Today, the Supreme Court granted certiorari in the following cases of interest to the business community:

Securities Law—State Court Jurisdiction Over "Covered Class Actions"

Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439

Congress enacted the Securities Litigation Uniform Standards Act of 1998 (SLUSA) to prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives of the Private Securities Litigation Reform Act. Among SLUSA's reforms was a provision authorizing the removal of damages actions brought under the Securities Act of 1933 on behalf of more than 50 people—which are referred to as "covered class actions." In its next Term, the Supreme Court is set to decide whether, in providing for the removal of covered class actions to federal court, SLUSA also stripped state courts of jurisdiction to entertain such cases in the first instance.

Bankruptcy Code—Recharacterizing Claims as Capital Contributions

PEM Entities LLC v. Levin, No. 16-492

When a small business is teetering on the brink of insolvency, the owner of the business will sometimes infuse the business with cash, characterizing the transaction as a loan to be repaid when the business rebounds. If the business ends up in bankruptcy, however, there will sometimes be a dispute as to whether the infusion was truly a loan or was instead a contribution to equity. The Supreme Court is set to decide whether a rule of federal law governs recharacterizations of debt as equity—or whether bankruptcy courts must consult state law for the rule of decision. The Court's decision will likely impact the willingness of business owners to provide infusions to financially troubled companies.

Tenth Amendment—Federal Commandeering of State Regulatory Power

Christie v. NCAA, No. 16-476
N.J. Thoroughbred Horsemen's Ass'n v. NCAA, No. 16-477

The Professional and Amateur Sports Protection Act (PASPA) prohibits States from authorizing by law sports-gambling schemes. The New Jersey Legislature enacted the 2012 Sports Wagering Act, which authorized casinos and racetracks to offer wagering on sporting events taking place outside New Jersey. When challenged under PASPA, the State contended that PASPA violated the Tenth Amendment's anti-commandeering rule. The Third Circuit rejected the State's defense and the Supreme Court denied certiorari.

The New Jersey Legislature subsequently enacted legislation to repeal all state laws related to gambling to the extent they apply to certain sports gambling. The district court and the Third Circuit again enjoined the legislation, interpreting it as an authorization of sports gambling prohibited by PASPA.

The Supreme Court will decide next Term whether the effect of PASPA is to commandeer the resources of New Jersey to require the regulation of sports gambling in a way that New Jersey deems unnecessary. Despite the sports-gambling context, a decision in favor of New Jersey could have wide-ranging implications for the power of the federal government to regulate state law.

Foreign Sovereign Immunity—Attachment of Assets Owned by State Sponsors of Terrorism

Rubin v. Islamic Republic of Iran, No. 16-534

The Foreign Sovereign Immunities Act (FSIA) generally prohibits U.S. courts from attaching property of a foreign state that is within the territorial boundaries of the United States. In this case, plaintiffs seeking to enforce a money judgment against the Islamic Republic of Iran seek to attach a collection of cuneiform-inscribed tablets owned by the National Museum of Iran that are on long-term loan to a museum at the University of Chicago.

In conjunction with this dispute, the Supreme Court has agreed to interpret a 2008 amendment to the FSIA that expanded the availability of assets of foreign state sponsors of terrorism for postjudgment execution. In particular, the Court will decide whether the 2008 amendment provides a freestanding exception to immunity from attachment, or if claimants must also demonstrate that the assets are connected to commercial activity in the United States.

This case will be decided by an eight-Justice Court, with Justice Kagan recused.

Originally published June 27, 2017

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