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Employer groups happy with high court nominee

Neil Gorsuch has spoken out against class-action securities fraud suits.

Gorsuch seen as friend to business, no fan of "complicated' regulation

Supreme Court nominee Neil Gorsuch's legal positions are reassuring employer groups that they will have a pro-business ally critical of regulators and investor lawsuits if he is confirmed to replace the late Justice Antonin Scalia.

Still, legal experts say, his reputation for balance does not guarantee it. Mr. Gorsuch, President Donald Trump said as he announced the nomination Jan. 31, is “a "judge's judge' who decides cases based on the law, not personal policy preferences. He is not afraid to reach results contrary to his own policy views.”

And as the current court's youngest justice at 49, Mr. Gorsuch would have a say in plenty of issues before the Supreme Court for many years to come.

Some of the pro-business optimism comes from legal opinions Mr. Gorsuch has written in the last 10 years as a judge in the 10th U.S. Circuit Court of Appeals in Denver. In those, he has disagreed with the Supreme Court precedent for deferring to federal agencies on interpretation of laws and complained that it is too easy for investors to bring securities fraud claims.

The Supreme Court's position that federal agencies' interpretations of ambiguous statutes should prevail, known as Chevron deference based on a 1984 decision in Chevron vs. Natural Resources Defense Council, was criticized by Mr. Gorsuch in a 2016 concurring opinion. In that opinion, he suggested that it was time to reconsider such deference, which would make it easier for employers and others to push back.

"Elephant in the room'

Calling it “an elephant in the room,” he went on to say that in the opinion, Chevron and a similar case “permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers' design. Maybe the time has come to face the behemoth.” Federal regulations have gotten so complicated that it takes “an army of perfumed lawyers and lobbyists” to keep up, he wrote.

David Levine, a principal at Groom Law Group, a Washington firm specializing in ERISA, said that “in the benefit context, given the significant number of administrative rules and interpretations, including enforcement actions by regulators, such a change could make efforts to challenge agency actions and rules more likely to succeed.”

Still, said Nancy Ross, a Chicago-based partner at law firm Mayer Brown, while Mr. Gorsuch will be wary of regulatory burdens on employers, “he will not uniformly side with the employer or plan sponsor.”

Billy Corriher, a legal expert with the progressive advocacy group Center for American Progress in Washington, worries that if confirmed, Mr. Gorsuch's position on Chevron “would upset the long-standing separation of power between the judiciary and the political branches of government,” and give unelected judges more power to strike down regulations.

Noting that Mr. Gorsuch has criticized using litigation for social agendas, “he seems to be fine with corporations using lawsuits to strike down laws if they do not want to comply,” Mr. Corriher said.

Mr. Gorsuch has often criticized the proliferation of securities lawsuits in his judicial opinions and in legal writings from his time in private practice. An August 2014 opinion from the appeals court bench made it harder to bring securities cases about misleading statements by issuers. In MHC Mutual Conversion Fund LP et al. vs. Sandler O'Neill & Partners LP et al., investors were rebuffed in seeking to establish liability by United Western Bancorp Inc. over projections in a 2009 stock offering.

“Establishing that an opinion about the future failed to pan out in the end may go some way to meeting that standard (for pursuing such cases) but it doesn't go all the way,” wrote Mr. Gorsuch. “To establish liability for an opinion about the future, more is required.”

As a partner in the Washington office of law firm Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC until 2005, Mr. Gorsuch served a diverse clientele, including the U.S. Chamber of Commerce, on whose behalf he filed two briefs arguing to make it harder to file securities class actions. Such cases, he complained in a 2005 paper, largely lead to settlements that enrich lawyers as much, or more, than investors.

In that paper written for the Washington Legal Foundation while he was at the law firm, he argued that while securities class actions have offered some social benefits, “experience has shown that, like many other well-intended social experiments, they are not exempt from the law of unintended consequences, having brought with them vast social costs never imagined by their early promoters. Today, economic incentives unique to securities litigation encourage class-action lawyers to bring meritless claims and prompt corporate defendants to pay dearly to settle such claims. These same incentives operate to encourage significant attorneys' fee awards even in cases where class members receive little meaningful compensation. And the problem is widespread,” argued Mr. Gorsuch, who recommended a bidding process to reduce lawyers' fees, and more enforcement by courts of securities law restrictions on “professional plaintiffs” that would help institutional investors “from becoming spread too thin.”

Represented institutions

Mr. Gorsuch has also represented institutional investors before the Supreme Court in two related cases criticizing the dynamics of class-action settlements that favor some class members over others.

In one, arguing for the Council of Institutional Investors and the lead plaintiffs, the $306.6 billion California Public Employees' Retirement System, Sacramento, and the $186.2 billion Florida State Board of Administration, Tallahassee, Mr. Gorsuch said class-action settlements prevented them from objecting to settlements that benefited lead class members, counsel and defendants at the expense of other class members. His successful 1999 petition for Supreme Court review ended in a tie with the lower court judgment affirmed. But in a related case three years later in which Mr. Gorsuch wrote the amicus brief, a 6-3 vote gave CII and its public pension fund members standing to object to settlements.

Shaped by clerkships

His opinions have also been shaped by his clerkship for a District of Columbia circuit judge and for Supreme Court justices Byron White and Anthony Kennedy, and his time as principal deputy associate attorney general from 2005 to 2006. After being appointed by President George W. Bush to the 10th circuit appellate court in 2006, Mr. Gorsuch was approved by the Senate in a unanimous voice vote, which the current Senate is not likely to repeat, given vocal resistance from the Democratic party today, 11 of whom approved him in 2006.

If confirmed by March, Mr. Gorsuch will have a role in deciding whether church-affiliated retirement plan sponsors are covered by the Employee Retirement Income Security Act, a decisin that could have wide implications for all benefit plans.

The case, which consolidates three cases brought by plan sponsors Dignity Health, Advocate Health Care and Saint Peter's Healthcare, has already sparked interest because of the unexpected position of federal regulators.

Those regulators on Jan. 24 joined the U.S. solicitor general"s amicus brief urging the Supreme Court to overturn lower court rulings that ERISA does apply to church-affiliated defined benefit plan sponsors.

Arguments will be heard March 27, and a decision is expected before the Supreme Court term ends in June.

This article originally appeared in the February 6, 2017 print issue as, "Employer groups happy with high court nominee".