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Court to hear three new cases

The Supreme Court agreed on Monday to add three new cases for decision at its next Term — cases on a major issue in commodities exchange regulation (Klein & Co. v. Board of Trade, 06-1265), on the power of states to tax the interest on other states’ municipal bonds (Kentucky Department of Revenue v. Davis, petition, BIO), and on the extent to which Supreme Court decisions against making criminal law decisions retroactive bind the states (Danforth v. Minnesota, 06-8273). More on Danforth can be found in posts here, here, and here.

The Court asked for the views of the federal government on two cases: one that seeks to clarify the power of states to tax the profits of businesses that receive dividends from overseas subsidiaries (General Electric v. New Hampshire Revenue Commissioner, 06-1210), and the other on states’ authority to impose their own drug labeling requirements to assure that drugs are safe for use (Wyeth v. Levine, 06-1249, cert. documents linked to here). The U.S. Solicitor General’s responses are not likely to be filed before next Term.

In a summary decision without briefing and argument, the Court ruled 6-3 that Los Angeles police officers did not violate the Fourth Amendment rights of occupants of a house where they carried out a search warrant looking for African-American suspects, but found only Caucasians, instead; the African-Americans had moved and new occupants were in the house. The white couple was ordered out of their bed, naked, and forbidden for a few minutes to get dressed. The Court majority found that the Ninth Circuit erred in ruling that the search should have been called off when the officers concluded that the occupants were not the suspects they were seeking. The majority opinion was unsigned (Per Curiam). Justice David H. Souter would have denied review, and Justice John Paul Stevens, joined by Justice Ruth Bader Ginsburg, joined only in the result, arguing that the officers had qualified immunity and thus the Court should not have decided the constitutional question. The case was Los Angeles County v. Rettelle, et al. (06-605).

The newly granted case in the Klein case tests whether firms that solicit or accept orders to trade on commodities exchanges — that is, “futures commission merchants” — have a right to sue for losses they incur when futures prices are manipulated illegally. The appeal argued that a Second Circuit Court ruling barring those merchants from suing an exchange will have a major impact on the $110 billion futures industry. The appeal was supported by the Futures Industry Association.

The municipal bond tax case involves an appeal by Kentucky officials, supported by the National Association of State Treasurers, testing whether the Commerce Clause permits a state tp exe,[t ots pwm state’s municipal bonds from income taxes, while taxing income earned onbonds issued elsewhere. The Kentucky Court of Appeals struck down a state law on the subject. The appeal argues that 38 states apply their income taxes to interest earned on out-of-state bonds issued by state and local governments.

The Danforth case is an important test of whether states are constitutionally free to give state prison inmates the retroactive benefit of Supreme Court criminal law procedure rulings, even if the Court has not made them retroactive and, indeed, has found they would not apply retroactive. The Minnesota Supreme Court ruled that states are bound by the retroactivity rulings of the Supreme Court on new rules of criminal procedure. The case involves an inmate, Stephen Danforth, who is seeking to challenge the admission of a child’s out-of-court videotaped testimony against him in a sex abuse case. That would be a violation of the Supreme Court ruling in Crawford v. Washington in 2004, except that the Supreme Court in Whorton v. Bockting ruled in February that Crawford does not apply retroactively and Danforth’s conviction was final before Crawford was decided. He thus seeks relief under state law.

The two cases on which the Solicitor General was invited to offer the federal government’s views involve these issues:
** Is it unconstitutional for a state to discriminate in its business profits tax between dividends paid to U.S. companies by foreign subsidiaries, based on whether those units themselves do business within the state. General Electric Co. raises that issue in the case from New Hampshire. It argues that the New Hampshire Supreme Court ruling upholding the differing tax treatment violates the Supreme Court’s 1996 decision in Fulton Corp. v. Faulkner and the 1977 ruling in Boston Stock Exchange v. State Tax Commission.
** Are state laws imposing labeling requirements on the appropriate medical uses of federally approved drugs preempted by federal law? The appeal by the pharmaceutical company, Wyeth, involves a challenge to a separate labeling requirement imposed by the state of Vermont on Wyeth’s anti-nausea drug, Phenergan. The appeal says that the state-federal conflict at issue in the case “is far from uncommon.”
There is no specific deadline for the Solicitor General’s responses.