Legal News for Fri 5/10 - Xtandi Cost Cut, Lawsuit Against Iowa Immigration Law, Musk Potential SEC Testimony, ABA Shift on Bar Exam Alts and FERC's New Rules

Minimum Competence

This Day in Legal History: Corporations Are “Persons” Under 14th Amendment

On May 10, 1886, the U.S. Supreme Court delivered a landmark decision in the case of Santa Clara County v. Southern Pacific Railroad Company, fundamentally altering the legal landscape for corporations in the United States. This ruling established that corporations were to be considered "persons" under the Fourteenth Amendment and were thus entitled to equal protection rights under state law. The decision arose from a dispute involving Santa Clara County and the Southern Pacific Railroad, which contested certain tax assessments on the grounds that they were discriminatory against the corporation.

The Supreme Court, without directly addressing the issue in the oral argument or written opinion, allowed the notion that corporations were persons for the purpose of the Fourteenth Amendment to stand, based on a headnote by the court reporter, which was not part of the official opinion. This headnote indicated that the Chief Justice had acknowledged corporate personhood in relation to the amendment during the proceedings. Although it did not form part of the decision, this assertion guided future interpretations of corporate rights in the U.S.

As a result, the ruling provided corporations with expanded protections that had originally been intended to protect the rights of former slaves. Over time, this interpretation has been used to defend corporations in various legal battles, granting them rights comparable to those of individual citizens in many respects. This includes the right to a trial by jury, the right to protection from unreasonable searches and seizures, and the right to free speech.

The implications of the Santa Clara decision have been far-reaching and controversial. Critics argue that it has led to an excessive amount of power being held by corporations, influencing political processes and public policy disproportionately. Supporters, however, see the ruling as essential for ensuring that businesses can operate on a level playing field, free from unfair government interference.

The Santa Clara case remains a pivotal point in legal history, frequently cited in discussions about the balance between corporate power and public control. It opened the door to subsequent legal challenges and rulings that continue to shape the interaction between corporations, individuals, and the government in the United States. The ongoing debates surrounding corporate influence in politics and society trace back to this seminal Supreme Court decision, underscoring its significance in American legal history.

The Biden administration is considering a proposal by Knowledge Ecology International (KEI) and other groups to use U.S. Code § 1498 to seize patents for the cancer drug Xtandi, manufactured by Astellas Pharma, without paying royalties. This move, aimed at reducing the drug's cost, represents a more aggressive stance toward pharmaceutical pricing, leveraging the government's legal abilities to override private patents under specific conditions. Xtandi, costing over $14,000 monthly for uninsured patients, has been a focal point in debates over drug prices.

The proposal suggests that because Xtandi was developed with government grants, existing laws provide a mechanism for the government to authorize generic production without compensating the patent holder. Critics, including former US Patent and Trademark Office head Andrei Iancu, argue that this interpretation distorts patent laws and undermines the Hatch-Waxman Act, which regulates drug patent exclusivities and generic entry. Despite skepticism about the administration adopting this aggressive approach, proponents see it as a viable strategy to control drug prices and alter pharmaceutical company behaviors without the need for compensation, sparking a significant legal and ethical debate on the extent of government intervention in private industry.

Cancer Drug Price-Cutting Pitch Mulled by HHS as Industry Waits

The Biden administration and several civil rights groups, including the ACLU, have filed lawsuits against the state of Iowa to challenge a new law, S.F. 2340, which authorizes the arrest and prosecution of individuals who re-enter the U.S. after deportation. The law, signed by Iowa Governor Kim Reynolds, makes "illegal reentry" into Iowa a criminal offense punishable by up to two years in prison and permits state judges to order deported individuals to return to their home countries. Both the federal government and civil rights organizations argue that this state law unlawfully conflicts with federal immigration law and its established procedures for handling illegal entries and deportations. This Iowa law also fails to exempt individuals with legal status in the U.S., such as asylum seekers and visa holders. This move by Iowa reflects a broader trend among Republican-led states, influenced by similar laws in Texas and recently Oklahoma, aiming to enforce immigration laws due to perceived inaction by the federal government on illegal border crossings. A U.S. appeals court recently blocked a similar law in Texas, citing its inconsistency with federal jurisdiction over immigration matters.

Biden administration, civil groups sue Iowa over immigrant arrest law | Reuters

Elon Musk may be required to provide additional testimony in the SEC’s investigation into his $44 billion acquisition of Twitter. During a court hearing in San Francisco, U.S. District Judge Jacqueline Scott Corley considered the SEC's request to compel Musk to testify, following another judge's earlier ruling in favor of the agency. The SEC is investigating whether Musk violated federal securities laws during his 2022 purchase of Twitter, now renamed X, particularly concerning his stock purchases and related public statements and filings. Musk had previously participated in the investigation via two videoconference sessions and had provided documents. His legal representation argued that further testimony would impose an undue burden on him, given his responsibilities to multiple companies. The judge questioned the argument that Musk's busy schedule should exempt him from compliance with securities laws. This legal battle is part of an ongoing feud between Musk and the SEC that dates back to a 2018 incident where Musk tweeted about having funding secured to take Tesla private.

Elon Musk may be compelled to testify again in SEC's Twitter takeover probe | Reuters

The American Bar Association (ABA) is considering endorsing alternative pathways to lawyer licensing that do not involve passing the traditional bar exam, signaling a significant shift from its longstanding pro-exam stance. This reconsideration is spurred by a task force formed to evaluate the ABA’s existing policies, which since 1921 have primarily supported the bar exam as a requisite for legal practice. The draft policy, set for discussion on May 17, encourages states to develop diverse licensing methods. This change comes in response to actions by states like Oregon and Washington, which have already implemented alternatives such as apprenticeships and skills coursework to bypass the bar exam. The ABA's move aligns with efforts to address racial and socioeconomic disparities in bar exam pass rates, which show significantly lower success rates among minority test takers. The National Conference of Bar Examiners acknowledges the ABA's new direction as it prepares to launch a revised bar exam in 2026, highlighting the ongoing evolution in standards for entering the legal profession.

Bar exam alternatives, long out of favor with ABA, make inroads | Reuters

The U.S. Federal Energy Regulatory Commission (FERC) is set to finalize two significant rules aimed at enhancing the planning and funding mechanisms for long-distance electric transmission lines. These rules are designed to facilitate the development of a more robust national power grid and address the increasing demand driven by renewable energy sources and electric vehicles. The first rule mandates regional grid planners to develop at least 20-year plans that consider a broad range of benefits, updating the less effective 2011 guidelines. The second rule potentially allows FERC to issue permits for transmission lines even if they are denied by states, focusing on national interest corridors identified by the Department of Energy.

The proposed rules have sparked concerns regarding the traditional role of state regulators in siting and permitting transmission lines and the potential sidelining of competitive bidding processes, which some argue could increase costs and project delays. However, proponents argue that the new rules will facilitate much-needed investment in the transmission infrastructure necessary to meet future energy demands and reduce longstanding disparities in regional transmission capabilities. The discussion is also heavily centered around equitable cost allocation, aiming to distribute costs in alignment with the derived benefits, a topic that has historically been contentious and frequently litigated. These regulatory changes are occurring amidst broader administrative efforts to modernize and expand the U.S. electric grid to support a clean energy future.

Transmission Rules to Back Planning of Long-Range Power Lines

This week’s closing theme is by Bedřich Smetana.

Bedřich Smetana, a towering figure in Czech music, stands as one of the pioneering composers of the 19th century, especially noted for his development of a distinctly Czech musical style. Born on March 2, 1824, in Litomyšl, now part of the Czech Republic, Smetana was a child prodigy in both violin and piano. He grew up immersed in a rich cultural atmosphere that fueled his passion for music, leading him to compose from an early age.

His early career was marked by the struggle for recognition, balancing a desire to compose with the need to earn a living as a teacher and conductor. Despite these challenges, Smetana's nationalist spirit found expression in his music, which often incorporated Czech folk themes and stories. By the 1860s, he had established himself as a central figure in Prague's musical life, becoming the principal conductor of the Provisional Theatre, where he championed the cause of Czech music.

Smetana's personal life, however, was fraught with tragedy. He suffered the loss of his beloved wife and some of his daughters, and later, he was struck with deafness. Yet, these personal hardships only deepened the emotional depth of his compositions. One of his most famous works, "Má vlast" ("My Country"), is a cycle of six symphonic poems that celebrates the Czech landscape, history, and legends.

Among these poems, "Vltava" (known in German as "Die Moldau") is perhaps the most internationally celebrated. It beautifully captures the course of the Vltava River as it flows through the Bohemian countryside, underlining Smetana's mastery of orchestral color and melodic contour. This piece serves as a vivid sonic portrait of the Czech landscape, intertwining folk music with the river's thematic journey through the countryside.

Today, as we conclude our week, we turn to this poignant piece from Bedřich Smetana's "Má vlast." Without further ado, "Vltava," or "The Moldau," from Bedřich Smetana's symphonic poems "Má vlast" or "My Country."

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