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Where Sonia Sotomayor Stands on Business Issues

Economic policy questions will play a trivial role, if any, in the confirmation of Sonia Sotomayor to the Supreme Court. Her opponents are likely to focus on affirmative action, abortion, and gay marriage - even though Sotomayor has virtually no record on the last two issues. But the Supreme Court is the final authority for all the laws of the land, including all the ones relating to business and the economy. We think of economic policy as the province of the executive and legislative branches, but the courts wield considerable influence as well, though in the roundabout way of interpreting various statutes, regulations, or rules.

The legal issues that business groups care about are generally too abstruse for popular politics, but important nonetheless. Two related issues are class actions and punitive damages - or, in other words, the risk of being sued for lots and lots of money. A class action enables a large group of plaintiffs - potentially thousands - to sue a company together, vastly increasing the potential liability of the defendant and the potential fees for the plaintiffs' attorneys. However, the rules governing when a suit may be brought as a class action are vague and open to interpretation, and only become vaguer with each passing Supreme Court opinion on the subject.

Punitive damages are damages that may be imposed on a defendant above and beyond the amount that must be paid to compensate plaintiffs; for example, even if a plaintiff only suffers $1 million worth of harm (medical costs, lost wages, pain and suffering, etc.), a jury could grant a $10 million award on the grounds that the defendant should be punished for its behavior (such as wantonly ignoring a known safety risk). Higher courts generally have broad latitude to modify such punitive damage awards, such as last year's Supreme Court decision eliminating a $2 billion in punitive damages imposed on Exxon as a result of the Exxon Valdez oil spill.

Businesses also care about the concept of regulatory preemption. This applies when there is a conflict between state and federal regulation - most often between a relatively stringent state regulation and a relatively lax federal regulation - and the question is whether the federal regulation "pre-empts" the state one; a prominent example was the debate over whether states were allowed to impose auto emissions standards that were stricter than those imposed by the federal government.

On these issues, which are often not decided on the liberal-conservative lines familiar to Supreme Court-watchers, the early verdict seems to be that Sotomayor is a relative moderate.

When it comes to the economy in general, and the economic crisis in particular, however, the court may have a different role to play. There are likely to be legal challenges to actions that both the Bush and Obama administrations have taken in response to the economic crisis, such as the government-sponsored bankruptcies of Chrysler and (probably) GM. Ultimately, the high court could find itself having to decide what powers the government has to deal with an economic emergency, or what powers Congress has to regulate the financial sector.

Finally, the economic crisis could help shape the confirmation process for Sotomayor. Supreme Court confirmations have recently been consumed by "hot-button" issues - primarily abortion. Barack Obama became president in part by successfully setting these "cultural" issues to the side during the election. Today, Americans may be less interested in the sideshow of senators grandstanding about "American values" in the midst of a severe economic crisis. At the end of the day, Obama has the votes - unless the Republicans can maintain all 40 senators in a filibuster - and the length of the process will be determined by the public's appetite for spectacle. If the crisis has reduced that appetite, that would be one silver lining.

--James Kwak

By James Kwak  |  May 27, 2009; 11:59 AM ET
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So wait, what are her stances on business issues? The only characterization I could parse out of an entire article entitled "Where Sonia Sotomayor Stands on Business Issues" is "Fairly Moderate". Examples, specifics anything? While I find the clear statements that her confirmation will have little or nothing to do with economic issues honest and true, in the end this article does nothing to improve the sad media coverage of supreme court nominations beyond that.

Posted by: mikesbox4mail | May 28, 2009 3:45 PM | Report abuse

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