With a new justice in the line-up for the first time in 11 years, the U.S. Supreme Court began its new term on Oct. 3.

A number of cases could potentially affect companies across the nation. Here’s a look at some of the important cases the Court has agreed to hear this term and their potential impact.

Arbitration Clauses

When the validity of an entire contract is challenged, can its arbitration clause still be enforced?

The plaintiff, John Cardegna, sued a check-cashing company for allegedly making usurious loans disguised as check cashing transactions. The defendant sought to compel arbitration under a clause in its standard customer agreement which stated: “Any claim, dispute or controversy … arising from or relating to this agreement … or the validity, enforceability, or scope of this arbitration provision or the entire agreement (collectively ‘claim’), shall be resolved, upon the election of you or us … by binding arbitration pursuant to this arbitration provision.” The agreement expressly stated that it was governed by the Federal Arbitration Act.

The plaintiff argued that the arbitration clause couldn’t be enforced because the underlying check-cashing agreements allegedly violated state law.

The Florida Supreme Court agreed.

“In the case before us today … the underlying contract at issue would be rendered void from the outset if it were determined that the contract indeed violated Florida’s usury laws. Therefore, if the underlying contract is held entirely void as a matter of law, all of its provisions, including the arbitration clause, would be nullified as well. …

“Hence, [the plaintiff’s] claim that the underlying check cashing contract is illegal and void ab initio as being usurious must be resolved by a trial court before arbitration of any other disputes may be compelled,” the court said.

It noted similar decisions from state courts in California and Colorado, as well as from the 3rd, 7th, 9th, 10th and 11th Circuits.

Washington, D.C. Trial Lawyers for Public Justice attorney Paul Bland, who represents the plaintiff, said that if the court rules for the check cashing company, “it could radically change the law that governs this area.

“If the Supreme Court rules that arbitration clauses are more important than other contract terms and therefore enforceable even where the contract itself couldn’t be enforced – that could potentially cause a lot of dislocations in the law,” Bland said.

Buckeye Check Cashing, Inc. v. Cardegna, Docket No. 04-1264. Certiorari granted June 20, 2005. Ruling below: 894 So.2d 860 (Fla. 2005).

Suing National Banks

Does diversity jurisdiction exist in a fraud suit against a national bank with branch offices in the state where the plaintiff lived and filed his complaint?

The defendant was a national bank with its principal place of business in North Carolina, while the plaintiff, Daniel G. Schmidt, III, lived in South Carolina.

He sued in South Carolina state court, alleging that the bank had fraudulently induced him and other investors to engage in a high-risk investment scheme.

The bank filed an action in federal court seeking to compel arbitration of the plaintiff’s claims.

The plaintiff argued that diversity jurisdiction did not exist because the bank operated branch offices in his home state of South Carolina. 28 U.S.C. Sect. 1348 provides that, for purposes of diversity jurisdiction, “[a]ll national banking associations shall … be deemed citizens of the states in which they are respectively located.”

The 4th Circuit agreed the bank was a citizen of any state in which it operated branch offices.

“It is indisputable that a national banking association becomes physically present in a state when it opens branch offices in that state and conducts business there. … It follows that, within the ordinary meaning of ‘located,’ a national banking association is ‘located’ wherever it operates branch offices,” the court said.

A circuit split exists on this issue, with contrary holdings from the 5th and 7th Circuits.

Wachovia Bank v. Schmidt, Docket No. 04-1186. Certiorari granted June 13, 2005. Ruling below: 388 F.3d 414 (4th Cir. 2004).

Here is a brief look at other hot button cases affecting businesses:

Antitrust

Can a vehicle dealer suing its distributor for antitrust violations prove a loss of profits by showing the distributor gave more favorable price concessions to other dealers?

Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. Docket No. 04-905. Certiorari granted March 7, 2005. Ruling below: 374 F.3d 701 (8th Cir. 2004).

Civil Procedure

If a case was wrongfully removed to federal court and subsequently remanded, are the plaintiffs entitled to attorneys’ fees and expenses?

Martin v. Franklin Capital Corp. Docket No. 04-1140. Certiorari granted April 25, 2005. Ruling below: 393 F.3d 1143 (10th Cir. 2004).

Where a party failed to renew a Rule 50(a) motion to dismiss after the jury returned a verdict, can it still appeal based on the sufficiency of the evidence?

Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc. Docket No. 04-597. Certiorari granted Feb. 28, 2005. Ruling below: 375 F.3d 1341 (Fed. Cir. 2004).

Diversity Jurisdiction

Can an entity not named as a defendant be deemed a “real party in interest” to destroy complete diversity of citizenship in a case removed from state court? Is a limited partnership’s citizenship determined by whether its business activities establish a “very close nexus” with a state or by the citizenship of its partners?

Lincoln Property Co. v. Roche. Docket No. 04-712. Certiorari granted Feb. 28, 2005. Ruling below: 373 F.3d 610 (4th Cir. 2004).

Employment

Does the failure to show that a defendant has 15 or more employees and thereby qualifies as an employer under Title VII deprive the federal courts of subject matter jurisdiction?

Arbaugh v. Y & H Corp. Dokcet No. 04-944. Certiorari granted May 16, 2005. Ruling below: 380 F.3d 219 (5th Cir. 2004).

Fair Labor Standards Act

Must employees be paid for the time they spend waiting at required safety equipment distribution stations and waiting to clock in?

IBP, Inc. v. Alvare. Docket No. 03-1238, consolidated with Tum v. Barber Foods, Inc., Docket No. 04-66. Certiorari granted Feb. 22, 2005. Rulings below: 339 F.3d 894 (9th Cir. 2003); 360 F.3d 274 (1st Cir. 2004).

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