BulletProofBlog the blog on crisis communications

One of the most eagerly awaited and potentially far reaching Supreme Court decisions in many years could end in a draw, and that would be bad news for any business now regulated by the federal government.

Wyeth v. Levine involves a Vermont woman who lost her hand after an intravenous anti-nausea drug was improperly administered. She sued, and a state court awarded her damages, even though the company that makes the drug, Wyeth, argued that it wasn' t the drug, but rather the way it was improperly injected, that caused the injury.

The issue now before the Supreme Court is federal "preemption." Since the drug was approved by the FDA, Wyeth argued that federal law automatically takes precedence over any state court ruling. With state regulators, especially attorneys general, on the prowl for new causes to pursue, preemption is no small matter for any company whose products or services are regulated at the federal level.

State attorneys general have made no secret of the fact that they are on the lookout for the next billion dollar tobacco settlement. If the Vermont decision is allowed to stand and federal preemption is weakened or eliminated, look for a chaotic 50 state regulatory assault on companies in all sorts of regulated industries. Unfortunately, because of a completely unexpected development in this particular case, the Supreme Court may miss the opportunity to step in.

Since the Levine case was argued last fall, Wyeth has accepted a $68 billion buyout offer from Pfizer. And it turns out that Chief Justice John Roberts owns some Pfizer stock. Since the eventual outcome of the case could have an impact on Wyeth' s market value, this creates a potential conflict of interest. As a result, Roberts may choose not to take part in the Court' s decision. That could force a four-four tie, allowing the Vermont court ruling to stand.

Last year, Roberts did decide to sit out another case involving Pfizer, resulting in a tie vote.  Roberts has offered no hint of his intentions this time around, but if he decides not to take part in the Levine decision and his fellow justices again split 4-4, the Court will have missed an opportunity to clarify an important legal issue. But even worse, hungry state regulators will have a clear shot at a wide range of regulated businesses, an opportunity you can bet they will seize at the first chance they get.