affordable Care Act. The most public controversy occurred in 2009, when Pacific Gas and Electric, two other big utilities, and Apple resigned from the Chamber over its position disputing the need to control greenhouse gases.
Trial lawyers remain the archenemy - though NCLC lawyers refer to them, more delicately, as the "plaintiffs bar." Many of the center's amicus briefs aim to curb plaintiffs lawyers' ability to file lawsuits.
The hostility is mutual at the national trial lawyers' lobby. "They're about preventing lawsuits when they involve individuals, but they are for
lawsuits for themselves," says Linda Lipsen, CEO of the American Association for Justice in Washington, D.C. "They're very litigious."
Public Citizen, the Ralph Nader-founded nonprofit with its own litigation section, runs a website called U.S. Chamber Watch. In 2011 WikiLeaks supporters posted email pitches sent from a corporate intelligence firm to one of the Chamber's outside law firms, offering to discredit U.S. Chamber Watch and other liberal activist groups. (Proposed electronic warfare would cost $200,000 a month for research and up to $2 million a month for a full campaign. A Chamber spokesman denied the offers had been discussed "with anyone at the Chamber," and called them "abhorrent.")
Under Donohue's watch, the NCLC has built an impressive record. Adam Chandler at SCOTUSblog
reports that the NCLC filed 54 cert-stage amicus briefs at the Supreme Court between May 2009 and August 2012 - more than any other private petitioner - with an acceptance rate of 32 percent. Only the conservative Mountain States Legal Foundation had a better average, but it filed just 10 amicus briefs during the same period. That's a considerable achievement, given that the Court agrees to hear fewer than 5 percent of all paid cert petitions (thousands more are brought annually by litigants - mostly prisoners - who can't afford the filing fee).
The NCLC publishes on its website a complete listing of cases it has targeted with petitions for review in jurisdictions nationwide - listing denial of cert as a "defeat." Once cert has been granted by the Supreme Court, the NCLC's win-loss record is impressive - with a handful of cases still pending at press time.(See "The Chamber's Scorecard," opposite.)
Of course, numbers mean only so much.
"The Chamber is doing well at the cert stage, where they are able to point out the broad implications of decisions below that might not be as obvious to the petitioner," says Alan B. Morrison, an associate dean at George Washington University Law School and a Supreme Court advocate. "But I don't think the fact that it's weighing in on these cases has a lot of impact on the outcome. My experience is that by the time they get to the Supreme Court, cases have been pretty well litigated. It's not as if the Chamber has some radically new insight into these things."
Chandler says he keeps a list of frequent cert filers and notes that though newcomers are generally "more conservative, antiregulatory, and pro-business than those they replace," liberal groups "are still nowhere to be found." Even the venerable American Civil Liberties Union filed just one amicus brief from 2009 to 2012.
Several decades ago, the ACLU was the poster child for using the court system to advance a cause. In October 1971, Lewis F. Powell Jr. - then a corporate lawyer who would be nominated to the Supreme Court just two months later - wrote to a friend that the ACLU, among others, had been "far more astute in exploiting judicial action than American business. ... It initiates or intervenes in scores of cases each year, and it files briefs amicus curiae in the Supreme Court in a number of cases during each term of that court. ... Their success, often at business'[s] expense, has not been inconsequential."
Powell noted in what was then a confidential memo, "This is a vast area of opportunity for the Chamber if it is willing to undertake the role of spokesman for American business and if, in turn, business is willing to provide the funds." He counseled, "As with respect to scholars and speakers, the Chamber would need a highly competent staff of lawyers. In special situations it should be authorized to engage, to appear as counsel amicus in the Supreme Court, lawyers of national standing and reputation. The greatest care should be exercised in selecting the cases in which to participate, or the suits to institute. But the opportunity merits the necessary effort."
More than 40 years later, the NCLC is following Powell's strategy to a T. Staff attorney Todd, who is in charge of the NCLC's appellate cases, says, "We have the luxury of picking and choosing those situations in which we'll get involved. We try to find ... cases that could have a significant impact on the business community beyond just the individual parties. That's the formula."
Over the past two decades, the Chamber has embarked on a series of largely successful legislative and litigation-driven campaigns - to frustrate securities class actions, encourage mandatory arbitration agreements, support the preemption of federal over state laws, reduce punitive damage awards, and raise procedural hurdles for standing to sue.
Chamber GC Claffee explains that the cases the NCLC chooses to enter tend to involve "threshold issues." That is, she says, whether "a case or a class of cases ... should [or should] not be heard in court." To critics of the Chamber's overarching legal strategy, that's just another way of limiting access to the courts to parties it believes ought to have access.
"The Chamber's ultimate goal is to protect [its] clients, which means restricting access to federal courts - in consumer, antitrust, and securities cases - either by getting the courts to restrict the application of those statutes, or by establishing procedural stop signs," says Arthur R. Miller, a law professor at New York University. "You can't fault them for that. It's classic protection of clients."
The Chamber doesn't see it quite like that. "We're almost entirely defensive" in posture, Claffee contends. "Either the plaintiffs bar is coming at us or at the business community, or the regulators are. We basically try to rein in the excesses of those groups. We are rarely affirmative actors. Sometimes we refer to ourselves as the last line of defense, basically when all of the other policy tools are exhausted."
Claffee's strategy for choosing cases excludes hot-button social issues, including gay marriage - even though corporate America generally opposes state bans on same-sex unions because they can make it more difficult to move employees around the country.
Party litigation in which the Chamber is the plaintiff tends to focus on the limits of regulatory reach, and on cases where a federal agency disregards its own procedural rules. "Agencies are allowed to switch their position ... but they have certain standards they need to meet that make it a rigorous process," says Todd. "We're challenging those situations where an agency hasn't met its burden."
In one such suit, the Chamber is a party - along with the American Farm Bureau and the State of Alaska - in a U.S. Supreme Court case argued in February over the scope of the Environmental Protection Agency's authority to regulate greenhouse gases under the Clean Air Act. (Chamber of Commerce of the United States v. EPA
, 684 F.3d 102 (D.C. Cir. 2012)) cert. granted, 134 S.Ct. 468 (2013) (pending as No. 12-1272).)
The law is moving, and of late usually in the direction the U.S. Chamber wants. Take arbitration, for example, where the Court handed the Chamber two major victories: AT&T Mobility, LLC v. Concepcion
(131 S.Ct. 1740 (2011)), and American Express v. Italian Colors Restaurant
(133 S.Ct. 2304 (2013)).
"There are a few unresolved issues [on arbitration] that are percolating around the lower courts," says Andrew J. Pincus, a partner at Mayer Brown's Washington office and lead counsel in the Chamber's American Express
amicus cert brief. "But for the most part, the critical question was, 'Is there some standard under which arbitration agreements that have class waivers are going to be unenforceable, generically?' I think those arguments, by and large, have been disposed of."
And take class actions, something the business community loathes. Both Wal-Mart v. Dukes
(131 S. Ct. 2541 (2011)) and last year's Comcast v. Behrend
(133 S. Ct. 1426 (2013)) substantially raised the threshold for class certification. "I think the Court has moved in a way that [makes it] easier for most of my clients to think about litigation now than it was three to four years ago," says Phillips at Sidley Austin.
Despite the string of significant Supreme Court victories in cases they've joined, the NCLC's attorneys realize that being on the winning side is only the beginning. "There are hundreds or thousands of cases that [require judges] to interpret Supreme Court decisions," notes Jeremy B. Rosen, a partner at Horvitz & Levy in Encino who serves on a Chamber advisory committee to help identify significant California and Ninth Circuit cases. "Some courts interpret just the very narrow facts of a case, and don't give fair import to the whole analysis - there are many ways not to fully implement what the U.S. Supreme Court decided. That animates a lot of what the Chamber is doing" outside Washington.
Other persistent battles are of interest to the business community, especially the quest to loosen regulations at both the federal and state levels. For example, strengthening federal pre-emption laws would give businesses more legal continuity among the 50 states - and might also vitiate stricter state laws.
It's a goal that Donohue pursues doggedly. In apparent response to critics who say the Chamber is too focused on the concerns of America's aging industrial base, the Chamber announced earlier this year that it would open an office in Silicon Valley - its first posting outside Washington, D.C.
Above all, Donohue is pragmatic enough to put the Chamber's bucks where he expects they'll deliver the most bang.
Describing the Chamber's mission last year at the conservative Manhattan Institute for Policy Research, Donohue departed from prepared remarks to joke, "See, we have one group [the Institute for Legal Reform] to stop all these ridiculous lawsuits around the country and class action and mass action and all that stuff," he said. "Then we've got another group that sues the government about 150 times a year," referring to the NCLC. "But we believe in balance," he added, to general laughter: "Suits [by the plaintiffs bar] are ridiculous, and ours are necessary."
T. R. Goldman is a freelance writer based in Washington, D.C.