Sotomayor: A Moderate on Business Issues

Supreme Court nominee Sonia Sotomayor's record is mixed on issues important to the business community

Federal Appellate Judge Sonia Sotomayor, nominated May 26 by President Barack Obama to the U.S. Supreme Court, has earned a centrist reputation in business cases: In 1995, she sided with Major League Baseball players in a confrontation with owners over free agency and arbitration, but 11 years later she rejected a petition by millions of investors that alleged rigging of initial public offerings in the dot-com boom.

The 54-year-old Sotomayor was first appointed to the federal bench by President George H.W. Bush in 1992. Six years later, President Bill Clinton elevated her to the U.S. Court of Appeals for the Second Circuit.

Rulings on Punitive Damages

"Judge Sotomayor has a track record of moderation on issues of importance to the business community," said Evan M. Tager, an appeals specialist at Mayer Brown in Washington, D.C.

One issue certain to be raised by conservative U.S. senators in the confirmation process is the issue of punitive damages in civil suits. Tager, whose firm examined the records of the handful of top candidates to succeed retiring Justice David Souter, says that on the bench Sotomayor has "expressed unease" about large punitive awards, yet has upheld large awards "when the ratio of punitive to compensatory damages is modest."

Souter himself voted against what critics called excessive punitive awards. Thomas H. Dupree Jr., an appellate lawyer with Gibson, Dunn & Crutcher, said he expects Sotomayor to "recognize the need to rein in arbitrary and excessive punitive damage awards."

Such a position fits with the alignment of the court on business issues. In social and civil cases, the court has routinely split 4-4, on conservative-liberal lines, with one of the justices serving as a swing vote. But the lines have blurred significantly in business cases. "Based on her record, it is very likely that she will align herself with the more liberal side of the court" on social and civil cases, Dupree said. "[Yet] while no one would call Judge Sotomayor stridently pro-business, there are many business issues that cut across the traditional liberal and conservative ideological lines."

In class actions, Sotomayor has occupied a strict middle ground, her record reflecting sympathy neither for those in favor of such issues, nor skepticism of them. "She looks at each case on its unique facts to determine whether a class action is appropriate," said Tager.

Centrist on Preemption

Another hot-button issue is preemption, or the right of federal courts to step in to cases involving state law. Tager said on this issue, too, Sotomayor has been centrist. "She has been evenhanded in cases raising federal preemption as a defense, finding preemption about half of the time and rejecting preemption about half of the time," Tager said.

In the 1995 baseball case, Sotomayor earned high marks from players when she ruled that owners could not unilaterally discard the two-decade-old system of free agency. In the 2006 case, she voted not to allow dot-com investors to sue to recover fees they said they wrongly paid to banks in initial public offerings, a victory hailed by Wall Street.

On discrimination in employment, Sotomayor has probably sided more with employees than employers, but has been "balanced overall," said Patricia Millett, co-leader of Akin Gump Strauss Hauer & Feld's Supreme Court and appellate practice.

On environmental law, Sotomayor was reversed by the U.S. Supreme Court in a high-profile case in which she ruled that a law requiring companies to use the best available technology to prevent endangered animals from being sucked into water intakes in power plants, for example, meant just that.

Millett said that decision does not necessarily indicate a hard-line attitude by Sotomayor toward the environment. "She was taking the statute at its word, so I don't think you can really read much into it," Millett said.

After graduating from Yale Law School and spending five years as an assistant state prosecutor in Manhattan under famed DA Robert Morgenthau, Sotomayor spent not quite a decade in private practice—from the mid-1980s to the early 1990s. At New York-based Pavia & Harcourt, which emphasizes its international commercial practice and counts international companies and French and Italian government agencies among its clients, she focused in part on copyright, patent, and other intellectual-property law and antitrust issues. With intellectual-property cases increasingly significant on the Supreme Court's docket, Millett said, "It's incredibly important for the court to have someone with a background like that."

LeVine is a correspondent in BusinessWeek's Washington bureau. Francis is a correspondent in BusinessWeek's Washington bureau.