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Pocketbook Justice

Supreme Court Cases That Could Affect Your Wallet

When the U.S. Supreme Court opened its 2009 term on Oct. 5, there was of course one conspicuous change: Sonia Sotomayor had taken her place as the first Hispanic justice, filling the seat of the retired David Souter. How this historic switch may affect the court, which according to many legal experts has become increasingly pro-business, will receive close attention from the media and the legal community this fall as oral arguments are heard, and again next spring when opinions are released.

The Supreme Court will decide a number of cases with potentially serious consequences for older Americans, especially for their wallets. These matters, which AARP has addressed or plans to address in friend of the court briefs, deal with everything from debt collection and bankruptcy to securities fraud and mutual fund fees. For instance, NRG Power Marketing v. Maine Public Utilities may affect the cost of consumers’ utility bills, of special concern for those with low or fixed incomes. Perdue, Governor of GA v. Kenny A. deals with what constitutes reasonable attorneys’ fees. And Conkright v. Frommert will zero in on questions related to the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that governs the administration of most private pension and health plans. One issue under review: Is a retirement plan administrator or a court better suited to decide who gets how much, and when, under a pension plan with disbursement terms that employees dispute?

One important case involves an intellectual property dispute that at first glance has no relevance for most older Americans. Technically, Bilski v. Kappos concerns a very narrow question: May someone patent a method of hedging risks in trading commodities, or does such an invention, as an examiner with the U.S. Patent and Trademark Office ruled, merely manipulate an “abstract idea” and solve a purely mathematical problem, making it unworthy of patent protection? Hardly the equivalent, it would seem, of court battles over advance directives or other issues typically linked with age.

Still, the outcome of Bilski may end up saddling consumers with higher fees for services ranging from financial planning to medical tests. The reason: The case raises the broader issue of whether certain business methods and mathematical formulas can be patented.

If the high court says yes, the cost of patent protection may, for example, be passed along to those hoping to use certain retirement plan and tax strategies. Similarly, if one doctor controls the method for diagnosing a disease, patients of other physicians may be denied access to that method—a situation that a trio of consumer groups warned in a friend of the court brief could inhibit timely and appropriate medical care.

Other cases awaiting consideration—including a pair of securities-related matters—are more straightforward. In fact, Jones v. Harris Associates L.P. prompted a Wall Street Journal columnist to observe that this case is a rarity for one notable reason: It’s seldom, he wrote, that anything the Supreme Court considers hits people “right in the pocket.”

But this case may affect the wealth of those 93 million Americans invested in mutual funds. It addresses the way fund companies decide what fees to charge and whether some of those fees are excessive—a matter important to every investor because even slightly higher fees can significantly lower total returns. By way of example, a Department of Labor study compared two 401(k) plans with starting balances of $25,000, each earning 7 percent over 35 years without additional contributions. A plan with fees and expenses of 0.5 percent annually and a second plan with 1.5 percent will yield an account balance difference of $64,000, or 28 percent, the study found.

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