Obama: What Kind of Change in the Courts?

Obama: What Kind of Change in the Courts?In keeping with the theme of ‘change,’ the US presidential election has sparked a slew of commentary, including speculation on the future composition of the US Supreme Court.

For international businesses and their lawyers, how would the appointment of new Justices by President Obama affect the Court in the areas such as securities, antitrust, RICO and employment discrimination law?

The answer may hinge on Justice Anthony Kennedy, a moderate appointed by President Reagan in 1987. Observers have speculated that three Justices on the ‘left wing’ side of the Court — John Paul Stevens, Ruth Bader Ginsburg and David Souter — are the most likely to leave first.

Their retirements, however, would probably not have a major short-term effect because the Democrats control Congress and the Obama administration would be able to replace the departing Justices with those of a similar judicial bent.

The more intriguing possibility is that Justice Kennedy will leave.

Justice Kennedy turns 73 in 2009 and is the third longest serving Justice on the Court. While Justices often resist retiring until the president can appoint a replacement with the same judicial philosophy, there have been some notable exceptions. Justice Kennedy, unlike more conservative justices such as Antonin Scalia, may lack the burning desire to hang on until there is a new administration.

Why is Justice Kennedy so crucial? In recent years the Court has turned increasingly centrist in cases affecting business – and Justice Kennedy has furnished the swing vote in several of those decisions.

One prominent example is the Ledbetter case, which President-elect Obama mentioned in the final presidential debate. Although Justice Samuel Alito authored the Ledbetter opinion, setting forth a strict statute of limitations that barred the female employee’s pay discrimination claim, Justice Kennedy provided the decisive fifth vote by joining Justices Alito, Scalia, Clarence Thomas and Chief Justice John Roberts in backing it.
Ledbetter is the type of case where an Obama appointee in place of Justice Kennedy would b elikely reach a different conclusion.

It is also important not to lose sight of the lower federal courts. The Supreme Court reviews cases on a discretionary basis, accepting for full hearing barely 100 cases each year.

Therefore, the last word on key issues in commercial law often comes from the federal circuit courts of appeals, particularly the Second, Seventh, Ninth and District of Columbia circuits, which are based in New York, Chicago, California and Washington respectively.

A recent stufy by the Brookings Institution, a US think tank, projected that Mr. Obama could significantly change the number of Democratic appointees to the 13 courts of appeals from the current 42 percent to 58 percent.

But such an increase does not necessarily translate into an ideological transformation. For instance, the influential Second Circuit tends to follow a middle course in commercial areas no matter what its ‘political’ composition.

The bottom line is that the new administration will clearly have an impact on the courts, but a perceptible shift is likely to take longer to occur than many people assume.

Pieter Van Tol is a partner at Lovells in New York.