Finance cases dominate Supreme Court’s December session

The Supreme Court will return for its final argument session of the year Monday, hearing several major finance and administrative law disputes.

Among the highlights of the two-week session include the Justice Department’s bid to block Purdue Pharma’s bankruptcy deal, and a couple’s attempt to strike down a key provision in Republicans’ 2017 overhaul of the tax system.

As the justices take the bench for the seven scheduled arguments, they are also weighing whether to take up a number of major cases for later in the term.

The court, during its Dec. 8 closed-door conference, is scheduled to consider whether to take up the legal battle over mifepristone, the common abortion pill. The justices have also been sitting on petitions implicating the Biden administration’s now-defunct vaccine mandates for federal employees and the military, among others.

Here’s a look at three arguments set to headline the upcoming session.

2017 tax bill challenge

On Dec. 5, the Supreme Court will contemplate what may seem like a simple question: What is income?

Specifically at issue is the constitutionality of a tax enacted as part of the sweeping 2017 tax law passed by Republicans and championed by then-President Trump.

But experts and advocates on both sides of the issue are closely monitoring the case for how the decision could impact a broader set of policy proposals, including a federal wealth tax.

The mandatory repatriation tax at issue imposed a one-time tax on Americans who owned shares in foreign corporations, based on the corporation’s earnings over the preceding three decades, even if the corporation didn’t distribute those earnings to the taxpayer.

The Constitution requires that direct taxes be apportioned among the states based on population, but the 16th Amendment provides a carveout for income taxes.

Charles and Kathleen Moore are seeking a refund of roughly $15,000 in taxes they said they were required to pay over their investment in an Indian company that supplies farmers in impoverished regions with tools and equipment.

The Moores say the tax is unconstitutional because they didn’t realize any income, as the couple never received any dividends or payments from the company.

The case has also been thrust into the ethics crosshairs at the Supreme Court.

Democrats and some activist groups have called for Justice Samuel Alito, one of the court’s conservatives, to recuse.

Alito sat down with one of the Moores’ attorneys for two interviews that were published in The Wall Street Journal’s opinion section, in which Alito said Congress had no authority to regulate the court, apparently responding to Democrats’ push for ethics legislation.

The conservative justice, who regularly recuses himself from cases when he has financial investments with one of the parties, said there is no valid reason for his recusal in this case.

“Similarly, many of my colleagues have been interviewed by attorneys who have also practiced in this Court, and some have co-authored books with such attorneys. Those interviews did not result in or require recusal,” Alito wrote in September.

The case is Moore v. United States.

Purdue Pharma bankruptcy

On Dec. 4, the Supreme Court will consider what some experts have described as one of the most important corporate bankruptcy disputes in decades.

Purdue Pharma, the maker of prescription painkiller OxyContin, filed for bankruptcy in 2019 as it faced thousands of lawsuits in connection with the opioid crisis.

The company’s reorganization plan would have the wealthy Sackler family, who previously controlled Purdue Pharma, contribute up to $6 billion to the settlement in exchange for being released from civil liability.

About 95 percent of creditors — which include personal injury victims, states and various governmental entities, among others — voted to approve the plan, court filings show.

But the U.S. Trustee Program, a component of the Justice Department that serves as a watchdog in bankruptcy cases, is bringing its objections over the Sackler releases to the Supreme Court.

The trustee contends the Bankruptcy Code does not allow courts in Chapter 11 cases to approve reorganization plans that release liability for nondebtors like the Sackler family, who did not themselves file for bankruptcy, without the consent of all creditors.

In August, the Supreme Court paused the bankruptcy settlement on an emergency basis as the justices agreed to take up the case in full.

The Justice Department, backed by a single claimant and another representing a group of Canadian municipalities, are now attempting to block Purdue Pharma’s reorganization plan on the merits.

The issue has attracted significant interest, with many noting the case’s potential impacts on other large corporate bankruptcies.

The case is Harrington v. Purdue Pharma L.P.

SEC administrative law

The Supreme Court this term is hearing several major cases that could dramatically reel in bureaucratic power.

After hearing arguments in a challenge to the Consumer Financial Protection Bureau in October, next in the justices’ lineup of administrative law cases is one that challenges certain in-house enforcement proceedings brought by the Securities and Exchange Commission (SEC) as unconstitutional.

On Wednesday, the Biden administration will attempt to defend the SEC before the justices.

George Jarkesy, who was found to have violated federal securities laws by misrepresenting his hedge funds to investors, contends the SEC’s setup of using administrative law judges violated his constitutional rights in three different ways.

Jarkesy first contends the setup violates his Seventh Amendment right to a jury trial.

He also argues that Congress impermissibly delegated legislative power by giving the SEC authority to decide whether to bring civil penalties. Finally, Jarkesy asserts that SEC administrative law judges’ double for-cause removal protections are unconstitutional.

A Justice Department loss on any of the three issues could claw back the SEC’s ability to use administrative law judges to secure penalties and take other enforcement actions.

The case is SEC v. Jarkesy.