The Bench Gives Business A Breakby
Business expected a lot more in recent years from the Supreme Court's conservative majority. Until the latest term, the justices imposed few curbs on state regulators trying to fill the regulatory vacuum left by the Reaganauts and Bushniks.
Now, and despite the defeat the court handed tobacco interests on June 24, business in general seems to be scoring. Throughout the term set to close June 30, the court has curbed the states' reach. In disputes ranging from taxation to airline advertising to garbage disposal, "business has done pretty well," says Kenneth S. Geller, a Washington lawyer.
Some court watchers attribute industry's success to "the luck of the draw, not a change in philosophy," says U.S. Chamber of Commerce General Counsel Stephen A. Bokat. But the justices also seem to be sending a message: States can't regulate and tax business at will.
While the court will engage in judicial activism on social issues, restraint is in vogue for business cases. The rationale: Sticking to stable ground rules "fosters investments by businesses and individuals," as Justice John Paul Stevens noted in rejecting one corporate tax.
READ OUR LIPS. Nowhere were states more aggressive--and the court more sympathetic to business--than on taxes. The recession and federal-aid cuts have forced states to search for cash. Often, they grab for the biggest pot around--corporation coffers. "We're really scratching for new money," says Nicholas Spaeth, Attorney General of North Dakota.
That state drew a bead on Quill Corp., a $200 million Lincolnshire (Ill.) mail-order company. North Dakota wanted to tax Quill's in-state sales, though it had no operations there. The court said no, pointing to a 1967 ruling barring states from taxing companies that lacked a "physical presence" in the state. Officials in Bismarck had argued that the heady growth of the mail-order industry, which now has $200 billion in annual sales, made the prior ruling obsolete. "If the states could collect back taxes, that would have killed a lot of companies," says Quill President Jack Miller.
New Jersey fared no better. It had tried to snag a cut of the $211.5 million profit that Southfield (Mich.)-based Bendix Corp. made on its 1981 sale of stock in Asarco Inc., a metals company incorporated in New Jersey. No dice, said the court. Prior cases had allowed states to tax the operating earnings of out-of-state companies if the companies had ties to the state. But the court said New Jersey had gone too far by taxing profits on a passive investment.
The court kept the states on a short regulatory leash, too. It held that the federal Airline Deregulation Act of 1978 bars Texas from bringing deceptive-advertising charges against Trans World Airlines Inc. and other carriers. And the court blocked Illinois from licensing hazardous-waste workers, saying the federal Occupational Safety & Health Act of 1970, not widely varying state law, regulates their training.
`LEVEL PLAYING FIELD.' The court also trashed two state laws aimed at keeping out other states' garbage. It declared unconstitutional Alabama's scheme charging higher fees for the disposal of hazardous waste from beyond its borders than from within. Michigan tried to bar out-of-state garbage altogether. Both rulings clear the way for waste haulers to choose the best sites for disposal plants. "It's easier for management to make good capital investments if they can expect a level playing field," says John T. Van Gessel, senior counsel for Oakbrook (Ill.)-based Chemical Waste Management Inc.
Still, the court gave business a bruise or two. In a boost to traditional notions of antitrust enforcement, the justices said Eastman Kodak Co. had to stand trial on charges it attempted to monopolize the servicing and sale of parts for its copying and micrographic equipment.
And the court said the Federal Trade Commission could bring a price-fixing action against title insurers. The insurers had claimed they were beyond the FTC's reach because they had filed their rates with the states, and state approval can provide immunity from federal antitrust law. But the court found the states weren't vigilant enough regulators for the insurers to escape federal scrutiny.
If the states want to toss lariats at business, the court suggested a way: Get lawmakers to change the rules. But Congress isn't likely to put the states at the top of its agenda. And now, business can rest assured that the high court is in no rush to change the rules.