Three non-employment law cases in High Court have business ramifications - HR News - human resources - University of Michigan - Nike Inc - Green Tree Financial Corp

HR Magazine,  April, 2003  by Margaret M. Clark

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A collection of 65 major U.S. corporations have joined in a brief filed Feb. 18 with the U.S. Supreme Court in support of the University of Michigan's affirmative action admissions policies, which include consideration of applicants' racial and ethnic background.

The university's policies are being challenged in the case of Grutter v. Bollinger and its companion case, Gratz v. Bollinger, which are among several non-employment cases on this term's high court docket that are expected to have ripple effects in the workplace.

Last May, the 6th U.S. Circuit Court of Appeals ruled that the university's law school admissions policy does not run afoul of the constitutional guarantee of "equal protection" under the law because it is narrowly tailored to achieve the state's compelling interest in having a diverse student body. About the same time, the 6th Circuit heard a similar case involving the university's undergraduate admissions and, in an unusual move, the Supreme Court granted review before the appellate court ruled.

Big companies including Abbot Laboratories, Boeing 3, Coca-Cola, Lucent Technologies, Microsoft and United Airlines are among those that signed on to the friend-of-the-court brief, which argued that the court should allow the public university to consider race and ethnicity as "plus" factors in admissions.

"The existence of racial and ethnic diversity in institutions of higher education is vital to [the companies'] efforts to hire and maintain a diverse workforce, and to employ individuals of all backgrounds who have been educated in a diverse environment. ... [S]uch a workforce is important to [the companies'] continued success in the global marketplace," the brief said.

"Because our population is diverse, and because of the increasingly global reach of American business, the skills and training needed to succeed in business today demand exposure to widely diverse people, cultures, ideas and viewpoints," the companies argued. "Employees at every level of an organization must be able to work effectively with people who are different from them."

More Workplace Fallout Expected

The outcomes in two other non-employment cases before the high court also are expected to affect workplace policy and practice. In Nike Inc. v. Kasky, the court will consider whether a corporation can be liable for factual inaccuracies in statements it makes during public debate. Green Tree Financial Corp. v. Bazzle involves the question of whether classwide arbitration is an option under a mandatory arbitration agreement that is silent on the subject.

In the Nike case, the California Supreme Court ruled last May that Nike could be sued for false advertising for misstatements it made in publicly defending itself against claims that it used sweatshop labor in its Asian factories. The court reasoned that Nike was vulnerable under California law as a commercial speaker making comments aimed at its customers about its own business operations with the goal of maintaining profits. So-called "commercial speech" is entitled to minimal First Amendment protection.

The ruling in Nike will affect companies defending themselves against union "corporate campaigns," which employ a variety of tactics--including the pursuit of negative media attention--in an attempt to organize an employer's workforce.

"This could just as easily have been a case involving statements by an employer about its own internal U.S. labor and employment policies in response to a union corporate campaign," observed Chicago employment attorney Ronald S. Kramer, a partner in the Seyfarth Shaw law firm. "How the court decides whether what Nike said was commercial speech or noncommercial speech will impact all employers," Kramer told HR News.

In Green Tree, a couple filed a class action lawsuit against the lending institution in state court claiming violations of the South Carolina Consumer Protection Act. The state court granted Green Tree's motion to compel arbitration in accordance with an arbitration clause in the loan agreement the plaintiffs had signed. In addition, however, the court ordered the arbitration to go forward as a class action, giving potential class members an opportunity to opt out of the proceeding.

Green Tree argued that because the arbitration agreement was silent on the issue, it should be interpreted to prohibit class-wide arbitration, but the South Carolina Supreme Court rejected that argument, holding that a class proceeding is appropriate as long as it would serve efficiency and equity and would not result in prejudice.

Many employers require employees to agree to arbitrate all job-related disputes as a condition of employment. While the Supreme Court has held that such agreements generally are enforceable, the validity of specific terms of agreements continue to be the subject of considerable litigation.

Amy W. Littrell, an associate in the Tampa office of employment law firm Ford & Harrison, told HR News that the Supreme Court's ruling in Green Tree will have implications for employment law arbitration. While employers often prefer arbitration to jury trials, their big concern with class arbitration will be: "is the arbitrator really equipped to handle a class action," she said.