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Regulation and Compliance > Federal Regulation

Are Obama Judges ‘Less Friendly’ to Business?

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Backing workers in discrimination suits. Signing off on a $1 billion class action judgment. Spurning attacks on federal regulations.

President Barack Obama’s appointees to the federal appeals courts have started to leave their mark on the business world, to the chagrin of corporate executives. Appellate lawyers say it’s too early to see major swings in the law, but individual rulings on labor, class actions and administrative law show signs of a shift to the left.

“Over the last eight years the courts of appeals have become decidedly less friendly to business overall, though the Supreme Court has served as something as a check on those courts,” said Kannon Shanmugam, who leads the appellate practice at Williams & Connolly.

Fifty-five judges have been confirmed to the federal appeals courts since 2009, with 31 of those judges replacing Republican appointees. Obama’s appointees make up just under a third of all active judges on the circuit courts, although their influence is less pronounced when senior judges are included in the tally.

Newer judges’ influence on their respective courts varies. There’s been a noticeable ideological flip on the Fourth Circuit, covering Virginia, Maryland, West Virginia, North Carolina and South Carolina, which has six Obama appointees out of 15 active judges. The majority of judges on that court, which was among the most conservative in the nation when Obama took office, are now Democratic appointees. On the Seventh Circuit, on the other hand, Obama has seated just one judge.

Rex Heinke, co-leader of the appellate practice at Akin Gump Strauss Hauer & Feld, said he hasn’t observed an overhaul in areas of law affecting business over the past eight years, although the president’s nominees to the bench “are certainly more liberal than the judiciary when he came into office.”

“There would be a dramatic shift if there were liberal justices added to the Supreme Court,” Heinke said. “For example, there have been all sorts of decisions on the Supreme Court in recent years about the use of arbitration to settle disputes, and the court has been very sympathetic to claims that agreements to arbitration be upheld. I suspect a more liberal justice on the Supreme Court might well have a different view.”

Obama Court Analysis Map (ALM Media)

Lawyers say the change they see in the appeals courts—the last litigation stop for the majority of cases—has been incremental. Mary Helen Wimberly, an appellate litigator at Hogan Lovells, noted a few key rulings by Obama appointees siding with class action plaintiffs. She pointed to a Sixth Circuit decision in 2015 by Judge Jane Stranch that reversed the dismissal of a gender discrimination class action against Walmart Stores Inc.

Stranch, who was confirmed in 2010, ruled that female Walmart employees weren’t prohibited by time restrictions from pursuing a regionally-focused lawsuit against the mega-retailer after the U.S. Supreme Court in 2011 rejected certification of a nationwide class of plaintiffs in Wal-Mart Stores v. Dukes.

“Courts may be required to decide whether a follow-on class action or particular issues raised within it are precluded by earlier litigation, but we would eviscerate Rule 23 if we were to approve the blanket rule advocated by Wal-Mart,” Stranch wrote.

Tenth Circuit Judge Robert Bacharach, who was confirmed in 2013, wrote a decision in 2014 that upheld a $1 billion judgment against the Dow Chemical Co. in favor of purchasers of polyurethane products alleging a price-fixing conspiracy. The court rejected Dow Chemical’s challenge to the certification of a class under the tougher standard set out in Dukes.

Judges confirmed since 2009 have written decisions in employment cases hailed by the plaintiffs bar. Eleventh Circuit Judge Beverly Martin, confirmed in 2010, wrote a 2015 opinion that held that job applicants, not just current employees, could bring claims against an employer alleging that a company policy discriminated against older individuals. She was reversed by a full sitting of the court in October; Martin wrote a strong dissent.

“The Equal Employment Opportunity Commission (EEOC), the agency charged with enforcing the [Age Discrimination in Employment Act], has reasonably and consistently interpreted the statute to cover claims like Mr. Villarreal’s,” Martin wrote in the 2015 decision, referring to the plaintiff. “We must defer to that reading rather than venture our own guess about what the statute means.”

In the Fifth Circuit, Judge Gregg Costa, confirmed in 2014, wrote a decision in 2015 holding that a jury could decide if a company should have to pay employees for their lunch break if the employer imposed travel obligations during that period of time.

“Unlike a requirement that the employee stay in uniform, or even one that may result in the employee having to perform a duty on rare occasions, a jury could find that preventing the employee from eating—ostensibly the main purpose of the break—for 12 out of 30 minutes during every break is a meaningful limitation on the employee’s freedom,” Costa wrote.

In the D.C. Circuit, the major forum for challenges to federal agency actions, Obama and Senate Democrats filled four vacancies over bitter Republican opposition. Lori Alvino McGill, a partner at Wilkinson Walsh + Eskovitz, said more decisions are coming down from the D.C. court that are favorable to government regulators, but that these are the “tip of the iceberg.”

“We won’t see the full effect of President Obama’s legacy for quite some time, just because the pace of litigation is generally pretty slow,” McGill said.

D.C. Circuit Judge Cornelia Pillard, confirmed in 2013, wrote opinions that rejected challenges to Obama’s executive actions on immigration and to the contraceptive care coverage mandate in the Affordable Care Act. Judge Sri Srinivasan, also confirmed in 2013, co-wrote a decision with Judge David Tatel, a Clinton appointee, upholding the Federal Communications Commission’s net neutrality rules.

A major test of the D.C. Circuit’s refashioned bench has yet to come. A full sitting of the court heard arguments last month in a challenge to one of the Obama administration’s signature efforts to tackle climate change, the Clean Power Plan, which regulates power plant emissions. During arguments, some of the judges appeared to split along ideological lines. Shanmugam said the outcome will be the “the most significant indicator” to date of the court’s direction on administrative law.

It isn’t just the D.C. Circuit that’s putting out big decisions that favor the executive branch. In the Eleventh Circuit, Judge Jill Pryor, confirmed in 2014, wrote decisions that upheld the contraceptive care mandate and found the court lacked jurisdiction to consider a challenge to the constitutionality of the U.S. Securities and Exchange Commission’s administrative law judge system.

Fourth Circuit Judge Andre Davis, confirmed in 2009, wrote an opinion that preserved the Federal Trade Commission’s ability to pursue money judgments in court.

The court, Davis wrote, rejected the challenger’s “attempt to obliterate a significant part of the Commission’s remedial arsenal.”

Morgan, Lewis & Bockius partner Allyson Ho said that she doesn’t see a broad shift in the administrative law arena driven by Obama’s appointees. When it comes to agency deference, courts remain bound by Supreme Court precedent, which weighs in favor of the government, she said.

“It’s a hot issue and I think it’s getting a lot of attention, but again I think that probably goes in the category of things that, were it not for Justice [Antonin] Scalia’s passing, we might have seen the Supreme Court take that on. But we haven’t seen that,” Ho said. “The lower courts tend simply to apply the Supreme Court’s deference doctrine, which pretty much across the board gives a lot of deference to agencies.”

Judges appointed by a particular president don’t act as a monolith. Obama’s appointees have ruled against the government and in favor of business—just last month, Eleventh Circuit Judge Adalberto Jordan wrote an opinion backing an employer who was sued by the EEOC for rescinding a job offer because the applicant wouldn’t cut her dreadlocks.

Clients should be mindful of the composition of a particular court when making decisions about where and whether to appeal, Heinke said, but trying to predict how judges will rule based on the president who appointed them is a dangerous game.

“Broadly speaking you’re going to find Democratic appointees are inclined to uphold federal power, and Republican appointees are less inclined to do so,” Heinke said. But judges have surprised people, he said, including “the presidents who appointed them and the Senate who confirmed them.”


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