Administrative Procedure -- active



American Chemistry Council v. EPA   (D.C. Circuit)

Protecting against the waiver of confidentiality of business information

On November 15, 2023, the NAM filed an amicus brief asking the D.C. Circuit to review an EPA rule concerning the treatment of confidential business information reported to or obtained by EPA under the Toxic Substances Control Act. TSCA requires EPA to maintain an inventory of chemicals manufactured, imported, and processed in the United States for non-exempt commercial purposes. Accordingly, companies must report a new chemical substance or a new use of an existing substance to EPA. Companies that manufacture the substance can claim confidentiality for the submitted information when reporting to EPA.

In this case, EPA's final rule allows third-party waivers of TSCA’s confidentiality protections when a third party, such as a chemical customer or processor, reports a new use of a substance that a manufacturer claimed was confidential. This could allow downstream customers or processors of a chemical who submit information to EPA to waive manufacturers’ confidentiality claims and rights. We argue in our amicus brief that TSCA does not authorize third party waiver of a manufacturer’s confidentiality protections in the fashion contemplated by EPA in its final rule. Protecting confidential business information is important to the competitive strength of the chemical industry to bring innovative solutions and new products to market. Making confidential business information freely available to other companies will disincentivize companies from investing in product development.


Related Documents:
NAM brief  (November 15, 2023)

 

Chamber of Commerce of the United States of America v. SEC   (6th Circuit)

Whether the SEC violated the APA in rescinding its 2020 proxy advisory firm rule

On June 27, 2023, in a parallel case to the NAM’s challenge to the SEC’s 2022 recission of the 2020 proxy firm rule, the NAM filed an amicus brief urging the 6th Circuit to reverse the district court grant of summary judgment for the SEC and vacate the SEC’s recission of the rule. As in our case, the U.S. Chamber of Commerce, Business Roundtable and Tennessee Chamber of Commerce and Industry brought this challenge to the 2022 rescission arguing that it is both substantively arbitrary and capricious and was adopted without observance of the Administrative Procedure Act’s mandated rulemaking procedures. Both cases seek to have the 2022 recission vacated. Our amicus brief expands on the appellants’ position that the concerns about proxy firms that animated the 2020 proxy firm rule have not abated, that the SEC failed to provide meaningful opportunity for comment prior to rescission of the 2020 rule, and that the SEC’s policy reversal is arbitrary and capricious.


Related Documents:
NAM brief  (June 27, 2023)

 

Chamber of Commerce of the United States of America v. SEC   (U.S. District Court for the Middle District of TN)

Whether the SEC violated the APA in rescinding its 2020 proxy advisory firm rule.

On September 30th, the NAM filed an amicus brief urging the Middle District of Tennessee to vacate the SEC’s recission of the rule. As in our case, plaintiffs U.S. Chamber of Commerce, Business Roundtable, and Tennessee Chamber of Commerce and Industry, brought this challenge to the 2022 rescission arguing that it is both substantively arbitrary and capricious several times over and was adopted without good-faith observance of the Administrative Procedure Act’s mandated rulemaking procedures. Both cases seek to have the 2022 recission vacated ahead of the 2023 proxy season. Our amicus brief expands on the plaintiffs’ position that the concerns about proxy firms that animated the 2020 proxy firm rule have not abated, that the SEC failed to provide meaningful opportunity for comment prior to rescission of the 2020 rule, and that the SEC’s policy reversal is arbitrary and capricious.

Unfortunately, on April 24, 2023, the court denied the plaintiffs' motion for summary judgment and granted the SEC's cross-motion.


Related Documents:
NAM brief  (September 30, 2022)

 

Earthworks v. Department of Interior   (D.C. Circuit)

Protecting the availability of critical mineral production

On July 27, 2023, the NAM filed an amicus brief in support of the government's and intervenors' position that mining law authorizes mining companies to use more than one mill site--nonmineral land used for mining support activities--per plot of land the companies seek to mine if no individual mill site is larger than five acres. Multiple mill sties are necessary to support mining. We argue that critical minerals obtained from mining play an important role in manufacturing, providing crucial inputs needed to make electric vehicles, batteries, computers and a wide range of other products. Reduced production of critical minerals would undermine U.S. national security interests by making the core military apparatus dependent on foreign sources of critical minerals. Reduced production of critical minerals would also produce worse environmental and safety outcomes by making less critical minerals available for the U.S. to develop a reliable renewable energy network and allowing nations that have weaker environmental and labor standards to dominate the critical mineral market.


Related Documents:
NAM brief  (July 27, 2023)

 

Medical Imaging & Technology Alliance v. Library of Congress   (D.C. Circuit)

Preserving the reviewability of executive action

On June 9, 2023, the NAM filed an amicus brief urging the D.C. Circuit to reverse the dismissal of an Administrative Procedure Act (APA) challenge to a final rule issued by the Librarian of the Library of Congress for lack of jurisdiction. The final rule exempts from copyright liability third-party service companies that circumvent technological protective measures for the purpose of diagnosing and repairing software-enabled medical devices, including MRI, CAT scan and X-ray machines. The trial court found that it lacks jurisdiction to consider the APA challenge because the Library of Congress is exempt from the APA.

We argue in our brief that allowing third-party repair of manufacturers’ products poses a danger to consumers and exposes companies’ intellectual property to theft by competitors. The APA authorizes judicial review of the Librarian's actions when the Librarian exercises rulemaking authority.


Related Documents:
NAM brief  (June 9, 2023)

 

National Association of Manufacturers & National Gas Services Group, Inc. v. U.S. Securities and Exchange Commission   (5th Circuit)

Whether the SEC violated the APA in rescinding its 2020 proxy advisory firm rule

In 2022, the NAM appealled the district court’s grant of judgment to the SEC on the NAM’s claims challenging the SEC’s rescission of the 2020 proxy firm rule. We argue in this appeal that the district court failed to engage on the substance of the NAM’s claims that the SEC failed to justify its rescission and to give the public a meaningful opportunity to comment in violation of the Administrative Procedure Act.


Related Documents:
NAM Reply Brief  (March 13, 2023)
Amicus brife of US Chamber and BRT  (January 13, 2023)
Amicus Brief of Former SEC Officials  (January 13, 2023)
Amicus Brief of the Society for Corporate Governance  (January 13, 2023)
NAM brief  (January 6, 2023)

 

National Association of Manufacturers & Natural Gas Services Group, Inc. v. U.S. Securities and Exchange Commission   (W.D. Tex.)

Whether the SEC violated the APA in rescinding its 2020 proxy advisory firm rule

In July 2022, the SEC issued a final rule to rescind the 2020 critical reforms subjecting proxy advisory firms—unregulated third parties with outsized influence on shareholder votes and manufacturers’ corporate governance policies—to reasonable SEC oversight just like every other participant in the securities markets. The NAM sued the SEC in the Western District of Texas arguing that the 2022 recission is arbitrary and capricious as well as procedurally defective. We have asked the court to vacate the 2022 recission in its entirety and declare that the recession is unlawful and void.

Unfortunately, on December 4, 2022, the court denied the NAM’s motion for summary judgment and granted the SEC's cross-motion.


Related Documents:
Decision  (December 4, 2022)
NAM Reply brief  (November 4, 2022)
SEC Opposition  (October 21, 2022)
NAM Motion for Summary Judgment  (September 9, 2022)
Complaint  (July 21, 2022)

 


Antitrust -- active



FTC v. Amgen   (N.D. Ill.)

Challenging the FTC’s speculative theory of anticompetitive conduct

On August 28, 2023, tthe NAM filed an amicus brief opposing the FTC’s attempt to block Amgen’s merger with Horizon, the sole manufacturer of two unique FDA-approved medicines for thyroid eye disease and chronic refractory gout. Even though Amgen and Horizon are not competitors, the FTC seeks to prevent the merger based on the speculative theory that hypothetical new competitors to Horizon’s products might achieve regulatory approval at some undetermined time in the future and that Amgen may then engage in price discounting practices to limit competition.

We argue in our brief that the FTC’s speculative theory of competitive harm is unsupported by antitrust law. Adopting the FTC’s theory would harm competition and consumers by chilling merger activity--due to uncertainty over what activity the FTC could construe as anticompetitive--which could result in further innovation and efficiencies.

Fortunately, on September 1, 2023, the parties reached an agreement on a consent order to resolve the case and allow Amgen to continue with its acqusition of Horizon.

 


Civil Procedure -- active



E. Ohman J:Or Fonder AB v. Nvidia Corporation   (9th Circuit)

Preserving the heightened pleading requirements under the PLSRA

On October 20, 2023, the NAM filed an amicus brief urging the full 9th Circuit to enforce the robust pleading standards required by the Private Securities Litigation Reform Act (PSLRA) to assert a securities fraud claim. Public companies, including many NAM members, are often the targets of frivolous securities litigation. The PSLRA created a heightened pleading standard for bringing securities fraud suits. Nevertheless, a 9th Circuit panel allowed the plaintiffs in this case to rely on an expert’s post hoc analysis to support their securities fraud claim without alleging with particularity the contents of any internal report or data source that would have put the defendant’s executives on notice that their public statements about who was purchasing the company’s gaming processing units were false or misleading when made.

We argue in our amicus brief that the full 9th Circuit should rehear this case. The panel’s decision will create a playbook for securities plaintiffs to evade the PSLRA’s stringent pleading requirements by pointing to post-hoc, made-for-litigation expert opinions resting on unreliable assumptions and devoid of any basis in internal company data.

Unfortunately, on November 15, 2023, the 9th Circuit declined to rehear the case.

 


Class Actions -- active



In re HIV Litigation   (9th Circuit)

Pushing back on inflated class actions

Yesterday, the NAM filed an amicus brief urging interlocutory review of a district court’s flawed class certification ruling that artificially inflated the size and scope of the putative class by allowing the named plaintiffs to (1) bring antitrust claims under the laws of states where they neither reside nor were injured, and (2) to seek “umbrella damages”—damages for paying for a competitor’s product because a generic drug was unavailable. In this case, In re HIV Antitrust Litigation, the named plaintiffs alleged that defendants engaged in anticompetitive conduct that prevented generic drug companies from selling cheaper HIV drugs. Ignoring the Supreme Court’s and other California district courts’ precedent, the district court here concluded that whether a named plaintiff can bring class claims under the laws of a state where they neither reside nor were injured should be considered under the typicality or adequacy requirements of Rule 23, not as a threshold Article III standing issue. According to the court, the named plaintiffs satisfied those requirements by asserting individual claims sufficiently like the antitrust or consumer protection claims under the laws in states where they neither reside nor were injured. And the damages class could include individuals who purchased competitor HIV drugs, not defendants’ HIV drug, because the alleged anticompetitive conduct could have been the proximate cause for those individuals paying more for competitor HIV drugs.

The NAM filed an amicus brief in support of the pharmaceutical defendants’ petition for interlocutory review emphasizing that plaintiffs seeking to represent a class must have Article III standing to bring each claim asserted. Here, the district court erred by following the minority approach, holding that whether a plaintiff can assert claims under laws of states other than those where the plaintiff resides or was injured is an issue of adequacy or typicality. Further, the district court artificially enlarged the class size by including in the class those who bought products from the defendants’ competitors, not defendants. As we explain in our brief, the 9th Circuit should grant the petition to protect “the courts and defendants from prolonged, expensive litigation, as well as abusive, in terrorem settlements driven by defendants’ risk aversion, not justice.” All manufacturers have an interest in ensuring that class certifications are properly tailored to concrete claims and that aggregating litigation does not distort outcomes that would have resulted had the litigants filed their claims individually.


Related Documents:
NAM brief  (October 18, 2022)

 

Xavier, et al. v. Evenflo Co., Inc. et al.   (1st Circuit)

A Concrete Injury is Required for Article III Standing

Last Friday, the NAM filed an amicus brief in the 1st Circuit asking the court to affirm dismissal of a putative class action where the proposed class members sustained no concrete harm. In this case, Xavier, et al. v. Evenflo Co., Inc., et al., the class alleged a purely economic injury—that they would not have purchased defendant’s booster seat or would have paid less for it had they known about the seat’s purported safety risks for children weighing under a certain amount. But each member of the proposed class received the full benefit of the bargain: they paid for a booster seat, they received a booster seat, and they used the booster seat without suffering any harm. Accordingly, the District of Massachusetts dismissed the claims for failing to allege a cognizable injury. The instant appeal followed.

As NAM’s brief explains, no-injury class actions can wreak havoc on the judicial system. They often lead to prolonged litigation, vacuous settlements that provide no real benefits to the class, and outcomes inconsistent with product liability and other substantive areas of law. Despite the U.S. Supreme Court’s recent holding in TransUnion v. Ramirez—"under Article III, an injury in law is not an injury in fact,”— class counsel around the country continue to bring cases under inventive damage theories, suggesting that the discovery of a potential defect or an alleged misrepresentation, even if it never caused physical harm, created a theoretical risk of harm and an undefined economic loss for the entire class based on that unrealized risk. Here, the district court properly applied the law and dismissed the claims because the plaintiffs made no showing in their pleadings that they suffered any real-world harm. The 1st Circuit should affirm that ruling to rein in abusive class actions and ensure that judicial resources are spent on claims involving actual injuries.

Unfortunately, on November 23, 2022, the 1st Circuit held that the plaintiffs have standing to seek monetary relief and remanded the case for further proceedings.


Related Documents:
NAM brief  (July 29, 2022)

 


Contracts -- active



Industrial Specialists, LLC v. Blanchard Refining Co. LLC & Marathon Petroleum Co. LP   (Texas Supreme Court)

Where businesses expressly agree to indemnification, their agreement controls under fundamental principles of contract law

The NAM filed an amicus brief in the Texas Supreme Court concerning the interpretation and enforceability of indemnity provisions in contracts between sophisticated commercial entities. In this case, the owner and operator of an oil refinery contracted with a large industrial contractor to perform specialty work. In the contract, the contractor agreed to indemnify the owner for losses or other liabilities due to bodily injury claims in connection with the contractor’s work. The owner was later sued after some of the contractor’s employees were injured. Although the owner reached a settlement with the injured workers, the contractor refused to participate in that settlement or honor its indemnity obligations. The owner filed suit, and the contractor moved for summary judgment, arguing that the owner had forfeited its contractual rights by settling with the workers. That motion was denied, and the instant interlocutory appeal followed.

Manufacturers consistently enter into contracts, like the general services agreement at issue in this case, with indemnification provisions governed under Texas law. The ability of sophisticated private parties to negotiate the allocation of risks and potential liability through contract is crucial to manufacturers’ business interests. The NAM’s brief argues that fundamental principles of contract law require Texas courts to honor the contractor’s express agreement to indemnify. The contractor’s position here would disrupt countless contracts between commercial parties and severely disincentive personal injury settlements, unnecessarily wasting judicial resources. Happily, on December 10, 2021, the court agreed to hear the case.


Related Documents:
NAM brief  (November 5, 2021)

 


Discovery -- active



In re Fluor Intercontinental, Inc. et al.   (4th Circuit)

Protecting privileged communications

The MCLA filed an amicus brief in support of Fluor Corporation's petition to the Fourth Circuit Court of Appeals seeking review of a trial court order requiring Fluor to produce privileged communications related to an internal investigation because they had been disclosed to the government pursuant to a regulatory requirement. Under the Federal Acquisition Regulation Mandatory Disclosure Rule (MDR), federal contractors must timely disclose instances in which the contractor has credible evidence that an employee has violated certain criminal laws or the civil False Claims Act. While investigating an employee's actions, Fluor found “credible evidence” of misconduct, and reported the conclusions of its investigation to the Defense Department pursuant to the MDR. That employee then sued Fluor, asserting defamation and other claims, and sought Fluor’s internal investigative files in discovery. Fluor objected on the basis that the files were protected by the attorney-client privilege and attorney work product doctrine. The district court held that Fluor’s governmental disclosure had waived privilege because it made a set of statements as part of its MDR disclosures that were “legal conclusions, . . . which only a lawyer is qualified to make,” and because Fluor had inadvertently characterized these disclosures as “voluntary” in filings before the court. Fluor sought emergency relief in the form of a writ of mandamus, and on March 6, 2020, the MCLA filed a coalition amicus brief arguing that the trial court's order poses significant adverse consequences for manufacturers in numerous regulated industries, and may ultimately chill participation in voluntary and mandatory disclosure and compliance programs. On March 13, 2020, while denying our motion to participate as amicus, the Court granted mandamus review indicating that the district court’s decision was “clearly and indisputably incorrect.”


Related Documents:
NAM brief  (March 6, 2020)

 


Energy -- active



Arizona Public Service Co. v. Arizona Corp. Commission   (Arizona Court of Appeals)

Manufacturers need reliable and affordable electric service

On August 17, the NAM filed an amicus brief urging the Arizona Court of Appeals to overturn a decision by the Arizona public utilities regulator to prevent Arizona Public Service Co.—the largest electric utility in the State—to recoup the cost of prudent capital investment in emissions-reduction technology. This case, Arizona Public Service Co. (APS) v. Arizona Corporation Commission, involves a reasonable investment by APS to install EPA-required emission controls for one of its coal power plants. The utilities regulator, Arizona Corporation Commission, acknowledged the significant costs involved in the project (nearly $370M) and found the plan prudent. After the plant had helped to preserve the reliability of Arizona’s electrical grid for several years, APS retired that plant. Despite its assurances that the investment was prudent when made, the Commission reversed course, adopting a new “planning imprudence” standard and disallowing over $200M of APS’s investment.

The NAM filed an amicus brief in support of APS’s appeal to the Arizona Court of Appeals. Our brief argues that the Commission’s new standard violates both administrative and constitutional law. First, by altering the prudence standard without engaging in formal rulemaking, the Commission violated the Arizona Administrative Procedure Act. Second, by excluding the costs of the emissions-reduction technology, the Commission flouted its constitutional mandate to set “just and reasonable rates” that are “related to” the fair value of the property used to generate electricity. The court should reject the Commission’s hindsight-biased approach which judged APS’s reasonable investment decision in light of later, unpredictable developments. Without the court’s intervention, the reliable and affordable power depended upon by manufacturers and consumers alike will be undermined.


Related Documents:
NAM brief  (August 17, 2022)

 

Enbridge Energy Ltd. Partnership, et al. v. Whitmer, et al.   (W.D. Mich.)

Federal government's exclusive role in regulating pipeline safety

On February 1, 2022, the NAM filed an amicus brief in support of Enbridge Energy’s lawsuit seeking to prevent Michigan from revoking its easement and shutting down its Line 5 pipeline. Enbridge has operated the Line 5 pipeline—which originates in Wisconsin, passes through Canada, and transports light crude and natural gas liquids into Michigan since 1953. In 2020, Michigan unilaterally revoked and terminated the nearly 70-year old easement because Enbridge had purportedly violated the public trust doctrine due to the risk of an anchor strike and potential rupture. Various lawsuits followed, including the current case, Enbridge Energy Ltd. V. Whitmer, in which Enbridge is seeking summary judgment in the Western District of Michigan on its claims that Michigan’s actions (1) are preempted by the Pipeline Safety Act and (2) violate the Foreign Affairs Doctrine.

The NAM’s amicus brief emphasizes the federal government’s exclusive role in regulating pipeline safety under the Pipeline Safety Act (49 U.S.C. § 60104). We further argued that permitting Michigan to shut down an international pipeline governed by treaty would undermine the U.S. government’s exclusive authority over transboundary pipelines, unduly burden international commerce, and weaken the federal government’s ability to speak with one voice on foreign affairs. Manufacturers have a shared interest in preventing novel attempts by states to force closure of vital pipelines based on speculative risks and despite significant economic impacts.


Related Documents:
NAM brief  (February 1, 2022)

 


Environmental -- active



United States v. Denka Performance Elastomer LLC   (E.D. La.)

Preserving the chemical risk assessment process

On August 14, 2023, the NAM requested permission to file an amicus brief in an enforcement action the EPA commenced in the Eastern District of Louisiana under the Clean Air Act to compel Denka Performance Elastomer to limit its chloroprene emissions or cease production of the chemical. Chloroprene is a chemical used to manufacture synthetic rubber. The EPA brought this action, based on its Integrated Risk Information System (IRIS) value for chloroprene and view that the IRIS value demonstrates that the emissions from Denka’s plant exceeding that value present an imminent risk of harm to the public.

We argue in our brief that IRIS values are neither statutes nor regulations and therefore the values are an improper basis for an enforcement action. IRIS simply assists the EPA in developing its emissions standards and other related rules under the Clean Air Act to assess the possible health effects of chemical exposure; IRIS does not definitely measure adverse effects of exposure. If the use of IRIS values for an enforcement action is condoned, companies could be subject to liability for their chemical emissions levels even if compliant with statutes, regulations and permit requirements.

Unfortunately, on August 16, 2023, the district court denied our motion for leave to file an amicus brief.


Related Documents:
NAM brief  (August 14, 2023)

 

Air-Conditioning, Heating & Refrigeration Institute, et al. v. U.S. EPA   (D.C. Circuit)

Emergency Compliance Relief for PIP (3:1) rule

The NAM joined with partner organizations to bring a prophylactic challenge to a final rule regulating PIP (3:1)—a persistent, bio-accumulative chemical that is ubiquitous in manufacturing operations and supply chains—under the Toxic Substances Control Act. The rule called for the prohibition of PIP (3:1) on an aggressive timeline that would have severely impacted supply chains for a wide variety of electronics, from cell phones, to robotics used to manufacture semiconductors, to equipment used to move COVID-19 vaccines and keep them at the appropriate temperature. After the NAM coalition files it petition in the D.C. Circuit raising these compliance issues, the EPA agreed to seek additional public input on the rule for a period of 60 days, with a special focus on alternative exposure reduction measures for certain products. The agency also issued a issued a rare “No Action Assurance” to notify regulated industry that it would not enforce the rule for 180 days pending next steps in the rulemaking process to provide longer-term relief. The case is currently in abeyance pending the new rulemaking.


Related Documents:
NAM comments  (May 17, 2021)
NAM Petition for Review  (March 4, 2021)

 

American Chemistry Council v. EPA   (D.C. Circuit)

Risk Management Program litigation

In 2017, the MCLA sued the EPA to challenge the agency’s rule governing risk management plans for chemical facilities and oil refineries. The rule imposed costly and burdensome requirements on facilities that handle hazardous substances without improving worker or community safety. The court stayed the litigation after the EPA delayed enforcement of the rule and proposed a substantive replacement. The EPA then issued a final rule in 2019. The litigation remains stayed pending further orders from the court.


Related Documents:
Petition for review  (March 13, 2017)
Petition to EPA for reconsideration  (February 28, 2017)

 

Baker v. Saint-Gobain Performance Plastics Corp.   (2nd Circuit)

Medical monitoring and economic loss claims in class action lawsuit

A group of individual plaintiffs brought a class action lawsuit against defendant Saint-Gobain Performance Plastics Corp., alleging that Saint-Gobain released perfluorooctanoic acid (PFOA) into groundwater that seeped into the plaintiffs' nearby land. The plaintiffs argued that they are entitled to financial damages to pay for ongoing medical health monitoring because of their alleged exposure to PFOA, and to compensate them for lower property values allegedly caused by the contamination. Saint-Gobain moved to dismiss the complaint because New York law does not recognize claims for medical monitoring absent any evidence of physical harm and does not recognize diminution of property value due to alleged groundwater contamination. The district court denied the motion to dismiss but certified immediate appellate review by the United States Court of Appeals for the Second Circuit. The NAM filed an amicus brief on behalf of Saint-Gobain to ensure that the law limiting medical monitoring and diminution-of-value claims remains appropriately balanced and favorable to manufacturers. Without appropriate limitations on these types of claims, manufacturers would be subject to massive and unwarranted increases in liability exposure.


Related Documents:
NAM brief  (March 1, 2018)

 

City and County of San Francisco v. EPA   (U.S. Supreme Court)

Challenging General NPDES Permit Prohibitions to Protect CWA Permit Shield

On February 12, 2024, the NAM filed an amicus brief asking the U.S. Supreme Court to address whether the Clean Water Act allows the EPA to include generic (and vague) prohibitions in National Pollutant Discharge Elimination System permits that subject permitholders to enforcement for exceedances of water quality standards. A NPDES permit is required to discharge a pollutant through a “point source” into “a water of the United States.” In this case, San Franscisco v. EPA, the 9th Circuit affirmed EPA’s use of a generic prohibition in San Francisco’s NPDES permit for a water treatment facility—stating that water discharge “shall not cause or contribute to the violation of any applicable water quality standard.” This ruling directly conflicts with 2nd Circuit precedent deeming generic prohibitions impermissible and could impact manufacturers’ ability to assert the permit shield defense—a defense that provides protection from liability if a manufacturer is operating under a valid permit and its facility discharges waste in accordance with the permit. Permit operators need specific guidance as to allowable discharges in accordance with the permit.

Our brief urges the Supreme Court to review this case to resolve the circuit split and highlights the key role of the permit shield defense in guarding against citizen suits and unforeseen enforcement actions.


Related Documents:
NAM brief  (February 12, 2024)

 

Commonwealth of Kentucky v. EPA   (D.C. Circuit)

Challenging PM 2.5 NAAQS

On March 6, 2024, the NAM joined a coalition of other major business trade associations to file suit in the D.C. Circuit to challenge the Environmental Protection Agency’s misguided final rule lowering the National Ambient Air Quality Standards for fine particulate matter (PM2.5) to 9 micrograms per cubic meter. The Clear Air Act requires manufacturers to obtain preconstruction permits for new and modified emissions sources obtainable only after showing that emissions from the proposed new source will not cause or contribute to a PM 2.5 NAAQS violation. The Clean Air Act also requires the EPA to review the NAAQS every five years to determine whether the PM2.5 standard should be retained or revised. In December 2020, following a complete review of the PM NAAQS, the EPA decided to retain the PM2.5 standard of 12 micrograms per cubic meter. But in June 2021, the agency announced it would reconsider that decision. The EPA ultimately issued the revised standard in an out-of-cycle reconsideration becoming the first administration to redo a promulgated NAAQS. The standard stands to impede economic development in much of the country due to many manufacturers’ inability to establish that a proposed new construction or modified emission source will not cause or contribute to a PM 2.5 NAAQS violation. The NAM therefore sued to protect manufacturers’ ability to obtain permits, expand facilities and pursue long-term investment plans, and defend our country’s competitive advantage.


Related Documents:
Petition for Review  (March 4, 2024)

 

County of San Mateo v. Chevron Corp.   (9th Circuit)

Public nuisance cases seeking to drive national energy policy on climate change.

The NAM filed an amicus brief in support of rehearing en banc by the 9th Circuit in one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. This case is part of a coordinated, national litigation campaign filed in carefully chosen states and federal circuits by agenda-driven lawyers and activists. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. In April 2022, the 9th Circuit rejected federal-question jurisdiction and all other bases for subject matter jurisdiction and remand the case to state court. In support of rehearing, the NAM filed an amicus brief arguing that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on June 27, 2022, the 9th Circuit denied the petition for rehearing.


Related Documents:
NAM brief  (May 27, 2022)

 

Environment Texas Citizen Lobby, Inc. v. ExxonMobil Corp.   (5th Circuit)

Citizen suit interference with environmental regulation

In 2015, the NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting a federal judge’s decision not to impose excessive penalties on ExxonMobil for various permit violations. On remand to the district court, the groups reduced their requested penalties from $642 million to about $40 million, and the district judge awarded them about $20 million, prompting Exxon’s appeal back to the Fifth Circuit. In 2018 and 2021, the NAM filed additional amicus briefs arguing that the Constitution and Clean Air Act limit citizen suits under the Clean Air Act and asking the Fifth Circuit to enforce the constitutional line that limits federal courts to deciding discrete cases and controversies and prevents them from acting as regulators or policymakers.

Unfortunately, on August 30, 2022, the Fifth Circuit affirmed the district court's latest decision imposing a $14.25M penalty on defendant-appellants (for 3,651 purported violations). On, October 20, 2022, the NAM filed an amicus brief in support of Exxon’s petition for the 5th Circuit to rehear en banc its appeal challenging the district court’s penalty award.

Happily, on February 17, 2023, the 5th Circuit granted the petition for rehearing en banc and vacated the panel decision. On March 27, 2023, the NAM filed an amicus brief asking the full 5th Circuit to reverse the panel’s decision to enforce the limits of federal courts’ jurisdiction. This case is important to manufacturers because courts should exercise discretion in determining civil penalties to prevent creating perverse incentives for plaintiffs.


Related Documents:
NAM En Banc brief  (March 27, 2023)
Per Curiam Order  (February 17, 2023)
NAM brief in support of Exxon’s petition for rehearing en banc  (October 20, 2022)
Decision on Exxon’s second appeal  (August 30, 2022)
NAM brief in support of Exxon’s second appeal  (July 14, 2021)
NAM brief in support of Exxon’s first appeal  (January 19, 2018)
NAM brief in support of the district court’s initial decision  (September 17, 2015)

 

Environmental Comm. of the Fla. Elec. Power Coord. Grp. v. EPA   (D.C. Circuit)

Challenging the EPA's effort to amend state plans regarding emissions during startups, shutdowns and malfunctions

The NAM sued the EPA in 2015 to challenge the EPA’s declaration that 36 states’ state implementation plans (SIPs) under the Clean Air Act are invalid because they allow air emissions in excess of permit limits during startup, shutdown or equipment malfunctions. That flexibility is important to manufacturers that might temporarily exceed permit limits for reasons beyond their control. The litigation has been held in abeyance since April 2017 while the EPA considers whether to revise or rescind the rule.

 

Environmental Defense Fund v. EPA   (D.C. Circuit)

Air permitting streamlining

On June 25, 2018, the NAM moved to intervene in a case involving permitting requirements for manufacturers under the Clean Air Act. Environmental groups sued to challenge a guidance document from the U.S. Environmental Protection Agency (EPA) that streamlines Clean Air Act permits under the New Source Review program for facilities that expand or modify their operations. If the plaintiffs' claims are successful, facility modifications could be significantly delayed and rendered more expensive. The NAM's motion asks the court to allow the NAM to become a co-defendant in the case with EPA to bring the voice of manufacturers in defense of the EPA's sensible policy.

On July 13, 2018, the court held the case in abeyance pending the completion of an EPA rulemaking to implement the terms of the guidance document. The litigation is expected to reactivate when the final rule issues.


Related Documents:
NAM Motion to Intervene  (June 25, 2018)
NAM brief  (May 31, 2018)

 

Lighthouse Resources, Inc. v. Inslee   (9th Circuit)

Local interference with free trade

The NAM filed an amicus brief in a case involving the state of Washington’s authority to prohibit certain exports from Washington’s coastal ports. Washington state denied several environmental permits necessary to construct a new coal export terminal near Longview, Washington. The denials were improperly based on concerns about the use of coal for electricity generation in foreign countries. The state’s actions have dangerous implications for the power of individual states to interfere with interstate and international trade. A federal district court rejected the plaintiffs’ claims. On appeal to the 9th Circuit, the NAM’s amicus brief explained how state and local interference with foreign trade undermines a uniform foreign policy and is harmful to the national economy. Moreover, we argued that Washington’s actions violate the foreign commerce clause and that allowing the state’s actions to stand would give a green light to state and local interference with foreign trade policy.


Related Documents:
NAM brief  (November 6, 2019)

 

Natural Resources Defense Council v. Wheeler   (S.D.N.Y.)

Applicability of "Waters of the United States" rule

On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). A coalition of environmental groups sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule.


Related Documents:
NAM brief  (June 29, 2018)

 

North Dakota v. EPA   (D.C. Circuit)

Challenging the EPA's denial of reconsideration of Clean Power Plan

On 2/16/17, the NAM and other associations moved to intervene in a case brought by North Dakota challenging the EPA's latest action on its Clean Power Plan (CPP). The agency rejected a petition to reconsider the rule, and that decision is now being challenged in court. The case is likely to be affected by the court's soon-to-be-issued ruling in our main challenge to the CPP rule, since the procedural and substantive defects in the petition for reconsideration overlap significantly with the issues raised in the case already before the court. A motion to hold the case in abeyance pending EPA reconsideration was granted, and the case remains in abeyance.


Related Documents:
Motion to Intervene  (February 16, 2017)

 

North Dakota v. EPA   (D.C. Circuit)

EPA’s New Source Performance Standards (NSPS) for greenhouse gases from electric utilities

The NAM sought review in the U.S. Court of Appeals for the D.C. Circuit of the Environmental Protection Agency’s (EPA) 2015 Clean Power Plan rule governing New Source Performance Standards (NSPS) for greenhouse gases from electric utilities. The rule is an attempt to address emissions from new, modified and reconstructed electric generating units. This case is important for manufacturers because EPA should not rely on policy preferences rather than the rule of law.

The NAM sued the EPA with a broad industry coalition to challenge the NSPS rule. We seek to invalidate the rule to pave the way for a sensible alternative. Our briefs argue that the rule is unlawful because EPA’s conclusions are arbitrary and capricious, not supported by substantial evidence, and fail to make the requisite endangerment findings. In 2017, the D.C. Circuit held the rule in abeyance while the current administration considers whether to revise or rescind the rule.


Related Documents:
Brief on the merits  (October 13, 2016)
Preliminary statement of issues  (January 25, 2016)

 

North Dakota v. EPA   (D.N.D.)

Challenge to "Waters of the United States" rule

Upon promulgation of the EPA's 2015 rule defining jurisdictional "Waters of the United States" (WOTUS) under the Clean Water Act, a coalition of states led by North Dakota sued the EPA in federal district court in North Dakota to challenge the rule. The states then moved for preliminary injunction against the rule, which the court granted within the territorial boundaries of the plaintiff states (North Dakota, Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, New Mexico, Nevada, South Dakota, and Wyoming). Soon thereafter, however, the U.S. Court of Appeals for the Sixth Circuit claimed authority to consider all challenges to the WOTUS rule—to the exclusion of the North Dakota district court and several other district courts in which lawsuits had been filed, including an NAM coalition lawsuit in the U.S. District Court for the Southern District of Texas. In January 2018, however, the U.S. Supreme Court ruled that the Sixth Circuit lacked jurisdiction to consider the various WOTUS challenges. This reactivated the North Dakota case, allowing the court to proceed to the states’ merits challenges to the 2015 rule. On June 8, 2018, the NAM filed an amicus brief on behalf of the states that explains how the rule was promulgated without required procedure and how the rule violates the Clean Water Act and the U.S. Constitution.


Related Documents:
NAM brief  (June 8, 2018)

 

Oklahoma v. EPA   (10th Circuit)

Challenge to 2015 "Waters of the U.S. Rule"

Oklahoma and a coalition of business groups sued to challenge the EPA's 2015 rule governing jurisdictional "Waters of the United States" under the Clean Water Act. The rule adversely impacts manufacturers by asserting federal jurisdiction and permitting requirements over millions of acres of dry land throughout the country and by imposing unclear rules on land development. Oklahoma sought a preliminary injunction to stop the rule. A district court denied that injunction, and Oklahoma appealed. In support of their appeal, the NAM filed a coalition amicus brief that explains the impact of the rule on manufacturers and other sectors of the economy and supports an injunction in Oklahoma.


Related Documents:
NAM brief  (August 16, 2019)

 

Portland Pipe Line Corporation v. City of South Portland   (1st Circuit)

Local interference with energy exports

The NAM filed an amicus brief in the U.S. Court of Appeals for the First Circuit to overturn the city of South Portland, Maine’s ban on crude oil exports from the city’s harbor. The city council claimed it enacted the ban for health and safety reasons, but various public statements revealed a political opposition to the planned transportation of Canadian crude oil by pipeline to the harbor for export. The pipeline owner sued the city, arguing the ban violates the U.S. constitution’s commerce clause. A federal district court sided with the city. If such local energy export bans are allowed to stand, energy production and transportation would be restricted, shutting some products out of some markets, and increasing energy prices for many manufacturers. On appeal to the First Circuit, the NAM’s amicus brief explains the importance of the free trade of energy for manufacturers and argues that the city’s interference with free trade violates the U.S. constitution. On January 10, 2020, the court "sidestepped" the federal constitutional questions and certified three questions to Maine’s high court concerning potential preemption of the ordinance by state law.


Related Documents:
NAM brief  (February 19, 2019)

 

Sierra Club v. EPA   (D.C. Circuit)

Challenge to affirmative defense for equipment malfunctions

In June, 2014, the Sierra Club challenged 9 EPA Clean Air Act rules in court, alleging that provisions in each rule are no longer valid as a result of a decision in April by the U.S. Court of Appeals for the D.C. Circuit. The provisions at issue allows companies an affirmative defense to civil penalties for exceeding emissions limits that are caused by malfunctions. A company must prove that the malfunction was sudden, infrequent, not reasonably preventable and not caused by poor maintenance or careless operation, and that it took steps to correct the malfunction and minimize resulting emissions.

In April, the court decided in Natural Resources Defense Council v. EPA to vacate portions of a Portland cement industry rule pertaining to the affirmative defense, finding that the EPA lacked the authority to create a defense applicable in federal court. This Sierra Club suit attempts to remove the defense from 9 other rules in which it arises, involving various industries and kinds of equipment. Challenges to regulations must be brought within 60 days of their promulgation unless the petition "is based solely on grounds arising after such sixtieth day . . . ." The suit claims that the NRDC case decision constitutes grounds arising after the rules were promulgated.

In July, the NAM and 13 other business associations filed a motion to intervene in the suit. Manufacturers will be negatively impacted if the suit is successful, since it could make them liable for permit violations arising from unavoidable equipment malfunctions. That liability can arise both from EPA citations and from citizen suits around the country.

The rules at issue govern chemical manufacturing, pulp and paper mills, steel pickling, marine tank vessel loading operations, industrial steam-generating units, nitric acid plants and others.

On July 25, the court ordered the case held in abeyance while the EPA decided on a pending administrative petition from the Sierra Club to revise the rules. The EPA granted the petition, and on December 17, 2014, the court held this case in abeyance until the EPA completes the rules revision process. As of July 30, 2019, the EPA has not yet completed its administrative process.


Related Documents:
NAM Motion to Intervene  (July 17, 2014)

 

South Carolina Coastal Conservation League v. Wheeler   (D.S. Car.)

Defending EPA's rescission of the 2015 "Waters of the United States" rule

The MCLA intervened in an environmental group’s legal challenge to the EPA’s rescission of the prior administration’s 2015 “Waters of the United States” rule. The EPA rescinded the 2015 rule because the rule’s lack of clarity resulted in regulatory uncertainty and confusion. Additionally, because some federal courts invalidated the 2015 rule in some parts of the country and not others, manufacturers faced a regulatory patchwork that made compliance across different states very difficult. The EPA’s rescission of the 2015 rule restored regulatory consistency and clarity. A coalition of environmental groups sued to challenge the rescission, arguing that the EPA exceeded its authority in doing so. The NAM and other leading industry trade associations intervened in the case to help defend the rule and to represent the interests of our members in the litigation.

 

State of New York v. Wheeler   (S.D.N.Y.)

Applicability of "Waters of the United States" rule

On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). A group of states led by New York sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule.


Related Documents:
NAM brief  (June 28, 2018)

 


ERISA -- active



The ERISA Industry Committee v. City of Seattle   (U.S. Supreme Court)

Seattle's ordinance mandating health care coverage for part-time hotel workers is expressly preempted by ERISA

On February 18, 2022, the NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a 9th Circuit decision which sanctions a patchwork system of local regulation of healthcare and retirement benefits in square conflict with ERISA’s expansive preemption provision. This case, ERISA Industry Committee (ERIC) v. City of Seattle, involves a challenge to a Seattle ordinance requiring certain employers to make monthly healthcare expenditures to employees at Seattle-specific thresholds. The 9th Circuit rejected the challenge even though Congress intended for federal law—the Employee Retirement Income Security Act of 1974 (ERISA)—to provide a single uniform national scheme for the administration of healthcare and retirement plans without interference from states or municipalities. Indeed, the 1st and 4th Circuits have held that similar laws are preempted under well-established ERISA preemption principles.

The NAM filed an amicus brief in support of Supreme Court review explaining that ERISA preemption plays a critical role in making benefits possible for employees, and state and local rules that conflict with ERISA’s national uniformity must be struck down. As a practical matter, state and local mandates like this one harm workers, forcing employers to divert resources away from providing quality health coverage, and instead spend money to comply with a complex and mismatched patchwork of state and local rules. Already, localities across the country have begun to adopt similar ordinances with varied minimum benefit rates, timelines, definitions, and recordkeeping requirements—a completely unworkable, fragmented regulatory regime. Supreme Court intervention is sorely needed.

Unfortunately, on November 21, 2022, the Supreme Court denied cert.


Related Documents:
NAM brief  (February 18, 2022)

 


Expert Testimony -- active



3M Co. & Arizant Health Care, Inc. v. Amador   (U.S. Supreme Court)

Eighth Circuit Erred by Applying Erroneous Standard to Plaintiffs' General Causation Experts

The NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a deeply flawed Eighth Circuit opinion applying an erroneous standard to the admissibility of expert testimony and usurping the gatekeeping role of the trial court. This multidistrict litigation involves allegations that 3M’s Bair Hugger patient warming device causes surgical site infections. After conducting a thoughtful and thorough review of plaintiffs’ general causation experts’ opinions—a faithful application of Fed. Rule of Evidence 702—the district court found that the opinions included large analytical gaps and were not generally accepted, and, accordingly, granted summary judgment in favor of 3M.

The Eighth Circuit reversed, applying a pre-Daubert standard. Under that standard, it is an abuse of discretion to exclude expert testimony unless the experts’ opinions are “so fundamentally unsupported” that they’re of no help to a jury. This obsolete standard essentially abrogates any discretion a district court has to exclude expert testimony.

The NAM filed an amicus brief urging the Court to grant 3M’s cert petition to resolve the widespread confusion in the courts on applying Rule 702 and safeguard the scientific underpinnings of the American health care system. The Eighth Circuit’s liberal admissibility standard threatens to adversely affect those who rely on the benefits of a medical device or drug—approximately 50,000 people per day. Such critical products, which are subject to substantial scientific analysis and review by the federal government, should not be deemed defective by juries applying an erroneous, overly permissive admissibility standard.

Unfortunately, on May 16, 2022, the Supreme Court denied cert.


Related Documents:
NAM brief  (March 11, 2022)

 

Bader v. Johnson & Johnson   (California Supreme Court)

Challenging the failure to exclude unreliable expert testimony

On February 28, 2023, the NAM filed an amicus letter requesting that the California Supreme Court review and reverse a California Court of Appeal decision affirming the trial court’s admission of unreliable expert testimony that equated talc with asbestos. In this case, the plaintiff-appellee maintained that the defendants’ cosmetic talc products were contaminated with asbestos and that her exposure thereto caused her mesothelioma. A California trial judge allowed, over defendants-petitioners’ objection, the admission of expert testimony proffered by the plaintiff-appellee that equated talc’s and asbestos’ effects on DNA--a novel theory excluded in other talc trials. After a jury returned a verdict in the plaintiff-appellee’s favor, a California Court of Appeal affirmed the trial judge’s evidentiary ruling on the ground that the appellants-petitioners did not invoke a particular case name to support their challenge. In fact, the appellants-petitioners validly challenged the admissibility of the disputed testimony as an unsupported and unreliable scientific theory not accepted within the scientific community.

In our letter brief, we argue that review is necessary to clarify how to challenge a novel scientific technique--the Court of Appeal’s holding sows confusion in how to preserve expert challenges and creates an artificial, distinct standard for evaluation of certain expert testimony that is not supported by the relevant case law or California’s evidentiary rules. Unfortunately, on April 12, 2023, the California Supreme Court denied the petition for review.


Related Documents:
NAM brief  (February 28, 2023)

 

Vanderventer, et al. v. Hyundai Motor America, et al.   (Supreme Court of Wisconsin)

Challenging the failure to exclude unreliable expert testimony

On December 9, 2022, the NAM filed an amicus brief urging the Supreme Court of Wisconsin to review and reverse a trial court’s failure to exercise its gatekeeping duty to exclude unreliable expert testimony. In this case, Vanderventer, et al. v. Hyundai Motor America, et al., the plaintiffs allege that the defective design of a driver seat caused one of the plaintiffs to experience enhanced injuries from a car accident. Over the defendant’s objection, the trial court admitted the testimony of plaintiffs’ expert witnesses and the jury returned a verdict of $38 million in the plaintiffs’ favor.

Our coalition brief argues that the Supreme Court of Wisconsin should grant the petition to clarify Wisconsin trial courts’ gatekeeping obligation to ensure that expert testimony is the product of reliable principles and methods prior to admission into evidence. The trial court failed in this regard by allowing (1) plaintiffs’ expert witnesses—a biomechanical engineer and a medical doctor—“to extend their [causation] testimony beyond their specific fields of expertise”; and (2) the plaintiff’s biomechanical engineer to give design defect testimony without his ever testing the actual car seat at issue under conditions similar to those that occurred during the accident. All manufacturers have an interest in ensuring that trial courts closely scrutinize the factual foundation of expert testimony, as that testimony tends to have an outsized influence on juries.

Unfortunately, on February 21, 2023, the Supreme Court of Wisconsin denied the petition for review.


Related Documents:
NAM brief  (December 9, 2022)

 


False Claims Act -- Active



Shoshone-Bannock Tribes of the Fort Hall Reservation v. Daniel-Davis   (9th Circuit)

Scope of the Federal Land Policy and Management Act

On January 22, the NAM filed an amicus brief in an appeal to the 9th Circuit challenging a lower court finding that an Idaho land exchange between a manufacturer and the federal government violated federal law. In this case, Shoshone-Bannock Tribes of the Fort Hall Reservation v. DOI, Simplot acquired federal land from the Bureau of Land Management in accordance with the Federal Land Policy and Management Act (FLPMA) to build new gypstacks containing waste products from fertilizer in exchange for Simplot land. Nevertheless, the trial court agreed with a local tribe that the exchange was precluded by a 1900 law that restricted the potential uses of exchanged federal land.

We argue in our brief that the exchange is authorized by both the 1900 Act and FLPMA. FLPMA is a comprehensive land management statute that must be read to allow for all federal land dispositions to satisfy business expectations and foster resource development on public lands in the United States, which are crucial to supply chain and energy security for American manufacturing.


Related Documents:
NAM brief  (January 22, 2024)

 

U.S. ex rel. Island Industries, Inc. v. Sigma Corp., et al.   (9th Circuit)

An objectively reasonable reading of a statute cannot be the basis for a finding of falsity under the False Claims Act

On June 9, 2022, the NAM filed an amicus brief in the 9th Circuit arguing that, where a business acts in accordance with an objectively reasonable interpretation of an ambiguous government regulation, the business’s conduct does not fall within the ambit of the False Claims Act (FCA.) Originally enacted in 1863 in response to defense contractor fraud during the Civil War, the FCA is a federal statute used to combat fraud against the government. In this case, U.S. ex rel. Island Industries, Inc. v. Sigma Corp., a company brought a FCA suit against its competitor based on the purported failure to pay required antidumping duties. In a separate proceeding before the Court of International Trade, however, the court ruled that the antidumping duty order at issue was ambiguous and based upon the publicly available information, it was not clear whether the defendant’s product was subject to the duty. Further, the Department of Commerce thereafter agreed that the order was ambiguous, and as a result, held that no duties were owed. Nonetheless, a C.D. Cal. jury found the defendant liable for failing to pay the duties, returning an $8M verdict, before trebling.

The NAM filed a brief arguing that exposing companies to this type of draconian penalty for behaving in conformance with reasonable interpretations of legal requirements would create untold liability traps and unmoor the FCA from its narrow fraud-prevention purpose. Where, as here, a company takes an “objectively reasonable” position regarding a regulation or contract term that it was not warned away from by authoritative guidance, the FCA’s scienter—or knowledge—requirement simply is not satisfied. Further, a reasonable interpretation of an ambiguous regulation defeats any claim that there is an obligation to pay the government, or that the failure to adhere to a different reasonable interpretation is material to any payment to the government. Allowing the judgment to stand would transform the FCA into a blunt enforcement instrument and would impose unwarranted risks and uncertainties on manufacturers and other businesses that must navigate complex regulatory terrains.


Related Documents:
NAM brief  (June 9, 2022)

 

U.S. ex rel. Streck v. Eli Lilly and Company   (7th Circuit)

An objectively reasonable reading of a statute cannot be the basis for a finding of falsity under the False Claims Act

On December 22, 2023, the NAM filed an amicus brief asking the 7th Circuit not to impose False Claims Act liability where a defendant subjectively believes that it is following a legal obligation based on an objectively reasonable interpretation of an ambiguous statutory, regulatory or contract provision. In this case, a drug manufacturer participated in the federal government’s Medicaid drug rebate program which requires manufacturers to pay a rebate back to the state and federal government for each drug sold to the program based on the Average Manufacturer's Price for the drug. The plaintiff-relator alleged that Lilly miscalculated the rebate it was required to provide under the program by miscalculating the AMP even though Lilly based its calculation on a reasonable interpretation of an ambiguous term and informed the government of its interpretation without the government taking any action. The relator obtained a verdict of over $61 million, which the district court subsequently trebled.

We joined other business groups in arguing that the plaintiff failed to satisfy the falsity and knowledge requirements necessary to impose False Claims Act liability. We explained that those requirements are not satisfied where, as here, a party’s legal obligations are unclear, and the party acts in accordance with its genuinely held reasonable interpretation. Expanding False Claims Act liability to situations like this would expose government contractors to protracted litigation and potential liability any time a relator comes up with an alternative interpretation to a manufacturer’s interpretation of an ambiguous legal obligation.


Related Documents:
NAM brief  (December 22, 2023)

 


Free Speech -- active



ExxonMobil v. Healey   (2nd Circuit)

Government investigations to chill corporate speech

The NAM filed an amicus brief to oppose overbroad government investigations intended to chill corporate scientific inquiry, debate, and discussion. ExxonMobil sued the attorneys general of New York and Massachusetts to challenge overbroad subpoenas and civil investigative demands seeking more than 40 years of communications between the company and other parties involving the topic of climate change. On appeal to the U.S. Court of Appeals for the Second Circuit, the NAM’s brief explains that corporations contribute to important policy discussions involving economic, scientific and other issues of public concern and that expansive use of government investigatory powers can chill corporations’ contributions to the free exchange of ideas.


Related Documents:
NAM brief  (August 10, 2018)

 


Government Contracting -- active



Elorreaga v. ViacomCBS, Inc.   (9th Circuit)

Protecting the government contractor defense

On November 20, 2023, the NAM also filed an amicus brief asking the 9th Circuit to reverse a trial court’s decision limiting the application of the government contractor defense to state law claims. In this case, the plaintiffs brought wrongful death claims against Viacom under federal maritime law. They allege that the decedent developed mesothelioma from exposure to equipment on a U.S. Naval vessel manufactured by Viacom’s predecessor while serving in the Navy. Viacom moved to dismiss the claims as barred by the government contractor defense—applicable to contractors who provide products to the federal government that meet the government’s specifications—but the trial court denied the motion. The trial court concluded that the defense applied to bar state, not federal, claims. Thereafter, the 9th Circuit granted Viacom’s request to review the trial court’s decision on interlocutory appeal.

We argue in our amicus brief that the federal government contractor defense is an extension of the federal government’s sovereign immunity. The defense allows government contractors to receive the benefits of sovereign immunity when a contractor complies with the specifications of a federal government contract. The defense applies equally to state and federal claims. All government contractors have an interest in broad immunity to prevent them from facing liability for an alleged violation of law when they carry out the government’s objectives.


Related Documents:
NAM brief  (November 20, 2023)

 


Government Regulation -- active



Biotechnology Innovation Org., et al. v. Alex M. Azar II, et al.   (N.D. Cal.)

Challenging “Most Favored Nation” rule which creates price controls on pharmaceutical drugs

The NAM filed an amicus brief in support of the pharmaceutical industry's challenge to the Trump administration's Most-Favored Nation (MFN) Rule. The rule, which bypassed the notice and comment process that agencies must ordinarily follow before making rules effective, creates a new payment model for Medicare Part B drugs, tying payments for certain drugs (a set of 50 that encompass a high percentage of Medicare Part B drug spending) to the lowest price paid by other wealthy countries. In this case, the NAM filed an amicus brief in the Northern District of California in support of plaintiffs'--the Biotechnology Innovation Organization (BIO) and two California-based biotechnology organizations--motion for preliminary injunction. A near-identical case was filed in the District of Maryland by the Pharmaceutical Research and Manufacturers of America (PhRMA) and groups representing cancer treatment providers. The NAM's brief argues that the MFN rule is yet another fatally flawed attempt by the government to use the COVID-19 pandemic as the basis for an end-run around the Administrative Procedure Act's (APA) notice and comment procedures. The NAM's members have a vital institutional interest in ensuring that the federal government is held to the procedural safeguards provided in the APA.

Happily, oOn December 28, 2020, the district court granted the plaintiffs' motion for a preliminary. Injunction .


Related Documents:
NAM brief  (December 17, 2020)
Order Granting Preliminary Injunction  (December 17, 2020)

 

Huntsman Petrochemical LLC v. EPA   (D.C. Circuit)

Preserving the chemical risk assessment process

On July 31, 2023, the NAM filed an amicus brief urging the D.C. Circuit to vacate the EPA’s 2020 rule that sets emission standards for ethylene oxide. Ethylene oxide is frequently used to sterilize critical medical products in the United States. In a 2016 Integrated Risk Information System (“IRIS”) assessment, the EPA developed a value that estimates the health risk of inhalation exposure to ethylene oxide. The EPA used this value as a basis for setting ethylene oxide emissions standards in 2020 that limited the emissions from over 200 chemical manufacturing facilities. In 2022, the EPA issued a decision on reconsideration of its 2020 rule, reaffirming the rule and its reliance on the 2016 IRIS value.

We argued in our brief that the EPA violated the Administrative Procedure Act by using its 2016 IRIS value without following its own guidance for setting standards and providing an adequate explanation for failing to do so. Specifically, the EPA failed to follow the best available science, to take into consideration disagreement within the scientific community as to the proper approach to calculating cancer risks and to subject its 2016 IRIS value to peer review. This case is important to all chemical manufacturers who oppose using IRIS values to assess safe emission levels because such values are usually set at detect levels rather than levels that would contribute to harm. It will also have an impact on the medical community because some medical devices and instruments can only be sterilized with ethylene oxide, making the availability of the chemical necessary for safe and high-quality medical devices necessary for use in medical procedures.


Related Documents:
NAM brief  (July 31, 2023)

 

Nat'l. Pork Producers & Am. Farm Bureau Fed. v. Ross, et. Al.   (U.S. Supreme Court)

Challenging California's improper efforts to regulate the national pork market

The NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse the lower courts’ dismissal of a challenge to a California ballot initiative that regulates the conduct of farmers, manufacturers, and producers nationwide. Proposition 12 bans the sale of imported pork and veal in California unless farmers and producers outside of California meet strict animal confinement standards set by California voters. The NAM argued in the brief that Proposition 12 violates the Commerce Clause by regulating conduct beyond California’s borders, impinging on other states’ sovereign authority to legislate within their own jurisdictions, and, substantially burdening out-of-state pork producers absent a sufficient and legitimate local interest.

On May 28, 2022, the Supreme Court granted the cert. petition. On June 17, the NAM filed an amicus brief asserting the same arguments included in its amicus brief filed in support of the U.S. Supreme Court granting review. This litigation is important to all manufacturers because if upheld, Proposition 12 may embolden other states to regulate out-of-state conduct, resulting in a complex web of inconsistent and competing extraterritorial regulations in the agriculture and food industries, and beyond.

Unfortunately, on May 11, 2023, the Supreme Court affirmed the 9th Circuit's decision affirming the lower court's dismissal of the case.


Related Documents:
NAM brief  (June 17, 2022)
NAM brief  (November 18, 2021)

 

PhRMA v. Landsberg   (9th Circuit)

California law freezing the Wholesale Acquisition Cost of prescription drugs violates the Commerce Clause

The NAM filed an amicus brief in the Ninth Circuit in support of PhRMA’s constitutional challenge to California’s Senate Bill 17, a drug pricing law that allows California to control wholly out-of-state prices and directly regulate conduct outside its borders. SB 17 effectively freezes a prescription drug’s wholesale acquisition cost (WAC)—the uniform, nationwide list price, akin to the sticker price for a car— nationwide for 60 days before it can be raised. As the NAM’s brief explains, by freezing a nationally uniform pricing benchmark, SB 17 impermissibly regulates the price of wholly out-of-state drug transactions. Further, upholding SB 17 threatens the success of the national common market by encouraging every state to find and manipulate pricing benchmarks in hopes of influencing downstream prices.

Unfortunately, on July 25, 2022, the Ninth Circuit affirmed the district court's decision, concluding that it did not err in finding that issues of fact exist regarding whether "SB 17's practical effect is to directly regulate transactions in interstate commerce."


Related Documents:
NAM brief  (November 26, 2021)

 

Sunoco Pipeline L.P. v. U.S. Dep't of Trans., et al.   (D.D.C.)

FOIA protections

The NAM filed an amicus brief seeking to enjoin the federal government from publicly disclosing sensitive risk assessment and hazard modeling documents associated with Sunoco's pipeline operations. Sunoco initiated this lawsuit in the U.S. District Court for D.C. after the Pipeline and Hazardous Materials Safety Administration—which had historically protected this type of information from public disclosure under the Freedom of Information Act (FOIA) given its sensitive nature—reversed course and sought to disclose the information publicly within a matter of days. Our amicus brief argues that risk assessment and hazard modeling documents provided to the federal government to help protect against a major physical or cyber-attack are critical to maintaining pipeline operations and should be protected from disclosure under FOIA for both security and commercial reasons. Manufacturers in the oil & gas industry and beyond customarily protect the type of information at issue in this case from public disclosure due to significant threats to disruption of operations and public safety from bad actors seeking to exploit potential vulnerabilities. The government's decision to disregard the applicable FOIA exemptions presents grave concerns regarding the treatment of similar information that manufacturers routinely provide to regulators.


Related Documents:
NAM brief  (October 22, 2021)

 


Immigration -- active



Chamber of Commerce of the United States, et al. v. Department of Homeland Security   (N.D. Cal.)

Challenging two rules intended to damage the H-1B program

Citing the COVID-19 pandemic as a pretext for emergency rulemaking, the Departments of Labor and Homeland Security issued two rules in mid-October 2020 creating a series of new restrictions on the H-1B visa program that would have slammed the door on talented workers in hard to fill specialty and technical roles. The rules were especially unsound because they were directly issued as final rules, with no notice or opportunity to provide comment on their harmful impacts despite cost estimates that put these rules among the most expensive federal rules ever issued. The NAM joined with a coalition of business groups, health care organizations and prominent universities to challenge the rules, filing a lawsuit against the Trump administration arguing that they were unlawful and hugely detrimental to American competitiveness. On December 1, 2020 a federal judge agreed and handed manufacturers a crucial victory that immediately vacated both rules and protected the H-1B program.


Related Documents:
NAM Motion for Preliminary Injunction or Summary Judgment  (October 23, 2020)

 

National Association of Manufacturers v. Department of Homeland Security   (N.D. Cal.)

Challenging the Trump Administration's proclamation restricting high-skilled and temporary worker nonimmigrant visas

In July 2020, the NAM filed a lawsuit in the Northern District of California against the Trump administration’s unlawful restrictions to a wide range of nonimmigrant work visas. The restrictions, which were part of a June 22 Presidential Proclamation that essentially shut off the flow of high-skilled workers for hard-to-fill jobs in the manufacturing sector, were the subject of intense member interest and concern. The restrictions were so disruptive that they quickly began to inflict irreparable harm on our members, and we argued that they lacked legal basis because economic policy–the justification for the Proclamation—is a uniquely Congressional domain, and the Proclamation exceeds the President’s constitutional authority by rewriting existing law. On October 1, 2020, Judge White granted our request for a preliminary injunction. The Justice Department has appealed that decision to the Ninth Circuit for review.


Related Documents:
Motion for Preliminary Injunction  (July 31, 2020)
Complaint  (July 21, 2020)

 

Save Jobs USA v. Dep't of Homeland Security   (D.D.C.)

H-4 visa work authorization for spouses

The NAM filed an amicus brief in the U.S. District Court for the District of Columbia supporting employers in their efforts to retain highly skilled workers. Spouses of H-1B skilled workers who have been approved for permanent residence can apply for and receive H-4 visas allowing them to work in the United States. If this rule were invalidated, manufacturers would lose access to leading talent, harming their ability to remain competitive in the global economy. A federal district court ruled that the plaintiffs lacked standing to bring the case, but the D.C. Circuit reversed and remanded the case for further proceedings. Now, following cross-motions for summary judgment, the NAM filed an amicus brief urging the court to preserve H-4 employment authorization. The NAM’s brief details the devastating impact that eliminating H-4s would have on affected employees and their families, employers, and the health of the overall economy.

Happily, on March 28, 2023, the district court upheld the rule allowing H-4 visa-holders to apply for employment authorization.


Related Documents:
NAM brief  (May 14, 2021)

 

State of Texas v. U.S.   (5th Circuit)

Supporting the DACA Program

On February 1, 2024, the NAM joined a coalition amicus brief urging the 5th Circuit to uphold DHS’s new Deferred Action for Childhood Arrivals rule. DACA is a program that allows undocumented immigrants who were brought to this country as children to apply for protection from deportation and permission to work in the United States. In this case, the 5th Circuit affirmed a district court ruling that DHS lacked authority to adopt DACA. The 5th Circuit remanded the case to the district court for consideration of whether DHS may accept new and renewal DACA applications based on DHS's promulgation of a new DACA rule. On remand, the district court invalidated the new rule, and barred DHS from approving new DACA requests.

Alongside 55 other businesses and trade associations, we argue in our brief that invalidating DACA will harm the economy because (1) businesses rely on DACA recipients as employees, customers, and job creators; and (2) DACA recipients fill jobs that would otherwise remain vacant. Moreover, DACA is a lawful exercise of executive authority.


Related Documents:
NAM brief  (February 1, 2024)

 


Insurance coverage -- active



Merck & Co., Inc. v. Ace American Insurance Co.   (New Jersey Supreme Court)

Insurance coverage for cyber events

On October 2, 2023, the NAM filed an amicus brief urging the New Jersey Supreme Court to affirm the Appellate Division’s determination that Merck’s insurers improperly denied coverage for losses arising out of a cyberattack. In this case, Merck sought coverage for losses from the 2017 NotPetya cyber event under its "all risk" property policies. The policies contained an express grant of coverage for electronic data corruption or destruction, including broad business interruption coverage. Nevertheless, the insurers denied coverage, contending that standard-form “war” exclusions—developed by the insurance industry years before cyber-risks emerged—barred coverage. The trial court and Appellate Division agreed with Merck that, by its plain language, the war exclusion was limited to situations involving the use of armed forces, and therefore did not apply. The instant appeal followed.

The NAM’s amicus brief underscores the significant threat posed by cyber risks to businesses of all sizes and across all industrial sectors. By developing and employing consistent rules of interpretation, New Jersey courts have created an environment in which policyholders can conduct business and prepare for cyber risks in a predictable and reasonable manner. The NAM further explains that the result advocated for by the insurance industry would undermine core principles of insurance policy interpretation that are critically important to manufacturers seeking coverage under policies purchased at considerable expense.

The case was resolved by the parties prior to oral argument.

 


International -- active



Thailand - Customs and Fiscal Measures on Cigarettes from the Philippines   (World Trade Organization)

Customs valuation issue in Thailand

The NAM led a group of associations in filing two World Trade Organization (WTO) statements because Thailand failed to abide by its WTO commitments on customs valuation and now threatens a company with fines of more than $2 billion and imprisonment of several individuals. Proper valuation is important because many manufacturers operate through interconnected commercial relationships and supply and production chains with producers and suppliers throughout the United States and foreign countries. The statements emphasize the importance of the WTO’s customs valuation rules to international trade, which allow companies to produce goods as efficiently as possible and to access international consumers in the global marketplace.


Related Documents:
WTO second statement  (January 25, 2019)
WTO statement  (May 12, 2017)

 


Issue Advocacy -- active



Dwyer v. Ameriprise Financial   (Pennsylvania Supreme Court)

Judicial Discretion to Decline to Award Treble Damages Under State Consumer Protection Statute

On May 24, 2023, the NAM filed an amicus brief urging the Pennsylvania Supreme Court to affirm trial courts’ discretion to refuse to award treble damages under Pennsylvania’s consumer protection law for conduct that is already the basis of an award of punitive damages. In this case, Dwyer, et al. v. Ameriprise Financial, et al., the plaintiffs-appellants asserted several tort claims and a claim under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) stemming from alleged misrepresentations made regarding the plaintiffs’ payments for whole life insurance. A jury returned a verdict for the plaintiffs on their misrepresentation claims and awarded them punitive damages. The trial court subsequently ruled in the plaintiffs’ favor on their UTPCPL claim while declining to award remediable treble damages under the statute.

We argue that the plain language of the UTPCPL supports trial courts having the discretion to refuse to award treble damages under these circumstances. Interpreting the UTPCPL in this manner also avoids running afoul of the safeguards that the U.S. Supreme Court has placed on punitive damages awards. All manufacturers have an interest in avoiding crushing damages awards that could result if courts are required to award both punitive damages and treble damages for violations of a state consumer protection statute.


Related Documents:
NAM brief  (May 24, 2023)

 

Harrington v. Purdue Pharma   (U.S. Supreme Court)

Preservation of third-party releases in bankruptcy

On October 27, 2023, the NAM filed an amicus brief asking the U.S. Supreme Court to uphold bankruptcy courts’ broad equitable authority to issue third-party releases to ensure the success of a corporate reorganization plan. In this case, Purdue Pharma sought to resolve mass civil claims alleging that the company contributed to the opioid epidemic through the bankruptcy system. The Sackler family—owners of Purdue—agreed to personally contribute billions of dollars to the bankruptcy provided that all civil claims against them were released. A trial court ruled that the bankruptcy court lacked authority under the Bankruptcy Code to approve a reorganization plan that included nonconsensual releases for third parties (like the Sacklers), a decision the 2nd Circuit later reversed. The U.S. Supreme Court granted certiorari to consider “[w]hether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent.

We argue in our amicus brief that nonconsensual third-party releases are important tools for addressing mass tort claims efficiently and fairly. Bankruptcy courts can confirm reorganization plans containing nonconsensual third-party releases consistent with due process requirements by giving claimants notice of the releases and an opportunity to be heard.


Related Documents:
NAM brief  (October 27, 2023)

 


Jurisdiction -- active



Cameron Parish v. Apache, Inc.   (5th Circuit)

The 5th Circuit should enforce the consistent and clear application of the procedures codified in 28 U.S.C. § 1446, governing the removal of cases from state to federal courts

On September 12, 2023, the NAM joined a coalition brief in the 5th Circuit concerning removal under federal officer jurisdiction. This case is one of over 40 cases filed by a group of Louisiana parishes seeking relief for alleged damage to Louisiana’s coastal environment. The plaintiffs allege that the defendants--energy producing companies--violated the Louisiana State and Local Coastal Resources Management Act by violating or failing to obtain a use permit for oil production activities on the Louisiana coast. Defendants are authorized to remove cases against them from state to federal court for actions taken while “acting under” an officer of the United States. The defendants removed this case, in part, based upon acts taken to assist the Allies in World War II, pursuant to Shell Oil Company’s contracts with the government to refine oil. The district court found that Shell Oil Company’s contracts were insufficient to establish "acts under" a federal officer because the defendants failed to show that Shell Oil Company was "acting under" a federal officer in carrying out a specific directive to engage in the activity that provides the basis for the plaintiff’s suit.

In our amicus brief, we argue that Shell Oil Company "acted under" a federal officer because oil production was how the companies fulfilled their contractual obligation to produce refined oil to the government. Ensuring that courts properly apply federal-officer removal jurisdiction is important to all manufacturers who provide goods or services to the United States government pursuant to a contract and face potential liability claims in state courts.

 

Ethridge v. Samsung   (5th Circuit)

Scope of personal jurisdiction over out-of-state defendants

On September 22, 2023, the NAM filed an amicus brief urging the 5th Circuit to decline to extend Texas personal jurisdiction to an out-of-state manufacturer who never sold the product at issue in a lawsuit to consumers, advertised it to consumers, or directed anyone else to sell or advertise it to consumers. In this case, the plaintiff claims that a Samsung-manufactured 18650 lithium-ion battery in the plaintiff’s e-cigarette exploded in his pocket, causing severe burns. Although the plaintiff claimed that he purchased the battery on Amazon.com from a third-party seller, he sued Samsung in Texas state court asserting contract and tort claims. The defendants removed the case from state to federal court and the federal district court granted the defendants’ motion to dismiss for lack of personal jurisdiction, concluding that Samsung’s contacts with Texas were insufficient for it to exercise personal jurisdiction. Although Samsung provided batteries to companies in Texas engaged in manufacturing or repairing products, Samsung did not authorize the sale of its battery by a third-party to the plaintiff or sale of its batteries to be used in an e-cigarette.

We argue in our brief that there is an insufficient basis to exercise personal jurisdiction where a claim arises independent of a defendant’s deliberate efforts to serve a market. And exercising personal jurisdiction in this case would create unpredictability for the business community.


Related Documents:
NAM Brief  (September 22, 2023)

 

American Petroleum Institute v. Minnesota   (U.S. Supreme Court)

Jurisdiction for climate change lawsuits

On September 21, 2023, the NAM filed an amicus brief in support of energy manufacturers’ petition seeking U.S. Supreme Court review of a lower court’s remand order in a case asserting state liability claims related to climate change. This is a case seeking to hold oil and gas companies liable for the impacts of climate change in Minnesota. The 8th Circuit upheld the federal district court’s decision to remand the case to state court for lack of subject matter jurisdiction. In our brief, we argue that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. This case has important implications for all manufacturers because of the growing trend among plaintiffs’ lawyers of using public nuisance and consumer deception claims to seek monetary damages from manufacturers for broad, societal issues that are ill-suited for consideration by a patchwork of state court determinations and should be addressed in the policy process.

Unfortunately, on January 8, 2024, the U.S. Supreme Court denied the energy manufacturers' petition.


Related Documents:
NAM brief  (September 21, 2023)

 

Cemex Construction Materials Pacific, LLC v. National Labor Relations Board   (9th Circuit)

Challenging Mandatory Card Check Recognition

On February 9, 2024, the NAM joined 15 other leading business groups in filing an amicus brief urging the court to reject the National Labor Relations Board’s decision that does away with the longstanding policy of protecting workers’ rights to secret ballots in union organizing efforts. This case involved a bargaining unit of approximately 366 cement truck drivers who voted against representation by the International Brotherhood of Teamsters. Following this “no” vote, the Union accused the employer of unfair labor practices—specifically, that the employer engaged in coercive conduct to dissuade employees from voting in favor of Union representation—and asked that the results of the election be set aside, and that the employer be ordered to bargain with the Union. Although an Administrative Law Judge recommended that a new election be held, the NLRB’s Democratic majority instead used the case to announce a troubling new framework for determining when employers are required to bargain with unions without a representation election. The NLRB determined that if a union claims to have majority support and demands recognition, an employer must either (1) grant recognition without the benefit of a secret ballot election, or (2) file its own NLRB petition seeking an election. If the employer fails to take either step, the union can file an unfair labor practice charge, and the NLRB will order mandatory union recognition unless the employer proves the union did not have majority support in an appropriate bargaining unit. And, perhaps most worrying, even if the employer files a petition for election, the NLRB may cancel the election and issue a bargaining order if the employer commits virtually any unfair labor practice during the period preceding the election—this would include seemingly innocuous conduct like having a “workplace civility rule” in an employee handbook.

Our coalition argues that the Cemex decision is contrary to congressional intent by defaulting union representation to card check rather than via secret ballots and puts the burden on employers to call for an NLRB-supervised election, rather than the union as currently required. The brief also argues that the decision violates Supreme Court precedent by making any unfair labor practice sufficient to support the issuance of a bargaining order against the employer, forcing the employer to recognize a union that may not have majority support from the workforce.


Related Documents:
NAM brief  (February 9, 2024)

 

Chevron v. San Mateo County, California   (U.S. Supreme Court)

Public nuisance case seeking to drive national energy policy on climate change belong in federal court

On Wednesday, December 28, the NAM filed an amicus brief in support of energy manufacturers’ petition seeking U.S. Supreme Court review of the lower courts’ remand order in a case asserting “public nuisance” claims related to climate change. This case, Chevron Corporation, et al. v. San Mateo County, California, et al., is one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. The 9th Circuit upheld the district court’s decision to remand the case to state court for lack of subject matter jurisdiction.

In our brief, the NAM argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. This case has important implications for all manufacturers because of the growing trend among plaintiffs’ lawyers of using public nuisance and consumer deception claims to seek monetary damages from manufacturers for broad, societal issues that are ill-suited for consideration by a patchwork of state court determinations and should be addressed in the policy process.

Unfortunately, on April 24, 2023, the Court denied the energy manufacturers' petition.


Related Documents:
NAM brief  (December 28, 2022)

 

Gulden v. Exxon Mobil Corp.   (3rd Circuit)

Scope of jurisdiction over preliminary administrative orders in Sarbanes Oxley whistleblower cases

On October 18, 2023, the NAM filed an amicus brief urging the 3rd Circuit to affirm a lower court holding that federal courts lack the authority to enforce preliminary Department of Labor orders entered in administrative whistleblower retaliation cases. In this case, a district court found that the Sarbanes-Oxley Act does not allow enforcement of a DOL preliminary order requiring immediate reinstatement of terminated plaintiffs pending final resolution of the case by a DOL administrative law judge. The plaintiffs appealed the district court’s decision to the 3rd Circuit.

We argue that the plain language of the applicable statute authorizing judicial review makes clear that district courts lack jurisdiction to enforce preliminary orders of reinstatement; judicial review should only be available when the Secretary of Labor has issued a final order finding an actual violation of the Sarbanes-Oxley Act (as opposed to a preliminary order finding just “reasonable cause” to believe there has been a violation). A decision rejecting the plaintiffs’ appeal is critical for protecting employers’ administrative due process right to challenge preliminary orders in DOL proceedings.


Related Documents:
NAM Brief  (October 18, 2023)

 

Parish of Plaquemines, et al v. Chevron USA, Inc., et al.   (5th Circuit)

The 5th Circuit should enforce the consistent and clear application of the procedures codified in 28 U.S.C. § 1446, governing the removal of cases from state to federal courts

The case concerns a group of Louisiana parishes, supported by the Louisiana Department of Natural Resources and the Louisiana Attorney General as intervenors, seeking relief for alleged damage to Louisiana’s coastal environment based on acts committed during World War II that were controlled, directed, and regulated by the federal government. After learning of the WWII connection to plaintiffs’ claims via the plaintiffs’ 2018 expert report, the defendant oil companies sought to remove 42 related cases to federal court. In the defendants' first appeal, the Fifth Circuit held that removal was untimely because the defendants should have ascertained the federal question earlier based on vague references buried in an exhibit to the plaintiffs’ complaint. On September 15, 2020, the NAM filed an amicus brief in support of the defendants’ petition for rehearing en banc, arguing that the court's decision created uncertainty in all forms of removal, forcing defendants to file protective removal notices for fear that even equivocal and uncertain statements by plaintiffs may start the 30-day removal clock. The NAM maintained that the decision undermined the purpose of the removal statute to the detriment of both litigants and courts. On August 5, 2021, the court agreed with the defendants that their removal based on federal-officer jurisdiction was timely, but remanded the case for consideration of whether federal question jurisdiction exists.

On remand, the district courts found federal questions jurisdiction wanting, which the Fifth Circuit affirmed. The panel held that the defendants failed to present evidence that they acted pursuant to a federal officer's directive in the absence a contract that made them accountable to the federal government. On November 16, 2022, the NAM filed an amicus brief in support of the defendants' petition for a panel rehearing or, in the alternative, rehearing in banc, arguing that the panel decision conflicts with Congress's expressive directive, Supreme Court precedent, and other Circuits' case law, which do not require evidence of an express contract to establish "guidance or control" by the federal government for removal purposes.

Unfortunately, on November 29, 2022, the Fifth Circuit the petition.


Related Documents:
NAM brief  (November 16, 2022)
NAM brief  (September 15, 2020)

 

Plaquemines Parish v. BP America Prod. Co.   (5th Circuit)

The 5th Circuit should enforce the consistent and clear application of the procedures codified in 28 U.S.C. § 1446, governing the removal of cases from state to federal courts

On July 3, the NAM joined a coalition brief in the 5th Circuit concerning removal under federal officer jurisdiction. This case is one of over 40 cases filed by a group of Louisiana parishes seeking relief for alleged damage to Louisiana’s coastal environment. The plaintiffs allege that the defendants—energy producing companies violated the Louisiana State and Local Coastal Resources Management Act by violating or failing to obtain a use permit for oil production activities on the Louisiana coast. Defendants are authorized to remove cases against them for actions taken while acting under an officer of the United States. The defendants removed this case, in part, based upon acts taken to assist the Allies in World War II, pursuant to a contract with the government to refine oil. The district court found that Gulf Oil Corporation’s contract was insufficient to establish “acts under” a federal officer “because it imposed no federal supervision or control whatsoever over Gulf Oil’s oil production activities.

In our amicus brief, we argue that The Texas Company and Gulf Oil Corporation “acted under” a federal officer because oil production was how the companies fulfilled their contractual obligation to produce refined oil to the government. Ensuring that courts properly apply federal-officer removal jurisdiction is important to all manufacturers who provide goods or services to the United States government pursuant to a contract and face potential liability claims in state courts.


Related Documents:
NAM brief  (July 3, 2023)

 

Shell Oil Prods. Co. v. Rhode Island   (U.S. Supreme Court)

Public nuisance cases seeking to drive national energy policy on climate change belong in federal court

On January 5, 2023, the NAM filed an amicus brief in support of energy manufacturers’ petition seeking U.S. Supreme Court review of the lower courts’ remand order in a case asserting “public nuisance” claims related to climate change. This case is one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. The 1st Circuit upheld the district court’s decision to remand the case to state court for lack of subject matter jurisdiction.

In our brief, the NAM argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. This case has important implications for all manufacturers because of the growing trend among plaintiffs’ lawyers of using public nuisance and consumer deception claims to seek monetary damages from manufacturers for broad, societal issues that are ill-suited for consideration by a patchwork of state court determinations and should be addressed in the policy process.

Unfortunately, on April 24, 2023, the Court denied the energy manufacturers' petition.


Related Documents:
NAM brief  (January 5, 2023)

 

Sunoco LP v. City and County of Honolulu   (U.S. Supreme Court)

Public nuisance cases seeking to drive national energy policy on climate change belong in federal court

On January 5, 2023, the NAM filed an amicus brief in support of energy manufacturers’ petition seeking U.S. Supreme Court review of the lower courts’ remand order in a case asserting “public nuisance” claims related to climate change. This case is one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. The 9th Circuit upheld the district court’s decision to remand the case to state court for lack of subject matter jurisdiction.

In our brief, the NAM argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. The NAM also argues that the petitioners plainly satisfy the requirements for federal officer removal by asserting they are “person[s]” in a “civil action” “for or relating to” acts performed while “acting under” federal officers and “raise[d] a colorable federal defense”—which are the only requirements Congress and the Court have established for when the statute provides a right of removal. This case has important implications for all manufacturers because of the growing trend among plaintiffs’ lawyers of using public nuisance and consumer deception claims to seek monetary damages from manufacturers for broad, societal issues that are ill-suited for consideration by a patchwork of state court determinations and should be addressed in the policy process.

Unfortunately, on April 24, 2023, the Court denied the energy manufacturers' petition.


Related Documents:
NAM brief  (January 5, 2023)

 

Syngenta Crop Protection, LLC v. Nemeth   (Pennsylvania Superior Court)

Scope of personal jurisdiction over out-of-state defendants

On November 22, 2023, the NAM filed an amicus brief urging the Pennsylvania Superior Court to review and reverse a trial court decision finding Pennsylvania’s consent by registration statute—which conditions the privilege of doing business in the State on an out-of-state corporation’s submission to general personal jurisdiction—constitutional. In this case, the plaintiffs assert that they developed Parkinson’s disease from exposure to Syngenta’s herbicide and sued Syngenta in Pennsylvania state court even though a majority of the plaintiffs’ claims and Syngenta itself have no significant connection to the state. Syngenta objected to the trial court’s exercise of jurisdiction on the ground that Pennsylvania’s consent by registration statute violates the U.S. Constitution. The trial court, however, denied Syngenta’s request to dismiss the case for lack of personal jurisdiction.

We argue that the Pennsylvania Superior Court should hear the case to address a question left unresolved by the U.S. Supreme Court in Mallory v. Norfolk Southern Railway Co., 143 S. Ct. 2028 (2023): whether Pennsylvania’s consent by registration statute violates the dormant Commerce Clause. We maintain that the statute violates the dormant Commerce Clause by interfering with the efficiency of company operations and forcing companies to defend suits in locations where alleged injuries did not occur and neither party is a resident. In addition, Pennsylvania’s exercise of jurisdiction over residents of another state in cases asserting claims unconnected to the State raises federalism concerns as that conduct should be rightfully policed by some other State. Pushing back against expansion of a state court’s jurisdiction to hear such cases is important to prevent plaintiffs from forum shopping to plaintiff-friendly jurisdictions.


Related Documents:
NAM brief  (November 22, 2023)

 


Labor Law -- active



Arrmaz Prods. And Internat'l Chem. Workers Union   (NLRB)

The NLRB should reject General Counsel Abruzzo’s effort to imposep “make-whole” relief for an employer’s refusal to bargain

On August 26, the NAM filed an amicus brief urging the National Labor Relations Board to reject General Counsel Jennifer Abruzzo’s radical proposal to overturn longstanding and established precedent by awarding prospective, compensatory make-whole relief for the period when an employer refuses to bargain while challenging a union’s certification in court. The traditional remedy for cases where an employer unlawfully refuses to bargain with the chosen bargaining representative of its employees is a bargaining order whereby the NLRB commands the employer to stop its unlawful refusal and bargain with the representative. Over 50 years ago, in Ex-Cell-O Corp., the Board explicitly rejected make-whole relief—in that case raises for employees—as too speculative. The Board concluded that compelling employers “to accede to terms never mutually established by the parties” would violate the plain language of the National Labor Relations Act and Supreme Court precedent.

In this case, Arrmaz Prods. And Internat’l Chem. Workers Union, GC Abruzzo asked the Board to “make the bargaining unit employees whole for the lost opportunity to engage in collective bargaining” during the period when the employer refuses to bargain in order to test the union’s certification in the courts.” As the NAM’s brief explains, this inherently speculative and arbitrary remedy would chill the protected rights of every employer to petition a court to review certification of a union as the exclusive representative of the employer’s employees. Further, section 8(d) of the National Labor Relations Act flatly states that the obligation to bargain collectively “does not compel either party to agree to a proposal or require the making of a concession.” Here, the proposed make-whole remedy cannot be calculated without presuming an agreement that the Board is not entitled to presume or to compel. Employers and employees alike rely on the Board to maintain labor relations stability. Such reliance interests are severely undermined when longstanding and established precedents are overturned without adequate justification, as is threatened in this case.

On December 8, 2022, the Board held that respondent ArrMaz Products, Inc. violated the National Labor Relations Act by refusing "to recognize and bargain with the Union as the exclusive collective-bargaining representative of the employees in the appropriate unit." The Board did not address make-whole relief. The Board has severed this issue and plans to issue a supplemental decision regarding a make-whole remedy at a later date.


Related Documents:
NAM brief  (August 26, 2022)

 

Ralphs Grocery Co. and Terri Brown   (NLRB)

Arbitration agreements do not interfere with employees’ rights under the National Labor Relations Act

On March 21, 2022, the NAM filed an amicus brief urging the National Labor Relations Board to adhere to U.S. Supreme Court and Board precedent by preserving the validity of employment arbitration agreements. In Epic Systems v. Lewis, the Supreme Court held that the Federal Arbitration Act prevents the NLRB from challenging enforcement of arbitration agreements between employers and employees. Building on that holding, the NLRB ruled in 2020 that an arbitration agreement explicitly and prominently assures employees that their right to file charges with the Board does not interfere with employee rights under the National Labor Relations Act.

Despite this clear precedent, the current NLRB is seeking to abrogate its prior holdings and reconsider whether arbitration agreements interfere with employees’ right to file Board charges or otherwise access the Board’s processes. The NAM filed an amicus brief urging the Court to adhere to its current standard. Our brief highlights the Court’s holding in Epic Systems—that Congress does not alter the fundamental details of one statutory scheme (the FAA) through vague pronouncements in another (the NLRA). Any action by the Board to overrule its prior precedent and impose liability on an employer for enforcing its arbitration agreement would violate the FAA and lead to another confrontation with the Supreme Court. Many NAM members rely on lawful, voluntary arbitration agreements with their employees to reduce litigation costs and reach timely resolution of employment disputes through neutral fact finding and decision making, consistent with the FAA.


Related Documents:
NAM Brief  (March 21, 2022)

 

South Carolina State Ports Authority v. NLRB   (4th Circuit)

Protecting the bar against secondary boycotts

On October 30, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to review the 4th Circuit’s refusal to reverse a National Labor Relations Board decision that eviscerates the long-standing prohibition on secondary boycotts (where a union coerces a neutral employer to cease doing business with an employer with whom a union has a labor dispute). In this case, the South Carolina State Ports Authority operates the Port of Charleston by employing state workers to run lift-equipment and having International Longshoremen’s Association members perform the other longshoreman work there. After SCSPA opened another terminal at the port in 2022 and attempted to use the same division of labor, ILA sued the United States Maritime Alliance (USMX), a multi-employer association of carriers that deliver and pick up containers at the ports, and two of its carrier-members, alleging that they were violating the parties’ collective bargaining agreement by using state employees to perform port work. USMX, the State of South Carolina and SCSPA countered by filing unfair labor charges, maintaining that the lawsuit sought to obtain an illegal secondary objective in violation of the NLRA’s secondary boycott provision. The NLRB disagreed and the 4th Circuit refused to reverse the NLRB’s decision on appeal.

We argue in our amicus brief that the union’s actions in this case constitute a quintessential secondary boycott: the union is coercing neutral parties (the carriers) to stop doing business at a port unless a different party—the South Carolina State Ports Authority—accedes to the union’s demands. All manufacturers have an interest in limiting this type of coercive and intimidating conduct by unions. Unfortunately, on February 20, 2024, the U.S. Supreme Court declined to hear the case.


Related Documents:
NAM brief  (October 30, 2023)

 

Starbucks v. McKinney   (U.S. Supreme Court)

Pushing back against lower standard for NLRB to obtain preliminary relief

On November 6, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a lower court decision granting preliminary relief in favor of a union—including forcing the employer to reinstate terminated employees—while the Board’s adjudication process remains ongoing. Under the National Labor Relations Act, federal district courts are empowered to grant preliminary relief at the NLRB’s request while an NLRB adjudication remains pending. In this case, the 6th Circuit affirmed a district court’s grant of preliminary relief—which is considered an extraordinary remedy reserved for extreme cases—under an unduly permissive standard. Specifically, the 6th Circuit, along with the 3rd, 5th, 10th and 11th Circuits, has held that the NLRB is entitled to preliminary relief upon a showing of reasonable cause to believe that the unfair labor practice alleged has occurred and that preliminary relief is just and proper. By contrast, other circuit courts have applied the traditional, and more stringent, four factor test to determine whether the NLRB is entitled to preliminary relief. Under that test, the NLRB must establish that (1) that it is likely to succeed on the merits of its claim, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest.

We argue in our amicus brief that the Court should grant Starbuck’s petition to resolve the circuit split and that the 6th Circuit’s lenient standard places unreasonable burdens on employers subject to unfair labor practice proceedings.

Happily, on January 12, 2024, the Court granted the petition.


Related Documents:
NAM brief  (February 28, 2024)
NAM brief  (November 6, 2023)

 


OSHA -- active



NAHB v. Acosta   (W.D. Okla.)

Safety incentive programs and post-incident drug testing

The NAM filed an amicus brief supporting safety incentive programs and post-incident drug testing. Since 2016, the NAM has fought the U.S. Occupational Safety and Health Administration's (OSHA) overreaching "injury and illness" rule, which sought to restrict employers' ability to administer drug tests to employees after safety incidents. The rule also limited incentive programs that encourage safe workplaces. The incoming presidential administration in 2017 announced it would reconsider the rule, then OSHA issued guidance to clarify that post-incident drug testing and safety incentive programs are not prohibited. This case is important because a favorable ruling will help preserve pro-safety measures and keep a future administration from easily reinstating the guidance that was so harmful to manufacturers. The NAM’s brief asks a federal judge to invalidate the regulatory provisions underpinning OSHA's 2016 restrictions on post-incident drug testing and safety incentive programs.


Related Documents:
NAM brief  (May 24, 2019)

 


Patents, Copyrights and Trademarks -- active



Celanese Int’l Corp. v. International Trade Commission   (Federal Circuit)

Whether a patentee’s sale of an unpatented product made by a secret patented process is a bar to patentability under Section 102 of the Leahy-Smith America Invents Act of 2011

On October 28, 2022, the NAM filed an amicus brief in an appeal addressing an issue of first impression under U.S. patent law, as amended by the Leahy-Smith America Invents Act of 2011 (AIA)—whether a company’s sale of an unpatented product made by a secret patented process is a bar to patentability of that process under the AIA. In its appeal, Celanese sought to enforce its patent for the secret process used to create artificial sweetener Ace-K (which itself is not patented) against Chinese-based companies that were unlawfully using that patented process. The International Trade Commission concluded that Celanese’s sale of Ace-K invalidated the patent for its secret manufacturing process under the AIA’s on-sale bar.

In our brief, the NAM requests that the Federal Circuit reverse the International Trade Commission and hold that Celanese’s sale of Ace-K did not invalidate the patent for its secret manufacturing process. The International Trade Commission’s decision “finds no basis in the text of the AIA, undermines Congressional intent, and prevents manufacturers from developing complementary patent and trade secret rights.” All manufacturers depend on stable intellectual property laws to protect their investments and share an interest in knowing that their innovations will be subject to consistent protection worldwide.


Related Documents:
NAM brief  (October 28, 2022)

 


Preemption -- active



Janssen Pharm., et al. v. A.Y., et al.   (U.S. Supreme Court)

Preemption of state law for failure-to-warn of off-label use claims

The NAM filed an amicus brief urging the U.S. Supreme Court to grant cert to reinforce the preemptive authority of the federal government to regulate pharmaceutical drug labeling. Federal law bars drug manufacturers from unilaterally changing drug labels to include warnings for off-label uses; in fact, manufacturers can face potential criminal liability for “misbranding” a drug if the label includes information about unapproved uses. Yet in this case, Janssen Pharm., et al. v. A.Y., et al., a Philadelphia jury awarded plaintiffs $70 million in damages because the manufacturer did not include a warning about an off-label use of the drug Risperdal. There are over 10,000 nearly identical cases still pending against the company in Pennsylvania state court. Manufacturers across federally regulated industries are subject to carefully calibrated federal labeling regimes that provide the certainty and predictability needed to operate. As the NAM’s brief argues, the use of state tort law to undermine federal labeling requirements will, if allowed to continue, create a confusing and ultimately destructive “dual track” system where federal agencies and state tort law will conflict and ultimately undermine the federal goal of targeting labeling to a specific audience.

Unfortunately, on May 17, 2021, the Supreme Court denied cert.


Related Documents:
NAM brief  (March 8, 2021)

 

Creagan v. Wal-Mart Transportation   (6th Circuit)

Liability for negligent acts of truckers

The NAM filed an amicus brief to argue that the 6th Circuit should hold that businesses that hire independent trucking companies to transport goods are not liable for the negligent acts of those independent truckers. An individual was injured in a traffic collision involving a trucking company hired by a freight broker. The injured person argued that the broker was negligent in selecting the trucking company because it knew or should have know about the company’s prior regulatory infractions. The freight broker responded that the hiring directly concerns the services a freight broker provides under the Federal Aviation Administration Authorization Act of 1994, and therefore preempts state law, including state common law for negligence. The district court agreed. On appeal to the 6th Circuit, the NAM’s amicus brief explained the careful balance that congress struck in regulating drivers under the Act, and why the plaintiffs’ theory of liability is unworkable in practice.


Related Documents:
NAM brief  (November 7, 2019)

 

Jones, et al. v. Goodrich Corp., et al.   (2nd Circuit)

FAA preempts design defect claims under state law

The NAM filed an amicus brief in the Second Circuit seeking to uphold a summary judgment ruling in favor of the manufacturing defendants in a helicopter design defect case based on the doctrine of implied field preemption. The case arose from a fatal crash of a U.S. Army helicopter. The decedents’ estates brought design defect and manufacturing defect claims against the manufacturers of the helicopter, even though the Army required that the Federal Aviation Administration (FAA) approve all aspects of the helicopter’s design. The trial court rejected the plaintiffs’ claims after finding clear congressional intent to occupy the entire field of aviation safety, including aviation product liability cases. The NAM joined the General Aviation Manufacturers’ Association (GAMA) in filing an amicus brief arguing for affirmance of the trial court’s ruling. As the NAM’s brief explains, the FAA exercises pervasive authority to establish aviation design standards and approve compliance with those standards. The FAA also retains ultimate, exclusive authority over changes to approved designs and monitors aviation products throughout their lives in service to address any safety issues. This federal regulatory scheme requires preemption to prevent an unworkable array of conflicting requirements that would jeopardize the safety and viability of the aviation industry—in the United States and globally.


Related Documents:
NAM brief  (March 23, 2021)

 

Swinomish v. BNSF   (9th Circuit)

Challenging restrictions on goods shipped by rail

The NAM filed an amicus brief supporting BNSF and underscoring the importance of the freight rail network for manufacturers that rely on it to efficiently move materials. The plaintiff seeks an unprecedented injunction restricting the type and quantity of goods that can be shipped over an interstate railway that crosses its land, particularly hazardous materials. Such an injunction would disregard the exclusive federal regulatory scheme governing interstate rail transportation, would undermine shippers’ common-carriage rights and would obstruct interstate commerce in economically critical products. The NAM’s brief explained why the court should not allow the obstruction of commerce of lawful products by giving landowners an unprecedented ability to veto the quantity or types of cargo being shipped through interstate commerce.


Related Documents:
NAM brief  (November 21, 2018)

 


Product Liability -- active



American Honda Motor v. Milburn   (Texas Supreme Court)

Product liability for products complying with federal safety standards

On August 29, 2023, the NAM filed an amicus brief urging the Texas Supreme Court to rigorously enforce the State’s non-liability defense under Section 82.008 of the Texas Code for manufacturers that comply with federal safety standards. In this case, Sarah Milburn, a passenger seated in the middle seat of the third row of an Uber minivan, was severely injured when a pickup truck collided with the passenger side of the minivan. Sarah and her parents sued Honda for negligence in designing, manufacturing, and marketing the minivan’s third-row middle seat belt system, maintaining that the seat belt was not adequately designed, manufactured, or marketed to minimize the risk of injury. A jury returned a verdict for the plaintiffs, which a Texas court of appeal affirmed on appeal. And the Texas Supreme Court granted Honda’s request to hear the case.

We argue in our amicus brief that Honda’s seat belt system complied with federal safety standards. For a plaintiff to overcome a non-liability defense asserted under Section 82.008, the plaintiff must establish federal regulations are inadequate to protect from an unreasonable risk of injury or damage because there has been such a material change in technology or society that no reasonable manufacturer at the time of manufacture could believe that the standard remains adequate to protect the public. The plaintiffs failed to meet their burden. Further, the plaintiff’s proposed alternative design for the seat belt system was insufficient to support a product liability claim because it would have destroyed the utility of the third-row seats in the minivan and a manufacturer need not destroy a product’s utility to make it safer. Ensuring rigorous enforcement of Texas’ non-liability defense is important to prevent a broad tort—product liability—from becoming entirely boundless from a plaintiff expert’s benefit of hindsight to second guess a product’s design and manufacture.


Related Documents:
NAM brief  (August 9, 2023)

 

The Sherwin-Williams Company v. Certain Underwriters at Lloyd’s London   (Ohio Supreme Court)

Insurance coverage for public nuisance claims

On September 5, 2023, the NAM filed an amicus brief arguing to the Ohio Supreme Court that commercial general liability (CGL) insurance policies cover public nuisance claims. In this case, a California trial court held Sherwin-Williams liable for public nuisance claims, alleging that it contributed to a public health crisis by promoting lead paint for interior and exterior use despite knowing the use of lead was hazardous to human beings. The parties subsequently settled the case and Sherwin-Williams sought insurance coverage for monies paid to abate the conditions created by interior residential lead paint in 10 California jurisdictions. An Ohio court of appeal held that Sherwin-Williams' insurance policies provide coverage for the monies Sherwin-Williams had to pay, and the Ohio Supreme Court granted the insurers’ request to hear the case.

In our brief, we argue that the monies Sherwin-Williams was ordered to pay to abate the public nuisance are “damages” and that the Insurers’ CGL policies cover public nuisance claims. Further, knowledge of the risk of harm a product poses at the time of manufacturing and selling the product is not a sufficient basis to deny coverage under the clause in CGL insurance policies that excludes damages that are “expected or intended.” That exclusionary clause only applies to allow an insurance company to deny coverage when a company that is insured intends for a resulting harm or injury to occur. This case is important to prevent insurance companies from being able to deny coverage under their insurance policies any time a manufacturer has knowledge that a product might cause harm.


Related Documents:
NAM brief  (September 5, 2023)

 

City of New York v. BP   (2nd Circuit)

Opposing misguided public nuisance lawsuits

The NAM filed an amicus brief in the U.S. Court of Appeals for the Second Circuit to oppose misguided efforts to impose “public nuisance” liability on energy manufacturers. The city of New York sued several energy companies to seek damages for local impacts of climate change, arguing that the defendants’ sale of fossil fuels is a public nuisance that entitles the city to financial compensation. This theory of liability poses a grave risk for manufacturers because it would impose liability on manufacturers despite a plaintiff’s inability to prove the manufacturer actually caused the plaintiff’s injuries. A federal district court dismissed the lawsuit. On appeal to the Second Circuit, the NAM’s amicus brief explains how Supreme Court precedent forecloses such lawsuits by recognizing the federal legislature as the appropriate branch of government to set national energy policy, including addressing climate change. Our brief also highlights the extensive technological innovations that manufacturers have already deployed to reduce carbon emissions, and which they will continue to pursue to address climate change and other environmental challenges.


Related Documents:
NAM brief  (February 14, 2019)

 

Earth Island Institute v. The Coca-Cola Company   (D.C. Court of Appeals)

Protecting against the limitless reach of consumer protection statutes

On May 22, 2023, the NAM filed an amicus brief urging the D.C. Court of Appeals to affirm the dismissal of an environmental group’s claim that Coca-Cola's vocal support for recycling and environmental sustainability are misleading in violation of D.C.’s Consumer Protection Procedures Act (CPPA). In this case, Earth Island Institute v. The Coca Cola Company, the trial court correctly found that the challenged statements were aspirational in nature and not actionable—the instant appeal filed. Our brief argues that to be subject to the CPPA, statements must be (1) made in connection with a “consumer transaction” or advertisement about “goods and services” directed to D.C. residents to facilitate a consumer transaction; and (2) be material to a reasonable consumer’s decision as to whether they would receive fair value in purchasing the product or service. The statements at issue here plainly do not satisfy these requirements because they were cherry-picked from global communications having no direct tie with any product or service. Affirmance of the lower court’s decision is required to avoid special interest groups using the CPPA to push their political agenda in an effort to silence corporations with different views on public policy issues. All manufacturers have an interest in limiting the reach of sweeping consumer protection statutes and receiving fair notice of prohibited conduct.


Related Documents:
NAM brief  (May 22, 2023)

 

Eastern Maine Medical Center v. Teva   (Maine Supreme Court)

Protecting against unprecedented expansion of public nuisance liability

On November 2, 2023, the NAM filed an amicus brief asking the Maine Supreme Court to affirm a trial court decision rejecting public nuisance claims brought by various hospital operators based on the manufacturing defendants' marketing or distribution of opioid medications. In this case, the hospital operators allege that marketing and distribution of opioids contributed to the opioid epidemic and increased operating costs to treat impacted patients.

We argue in our amicus brief that the trial court's decision is consistent with longstanding public nuisance liability principles and to reverse the decision would threaten open ended, industry-wide liability for a variety of products that may also have foreseeable risks or inherent externalities, including pharmaceuticals, oil and gas, and household chemicals. This case is important for all manufacturers because if the lower court's ruling is reversed, manufacturers could be subject to industry-wide liability in Maine for selling and marketing products with known risks of harm with few, if any, defenses.

 

Gilead Sciences, Inc. v. Superior Court of the City and County of San Francisco   (California Supreme Court)

Challenging a radical change in the tort of negligence for manufacturers

On March 12, 2023, the NAM filed a coalition amicus letter urging the California Supreme Court to review a Court of Appeal decision endorsing a novel theory of liability where plaintiffs do not have to prove that a product is defective or unreasonably dangerous, but rather can assert that a company is liable for researching and developing another product that it “knew” was “safer” and failing to bring that product to market. In this case, the plaintiffs concede that the product at issue—a medication used to prevent and treat HIV/AIDS—is useful and not defective. Nevertheless, the Court of Appeal agreed with the plaintiffs that the manufacturer of the product can be held liable for the delay in bringing to market a different product the plaintiffs contend is safer.

We will argue that the decision conflicts with longstanding law and will result in a flood of litigation if left in place. The negligence theory that the Court of Appeal accepted could be repurposed against any manufacturer, not just a drug maker. And it will not be hard for enterprising plaintiffs’ lawyers to plead a claim under this new theory of negligence. California Supreme Corut review is necessary to clarify the scope of manufacturer liability and to bring California law back in line with the general and sound rule that a manufacturer can be held liable only for the products it made and sold, not products it could have made and sold.


Related Documents:
NAM letter  (March 12, 2024)

 

In re Aearo Technologies, LLC   (7th Circuit)

Addressing liabilities through bankruptcy rather than through the mass-tort system

On December 19, 2022, the NAM filed an amicus brief urging the 7th Circuit to stay or enjoin ongoing mass tort litigation against a manufacturer’s solvent parent to allow the manufacturer to resolve its overwhelming tort liabilities through bankruptcy. Debtor Aearo Technologies LLC sought chapter 11 relief and, on the same day, requested, under relevant provisions of the Bankruptcy Code, a stay or injunction of all pending and future actions seeking to hold Aearo and 3M (its parent) liable for alleged injuries related to military earplugs manufactured by the companies. Litigation over the earplugs’ alleged defective design and marketing has become the largest multidistrict litigation in history, with over 290,000 claims. The bankruptcy court denied Aearo’s request, finding that the Bankruptcy Code only authorized it to enter orders to protect the “debtor, not non-bankruptcy co-debtors like 3M. The bankruptcy court further determined that a stay of pending litigation and an injunction against future actions were unwarranted because, ultimately, under the terms of their funding agreement, 3M will fully fund any liability incurred by Aearo” related to the earplugs. The instant appeal followed.

Our brief argues that bankruptcy, unlike MDL, is well equipped to resolve mass-tort lawsuits of this magnitude in an efficient manner. Further, unlike in the MDL context, bankruptcy promotes global resolution of a company’s liabilities, by sweeping in even future claims based on injuries that have not yet manifested. We urge the 7th Circuit to clarify that a bankruptcy court can and should do what is necessary and appropriate to enable a bankruptcy proceeding’s success—including staying parallel mass-tort litigation against a related entity whose liabilities redound to the debtor.


Related Documents:
NAM brief  (December 19, 2022)

 

Johnson v. Emerson Electric Co.   (Texas Supreme Court)

Duty to warn of product risks

The NAM filed an amicus brief in the Texas Supreme Court to seek reversal of a Texas appellate court decision that improperly imposed liability on a manufacturer for its alleged failure to adequately warn of risks from one of its commercial air conditioners. An experienced HVAC repairman was injured when an HVAC compressor released pressurized fluids. The repairman sued the manufacturer, claiming the warning of such releases was insufficiently descriptive. A Texas jury found in the plaintiff’s favor, and an appeals court affirmed. In support of review by the Texas Supreme Court, the NAM filed an amicus brief that argued against the court of appeals’ unsupported expansion of the duty of a manufacturer to warn licensed professionals of known risks. The NAM’s brief also asks the court to clarify the jury instructions in failure-to-warn cases such as this.

The court granted review in June 2020. On April 16, 2021, the court affirmed the jury verdict, however the court took a giant leap forward by agreeing with NAM and Emerson's position that a jury in a design-defect case can be instructed on the five risk-utility balancing factors commonly used in other jurisdictions. The court failed to address the court of appeals’ unsupported expansion of the duty of a manufacturer to warn licensed professionals of known risks, deeming the issue waived based on Emerson's failure to object to a particular jury instruction. The NAM filed an amicus brief in support of Emerson's petition for rehearing on that issue, arguing that the court should have requested supplemental briefing before disposing of a case on an issue not raised or briefed by the parties.

Unfortunately, on September 3, 2021, the Texas Supreme Court denied the petition for rehearing.


Related Documents:
NAM Brief in Support of Rehearing  (June 9, 2021)
NAM Brief in Support of Review  (February 19, 2019)

 

Johnson & Johnson, et al. v. State of California   (U.S. Supreme Court)

Challenging the failure to provide fair notice of conduct that gives rise to severe penalties and scope of potential punishment

The NAM filed an amicus brief urging the U.S. Supreme Court to review California’s imposition of over $300 million in civil penalties under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL) without providing fair notice of the conduct that gave rise to those penalties and the scope of the potential punishment. In this case, the trial court imposed $344 million in civil penalties under the UCL and FAL—an amount 50 times greater than the largest penalties previously awarded under those statutes and larger than all other reported UCL and FAL awards combined—based on communications about FDA-approved pelvic mesh products. A California court of appeal reduced the civil penalty award to approximately $302 million but rejected the defendants-appellants’ argument that the trial court’s imposition of over $300 million in penalties violated their Fourteenth Amendment due process rights. The Supreme Court of California denied review.

We argue in our amicus brief that California’s—as well as many other states’—unfair, deceptive, and abusive practices statutes have failed to provide fair notice of the conduct that gives rise to civil penalties and the scope of the potential punishment. We urge the Supreme Court to grant the defendants-appellants’ petition for certiorari to (1) articulate the constitutional bounds for civil penalties; (2) establish principles states can use to ensure their civil penalties are objective and rational; and (3) draw from the principles the Court applies in the punitive damages and civil forfeiture contexts to place similar bounds on the aggregation of “per violation” civil penalties.

Unfortunately, on February 22, 2023, the Supreme Court denied the petition for certiorari.


Related Documents:
NAM brief  (December 15, 2022)

 

BP, et al. v. Mayor and City of Baltimore   (U.S. Supreme Court)

Jurisdiction for climate change "public nuisance" lawsuits

The NAM filed an amicus brief in support of an application to the U.S. Supreme Court to stay a remand order transferring litigation involving “public nuisance” claims related to climate change to state court. Twenty-six energy company defendants in the case filed the stay request to allow appeals to progress on the question of which court has proper jurisdiction over the claims. The case is part of a coordinated, national litigation campaign involving over two dozen public nuisance cases filed in carefully chosen states and federal circuits by agenda-driven lawyers and activists. This issue is important to energy producers and all manufacturers because public nuisance claims involving climate change implicate federal questions and the preemption of federal laws that are appropriately heard by federal courts rather than state courts. The NAM’s amicus brief explained to the court the broader context of the plaintiffs’ legal strategy and that these suits implicate federal issues and therefore should be in federal court. Unfortunately, Chief Justice Roberts denied the stay petition. Thereafter, following the Fourth Circuit's decision to remand the case to state court, the NAM filed an amicus brief in support of BP's petition for cert. pressing the high court to resolve the circuit split regarding the scope of appellate review of remand orders involving the federal officer removal statute. Happily, on October 2, 2020, the Court granted review.

On November 23, the NAM filed an amicus brief on the merits in support of removal jurisdiction in this case, asking the Court to ensure that lower courts evaluate all grounds for removal prior to issuing remand orders.

On May 17, 2021, in a 7-1 decision with Justice Gorsuch writing for the majority, the Court reversed the Fourth Circuit’s denial of full federal appellate review of the important jurisdictional issues raised by this case and remanded the case for the Fourth Circuit to consider those issues in the first instance. Unfortunately, on April 7, 2022, the Fourth Circuit affirmed the district court's remand order, holding that none of the asserted basis for removal permit the Court to exercise jurisdiction.

On November 17, 2022, the NAM filed an amicus brief in support of the petitioners' petition to the U.S. Supreme Court for cert. The NAM's brief again argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on April 24, 2023, the Court denied the petition.


Related Documents:
NAM brief  (November 17, 2022)
Opinion  (May 17, 2021)
NAM brief  (November 23, 2020)
NAM brief  (April 30, 2020)
NAM brief  (October 4, 2019)

 

People v. Johnson & Johnson   (California Supreme Court)

Improper application of the “likely to deceive” standard under California’s Unfair Competition Law and False Advertising Law

The NAM filed an amicus letter urging the California Supreme Court to review a lower court decision that eviscerates the rational boundaries for liability under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). In this case, the trial court imposed $344 million in civil penalties under the UCL and FAL—an amount 50 times greater than the largest UCL or FAL award previously reported and larger than all other reported UCL and FAL awards combined—based on the defendant’s communications about its FDA-approved pelvic mesh products. To reach this extraordinary result, the court refused to judge the communications from the perspective of their target audiences: trained physicians who treat pelvic floor conditions and the patients whom those physicians consent prior to prescribing mesh products. Instead, the court ruled that medical device risk disclosures must include all potential risks, no matter whether they are already known to physicians or likely to mislead prospective patients.

The NAM’s amicus letter emphasizes that proper application of the “likely to deceive” standard under the UCL and FAL is vital to protect against speculative allegations of deceit that are not grounded in the real-world context in which the communications were made. The UCL and FAL have already spawned a number of product lawsuits premised on idiosyncratic readings of existing representations or demands that every conceivable malfunction be disclosed prominently before purchase. Ensuring that any omission of risk information is assessed through a rigorous “likely to deceive” standard keeps the most highly speculative UCL and FAL lawsuits from clogging the judicial system

Unfortunately, on July 13, 2022, the California Supreme Court denied the petition for review.


Related Documents:
NAM brief  (June 27, 2022)

 

Suncor Energy (U.S.A.) Inc., et al. v. Board of Cnty. Commissioners of Boulder Cnty., et al.   (U.S. Supreme Court)

Public nuisance cases seeking to drive national energy policy on climate change belong in federal court

On July 8, the NAM filed an amicus brief asking the U.S. Supreme Court to grant cert in one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. The case, Suncor Energy Inc., et al v. Board of Cnty. Commissioners of Boulder Cnty., et al., is part of a coordinated, national litigation campaign filed in carefully chosen states and federal circuits by agenda-driven lawyers and activists. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable to federal court because they arise under federal law. On the few occasions where federal courts have reached the substance of these claims, the courts have concluded that the claims arise under federal common law and are displaced by the Clean Air Act.

Earlier this year, the 10th Circuit agreed with the plaintiffs’ novel argument that their claims became viable under state law and could not be removed because Congress exercised its authority and displaced the federal common law by enacting the Clean Air Act—a theory that the Second Circuit referred to in a related case as “too strange to seriously contemplate.” Further, the 10th Circuit concluded that under the well-pleaded complaint rule, federal courts are not permitted to look behind the veneer of the claims’ state law labels even when the labels are clearly masking federal law claims. In support of Supreme Court review, the NAM filed an amicus brief arguing that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on April 24, 2023, the Court denied the petition for cert.


Related Documents:
NAM brief  (July 8, 2022)

 

The DCH Health Care Authority v. Purdue Pharma L.P.   (Alabama Supreme Court)

Protecting against unprecedent expansion of public nuisance liability

On May 1, 2023, the NAM filed an amicus brief urging the Alabama Supreme Court to review and reverse a lower court order extending Alabama’s law of public nuisance to the marketing and distribution of legal and highly-regulated products—FDA-approved medications. In this case, Ex Parte Janssen Pharmaceuticals, Inc., Alabama hospitals sued the manufacturers and distributors of opioid medications in Alabama state court alleging that the defendants’ activities created a public nuisance—the opioid epidemic—that caused them to incur increased operational costs. Notably, however, public nuisance law in Alabama—as in other states—is a land and water use cause of action, directed at resolving local disturbances that interfere with the right of the public to use a public road, communal space, or local waterway.

We argue in our brief that the trial court’s decision departs from long-standing public nuisance liability principles and threatens open-ended, industry-wide liability for a variety of products that may also have foreseeable risks or inherent externalities, including pharmaceuticals, oil and gas, and household chemicals. This case is important for all manufacturers because if the trial court’s ruling can stand, manufacturers could be subject to industry-wide liability in Alabama for selling and marketing products with known risks of harm with few if any defenses.

Unforturnately, on June 2, 2023, the Alabama Supreme Court denied the request for review.


Related Documents:
NAM brief  (May 1, 2023)

 


Securities Regulation -- active



National Center for Public Policy Research v. SEC   (5th Circuit)

Pushing Back Against Shareholder Activists' Outsized Role in Corporate Governance

This case was brought in the 5th Circuit by activist group NCPPR accusing the SEC of applying its Rule 14a-8 in an inconsistent and politically motivated manner. Under SEC Rule 14a-8, public companies are required to include certain shareholder proposals on their proxy ballot. Historically, companies could exclude proposals that encroached on the company’s "ordinary business operations." However, in November 2021, the SEC released new guidance (SLB 14L) making proposals that raise issues with "broad societal impact" presumptively non-excludable. And activist groups from across the ideological spectrum are increasingly using shareholder proposals to inject contentious ideological policy fights into corporate governance. In May 2023, we intervened in this case to push back on this troubling trend.

On July 21, 2023, we filed our opening brief arguing that Rule 14a-8 violates the First Amendment by compelling a company to include shareholder-selected proposals unrelated to the company’s core business or the creation of shareholder value on the company’s own proxy statement at the company's own expense. Aside from these constitutional concerns, the SEC lacked authority to issue Rule 14a-8. Congress only authorized the SEC to enact rules prohibiting deceptive or misleading statements by corporations when they solicit shareholder-proxy votes. Rule 14a-8, however, does not address such statements.

On October 3, 2023, we filed our reply brief urging the 5th Circuit to reject the SEC's jurisdictional and procedural arguments and hear this important challenge to the SEC's authority to dictate which proxy ballot items investors should consider. We explain in our reply brief that, contrary to the SEC's assertions, there are no jurisdictional or procedural barriers preventing the 5th Circuit from holding that the SEC lacks authority to compel companies to include and subsidize shareholder speech within the company's own proxy statement. And in addition to the SEC's failure to clear the First Amendment barrier to its compelled subsidized speech regime, the SEC fails to identify a clear statement from Congress giving it the authority to hijack a corporation's own speech in contravention of state corporation law that does not enable shareholders to insert their speech or voting proposals onto a corporation's own proxy statement.


Related Documents:
NAM brief  (July 21, 2023)
NAM Opposition to Motion to Dismiss  (June 12, 2023)

 

Nat'l. Center for Pub. Policy Research v. SEC   (5th Circuit)

Pushing Back Against Shareholder Activists' Outsized Role in Corporate Governance

This case was brought in the 5th Circuit by activist group NCPPR challenging an SEC no-action letter--stating that it would not recommend enforcement action against Kroger if Kroger excluded NCPPR's proposal from its proxy ballot--and accusing the SEC of applying its Rule 14a-8 in an inconsistent and politically motivated manner. Under SEC Rule 14a-8, public companies are required to include certain shareholder proposals on their proxy ballot. Activist groups from across the ideological spectrum are increasingly using shareholder proposals to inject contentious ideological policy fights into corporate governance. We intervened in this case to raise two arguments not addressed by the parties: (1) Rule 14a-8 violates the First Amendment by compelling a company to include shareholder-selected proposals unrelated to the company’s core business or the creation of shareholder value on the company’s own proxy statement at the company’s own expense; and (2) the SEC lacks authority to compel company speech on its own proxy statement.


Related Documents:
NAM brief  (July 23, 2023)

 


Statute of Limitations -- active



American Chemistry Council v. Department of Toxic Substances Control   (California Supreme Court)

Statute of limitations for California Environmental Quality Act claims

On February 16, 2023, the NAM filed an amicus letter seeking intervention by the California Supreme Court in a case involving a party’s ability to challenge agency action under the California Environmental Quality Act (CEQA). This case arises from the California Department of Toxic Substances Control (the Department) listing spray foam systems as a priority product under California’s "Green Chemistry" law. This listing subjects the spray foam industry in California to potential restrictions or ban on the sale of its product. The petitioners--American Chemistry Council (ACC) and General Coatings Manufacturing Corp--sued the Department challenging the listing as a violation of the CEQA. The trial court found for the petitioners on their CEQA claim. On appeal, however, the Department maintained that the petitioners’ claim should have been dismissed as untimely under CEQA’s 180-day statute of limitations. In turn, the petitioners argued that their claim was timely because the statute of limitations period began to run after ACC fully exhausted the Department’s administrative appeals process under relevant regulations implementing the Green Chemistry law. The Court of Appeal agreed with the Department, concluding that litigants do not need to exhaust administrative remedies before initiating CEQA claims unless the underlying administrative review process specifically references CEQA--here, the relevant regulations make no reference to CEQA. We argued in our amicus letter that review is necessary because the Court of Appeal’s decision provides little guidance as to what level of detail is required to incorporate CEQA claims into administrative exhaustion procedures enumerated in other statutory schemes. Allowing the Court of Appeal’s decision to stand will undermine three key tenants of the California judicial system: (1) the efficiency and conservation of resources that administrative exhaustion affords; (2) legal clarity that precludes agencies from shielding their decision-making from judicial review; and (3) a preference for resolving disputes on the merits instead of on technicalities. All manufacturers involved in CEQA litigation would benefit from clear rules regarding what steps are required before CEQA litigation can be initiated. Unfortunately, on March 29, the California Supreme Court denied theh petition for review.


Related Documents:
NAM brief  (February 16, 2023)

 

Ford v. Parks   (Texas Supreme Court)

Urging Enforcement of Statue of Repose

On February 9, 2024, the NAM filed an amicus brief urging the Texas Supreme Court to enforce the state’s statute of repose. In this case, Ford v. Parks, the plaintiff brought a product liability suit against Ford after being injured in an auto accident more than 15 years after he purchased the SUV from a dealership. A Texas trial court properly applied the statute of repose to enter judgment for Ford. That statute requires a plaintiff to “commence a products liability action against a manufacturer or seller of a product before the end of 15 years after the date of the sale of the product by the defendant.” An intermediate appellate court, however, reversed the trial court’s decision, holding that Ford failed to conclusively establish that the plaintiff commenced his action more than 15 years after the “date of sale” because Ford failed to show that it received payment from the dealership on the date that it released the vehicle to the dealership.

We argue in our amicus brief that the “sale” of a product occurs when the product is transferred to the buyer—irrespective of when payment is received—and that a manufacturer need not prove the exact date of sale. We further contend that, if allowed to stand, the appellate court’s decision would disrupt the risk allocation that the Texas Legislature set not only for the auto-manufacturing business, but for all businesses that produce and sell durable goods in Texas.


Related Documents:
NAM brief  (February 9, 2024)

 

Textron Aviation Defense LLC v. United States   (Federal Circuit)

Accrual of the statute of limitations for submitting a certified claim to a contracting officer

On February 22, 2023, the NAM filed an amicus brief urging the Federal Circuit to reverse the lower court’s dismissal of over $19M in breach of contract claims against the federal government as barred by the statute of limitations for submitting a claim to a contracting officer, a prerequisite to pursuing litigation. In this case, a contracting officer denied Textron’s claim for payment of pension costs recoverable under government contracts as time-barred under the applicable six-year statute of limitations for submitting a claim. Textron promptly filed a complaint against the government in the U.S. Court of Federal Claims, which granted summary judgment in favor of the government based on the statute of limitations, holding that Textron’s claim had accrued more than six years before July 2020 (when Textron submitted the claim).

We argue in our brief that the trial court failed to apply the proper claim accrual standard. Textron’s request for the government to pay its share of pension costs following a segment closing should not be considered a "claim"--it is a routine submission that is not in dispute when submitted and the government must be afforded sufficient time to conduct its administrative review of the submission before the request can be considered a claim. Even assuming a request for payment of pension costs after a segment closing could be considered a claim, the trial court misapplied the remaining elements of claim accrual. Textron did not experience an injury and was unable to present its claim until the government denied payment. Claim accrual can only commence when all events have transpired to fix the government’s liability. All manufacturers who are government contractors subject to administrative adjustments between contracting partners have an interest in an efficient, collaborative, and non-litigious framework for the claim accrual standard.


Related Documents:
NAM brief  (February 20, 2023)

 


Taxation and State Taxation -- active



3M v. Commissioner   (8th Circuit)

Challenging the IRS’s blocked-income rule

On February 14, 2024, the NAM filed an amicus brief urging the 8th Circuit to reverse the IRS’s increase of a manufacturer’s taxable income by more than $23 million. In this case, 3M v. Commissioner, 3M licensed certain intellectual property to a Brazilian subsidiary who was barred by Brazilian law from paying 3M the arms-length price for use of the IP. The Tax Court erroneously endorsed the IRS’s view that it could increase the company’s taxable income to reflect a hypothetical arms-length transaction even though foreign law precluded the company from receiving the arms-length price in the transaction.

We argue in our brief that the IRS’s actions contradict controlling precedent and that allowing the IRS to increase 3M’s revenue would upend the public’s settled expectations upon which businesses rely to make investment decisions. We will also argue that the 8th Circuit should not allow the IRS to flout its Administrative Procedure Act obligations by relying on a rule for its actions that did not go through the notice and comment process.


Related Documents:
NAM brief  (February 14, 2024)

 

Little Sandy Coal Co., Inc. v. Comm'r   (7th Circuit)

Appeal from tax court regarding whether support and supervision of research activities qualify as research for purposes of the R&D tax credit

On March 31, 2022, the NAM filed an amicus brief urging the Seventh Circuit to reverse the Tax Court’s misapplication of tax code regulations which rendered a taxpayer’s valid research expenditures ineligible for the R&D tax credit. This case is of critical importance to manufacturers as the manufacturing sector leads all others in performing private sector R&D. Here, after finding that the taxpayer (a manufacturer of oil tankers and dry docks) undertook the type of research that the credit was intended to incentive, the Tax Court nonetheless denied the claimed credit after concluding that the taxpayer failed to prove that “substantially all” (80%) of its development activities “constitute[d] elements of a process of experimentation.” To reach this erroneous conclusion, that Tax Court distinguished costs incurred for employees engaging in qualified research from costs incurred for those directly supporting or supervising qualified research—a distinction not supported by the tax code or the relevant Treasury regulations.

The NAM’s brief explains that the Tax Court’s approach is inconsistent with the text, structure, history, and purpose of the Tax Code and with the relevant implementing regulations. Fabrication of prototypes or pilot models used in testing can be essential to the development of new products, particularly in the manufacturing sector. And, as was true in this case, the labor costs for such fabrication can be substantial. The Tax Court’s reasoning inexplicably penalizes manufacturers who, in performing legitimate and potentially important R&D, incur substantial costs to test new designs or concepts. If affirmed, that reasoning will undermine Congress’ efforts to encourage increased investments in domestic R&D, including increased spending on employees who directly support R&D efforts—results completely at odds with the purpose of the law.

On March 7, 2023, although the Seventh Circuit affirmed the Tax Court's decision, it clarified that both support time and supervision time as well as the costs of building and testing a prototype can be elements of a process of experimentation for purposes of the R&D tax credit.


Related Documents:
NAM brief  (March 31, 2022)

 

Quad Graphics, Inc. v. North Carolina Department of Revenue   (U.S. Supreme Court)

Challenging North Carolina’s Tax on Out-of-State Sales

On April 17, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a North Carolina Supreme Court decision disregarding precedent that precludes a state from taxing the sale of goods that occurs outside its borders. Quad Graphics is a Wisconsin-based commercial printer that prints books, magazines, catalogs, and direct-mail items for customers throughout the United States, including in North Carolina. The North Carolina Department of Revenue imposed a sales tax on Quad for sales to North Carolina residents even though those sales were consummated in Wisconsin by passing title to the merchandise (and risk of loss) when the merchandise arrived at a common carrier’s shipping dock outside of North Carolina for shipping. The North Carolina Supreme Court upheld the tax, concluding that subsequent U.S. Supreme Court precedent implicitly overruled McLeod v. J.E. Dilworth Co., 322 U.S. 327 (1944), which precludes taxing out-of-state sales.

We argued in our amicus brief that review is necessary for manufacturers to have clear rules about where and when taxes will be imposed. Further, the U.S. Supreme Court should grant the petition because the Commerce Clause precludes a state regulating conduct outside its borders. All manufacturers have an interest in limiting a state’s ability to regulate conduct occurring outside its borders as well as reducing the untenable risk of double taxation.

Unfortunately, on June 20, 2023, the Court denied the petition for certiorari.


Related Documents:
NAM brief  (April 17, 2023)

 

United States v. Microsoft Corp.   (W.D. Wash.)

IRS tax advice

The NAM filed an amicus brief in the U.S. District Court for the Western District of Washington supporting protection of confidential communications between taxpayers and their non-attorney tax advisors. Federal law under the “tax Privilege” generally makes such communications confidential, but an exception exists for communications relating to “the promotion of the direct or indirect participation” in a “tax shelter.” While a tax shelter is broadly defined, “promotion” is not, and the government wants to remove routine tax advice and common tax planning from the protections of the tax privilege, which would make it more difficult for manufacturers access to important tax advice. The NAM filed an amicus brief arguing that Congress did not intend such a broad interpretation, tax policy favors the free flow of information between taxpayers and their advisors, and routine advice should not make a tax advisor a promoter of a tax shelter. The court refused to consider NAM's or any other amici briefs and the case was closed in 2017.


Related Documents:
NAM amicus brief  (November 11, 2016)

 


White Papers -- active



The First Amendment and Mandatory Commercial Disclosures   (White Paper)

MCLA Constitutional Law Series

This white paper explores the First Amendment implications of mandatory product disclosures and transparency initiatives, when such disclosures compel manufacturers to disparage their own products, or to in-effect take sides in controversial public policy debates they might otherwise avoid. Such mandates raise important free speech concerns under the First Amendment, and as a result courts should apply strict scrutiny when reviewing them.


Related Documents:
White Paper  (August 16, 2019)

 

Government Investigations and the First Amendment   (White Paper)

MCLA Constitutional Law Series

The First Amendment prohibits public officials from wielding the coercive power of the government to silence private organizations—including corporations—with differing or opposing viewpoints on controversial issues of public concern. Corporations, either alone or through their participation in trade associations, and in conjunction with other third parties, make substantial and important contributions to issues of public debate contributing their industry knowledge, experience and research to enhance understanding of important issues of public concern.

This white paper argues that in order to safeguard these rights, Government officials and courts must cautiously evaluate motives for subpoenas and investigative demands that target activities relating to legitimate participation in the public policy process and must guard against the use of these powers to silence or censure particular points of view.


Related Documents:
White Paper  (August 16, 2019)

 

When the First Amendment Meets Chevron Deference: Free Speech and the Administrative State   (White Paper)

MCLA Constitutional Law Series

This white paper explains how regulatory actions can impinge on core First Amendment rights and identifies fundamental principles that should inform agency action and judicial review of such action to ensure that agencies properly recognize the First Amendment as a limitation on government power.


Related Documents:
White Paper  (January 1, 2019)

 


Product Liability -- 2024



Edwards v. Scapa Waycross, Inc.   (South Carolina Supreme Court)

Challenging the "cumulative exposure" theory in asbestos case

On July 18, the NAM filed a coalition brief in an asbestos injury case in which the plaintiffs’ attorneys are seeking to move the bar on the current law of causation in the state of South Carolina. Our brief urges the Supreme Court of South Carolina to reverse a trial court judgment that allowed expert testimony on asbestos causation without requiring an assessment of the dose required to cause injury or identifying how much exposure for the defendant’s product occurred. In this case, the plaintiff expert espoused a cumulative exposure theory of causation: that all exposures to asbestos contribute to the likelihood of developing disease. We argue that the cumulative exposure theory is simply a repacking of the each and every exposure theory—that each and every exposure to asbestos can cause disease—that courts have uniformly rejected and is inconsistent with the substantial factor standard the Court has adopted.

Unfortunately, on February 28, 2024, the Supreme Court of South Carolina affirmed the trial court's decision.


Related Documents:
Opinion  (February 28, 2024)
NAM brief  (July 18, 2023)

 


Securities Regulation -- 2024



Institutional Shareholder Services, Inc. v. SEC   (D.D.C.)

NAM Fights Efforts to Weaken Oversight of Proxy Advisory Firms

In October 2020, the NAM intervened in this case brought by Institutional Shareholder Services (ISS) against the Securities and Exchange Commission (SEC) to defend a rule that increases transparency and accountability for so-called “proxy advisory firms” against ISS’s challenge that the SEC lacked authority to issue the rule. In July 2020, after years of advocacy from the NAM, the SEC finalized a new rule increasing transparency and accountability of so-called proxy advisory firms—unregulated third parties with outsized influence on shareholder votes and manufacturers’ corporate governance policies. The final rule—issued under Section 14(a) of the Securities and Exchange Act of 1934—required proxy advisory firms to disclose their conflicts of interest, provide voting recommendations to companies after they are finalized, and notify investors of company perspectives on their recommendations.

On summary judgment, ISS argued that the SEC lacked authority under Section 14(a) to issue the proxy advisory firm rule. Section 14(a) makes it unlawful to “solicit” proxies “in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors[.]” ISS maintained that proxy firms’ provision of proxy voting advice is not a “solicitation” of proxies within the meaning of Section 14(a) that authorizes the SEC to regulate proxy advisory firms under the provision. The SEC and NAM disagreed. The NAM explained that a proxy advisory firm “solicits a proxy” because it both “‘endeavors to obtain’ a vote in line with its [voting] recommendation” and “‘invite[s] and encourage[s]’ an investor to hire ISS for its proxy voting advice.” The NAM further explained that the history of the Exchange Act supports its interpretation because (1) Congress had not disapproved of the SEC’s longstanding interpretation of proxy voting advice as “solicitation”; and (2) Congress has used the term “solicit any proxy” in recent legislation amending the Exchange Act.

Unfortunately, on February 23, 2024, the district court sided with ISS and held that “the ordinary meaning of ‘solicit’ at the time of Section 14(a)’s enactment does not reach proxy voting advice for a fee”; therefore, “[b]y definition the terms ‘solicit’ and ‘solicitation’ in the proxy rules to include proxy voting advice for a fee, . . . the SEC acted contrary to law and in excess of statute authority.


Related Documents:
Memorandum Opinion  (February 23, 2024)
Order  (February 23, 2024)
Intervenor Reply In Support of Cross-Motion for Summary Judgment  (December 9, 2020)
Intervenor Cross-Motion for SJ and Opp to Plf’s Motion for SJ  (October 30, 2020)
Reply in Support of Motion to Intervene  (October 30, 2020)
NAM Motion to Intervene  (October 15, 2020)

 


Administrative Procedure -- 2023



Alliance for Hippocratic Medicine v. FDA   (5th Circuit)

An objectively reasonable reading of an ambiguous law cannot be the basis for False Claim Act liability

On May 1, 2023, the NAM filed a coalition brief urging the 5th Circuit to reverse a Northern District of Texas decision disregarding the regulatory framework Congress established for FDA drug approval and preliminarily enjoining the FDA’s 23-year-old approval of the drug mifepristone. The plaintiffs in this case are a group of medical organizations and doctors who challenged the FDA’s approval of mifepristone under the Administrative Procedure Act, arguing that the drug is unsafe and that it was approved under an improper regulatory pathway. The district court granted the plaintiffs’ request for a preliminary injunction, concluding that they are likely to prevail on the merits of their claims. In finding that the FDA’s actions were arbitrary and capricious, the district court second-guessed the FDA’s scientific judgments.

We argue in our amicus brief that stakeholders in the biopharmaceutical industry rely upon the stability of FDA’s rigorous drug assessment and approval framework to develop and market medical innovations. The district court’s decision undermines Congress’s carefully calibrated regulatory framework for the FDA and risks billions of dollars in investments by: (1) replacing FDA’s scientific judgements with its own view on what information should be considered and how it should be assessed during the drug approval process; and (2) creating the possibility that any healthcare provider could bring suit to challenge any drug approval at any time without the holder of a drug application being given the notice and a hearing Congress required as part of any suspension or withdrawal of an FDA drug approval.

The 5th Circuit vacated the aspect of the district court's decision staying the FDA's 2000 approval of mifeprestone, concluding that the plaintiffs' claim challenging that approval is likely barred by the statute of limitations. The 5th Circuit also vacated the district court's decision staying the FDA's 2019 approval of the generic version of mifeprestone because the plaintiffs failed to show that they were injured by that agency action. The 5th Circuit, however, affirmed the aspects of the district court's decision staying the FDA's 2016 amendments to mifeprestone's risk evaluation and mitigation strategy and the FDA's 2021 decision not to enforce the in-person dispensing requirement for mifeprestone.


Related Documents:
Opinion  (August 16, 2023)
NAM brief  (May 1, 2023)

 

Western Watersheds Project v. McCullough   (9th Circuit)

Protecting the availability of critical mineral production

On May 5, 2023, the NAM filed an amicus brief urging the 9th Circuit to affirm a lower court decision rejecting a challenge to the Bureau of Land Management’s approval of a lithium mine in Thacker Pass, Nevada. Critical minerals such as lithium play an important role in manufacturing, providing crucial inputs needed to make electric vehicles, batteries, computers and a wide range of other products. In this case, the plaintiffs -- environmental groups, Nevada ranchers and tribes -- maintain that BLM’s approval of the mining project violates the Administrative Procedure Act because of BLM’s alleged failure to comply with three federal statutes prior to approving the Project (the National Environmental Policy Act, the Federal Land Policy and Management Act and the National Historic Preservation Act). The district court broadly rejected the plaintiffs’ claims, except for their challenge to the portions of BLM’s approval authorizing the mining company to occupy federal land with mining waste rock without first determining that valuable minerals are deposited there, as required by 9th Circuit precedent. The district court remanded that aspect of BLM’s approval to BLM concluding that the agency can fix the error.

We argued in our brief that reduced domestic production of critical minerals, such as lithium, that are the building blocks of many technologies would hamper the global economy, undermine national security and produce worse environmental and worker safety outcomes. We further argue that remand to BLM to fix its error is the appropriate remedy to ensure the mining project keeps moving forward.

Happily, on July 17, 2023, the 9th Circuit affirmed the district court's decision.


Related Documents:
Decision  (July 17, 2023)
NAM brief  (May 5, 2023)

 

Window Covering Manufacturers Association v. CPSC   (D.C. Circuit)

Whether the CPSC violated the CPSA and APA by issuing mandatory custom window covering standards

On February 7, 2023, the NAM filed an amicus brief urging the D.C. Circuit to set aside the U.S. Consumer Product Safety Commission’s mandatory rule overriding voluntary industry safety standards for custom widow covering cords that, if implemented, would have a devastating impact on the custom window covering industry. We argue that CPSC issued the mandatory rule in violation of the Administrative Procedure Act because of its failure to clear the high bar required for CSPC to override voluntary standards--here, the agency failed to show that rule was necessary and justifiable and conducted a flawed cost-benefit analysis which failed to account for the impact on small businesses. The CPSC also failed to provide a proper notice and comment period, finalizing a rule that deviated substantially from the initial proposal. In recent years, CPSC has been increasingly aggressive in overriding voluntary standards, pushing its authority beyond the parameters Congress set for it when it enacted the Consumer Protection Safety Act. This case therefore has significant ramifications for the regulatory landscape surrounding consumer products—specifically, whether CPSC will have to defer to voluntary standards or be allowed to overstep its statutory bounds to issue mandatory regulations. Happily, on September 12, 2023, the D.C, Circuit vacated CPSC's final rule.


Related Documents:
Opinion  (September 12, 2023)
NAM brief  (February 7, 2023)

 


Civil Procedure -- 2023



Slack v. Pirani   (U.S. Supreme Court)

Protecting against the improper expansion of shareholder suits

On February 3, 2023,the NAM filed an amicus brief urging the U.S. Supreme Court to reverse the 9th Circuit’s decision allowing a plaintiff to pursue his securities class action under Section 11 of the Securities Act of 1933--which imposes strict liability for any misstatements or omissions, even innocent ones, in a registration statement or prospectus--based on their purchase of unregistered shares. Consistent with the statutory text and 60 years of case law, plaintiffs are required to “trace” their securities to shares registered under the allegedly misleading registration statement on which they base their Section 11 claim. In this case, however, the 9th Circuit eliminated the tracing requirement and conferred standing on a shareholder who purchased shares through a direct listing, meaning he could not prove whether he purchased registered or unregistered shares.

We argue that the 9th Circuit’s policy concerns—that all companies will forego IPOs in favor of a direct listing to avoid any risk of Section 11 liability—reflect a fundamental misunderstanding of capital markets. In reality, companies choose a method of going public to fit their business needs and standing in the market. Each of those methods offers tradeoffs when it comes to things like a company’s ability to raise capital and find buyers for its shares, as well as relative cost, complexity, and risk of loss. Eliminating the requirement that plaintiffs trace their securities to shares registered under the statement on which they base their Section 11 claim would undermine the certainty that capital markets require. All publicly traded manufacturers have an interest in curbing unauthorized securities actions which are prevalent anytime stock price goes down.

Happily, on June 1, 2023, the U.S. Supreme Court reversed the 9th Circuit's decision.


Related Documents:
Opinion  (June 1, 2023)
NAM brief  (February 3, 2023)

 

Wright v. ExxonMobil Oil Corporation   (Washington State Supreme Court)

Where there is evidence that supports the application of an open and obvious instruction under Restatement (Second) of Torts § 343A, a trial court must charge a jury on the elements of § 343A.

On September 12, the NAM filed an amicus brief urging the Supreme Court of Washington to reverse a lower court’s refusal to instruct the jury on a key limitation on premises liability: landowners should not be held liable for injuries to an invitee where the invitee was aware of the dangerous condition. The plaintiff in this case, Wright v. ExxonMobil Oil Corp., proceeded on a negligence claim against the defendant refinery owner predicated on the decedent’s death from mesothelioma after working at the refinery, a site that the decedent knew contained asbestos. In fact, understanding the significant danger involved, the decedent—foreman for an independent contractor hired to remove insulation at the refinery—took every precaution to protect himself from asbestos exposure. The lower court erroneously refused to charge the jury on Restatement (Second) of Torts § 343A, which limits the duty of a possessor of land toward a hypothetical invitee if the actual invitee knows of a dangerous condition on the land. The Washington Court of Appeals affirmed, construing the error as harmless.

As explained in the NAM’s brief, the Court of Appeals’ decision is inconsistent with how Washington law allocates responsibility in premises-liability cases, where a trial court must charge on the elements of § 343A when evidence supports its application. Treating the charge as unnecessary would open manufacturers, who routinely invite employees of contractors and other third parties to their premises, to negligence actions even though the invited third parties or their employers are better positioned to protect against harm.

Unfortunately, on August 3, 2023, the Supreme Court of Washington affirmed the Court of Appeals' decision.


Related Documents:
Opinion  (August 3, 2023)
NAM brief  (September 12, 2022)

 


False Claims Act -- 2023



Schutte v. SuperValu   (U.S. Supreme Court)

An objectively reasonable reading of an ambiguous law cannot be the basis for False Claim Act liability

On March 28, 2023, the NAM filed an amicus brief asking the U.S. Supreme Court to affirm that to prove liability under the False Claims Act where ambiguous laws are at issue, a plaintiff must establish that the defendant’s interpretation of the requirements for submitting a claim to the government was not objectively reasonable. A person is subject to liability under the FCA if the person “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval. In this case, the 7th Circuit held that when allegations of false claims are premised on violations of ambiguous laws or regulations, a defendant’s subjective awareness of the laws or regulations are irrelevant to establishing that a defendant acted "knowingly." Rather, the 7th Circuit concluded that a plaintiff must establish that a defendant’s interpretation of the requirements for submitting a claim was not objectively reasonable. In other words, a defendant cannot be held liable if it can show that "(a) it has an objectively reasonable reading of the statute or regulation and (b) there was no authoritative guidance warning against its erroneous view." Although the 8th and D.C. Circuits have also applied the objective standard, the 6th, 9th, 10th, and 11th Circuits look to whether a defendant "actually knew or should have known that its conduct violated a regulation in light of any ambiguity at the time of the alleged violation." Here, the petitioners (FCA relators) urge the Court to hold that a violation of the FCA can rest on a defendant’s subjective understanding of ambiguous laws or regulations.

We argue in our brief that the objectively reasonable standard is important to cabining expansive FCA liability, which can often include crippling treble damages and statutory penalties after lengthy and costly litigation. Manufacturers routinely face complex contractual and regulatory schemes that contain ambiguous or unsettled provisions when they are serving as government contractors or otherwise implementing government programs.

Unfortunately, on June 1, 2023, the reversed the 7th Circuit's decision.


Related Documents:
Opinion  (June 1, 2023)
NAM brief  (March 28, 2023)

 


Government Contracting -- 2023



Secretary of Defense v. Raytheon Co.   (Federal Circuit)

Targeted trainings and clear corporate policies are needed to ensure compliance with the FAR’s technical language

On April 4, 2022, the NAM filed an amicus brief in the Federal Circuit defending government contractors’ use of bright-line rules and other reasonable policies and procedures to facilitate compliance with the FAR. The FAR (Federal Acquisition Regulation) directs government contractors on which costs are reimbursable from the federal government, ensuring that the government does not overpay on its contracts. Compliance with the FAR is an onerous undertaking that requires government contractors to invest significant resources, talent, and efforts. In this case, the government attacked Raytheon’s use of bright-line rules in corporate policies to help its personnel navigate how various FAR provisions interact with one another and should be interpreted. According to the government, such policies are non-compliant unless they repeat, verbatim, the language of the FAR—no more, no less.

As the NAM’s brief makes clear, a regime that renders a company non-compliant with the FAR if it implements policies and rules that expound upon and interpret—rather than mimic precisely—the FAR’s text is simply nonsensical. Determining which costs are allowed and which are unallowable under the FAR can be incredibly complex. The regulations themselves and caselaw interpreting the FAR recognize that the plain language is not always indicative of whether costs are allowable or unallowable. In light of the FAR’s complex framework, government contractors need the flexibility to explain to their personnel the terms of individual FAR provisions and how they interact with one another as applied to the company’s specific contracts. The government’s position in this case, that policies and trainings that do not mimic the exact language of the FAR are non-compliant, could result in more inadvertent overbilling to the government and heighten the risk exposure for government contractors, both of which could adversely impact taxpayers.

Unfortunately, on January 3, 2023, the Federal Circuit reversed the decision of the Armed Services Board of Contract Appeals, holding that Raytheon’s corporate practices and policies are inconsistent with the FAR.


Related Documents:
NAM brief  (April 4, 2022)

 


Government Regulation -- 2023



BNSF v. Federal Railroad Admin.   (5th Circuit)

Challenging FRA’s decision to reject expansion of BNSF’s Automated Track Inspection program despite its incredible safety benefits

On July 12, 2022, the NAM filed an amicus brief in the 5th Circuit in support of BNSF’s challenge to the Federal Railroad Administration’s refusal to allow BNSF to expand its use of Automated Track Inspection (ATI)—a deeply flawed policy decision implemented through an unlawful exercise of administrative authority. Long championed by the FRA, ATI technology offers track inspections that are far superior to those performed with the naked eye, while also reducing the need to shut down tracks for manual inspections. This case arose after the FRA promised BNSF that if it successfully implemented its ATI program in two territories, it could expand. After the change in administration, however, the FRA reversed its position—denying BNSF’s request to expand even though ATI had dramatically increased safety in the pilot territories.

The NAM filed an amicus brief arguing that the FRA’s decision harms the American economy and violates basic principles of administrative law. With the U.S. supply chain under tremendous pressure, ATI technology is critical to ameliorating the significant operational and service challenges faced by America’s freight network. If the FRA’s decision stands, it will negatively impact the railroad industry at an especially challenging time for the American economy. Further, the FRA’s decision—denying expanded use of ATI despite BNSF exceeding the prior metrics the FRA had set and the FRA’s broad historical support for the use of ATI—epitomizes arbitrary and capricious decision-making. Hornbook administrative law requires an agency that changes policy to at least acknowledge the shift and to offer some reasoned justification for adopting its new policy—requirements the FRA plainly failed to satisfy.

Happily, on March 15, 2023, the 5th Circuit concluded that "the agency has barely articulated any basis at all" for its rejection of the technology's expansion even though it is "duty-bound to provide further justification[.]" The 5th Circuit therefore vacated the FRA's decision and remanded the case for FRA to issue a new decision within 100 days.


Related Documents:
Opinion  (March 15, 2023)
NAM brief  (July 12, 2022)

 

Cal. Restaurant Ass'n v. City of Berkeley   (9th Circuit)

Challenging Berkeley's ban on natural gas

The NAM filed an amicus brief asking the Ninth Circuit to revive a challenge to a Berkeley, California ordinance which bans the installation of natural gas lines in new construction. The California Restaurant Association (CRA) filed this lawsuit in the Northern District of California challenging the Ordinance as invalid and unenforceable under the federal Energy and Policy and Conservation Act (the Act) and state law, arguing against its “uniquely negative impacts” on the restaurant community which relies heavily on gas appliances. The district court dismissed the case, holding that because the ordinance does not “directly regulate either energy use or energy efficiency of covered appliances,” it is not preempted under the Act.

The current appeal to the Ninth Circuit followed. The NAM filed an amicus brief arguing that the district court’s conclusion is not supported by the text of the Act, which broadly preempts any ordinance “concerning” the energy use of certain covered products, including gas appliances. Further, allowing the Ordinance to survive preemption would create exactly the type of regulatory patchwork Congress intended to avoid, especially given that many cities and municipalities have since followed in Berkeley’s footsteps by adopting similar ordinances of their own. These ordinances have the potential to negatively impact any manufacturer that sells, installs, or uses a gas appliance.

Happily, on April 17, 2023, the Ninth Circuit held that the Ordinance is preempted by the Act.


Related Documents:
Decision  (April 17, 2023)
NAM brief  (November 10, 2021)

 

Edakunni v. Mayorkas   (W.D. Wash.)

Challenging the federal government’s unreasonable processing delays of H-4 and L-2 visas”

The NAM filed an amicus brief in the Western District of Washington supporting a challenge to the federal government’s failure to fulfill its duty to timely process employment authorization documents for two classes of noncitizens who temporarily live in the United States: H-4 and L-2 visa-holders, the spouses of H-1B specialty-occupation workers and L-1 intra-company transferees, respectively. As detailed in the NAM’s brief, the government’s unjustified processing delays are currently freezing thousands of workers out of their employment, creating significant hardships both for families that rely on continued employment through H-4 and L-2 visas and for their employers—including many NAM members—that depend on the irreplaceable talents and knowledge of their H-4 and L-2 employees. The lawsuit seeks judicial intervention under the Administrative Procedure Act to compel the Department of Homeland Security to process H-4 and L-2 work authorizations with haste.

Happily the parties resolved the case prior to a court decision.


Related Documents:
NAM brief  (April 29, 2021)

 


Immigration -- 2023



Wash. Alliance of Tech. Workers v. U.S. Dep’t of Homeland Security   (U.S. Supreme Court)

Workforce program for STEM graduates

On August 4, 2023, the NAM filed its response to the Washington Alliance of Technology Workers’ petition for certiorari seeking Supreme Court review of the D.C. Circuit’s decision upholding the validity of the STEM occupational practical training (OPT) program. The NAM intervened in this case to protect the Department of Homeland Security’s STEM OPT program—a program that allows foreign-born students to continue their educational training by working in the United States for up to three years after completing college or a graduate program. We argued in our response that the Supreme Court should deny the petition requesting review of the D.C. Circuit’s decision upholding the validity of that program because the D.C. Circuit’s decision is correct and there is no circuit conflict on the issues involved in the case.

Happily, on October 2, 2023, the Supreme Court denied the petition.


Related Documents:
NAM Opposition Brief  (August 4, 2023)

 


Insurance coverage -- 2023



Merck & Co., Inc., et al. v. ACE American Insurance Company, et al.   (Superior Court of New Jersey Appellate Division)

Insurance coverage for cyber events

On May 6, 2022, the NAM filed an amicus brief urging the Superior Court of New Jersey, Appellate Division to affirm the trial court’s determination that Merck’s insurers improperly denied coverage for losses arising out of a cyberattack. In this case, Merck sought coverage for losses from the 2017 NotPetya cyber event under its “all risk” property policies. The policies contained an express grant of coverage for electronic data corruption or destruction, including broad business interruption cover. Nevertheless, the insurers denied coverage, contending that standard-form “war” exclusions—developed by the insurance industry years before cyber-risks emerged—barred coverage.

The trial court agreed with Merck that, by its plain language, the war exclusion was limited to situations involving the use of armed forces, and therefore did not apply. The instant interlocutory appeal followed. The NAM’s amicus brief underscores the significant threat posed by cyber risks to businesses of all sizes and across all industrial sectors. By developing and employing consistent rules of interpretation, New Jersey courts have created an environment in which policyholders can conduct business and prepare for cyber risks in a predictable and reasonable manner. The result advocated by the insurance industry would undermine core principles of insurance policy interpretation that are critically important to manufacturers seeking coverage under policies purchased at considerable expense.

Happily, on May 1, 2023, the Appellate Division affirmed the trial court's decision.


Related Documents:
Opinion  (May 1, 2023)
NAM brief  (May 6, 2022)

 


Jurisdiction -- 2023



Mallory v. Norfolk Southern Railway Co.   (U.S. Supreme Court)

Whether the due process clause of the Fourteenth Amendment prohibits a state from requiring a corporation to consent to personal jurisdiction to do business in the state.

On September 2, NAM filed an amicus brief urging the U.S. Supreme Court to affirm the Pennsylvania Supreme Court’s decision in Mallory v. Norfolk Southern Railway Company, which held that Pennsylvania statutes that condition the privilege of doing business in the State on an out-of-state corporation’s submission to general personal jurisdiction is inconsistent with the Fourteenth Amendment. Mallory is a lawsuit filed by a Virginia resident against Norfolk Southern Railway—a Virginia-based corporation—in the Philadelphia County Court of Common Pleas. The plaintiff alleges that exposure to harmful chemicals while employed by Norfolk Southern in Ohio entitled him to relief under the Federal Employer’s Liability Act. This case raises significant concerns regarding states’ ability to subject manufacturers to the jurisdiction of state courts that have little or no connection to a lawsuit, potentially subjecting manufacturers to greater liability then in their home state—generally their state of incorporation and principal place of business.

The trial court dismissed the case for lack of personal jurisdiction and the Pennsylvania Supreme Court affirmed. Our amicus brief urges the U.S. Supreme Court to likewise affirm. First, as a practical matter, ambiguous state statutes requiring registration to do or transact business have led to manufacturers registering in all states in which they have employees or operations—but registration alone is not indicative of a manufacturer’s consent to suit or sufficient to protect manufacturer’s liberty interests under the Due Process Clause. Further, the Supreme Court has explained that the Due Process Clause prescribes the circumstances under which a state can assert general jurisdiction over a manufacturer and focuses on a manufacturer’s “continuous and systematic” conduct in a forum state, not simply its registration with the state to do business. Finally, permitting states to expand general personal jurisdiction by statute would encourage forum shopping to plaintiff-friendly jurisdictions, which in turn would unnecessarily burden courts and juries with claims in which they have no meaningful stake.

Unfortunately, on June 27, 2023, the U.S. Supreme Court reversed the Pennsylvania Supreme Court's decision.


Related Documents:
Opinion  (June 27, 2023)
NAM brief  (September 2, 2022)

 


Labor Law -- 2023



Cothron v. White Castle   (Illinois Supreme Court)

Plaintiffs should not be able to recover for “each violation” of the Biometric Information Privacy Act (BIPA)

On March 3, 2022, the NAM filed an amicus brief asking the Illinois Supreme Court to reject an interpretation of the Illinois Biometric Information Privacy Act (BIPA)—one of the most stringent biometric privacy statutes in the country—that allows for a “per-scan” theory of accrual and recovery of statutory liquidated damages. Employers commonly use biometric data, including fingerprints, voice prints, and vein patterns in a person’s palm, for time management, security access, and safety reasons. Passed in 2008, the BIPA contains a comprehensive set of rules for companies collecting biometric data from Illinois residents, with a focus on preventing identity theft through responsible use and handling. The statute creates a private right of action and provides for statutory damages of $1,000 for each negligent violation and $5,000 for each intentional violation, which has led the BIPA to become a trial bar favorite—a whopping 1,450 BIPA class action lawsuits have been filed since 2017.

The question presented in this case is whether BIPA claims “accrue each time a private entity scans a person's biometric identifier and each time a private entity transmits such a scan to a third party, respectively, or only upon the first scan and first transmission.” The NAM’s brief argues that the only reasonable interpretation of a law focused on ensuring notice and consent is that a violation occurs when biometric identifiers or biometric information is first collected or obtained. Given the remedial purposes of the BIPA, any damages resulting from alleged violations of the statute should encourage compliance, but not be punitive in nature. The “per-scan” theory of accrual suggested by the plaintiff here would lead to absurd and unjust results, as a single employee could scan 1,000 times over the course of a year.

Unfortunately, on February 27, 2023, the Illinois Supreme Court held that BIPA’s plain language "shows that a claim accrues under the Act with every scan or transmission of biometric identifiers or biometric information without prior informed consent."

On March 10, 2023, we filed in amicus brief requesting that the Supreme Court of Illinois reconsider its decision because it mistakenly construed BIPA in a way that would lead to the absurd result of astronomical damages awards that could bankrupt businesses, which is consistent with neither legislative intent nor the court’s case law requiring it to construe statutes in a way that prevents such absurd results.

Unfortunately, on July 18, 2023, the Supreme Court of Illionis denied the request for it to reconsider its decision.


Related Documents:
NAM Petition for Rehearing  (March 10, 2023)
Opinion  (February 17, 2023)
NAM brief  (March 3, 2022)

 

Kuciemba v. Victory Woodworks   (Supreme Court of California)

Keeping COVID-19 claims derivative to Workers’ Comp

On October 12, 2022, the NAM joined other business groups to file an amicus brief urging the Supreme Court of California to reject claims by non-employees seeking to impose liability on employers for COVID-19 infections they contract from an employee outside the employers’ place of business. In this case, the district court concluded that the derivative liability rule—which establishes workers’ compensation as the exclusive remedy for all claims that are derivative of an employee’s covered workplace injury—barred claims asserted by an employee’s wife based on her allegations that she contracted COVID-19 through direct contact with her husband outside of his workplace. The district court also found that the plaintiff failed to state a claim because an employer’s duty to provide a safe workplace to its employees does not extend to non-employees who contracted COVID-19 away from the workplace. On appeal, the 9th Circuit certified two issues to the Supreme Court of California: (1) does the derivative injury liability doctrine bar a spouse’s claim in this context; and (2) does an employer owe a duty to the households of its employees to exercise reasonable care to prevent the spread of COVID-19?

Our brief argues that recognizing an exemption to the derivative liability injury rule would impermissibly deprive employers of the California Legislature’s careful balance of employer and employee rights and competing interests by subjecting employers to an assortment of claims based solely on a non-employee’s purported contact with an infected employee. Even assuming the derivative liability injury rule was inapplicable, the California Supreme Court should conclude that employers have no duty to protect non-employees from contracting infectious diseases from employees infected in the workplace. The NAM argues that the Court should do so because (1) too many intervening factors render it impossible to foresee whether an employer’s negligence will result in a non-employee contracting COVID-19, a community-transmitted disease, from an employee; (2) employers are unable to control whether COVID-19 is present in the workplace and the costs of imposing a duty on employers is high; and (3) the judicial system would be heavily burdened by trying to address whether an employer’s negligence caused a non-employee harm. Happily, on July 6, 2023, although the Court concluded that the derivative injury liability doctrine does not bar a spouse’s claim, it refused to recognize that employers owe a duty of care to the households of its employees to prevent the spread of COVID-19.


Related Documents:
Opinion  (July 6, 2023)
NAM brief  (October 12, 2022)

 

South Carolina State Ports Authority v. NLRB   (4th Circuit)

Protecting the bar against secondary boycotts

On April 7, 2023, the NAM filed an amicus brief urging the Fourth Circuit to reverse an NLRB decision that eviscerates the long-standing prohibition on secondary boycotts. Although the NLRA protects the right to strike or picket a primary employer (an employer with whom a union has a labor dispute), it seeks to keep neutral employers from being dragged into the fray by making it unlawful for a union to coerce a neutral employer to force it to cease doing business with a primary employer.

This case involves the South Carolina State Ports Authority (SCSPA), which has operated the Port of Charleston for the last 50 years by employing state workers to run lift-equipment and members of the International Longshoremen’s Association (ILA) to perform the other longshoreman work there. The SCSPA opened another terminal at the Port in 2022, requiring the same division of labor. ILA subsequently sued the United States Maritime Alliance (USMX)—a multi-employer association of carriers that deliver and pick up containers at the ports—and two of its carrier-members who used the new terminal for $300 million. ILA alleged that the USMX and the two carrier members were violating the parties’ collective bargaining agreement by using state employees to perform port work. USMX, the State of South Carolina and the SCSPA filed unfair labor charges against the union, maintaining that the lawsuit sought to obtain an illegal secondary objective in violation of the NLRA’s secondary boycott provision. The NLRB disagreed and ruled against the plaintiffs in a 2-1 decision, concluding that ILA’s lawsuit had a lawful work-preservation objective. Board member John Ring dissented, reasoning that this is a “classic case of unlawful secondary pressure.

We argue in our amicus brief that the ILA’s lawsuit is a quintessential secondary boycott: ILA is coercing the carriers to stop doing business at the new terminal unless a different party—the SCSPA—accedes to the union’s demands to hire more union workers to perform jobs that union members had never performed at the Port. The NLRB’s decision guts the distinction between work preservation and work acquisition and incorrectly concludes that carriers have control over the work assignments of another entity (the SCSPA). Allowing this decision to stand would turn the NLRA upside down, converting the clear statutory ban on secondary boycott activity into a presumptive authorization. All manufacturers have an interest in limiting this type of coercive and intimidating conduct by unions.

Unfortunately, on July 28, 2023, the Fourth Circuit denied the petition for review.


Related Documents:
Opinion  (July 28, 2023)
NAM brief  (April 7, 2023)

 

Stericycle, Inc. and Teamsters Local 628   (NLRB)

The NLRB should protect employers' rights to maintain facially neutral workplace rules

On March 7, the NAM filed an amicus brief with the National Labor Relations Board urging the Board to maintain its current standard for determining whether an employer’s facially neutral work rule violates the National Labor Relations Act. In this case, Stericycle, Inc. and Teamsters Local 628, an administrative law judge held that three of Stericycle’s work rules, including a rule that prohibits retaliation against employees who report discrimination or harassment or participate in a discrimination or harassment investigation, violated the NLRA. Work rules encompass a wide variety of policies and employee handbook provisions that advance and protect vitally important interests like attendance, scheduling and time off; non-harassment, non-discrimination, and DE&I; and workplace safety and operating procedures. In 2017, the NLRB adopted a standard for evaluating work rules that properly balances a rule’s potential impact on NLRA-protected rights with the rule’s legitimate justifications. The NLRB recently invited interested amici to file briefs regarding whether that standard should be retained or modified to a more employee-friendly standard.

In response to the specific questions posed by the Board, the NAM's brief argues that any evaluation of work rules, employment policies, and employee handbook provisions should consider both a rule’s potential “chilling” effect regarding NLRA-protected rights, as well as legitimate business justifications and the obligations imposed on employers by other laws. If the Board does modify the current standard, it should allow employers to implement standard disclaimer language in their rules, policies, or handbooks, that avoids an interpretation that would unlawfully interfere with protected rights under the NLRA. Further, rules requiring confidentiality in open workplace investigations, non-disparagement rules, and policies barring outside employment should continue to be deemed generally lawful.

Unfortunately, on August 2, 2023, the Board announced a new approach for determining whether an employer’s facially neutral work rule violates the NLRA. Under the Board’s new approach, "[i]f an employee could reasonably interpret a rule to restrict or prohibit Section 7 activity, the General Counsel has satisfied her burden and demonstrated that the rule is presumptively unlawful”" An employer can only "rebut the presumption by proving that the rule advances a legitimate and substantial business interests, and that the employer is unable to advance that interest with a more narrowly tailored rule." The Board remanded the case to the ALJ for further consideration in light of its new standard.


Related Documents:
Decision  (August 2, 2023)
NAM brief  (March 7, 2022)

 


Patents, Copyrights and Trademarks -- 2023



Jack Daniel’s Properties, Inc. v. VIP Products LLC   (U.S. Supreme Court)

Protecting against trademark dilution and infringement

On January 18, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to reverse the 9th Circuit’s holding that VIP Products LLC’’s “Bad Spaniels Silly Squeaker” dog toy—which is the shape of a Jack Daniel’s bottle and contains a label that resembles the label on Jack Daniel’s Old No. 7 Black Label Tennessee Whiskey with dog-related humorous alterations—is an expressive work entitled to First Amendment protection from the trademark infringement and dilution claims asserted by Jack Daniel’s under the Lanham Act. In this case, the 9th Circuit reversed the lower court’s judgment entered in Jack Daniel’s favor, holding that the Lanham Act’s protections for trademarks only apply to expressive works if a plaintiff shows that a defendant’s use of the “mark is either (1) ‘not artistically relevant to the underlying work’ or (2) ‘explicitly misleads consumers as to the source of content of the work.’” According to the 9th Circuit, the district court erred in not considering whether Jack Daniel’s satisfied at least one of these prongs. The 9th Circuit further discounted Jack Daniel’s dilution by tarnishment claim, holding that VIP’s use of Jack Daniel’s mark was noncommercial because it was used to convey a humorous message protected by the First Amendment. On remand, the district court granted VIP’s motion for summary judgment, a decision the 9th Circuit affirmed on appeal.

We argued in our amicus brief that the First Amendment does not apply to protect speech that confuses or misleads consumers of products, and that the Court should reject the 9th Circuit’s holding that any “humorous” use automatically qualifies as “noncommercial,” and is therefore immune from trademark dilution claims. As trademark owners who have devoted substantial resources to building and protecting the goodwill and reputation associated with their products and trademarks, manufacturers have a strong interest in ensuring robust federal protections for those marks.

Happily, on June 8, 2023, the Court reversed the 9th Circuit's decision.


Related Documents:
Opinion  (June 8, 2023)
NAM brief  (January 18, 2023)

 


Product Liability -- 2023



Brown, et al. v. Saint-Gobain Performance Plastics, et al.   (New Hampshire Supreme Court)

New Hampshire should reject a medical monitoring cause of action or remedy

Last Friday, the NAM filed an amicus brief urging the New Hampshire Supreme Court to reject medical monitoring as a remedy or cause of action absent present physical injury. The plaintiffs in this putative class action, are seeking damages in the form of costs to cover monitoring for potential medical conditions arising from their alleged exposure to PFOA, even though they are not presently physically injured. The case is before New Hampshire’s high court following a federal district court’s certification of a critical, undecided issue under New Hampshire law: whether and under what terms the state authorizes recovery of medical monitoring.

As the NAM’s brief explains, medical monitoring cases brought by asymptomatic plaintiffs trample the long-established present injury requirement—a basic tenet of recovery in tort for more than 200 years—by permitting recovery based on the mere possibility of a future injury. Moreover, a medical monitoring system involves myriad complex scientific, medical, economic, and policy-laden questions that courts are ill-equipped to decide. The U.S. Supreme Court and numerous state high courts have thus recognized the inherent and intractable problems with allowing a medical monitoring remedy for the unimpaired and with court-created medical monitoring programs. Most jurisdictions have likewise rejected medical monitoring as an independent cause of action. Adoption of a medical monitoring cause of action or remedy in New Hampshire would radically alter tort law in the state and subject manufacturers to unpredictable and potentially unbounded liability.

Happily, on March 21, 2023, the New Hampshire Supreme Court rejected medical monitoring as a remedy or cause of action absent a present injury.


Related Documents:
Opinion  (March 21, 2023)
NAM brief  (July 8, 2022)

 

In re. LTL Management LLC   (3rd Circuit)

Addressing liabilities through corporate restructuring and bankruptcy rather than through the mass-tort system

On August 22, 2022, the NAM filed an amicus brief in the Third Circuit arguing that bankruptcy provides an important and legitimate mechanism for financially distressed manufacturers to efficiently resolve liabilities and obtain a fresh start. The entity seeking chapter 11 protection in this case—In re: LTL Management, LLC—was created through corporate restructuring to take on Johnson & Johnson’s talc liabilities. With nearly 40,000 lawsuits alleging injury from J&J’s Baby Powder, and thousands of additional claims expected for decades to come, LTL sought to resolve the claims through bankruptcy, just as numerous manufacturers have done before. The claimants moved to dismiss LTL’s chapter 11 petition as a bad-faith abuse of the bankruptcy system. After a five-day evidentiary hearing, and several months of discovery, the bankruptcy court found that the restructuring and bankruptcy would not prejudice creditors and would maximize value for all talc claimants. The instant appeal followed.

The NAM’s brief explained that bankruptcy, unlike multi-district litigation (MDL), is well equipped to resolve mass-tort lawsuits of this magnitude in an efficient manner. Bankruptcy channels all claimants into a single forum so that the company’s liabilities can be addressed in a coordinated manner. This channeling function preserves the company’s value against a rush-to-the-courthouse frenzy of creditors that will deplete the company’s remaining assets to the detriment of its employees, shareholders, and other creditors. Further, bankruptcy promotes global resolution of a company’s liabilities, by sweeping in even future claims based on injuries that have not yet manifested. By contrast, MDL, which claimants here have argued is the better alternative, cannot reliably achieve global resolution as it lacks a mechanism to address state court actions and future claimants and is notorious for inefficiency and attracting meritless claims.

Unfortunately, on January 30, 2023, the Third Circuit reversed the bankruptcy court's decision and remanded the case with the instruction that the bankruptcy court dismiss the bankruptcy petition. The Third Circuit concluded that "[o]nly a putative debtor in financial distress can" "acesses the Bankruptcy Code's safe habor" and that "LTL was not."

On February 22, 2023, the NAM filed an amicus brief supporting a petition for rehearing en banc.In our brief, we argue that bankruptcy provides a crucial tool for a financially distressed manufacturer to obtain a fresh start and that the panel’s approach for determining financial distress creates uncertainty for manufacturers because it provides no meaningful guidance for debtors seeking to determine whether their financial predicament will qualify for Chapter 11 relief. The panel concluded that J&J’s payment obligation under a funding agreement rendered LTL insufficiently financially distressed but also opined that other entities operating under the same type of funding agreement could qualify for bankruptcy. If allowed to stand, the panel’s decision will cause businesses to expend enormous sums litigating their own financial distress, leading many to forgo bankruptcy until it is too late. Unfortunately, on March 22, 2023, the Third Circuit denied the petition for rehearing.


Related Documents:
Petition for Rehearing  (February 21, 2023)
Opinion  (January 30, 2023)
NAM brief  (August 22, 2022)

 

McGinnis v. Bard   (New Jersey Supreme Court)

Allowing evidence of conformance with FDA’s safety standards

The plaintiffs appealed the Superior Court of New Jersey Appellate Division’s March 2, 2021, decision reversing a trial court’s ruling that evidence of a U.S. Food and Drug Administration (FDA) medical device 510(k) approval process, which determined a device is safe and effective, may be excluded from evidence in this product liability case seeking punitive damages. The NAM filed an amicus brief in the Appellate Division, arguing that Congress and the FDA established the 510(k) process to ensure the safety of medical devices and that evidence of a manufacturer’s conformance with the FDA’s safety standards is essential to a fair determination of product defects and punitive damages. The Supreme Court of New Jersey lodged the NAM’s brief on its docket as a part of the plaintiffs’ appeal. It held oral argument on February 27, 2023, during which it accepted argument from the NAM’s counsel.

The New Jersey Supreme Court affirmed the Appellate Division’s decision. The Court concluded that the "510(k) evidence is generally inadmissible because the 510(k)-clearance process solely determines equivalency, and not safety and efficacy, and could therefore mislead the jury." Nevertheless, the Court reasoned, the plaintiffs’ "opened the door" to the admission of 510(k) evidence in this case by their counsel’s reference to "Bard’s failure to conduct clinical trials" and "it was unfair for the trial court not to allow Bard to explain in response that it received 510(k) clearance to market the devices without clinical studies or trials." The Court further explained that such evidence is admissible in the punitive damages phase of a case where, as here, pertinent to a defendant’s state of mind to refute the accusation that a defendant acted willfully.

This case is important because manufacturers could be adversely impacted if courts reach liability decisions based on an improper understanding of the principles of safety and effectiveness that underlies each 510(k) clearance.


Related Documents:
Opinion  (July 25, 2023)

 


Securities Regulation -- 2023



NAM v. SEC   (6th Circuit)

Protecting proprietary company information from public disclosure

In 2021, the SEC announced a novel rule interpretation imposing public disclosure requirements on private companies that raise capital through a certain type of corporate bond (referred to as Rule 144A securities). This interpretation would have severely disrupted private companies’ ability to access debt markets, risking higher borrowing costs, less liquidity and job loss.

In the fall of 2022, the NAM joined the Kentucky Association of Manufacturers in filing two petitions for rulemaking with the SEC seeking to forestall the economic damage the new rule interpretation would cause: one called on the SEC to promulgate a new rule (giving all relevant stakeholders a chance to weigh in) or utilize its exemptive authority to protect private Rule 144A bond issuers from the public disclosure rule, and another asked for temporary “no-action” relief while the SEC considered how best to reverse course. In response to our petitions, the SEC announced that it would not begin applying the new public disclosure requirements to Rule 144A securities until January 2025, but took no action on the petition requesting rulemaking or an exemption.

After ten months of SEC inaction on the petition, the NAM and the KAM took the fight to federal court, using a three-pronged approach to obtain judicial review. First, we sued the SEC in the Eastern District of Kentucky, challenging the SEC’s novel interpretation of Rule 15c2-11 as unlawful under the APA—arguing in our complaint that the agency did not comply with the law’s notice-and-comment requirements and that the new interpretation itself is arbitrary and capricious. We also filed in the 6th Circuit a petition for review and petition for a writ of mandamus that would direct the SEC to act on our petition for rulemaking.

On the day of its first substantive filing deadline in the 6th Circuit, the SEC issued an order exempting Rule 144A securities from the public disclosure requirements—the precise relief that NAM and KAM had been seeking. The SEC’s order muted any further litigation.


Related Documents:
Complaint  (September 12, 2023)
Writ of Mandamus  (September 12, 2023)
Petition for Review  (September 12, 2023)

 


Takings -- 2023



PhRMA v. Williams, et. al.   (8th Circuit)

Minnesota's Insulin Affordability Act Violates the Takings Clause of the Fifth Amendment

The NAM filed an amicus brief in support of PhRMA's challenge to a Minnesota law that requires some PhRMA members to provide free insulin to certain state residents. The law at issue, the Alec Smith Insulin Affordability Act, seeks to achieve a laudable policy goal of improving access to insulin, but it runs afoul of the Constitution because it simply takes manufacturers’ property without any compensation. The NAM previously filed an amicus brief in the District of Minnesota arguing that under the U.S. Supreme Court's per se takings doctrine the government has a categorical duty to pay just compensation for physical takings of property and that the Act at issue fits squarely within the definition of a per se taking. In March 2021, the court granted the state’s motion to dismiss the complaint, holding that the state provides an adequate method for PhRMA’s members to seek compensation for any taking—i.e., by bringing an “inverse condemnation” suit in state court to seek compensation for practically each dose of insulin they must give away under the statute.

PhRMA appealed the case to the Eighth Circuit, and the NAM once again filed a brief in support. The NAM’s brief argues that that under the U.S. Supreme Court's per se takings doctrine the government has a categorical duty to pay just compensation for physical takings of property and holding to the contrary would undermine the security of property rights not just for insulin manufacturers, but for businesses across every industry sector. Further, the district court’s threshold dismissal creates an absurd procedural loophole that would allow states to continuously and physically take manufacturers’ property without an adequate remedy.

Happily, on April 3, 2023, the Eighth Circuit reversed and remand the case, concluding that a state-court inverse condemnation action was not an adequate remedy at law thus justifying the relief PhRMA sought.


Related Documents:
NAM brief  (May 31, 2021)

 


-- 2022



State of Texas, et al. v. United States, et al.   (5th Circuit)

Workplace protections for DACA recipients

The NAM filed an amicus brief in the Fifth Circuit to support the Deferred Action for Childhood Arrivals program (DACA) against efforts to end the program and remove 800,000 individuals from the American workforce. Established by the Obama administration in 2012, DACA allows undocumented immigrants who had been brought to this country as children to apply for protection from deportation and permission to work in the United States. In 2017, the Trump administration announced plans to terminate DACA, and after a serious of decisions by federal courts, the Supreme Court ruled in 2020 that the decision to terminate the program was arbitrary and capricious under the Administrative Procedure Act (APA).

Following a new legal challenge, the Southern District of Texas ruled last July that the Department of Homeland Security violated the APA by creating and operating DACA; the instant appeal followed. This issue has a significant impact to NAM members, many of whom face workforce challenges that would be made far worse if 800,000 individuals suddenly lose their work authorization. The NAM joined a multi-industry and multi-employer amicus brief to highlight valuable the contributions that individuals with DACA status provide to manufacturers and to the entire U.S. economy and society.

Unforturnately, on October 5, 2022, the 5th Circuit affirmed the trial court's decision.


Related Documents:
Opinion  (October 5, 2022)
NAM brief  (December 15, 2021)

 

National Association of Manufacturers & Natural Gas Services Group, Inc. v. U.S. Securities and Exchange Commission   (W.D. Tex.)

Challenging SEC’s unlawful about-face on proxy advisory firm rule

The NAM filed a lawsuit on October 21, 2021, challenging the SEC’s attempt to unilaterally suspend the lawfully promulgated proxy advisory firm rule absent any rulemaking process. In July 2020, after years of advocacy from the NAM and our members, the SEC finalized a new rule increasing transparency and accountability of so-called proxy advisory firms— unregulated third parties with outsized influence on shareholder votes and manufacturers’ corporate governance policies. The final rule subjects proxy firms to reasonable SEC oversight just like every other participant in the securities markets. As such, the rule requires them to disclose their conflicts of interest, provide their voting recommendations to companies after they are finalized, and notify investors of company perspectives on their recommendations.

Proxy advisory firm Institutional Shareholder Services (ISS) filed suit last year to invalidate these modest reforms. After that case was fully briefed, with the SEC vigorously defending the rule, new SEC Chairman Gary Gensler announced in June 2021 that the SEC would be reviewing the proxy firm rule with the intent to revise or rescind it. SEC’s Division of Corporation Finance simultaneously announced that it would not recommend enforcement action against proxy firms for failing to comply with the rule while it is under review. And, that same day, the SEC stated in a court filing that the non-enforcement policy grants ISS and other proxy advisory businesses “relief” from the rule’s December 1, 2021 compliance date.

The NAM and co-plaintiff Natural Gas Services, Inc. (NYSE: NGS) filed a complaint on October 21, 2021 in the U.S. District Court for the Western District of Texas arguing that the SEC’s failure to undertake notice-and-comment rulemaking before amending the rule’s effective date renders its conduct unlawful. Agencies cannot simply ignore rules that they do not politically agree with. The APA prescribes a deliberative process, involving feedback from the public, that allows agencies to amend or revise rules—steps the SEC failed to take here. Indeed, the procedural provisions of the APA exist precisely to bring regularity to agency action. The NAM and NGS have asked the court to vacate SEC’s unlawful non-enforcement policy.


Related Documents:
Order Granting Summary Judgment  (September 28, 2022)
Reply In Support of Summary Judgment  (December 22, 2021)
Motion for Summary Judgment  (November 5, 2021)
NAM complaint  (October 13, 2021)

 

Southwest Airlines, Co. v. Saxon   (U.S. Supreme Court)

Interstate/foreign commerce exception to the Federal Arbitration Act

On January 31, 2022, the NAM filed an amicus brief urging the U.S. Supreme Court to reverse a Seventh Circuit decision by holding that the Federal Arbitration Act (FAA)—a national policy favoring arbitration—covers the arbitration agreement of an airport worker who never crosses state or international borders. The FAA contains an exemption for the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” There is a deep circuit split over the scope of the residual clause—the “transportation worker exemption”—and the High Court has not yet defined who qualifies as a transportation worker.

As the NAM’s brief explains, the Seventh Circuit’s approach threatens substantial litigation costs both from future disputes over the FAA’s application and from judicial decisions that deprive businesses and workers of the benefits of the FAA. Arbitration is important to manufacturers because it encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. Both the plain meaning and historical context of the FAA demonstrate that only workers that engage in actual transportation across state or national borders as a central part of the workers’ job description are exempt.

Unfortunately, on June 6, 2022, the Supreme Court affirmed the Seventh Circuit's decision.


Related Documents:
Opinion  (June 6, 2022)
NAM brief  (January 31, 2022)

 

Earl v. Boeing & Southwest Airlines   (5th Circuit)

No injury class action involving the Boeing 737 Max

On January 14th, the NAM filed an amicus brief urging the Fifth Circuit to reverse the lower court’s decision to certify a class of millions of uninjured individuals, endorsing a theory of standing that essentially monetized a risk of harm that never materialized as to those class members. The class in this case, Earl v. Boeing Co. and Southwest Airlines Co., consists of hundreds of millions of Southwest and American Airlines ticket purchasers who assert that they overpaid for tickets due to a concealed safety defect in Boeing’s 737 MAX 8. However, 95% of the class never boarded a 737 MAX airplane. And the remaining 5% that did travel on a 737 MAX did so safely—the alleged defect never manifested itself in those aircraft. In other words, the class members got the safe transportation that they paid for and therefore fail to assert any Article III injury in fact.

The NAM’s brief argues that Article III standing is a threshold requirement that must be established at the class certification stage. Plaintiffs should not be able to circumvent this requirement by asserting speculative pocketbook injuries—here, an “overcharge” theory supported only by dubious expert testimony. As manufacturers are acutely aware, the presence of millions of plaintiffs in a class can increase litigation risk and settlement pressure to the point at which defending against the claims becomes unrealistic.

Happily, on November 21, 2022, the Fifth Circuit held that the plaintiffs lack Article III standing, reversed the district court, and remanded the case to be dismissed for want of jurisdiction.


Related Documents:
Opinion  (November 21, 2022)
NAM brief  (January 14, 2022)

 

In re: Du Pont de Nemours & Co. C-8 Personal Injury Litig.   (6th Circuit)

Pushing back on plaintiffs’ attempt to fund an investigation of PFAS chemicals through an injunction-based class action

On December 27, 2022, the NAM filed a coalition amicus brief urging the 6th Circuit to reverse the Southern District of Ohio’s class certification order which attempts to fund an investigation of PFAS chemicals through an injunction-based class action. In this case, the lead plaintiff asked the Southern District of Ohio to force ten separate companies to provide for and fund a panel that will study potential health risks associated with nearly 5,000 different PFAS chemicals. The court obliged by erroneously certifying the lawsuit as an injunction-based class action under Rule 23(b)(2)—an extraordinary use of a rule that typically applies in cases involving civil rights and government benefits, where a single injunction or declaratory judgment would provide relief to all members of the class. Following NAM’s participation as amicus at the petition stage, the 6th Circuit granted interlocutory review, referencing our brief filed in support of the petition in a footnote (“What plaintiffs desire is an order that defendants fund, at substantial expense, both a science panel and potential medical monitoring. As amici point out, that claim is probably more analogous to a damages action than to traditional equitable relief”).

As explained in our December 27 brief, Rule 23(b)(2) is subject to the constraints that stem from traditional equity practice and the district court’s order lacks support in traditional equitable principles and bears no similarities to the injunctions historically ordered by equity courts. The district court cannot use its authority to force defendants to help determine whether a plaintiff has any viable claims, much less whether millions of absent class members exposed to unknown PFAS chemicals from unknown sources have any claims.

All manufacturers support a predictable, rational, and fair legal environment for class actions. They thus have a keen interest in ensuring that the courts rigorously and consistently analyze whether plaintiffs have properly satisfied all the requirements of Rule 23 before certifying a class. If the plaintiff here can get a class of millions certified to fund an investigation of yet-unknown health issues associated with PFAS chemicals, nearly every industrial emission, consumer product, food and beverage, or drug and medical device could be subject to similar industry-funded fact finding.

Happily, on November 27, 2023, the 6th Circuit vacated the class certification order.


Related Documents:
Decision  (November 27, 2023)
NAM brief  (December 27, 2022)
Decision  (September 9, 2022)
NAM brief  (March 28, 2022)

 

Buchanan v. General Motors LLC   (Georgia Supreme Court)

Challenging plaintiff's ability to depose high-level corporate employees

The NAM filed an amicus brief urging the Georgia Supreme Court to review a decision permitting tort plaintiffs to depose GM's CEO, Mary Barra, despite the existence of less senior executives with far greater direct knowledge of the facts at issue in the case. The plaintiffs in this wrongful death suit allege that a product defect caused the decedent's crash. The trial court granted the plaintiff's demand to depose Barra based on general statements she made publicly and in congressional testimony about her efforts to advance GM's culture of safety, and the appellate court affirmed.

The NAM filed an amicus brief in support of GM’s petition for review by the Georgia Supreme Court. Our brief explains that subpoenaing a corporate executive who has no unique knowledge of a matter is often intended to generate an unwarranted litigation advantage, unconnected to the substantive merits of a case. The brief further argues that review of the trial court's order is critical for promoting responsible discovery and limiting discovery abuse. Many manufacturers, particularly those that have famous executives, have experienced this type of pressure tactic during litigation. Unless the Georgia Supreme Court adopts an “apex” doctrine or interprets the state’s discovery rules appropriately, manufacturers will remain unusually vulnerable to shady tactics in that state.

Unfortunately, on June 1, 2022, the Georgia Supreme Court did not adopt the apex doctrine. The Court did, however, hold that a trial court should consider the apex factors, if asserted, in determining whether good cause exists to issue a protective order and ordered the Court of Appeals to remand the case to the trial court for further consideration.


Related Documents:
Opinion  (June 1, 2022)
NAM brief  (November 22, 2021)
NAM brief  (June 21, 2021)

 

Energy Policy Advocates v. Ellison et al.   (Minnesota Supreme Court)

Common interest privilege in Minnesota

The NAM filed a brief urging the Minnesota Supreme Court to reaffirm the common-interest doctrine—an extension of the attorney-client privilege that applies to communications between two or more parties that have agreed to coordinate a legal strategy—on the heels of a Minnesota Court of Appeals decision that categorically denied the existence of the doctrine in-state. The NAM and its members routinely rely on the common-interest doctrine in a variety of contexts, including when they solicit bids from law firms for a common client group or in coordinating legal strategy on matters of shared interests. The NAM’s brief argues that the common-interest privilege advances the same goals as the attorney-client privilege: ensuring that attorneys are able to provide fulsome and candid legal advice to their clients. Affirming the common-interest doctrine, as over 90% of jurisdictions have done, would encourage cooperation and coordination, reduce litigation costs and improve the administration of justice.

Happily, on September 28, 2022, the Minnesota Supreme Court reversed the Minnesota Court of Appeals and recognized the common-interest doctrine as applicable to the attorney work product privilege and attorney-client privilege. In its decision, the Minnesota Supreme Court explained that the doctrine can be applicable "in a litigated or non-litigated matter" where "two or more parties, represented by separate lawyers, have a common legal interest" but is inapplicable for "a purely commercial, political, or policy interest."


Related Documents:
NAM brief  (September 8, 2021)
Request for Leave to Participate as Amicus  (July 7, 2021)

 

Spire Missouri Inc., et al. v. Envt'l Defense Fund, et al.   (U.S. Supreme Court)

Challenging D.C. Circuit's decision to vacate Spire's Interstate Pipeline FERC Certificate

The NAM filed an amicus brief in the U.S. Supreme Court in support of the Spire STL pipeline’s petition for review seeking to overturn the D.C. Circuit’s vacatur of Spire’s operational authority which threatens drastic and unpredictable disruptions in natural gas service for residential and commercial customers alike. This case began as a challenge to the Spire STL’s legal authority. Rather than remanding the case to the district court for further proceedings, the D.C. Circuit took the extreme step of vacating Spire’s certificate to operate from the Federal Energy Regulatory Commission (FERC)—risking the reliable supply of natural gas to the entire St. Louis region—without fully considering the potential ramifications of its actions.

The NAM’s brief explains that millions of Americans depend on the predictable, disruption-free supply of natural gas from interstate pipelines. When supply is unexpectedly interrupted, so too are the critical industrial and manufacturing processes that depend directly on natural gas or indirectly on the electricity that generators supply. The D.C. Circuit’s flawed approach in this case eliminates disruption as a factor weighing against vacatur of an operational pipeline’s FERC certificate. Review is especially imperative here because the D.C. Circuit hears an outsized majority of administrative law cases, including challenges to FERC actions. Unfortunately, on April 18, 2022, the Court denied cert.


Related Documents:
NAM brief  (January 6, 2022)

 

State of Washington v. Grocery Manufacturers Association   (Washington State Supreme Court)

Compelled disclosure of trade association membership

The NAM filed an amicus brief to defend the right of companies to collectively promote their public policy positions through a trade association without a state compelling the association to reveal the names of member contributors. Washington State fined the Grocery Manufacturers’ Association $18 million for allegedly violating Washington’s campaign finance laws. The alleged violation arose from GMA not publicly disclosing the names of member companies that financially contributed to GMA’s advocacy against a ballot initiative regarding food labeling. A Washington state trial court and appellate court upheld the penalty. On appeal to the Washington State Supreme Court, the NAM filed an amicus brief in support of GMA that argues that compelled disclosures must meet exacting scrutiny under the First Amendment to the U.S. Constitution, and that the penalty here fails to satisfy that scrutiny. The NAM’s brief also explains how compelled disclosures of member information can chill public policy advocacy and undermine a robust public debate on important issues.

Unfortunately, on April 16, 2020, the Court rejected the First Amendment claims, upholding the trial court's finding that GMA violated Washington's campaign-contribution laws. However, the Court remanded the case on Eighth Amendment grounds, ordering the Court of Appeals to carefully scrutinize the penalty. On remand, the Court of Appeals held that because the $18 million penalty was within the permissible statutory range, the fine was not excessive. The NAM filed an amicus brief in support of GMA's petition for review of the Eighth Amendment issue by the Washington Supreme Court, which the court granted. As NAM's briefs--both in support of the petition and on the merits--explain, a statutorily compliant penalty can still be constitutionally excessive and a court must still consider whether improper enforcement motive affected the size of the penalty. In this case, GMA's penalty dwarfs all other campaign finance penalties ever issued including toward an organization on the other side of the ballot issue who only was assessed $322,000. If allowed to stand, the penalty in this case would open the door to disproportionate penalties whenever trade groups make a mistake in complying with campaign-finance laws and happen to speak for a business organized in the corporate form. It allows the State, under guise of a statutory penalty, to silence disfavored speech. This result betrays the Constitution’s guarantee that individuals and organizations of any viewpoint can speak without fear of excessive government retaliation.

Unforturnately, on January 20, 2022, the Washington Supreme Court affirmed the Court of Appeals' decision.


Related Documents:
Opinion  (January 20, 2022)
NAM Merits brief on Eighth Amendment  (August 13, 2021)
NAM Petition brief on Eighth Amendment  (March 22, 2021)
NAM brief  (September 6, 2019)

 

Wash. Alliance of Tech. Workers v. U.S. Dep't of Homeland Security   (D.C. Circuit)

Workforce program for STEM graduates

The NAM filed a response brief in the D.C. Circuit in defense of a program that provides hundreds of thousands of skilled workers for manufacturers and other American businesses. To address a shortfall of certain skilled workers in the American economy, the federal government in 1992 established the "optional practical training" (OPT) program. That program and a subsequent extension for STEM students (STEM OPT) allows foreign-born students to continue their educational training by working in the United States for up to three years after completing college or a graduate degree. Without the OPT program and STEM OPT, manufacturers would be unable to fill critical positions requiring specialized training in engineering, math, technology and the sciences. An anti-immigration activist group sought to invalidate the entire OPT program by suing the U.S. Department of Homeland Security. To help ensure the continued availability of hundreds of thousands of highly skilled workers for manufacturers, the NAM intervened in the case as a defendant. Becoming a defendant allowed the NAM to present the best legal arguments possible in support of the OPT program and STEM OPT. The court granted NAM's motion for intervention in 2019, and on November 30, 2020, the court granted NAM’s request for summary judgment.

The activist group then appealed the ruling to the D.C. Circuit. Happily, in a 2-1 decision issued on October 4, 2022, the D.C. Circuit upheld the validity of the STEM OPT program as a lawful exercise of executive branch authority.


Related Documents:
Denial of Rehearing En Banc  (February 1, 2023)
Opposition to Rehearing En Banc  (December 1, 2022)
Opinion  (October 4, 2022)
NAM brief  (June 11, 2021)

 

Esso Exploration & Production Nigeria Ltd. & Shell Nigeria Exploration & Production Co. Ltd. v. Nigeria National Petroleum Corp.   (2nd Circuit)

Protecting foreign investments through enforcement of international arbitration awards

The NAM filed an amicus brief seeking to reverse a lower court's refusal to enforce a valid $1.8B arbitral award related to Exxon's off-shore operations in Nigeria that was wrongly set aside by Nigerian courts. Pursuant to the parties' agreement, the award was rendered in Nigeria by a competent panel following fair procedures, yet was erroneously set aside by politically motivated Nigerian courts. The Southern District of New York followed suit, giving deference to the Nigerian set-aside judgment and refusing to enforce the award. On appeal to the 2nd Circuit, the NAM filed an amicus brief arguing that under the New York Convention, a U.S. court should not defer to a foreign court's judgment setting aside an arbitral award where the arbitration involved a state-owned entity, securing the set-aside judgment in its own sovereign courts, based upon parochial grounds far removed from international norms. This litigation is important for all manufacturers that employ arbitration clauses in their international dealings and rely on proper construction of the treaties governing their enforceability and the enforceability of the resulting awards.

On July 8, 2022, the 2nd Circuit concluded that the Nigerian judgments did not strike all parts of the arbitral award. The 2nd Circuit vacated the district court's decision "as to those parts of the award that were not struck by Nigerian judgments" and affirmed on all other grounds. The 2nd Circuit remanded the case to the district court "so that it may first determine precisely which aspects of the Award are enforceable under the Nigerian judgments, and then enter a partial enforcement order based on that determination."


Related Documents:
Decision  (July 8, 2022)
NAM brief  (January 17, 2020)

 

Keene v. CNA Holdings, LLC   (South Carolina Supreme Court)

Protecting South Carolina's statutory employer doctrine

The NAM called on the South Carolina Supreme Court to reconsider a decision that leaves countless manufacturers and contractors exposed to unexpected tort liability and upsets the statutory scheme and purpose of having workplace injuries addressed through the no-fault workers’ compensation system. In this wrongful death case involving alleged asbestos exposure, the South Carolina Supreme Court defied 80 years of precedent by upholding a $20M jury verdict against CNA Holdings, even though the decedent was a “statutory employee” of CNA, meaning that he was covered by the workers’ compensation system and barred from pursuing a claim through the civil law tort system. Under the statutory employer doctrine—codified in South Carolina’s workers’ compensation statute—a business which subcontracts out work that is important, necessary, essential or integral to the business is treated as the statutory employer of the subcontractor’s employees and thus responsible for providing workers’ compensation insurance for those employees. That is precisely what CNA did in this case, yet the court deprived CNA of the immunity from civil liability that is the benefit of that bargain.

The NAM filed an amicus brief in support of CAN’s petition for rehearing, emphasizing the significant destabilizing impact on the manufacturing sector should the court’s erroneous construction of the “statutory employer doctrine” not be reconsidered. Our brief further argues that the doctrine must be construed in the broadest manner possible in order to extend workers’ compensation coverage to South Carolina workers, as the state legislature intended.

Unfortunately, in April 2022, the court denied rehearing.


Related Documents:
NAM brief  (November 8, 2021)
Notice of Intent to file amicus brief  (September 13, 2021)

 

Walsh v. Tampa Electric Co.   (11th Circuit)

OSHA Cannot Ignore Decades of Letters of Interpretation Regarding Emergency Response Requirements

The NAM filed an amicus brief involving the definition of “emergency response” under OSHA regulations and OSHA’s ability to depart from its own interpretation letters upon which employers reasonably rely. NAM’s brief asks the 11th Circuit to reject OSHA’s decision to impose penalties on an energy company for reasonable, previously allowed conduct because OSHA’s position in the case contradicts its past policy as expressed in letters of interpretation—letters relied upon by industry for decades. The case, Walsh v. Tampa Electric Co., involves the definition of “emergency response” under a specific OSHA standard (the Hazardous Waste Operations and Emergency Response (HAZWOPER) standard, 29 CFR 1910.1020(q)). After OSHA initially issued citations for Tampa Electric Company (TECO)’s alleged violation of the HAZWOPER standard in handling an incidental ammonia release, the Occupational Safety and Review Commission (OSHRC) reversed, concluding that OSHA had failed to show that the standard applied. OSHA, in turn, petitioned the 11th Circuit for review.

NAM’s brief argues that adopting OSHA’s newly asserted interpretation of the scope and coverage of the HAZWOPER standard would severely impact operations involving hazardous chemicals across a broad range of industries. More importantly, if adopted, OSHA’s interpretation would not advance safety for employers and employees that manage risks associated with hazardous chemicals on a daily basis. The case is likely to set important precedents that will significantly impact workplace safety for employers in general, and manufacturers in particular. A favorable ruling for employers is especially important at this time, given the Biden administration’s increased enforcement posture.

Happily, on June 22, 2022, the 11th Circuit affirmed OSHRC's decision.


Related Documents:
Decision  (June 22, 2022)
NAM brief  (November 1, 2021)

 

California Trucking Association, et al. v. Bonta, et al.   (U.S. Supreme Court)

Federal law preempts California's AB-5 for the trucking industry

The NAM filed an amicus brief in support of the California Trucking Associations’ cert petition to the U.S. Supreme Court, asking the Court to hold that California’s Assembly Bill 5 (AB-5)—which radically changed worker classification in the State and effectively requires all independent contractor drivers of motor carriers operating in California to be classified as employees—is preempted by federal law. Passed in 2019, AB-5 adopted the so-called "ABC test" for determining whether a given worker is an independent contractor or statutory employee under the California Labor Code. By design, the ABC test results in many more workers being reclassified as employees for wage and hour laws and other purposes.

Under the Federal Aviation Administration Authorization Act (FAAAA), however, state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property,” are preempted. A federal district accordingly enjoined enforcement of AB-5 against motor carriers, but the Ninth Circuit reversed, deeming AB-5 a "generally applicable labor law," not subject to FAAAA preemption.

The NAM joined a coalition of manufacturers, distributors, wholesalers, retailers, and receivers of goods shipped through interstate commerce in filing an amicus brief in support of Supreme Court review, highlighting the significant burden AB-5 places on interstate commerce and the American economy. Our brief argues that AB-5 will harm the competitive, efficient, and flexible trucking services that Congress afforded U.S. businesses by limiting state interference in the trucking market. The ripple effect from this disruption will harm consumers and the national economy, which are already grappling with delivery delays, product shortages, and empty store shelves caused by the pandemic.

Unfortunately, on June 30, 2022, after calling for the views of the Solicitor General, the Court denied cert.


Related Documents:
NAM brief  (September 10, 2021)

 

Miller v. C.H. Robinson   (U.S. Supreme Court)

Liability for negligent acts of truckers

The NAM filed an amicus brief urging the U.S. Supreme Court to grant cert to reverse a Ninth Circuit decision subjecting freight brokers to tort liability for their selection of carrier, despite the preemptive authority of federal trucking laws as applied to brokers. In this case, the plaintiff was injured in a traffic collision involving a trucking company. He alleged that the broker was negligent in selecting the trucking company because it knew or should have known about the company’s prior regulatory infractions. However, the Federal Aviation Administration Authorization Act (“FAAAA”) regulates shipping by commercial trucks as well as the brokerage services necessary to facilitate that shipping. To that end, the FAAAA preempts certain state laws as they apply to brokers, including state common law claims for negligence, unless they implicate “the safety regulatory authority of the State with respect to motor vehicles.” 49 U.S.C. § 14501(c)(2)(A). The district court dismissed the case after finding the plaintiff’s claims preempted, but the Ninth Circuit reversed, significantly narrowing the federal preemption of state laws that regulate trucking.

The NAM filed an amicus brief in support of Supreme Court review explaining the careful balance that Congress struck in regulating drivers under the FAAAA, and why the plaintiffs’ theory of liability is unworkable in practice. By increasing liability risk in the form of inconsistent state common law tort claims against brokers, which they have almost no ability to manage or control for, the Ninth Circuit’s decision threatens a huge swath of the nation’s economy and offers little or no prospect of improved public safety. Unfortunately, on June 27, 2022, the Court denied cert.


Related Documents:
NAM brief  (May 19, 2021)

 

Bader Farms, Inc. v. Monsanto Co. & BASF Corp.   (8th Circuit)

A manufacturer is not liable for harm caused by a product it did not make or sell

The NAM filed an amicus brief urging the Eighth Circuit to reverse a $75 million judgement against BASF and Monsanto that upends the long-standing rule that a manufacturer or seller is liable only for a product it places into the stream of commerce, and not for harm caused by a third party’s product. Proximate cause is a fundamental element for liability to be imposed in any tort case. Under Missouri law and the law of most states, proximate cause is missing when a plaintiff fails to identify the manufacturer or seller of the particular product that caused the plaintiff’s injury. In this case, the trial court misapplied Missouri law by allowing the case to proceed against Monsanto and BASF in the absence of proof that they manufactured the herbicides that allegedly caused damage to Bader’s peach trees. NAM’s brief argues that contrary to the plaintiff’s novel liability theory, Missouri—consistent with the majority rule nationwide—adheres to a traditional proximate cause standard. Forcing companies to pay for injuries caused by others—and allowing the actual tortfeasors to escape liability—improperly alters the parties’ economic incentives and market behavior. Unfortunately, on July 7, 2022, while vacating the punitive damages award, the court affirmed the judgment.


Related Documents:
NAM brief  (March 19, 2021)

 

BP, et al. v. Mayor and City of Baltimore   (4th Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

The NAM filed an amicus brief in the Fourth Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented was whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law.  The NAM's brief argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on April 7, 2022, the Fourth Circuit affirmed the district court's remand order, holding that none of the asserted basis for removal permit the Court to exercise jurisdiction.


Related Documents:
Decision  (April 7, 2022)
NAM brief  (August 13, 2021)

 

City of Hoboken v. ExxonMobil Corp. et al.   (3rd Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

The NAM filed an amicus brief in the Third Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argued that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on August 17, 2022, the Third Circuit affirmed the district court order remanding the case to state court, holding that there is no federal hook to allow the case to be removed to federal court.


Related Documents:
Decision  (August 7, 2022)
NAM brief  (November 22, 2021)

 

State of Delaware v. BP America Inc., et al.   (3rd Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

On March 21, 2022, the NAM filed an amicus brief in the Third Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case, State of Delaware v. BP America Inc., et al., is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argued that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. Further, as is evident from current geopolitical unrest, energy production has significant national security implications. A state court, wielding state law cannot simply decide to stop the sale of fossil fuel.

Unfortunately, on August 17, 2022, the Third Circuit affirmed the district court order remanding the case to state court, holding that there is no federal hook to allow the case to be removed to federal court.


Related Documents:
Decision  (August 17, 2022)
NAM brief  (March 22, 2022)

 

State of Rhode Island v. Shell Prods. Co., et al.   (1st Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

Tthe NAM filed an amicus brief in the First Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on May 23, 2022, the First Circuit affirmed the district court's order remanding the case to Rhode Island state court.


Related Documents:
Decision  (May 23, 2022)
NAM brief  (August 4, 2021)

 

Whirlpool Financial Corporation, et al. v. Comm'r of Internal Revenue   (6th Circuit)

Seeking rehearing of 6th Circuit's failure to consider decades-long Treasury regulations in ruling against taxpayer

On January 27, 2022, the NAM filed an amicus brief urging the Sixth Circuit to grant rehearing en banc after the court disregarded valid Treasury Department regulations relied upon by manufacturers in running their global operations for over 50 years. This case, Whirlpool v. Comm’r of Internal Revenue, involves a complex international tax issue—foreign base company sales income (FBCSI). Subpart F of the Internal Revenue Code prohibits a U.S. parent company from using sales of finished goods between foreign subsidiaries to generate income in a “tax haven” country—that income is known as FBCSI. Despite an express statutory delegation of authority to Treasury to write the regulations that determine when income qualifies as FBCSI, the 6th Circuit put aside those regulations—which had been around for decades—and held that under the statutory text alone the defendant taxpayer’s subsidiary in Mexico generated FBCSI.

The NAM’s brief argues that the majority’s novel interpretation of the Internal Revenue Code conflicts with over 50 years of tax law. If allowed to stand, the court’s decision could result in hundreds of millions of dollars of unexpected and unjustified taxes, disrupt efficient global business operations, and confuse taxpayers (and the government) concerning how to apply the tax laws. All manufacturers have an interest in the consistent and predictable application of regulations, especially where the administration of tax laws is concerned.

Unfortunately, on March 2, 2022, the Sixth Circuit denied the petition for rehearing.


Related Documents:
NAM brief  (January 27, 2022)

 

Whirlpool Financial Corporation, et al., v. Comm'r of Internal Revenue   (U.S. Supreme Court)

Seeking Supreme Court review of the 6th Circuit's failure to consider decades-long Treasury regulations in ruling against tax payer

The NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a 6th Circuit decision that flouted valid Treasury Department regulations relied upon by manufacturers in running their global operations for nearly 60 years. This case involves a complex international tax issue—foreign base company sales income (FBCSI). The Internal Revenue Code prohibits a U.S. parent company from using sales of finished goods between foreign subsidiaries to generate income in a “tax haven” country—that income is known as FBCSI. Despite an express statutory delegation of authority to Treasury to write the regulations that determine when income qualifies as FBCSI, the 6th Circuit ignored the applicable regulations—which had been around for decades—and held that under the statutory text alone the defendant taxpayer’s subsidiary in Mexico generated FBCSI.

  The NAM’s brief argues that the 6th Circuit’s novel interpretation of the Internal Revenue Code conflicts with nearly 60 years of tax law. If allowed to stand, the court’s decision could result in hundreds of millions of dollars of unexpected and unjustified taxes, disrupt efficient global business operations, and confuse taxpayers (and the government) concerning how to apply the tax laws. All manufacturers have an interest in the consistent and predictable application of regulations, especially where the administration of tax laws is concerned.

  Unfortunately, on November 21, 2022, the U.S. Supreme Court denied cert.


Related Documents:
NAM Brief  (August 8, 2022)

 


Administrative Procedure -- 2022



National Association of Manufacturers & Natural Gas Services Group, Inc. v. U.S. Securities and Exchange Commission   (W.D. Tex.)

Challenging SEC’s unlawful about-face on proxy advisory firm rule

The NAM filed a lawsuit on October 21, 2021, challenging the SEC’s attempt to unilaterally suspend the lawfully promulgated proxy advisory firm rule absent any rulemaking process. In July 2020, after years of advocacy from the NAM and our members, the SEC finalized a new rule increasing transparency and accountability of so-called proxy advisory firms— unregulated third parties with outsized influence on shareholder votes and manufacturers’ corporate governance policies. The final rule subjects proxy firms to reasonable SEC oversight just like every other participant in the securities markets. As such, the rule requires them to disclose their conflicts of interest, provide their voting recommendations to companies after they are finalized, and notify investors of company perspectives on their recommendations.

Proxy advisory firm Institutional Shareholder Services (ISS) filed suit last year to invalidate these modest reforms. After that case was fully briefed, with the SEC vigorously defending the rule, new SEC Chairman Gary Gensler announced in June 2021 that the SEC would be reviewing the proxy firm rule with the intent to revise or rescind it. SEC’s Division of Corporation Finance simultaneously announced that it would not recommend enforcement action against proxy firms for failing to comply with the rule while it is under review. And, that same day, the SEC stated in a court filing that the non-enforcement policy grants ISS and other proxy advisory businesses “relief” from the rule’s December 1, 2021 compliance date.

The NAM and co-plaintiff Natural Gas Services, Inc. (NYSE: NGS) filed a complaint on October 21, 2021 in the U.S. District Court for the Western District of Texas arguing that the SEC’s failure to undertake notice-and-comment rulemaking before amending the rule’s effective date renders its conduct unlawful. Agencies cannot simply ignore rules that they do not politically agree with. The APA prescribes a deliberative process, involving feedback from the public, that allows agencies to amend or revise rules—steps the SEC failed to take here. Indeed, the procedural provisions of the APA exist precisely to bring regularity to agency action. The NAM and NGS have asked the court to vacate SEC’s unlawful non-enforcement policy.


Related Documents:
Order Granting Summary Judgment  (September 28, 2022)
Reply In Support of Summary Judgment  (December 22, 2021)
Motion for Summary Judgment  (November 5, 2021)
NAM complaint  (October 13, 2021)

 


Arbitration -- 2022



Southwest Airlines, Co. v. Saxon   (U.S. Supreme Court)

Interstate/foreign commerce exception to the Federal Arbitration Act

On January 31, 2022, the NAM filed an amicus brief urging the U.S. Supreme Court to reverse a Seventh Circuit decision by holding that the Federal Arbitration Act (FAA)—a national policy favoring arbitration—covers the arbitration agreement of an airport worker who never crosses state or international borders. The FAA contains an exemption for the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” There is a deep circuit split over the scope of the residual clause—the “transportation worker exemption”—and the High Court has not yet defined who qualifies as a transportation worker.

As the NAM’s brief explains, the Seventh Circuit’s approach threatens substantial litigation costs both from future disputes over the FAA’s application and from judicial decisions that deprive businesses and workers of the benefits of the FAA. Arbitration is important to manufacturers because it encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. Both the plain meaning and historical context of the FAA demonstrate that only workers that engage in actual transportation across state or national borders as a central part of the workers’ job description are exempt.

Unfortunately, on June 6, 2022, the Supreme Court affirmed the Seventh Circuit's decision.


Related Documents:
Opinion  (June 6, 2022)
NAM brief  (January 31, 2022)

 


Class Actions -- 2022



Earl v. Boeing & Southwest Airlines   (5th Circuit)

No injury class action involving the Boeing 737 Max

On January 14th, the NAM filed an amicus brief urging the Fifth Circuit to reverse the lower court’s decision to certify a class of millions of uninjured individuals, endorsing a theory of standing that essentially monetized a risk of harm that never materialized as to those class members. The class in this case, Earl v. Boeing Co. and Southwest Airlines Co., consists of hundreds of millions of Southwest and American Airlines ticket purchasers who assert that they overpaid for tickets due to a concealed safety defect in Boeing’s 737 MAX 8. However, 95% of the class never boarded a 737 MAX airplane. And the remaining 5% that did travel on a 737 MAX did so safely—the alleged defect never manifested itself in those aircraft. In other words, the class members got the safe transportation that they paid for and therefore fail to assert any Article III injury in fact.

The NAM’s brief argues that Article III standing is a threshold requirement that must be established at the class certification stage. Plaintiffs should not be able to circumvent this requirement by asserting speculative pocketbook injuries—here, an “overcharge” theory supported only by dubious expert testimony. As manufacturers are acutely aware, the presence of millions of plaintiffs in a class can increase litigation risk and settlement pressure to the point at which defending against the claims becomes unrealistic.

Happily, on November 21, 2022, the Fifth Circuit held that the plaintiffs lack Article III standing, reversed the district court, and remanded the case to be dismissed for want of jurisdiction.


Related Documents:
Opinion  (November 21, 2022)
NAM brief  (January 14, 2022)

 

In re: Du Pont de Nemours & Co. C-8 Personal Injury Litig.   (6th Circuit)

Pushing back on plaintiffs’ attempt to fund an investigation of PFAS chemicals through an injunction-based class action

On December 27, 2022, the NAM filed a coalition amicus brief urging the 6th Circuit to reverse the Southern District of Ohio’s class certification order which attempts to fund an investigation of PFAS chemicals through an injunction-based class action. In this case, the lead plaintiff asked the Southern District of Ohio to force ten separate companies to provide for and fund a panel that will study potential health risks associated with nearly 5,000 different PFAS chemicals. The court obliged by erroneously certifying the lawsuit as an injunction-based class action under Rule 23(b)(2)—an extraordinary use of a rule that typically applies in cases involving civil rights and government benefits, where a single injunction or declaratory judgment would provide relief to all members of the class. Following NAM’s participation as amicus at the petition stage, the 6th Circuit granted interlocutory review, referencing our brief filed in support of the petition in a footnote (“What plaintiffs desire is an order that defendants fund, at substantial expense, both a science panel and potential medical monitoring. As amici point out, that claim is probably more analogous to a damages action than to traditional equitable relief”).

As explained in our December 27 brief, Rule 23(b)(2) is subject to the constraints that stem from traditional equity practice and the district court’s order lacks support in traditional equitable principles and bears no similarities to the injunctions historically ordered by equity courts. The district court cannot use its authority to force defendants to help determine whether a plaintiff has any viable claims, much less whether millions of absent class members exposed to unknown PFAS chemicals from unknown sources have any claims.

All manufacturers support a predictable, rational, and fair legal environment for class actions. They thus have a keen interest in ensuring that the courts rigorously and consistently analyze whether plaintiffs have properly satisfied all the requirements of Rule 23 before certifying a class. If the plaintiff here can get a class of millions certified to fund an investigation of yet-unknown health issues associated with PFAS chemicals, nearly every industrial emission, consumer product, food and beverage, or drug and medical device could be subject to similar industry-funded fact finding.

Happily, on November 27, 2023, the 6th Circuit vacated the class certification order.


Related Documents:
Decision  (November 27, 2023)
NAM brief  (December 27, 2022)
Decision  (September 9, 2022)
NAM brief  (March 28, 2022)

 


Discovery -- 2022



Buchanan v. General Motors LLC   (Georgia Supreme Court)

Challenging plaintiff's ability to depose high-level corporate employees

The NAM filed an amicus brief urging the Georgia Supreme Court to review a decision permitting tort plaintiffs to depose GM's CEO, Mary Barra, despite the existence of less senior executives with far greater direct knowledge of the facts at issue in the case. The plaintiffs in this wrongful death suit allege that a product defect caused the decedent's crash. The trial court granted the plaintiff's demand to depose Barra based on general statements she made publicly and in congressional testimony about her efforts to advance GM's culture of safety, and the appellate court affirmed.

The NAM filed an amicus brief in support of GM’s petition for review by the Georgia Supreme Court. Our brief explains that subpoenaing a corporate executive who has no unique knowledge of a matter is often intended to generate an unwarranted litigation advantage, unconnected to the substantive merits of a case. The brief further argues that review of the trial court's order is critical for promoting responsible discovery and limiting discovery abuse. Many manufacturers, particularly those that have famous executives, have experienced this type of pressure tactic during litigation. Unless the Georgia Supreme Court adopts an “apex” doctrine or interprets the state’s discovery rules appropriately, manufacturers will remain unusually vulnerable to shady tactics in that state.

Unfortunately, on June 1, 2022, the Georgia Supreme Court did not adopt the apex doctrine. The Court did, however, hold that a trial court should consider the apex factors, if asserted, in determining whether good cause exists to issue a protective order and ordered the Court of Appeals to remand the case to the trial court for further consideration.


Related Documents:
Opinion  (June 1, 2022)
NAM brief  (November 22, 2021)
NAM brief  (June 21, 2021)

 

Energy Policy Advocates v. Ellison et al.   (Minnesota Supreme Court)

Common interest privilege in Minnesota

The NAM filed a brief urging the Minnesota Supreme Court to reaffirm the common-interest doctrine—an extension of the attorney-client privilege that applies to communications between two or more parties that have agreed to coordinate a legal strategy—on the heels of a Minnesota Court of Appeals decision that categorically denied the existence of the doctrine in-state. The NAM and its members routinely rely on the common-interest doctrine in a variety of contexts, including when they solicit bids from law firms for a common client group or in coordinating legal strategy on matters of shared interests. The NAM’s brief argues that the common-interest privilege advances the same goals as the attorney-client privilege: ensuring that attorneys are able to provide fulsome and candid legal advice to their clients. Affirming the common-interest doctrine, as over 90% of jurisdictions have done, would encourage cooperation and coordination, reduce litigation costs and improve the administration of justice.

Happily, on September 28, 2022, the Minnesota Supreme Court reversed the Minnesota Court of Appeals and recognized the common-interest doctrine as applicable to the attorney work product privilege and attorney-client privilege. In its decision, the Minnesota Supreme Court explained that the doctrine can be applicable "in a litigated or non-litigated matter" where "two or more parties, represented by separate lawyers, have a common legal interest" but is inapplicable for "a purely commercial, political, or policy interest."


Related Documents:
NAM brief  (September 8, 2021)
Request for Leave to Participate as Amicus  (July 7, 2021)

 


Energy -- 2022



Spire Missouri Inc., et al. v. Envt'l Defense Fund, et al.   (U.S. Supreme Court)

Challenging D.C. Circuit's decision to vacate Spire's Interstate Pipeline FERC Certificate

The NAM filed an amicus brief in the U.S. Supreme Court in support of the Spire STL pipeline’s petition for review seeking to overturn the D.C. Circuit’s vacatur of Spire’s operational authority which threatens drastic and unpredictable disruptions in natural gas service for residential and commercial customers alike. This case began as a challenge to the Spire STL’s legal authority. Rather than remanding the case to the district court for further proceedings, the D.C. Circuit took the extreme step of vacating Spire’s certificate to operate from the Federal Energy Regulatory Commission (FERC)—risking the reliable supply of natural gas to the entire St. Louis region—without fully considering the potential ramifications of its actions.

The NAM’s brief explains that millions of Americans depend on the predictable, disruption-free supply of natural gas from interstate pipelines. When supply is unexpectedly interrupted, so too are the critical industrial and manufacturing processes that depend directly on natural gas or indirectly on the electricity that generators supply. The D.C. Circuit’s flawed approach in this case eliminates disruption as a factor weighing against vacatur of an operational pipeline’s FERC certificate. Review is especially imperative here because the D.C. Circuit hears an outsized majority of administrative law cases, including challenges to FERC actions. Unfortunately, on April 18, 2022, the Court denied cert.


Related Documents:
NAM brief  (January 6, 2022)

 


Free Speech -- 2022



State of Washington v. Grocery Manufacturers Association   (Washington State Supreme Court)

Compelled disclosure of trade association membership

The NAM filed an amicus brief to defend the right of companies to collectively promote their public policy positions through a trade association without a state compelling the association to reveal the names of member contributors. Washington State fined the Grocery Manufacturers’ Association $18 million for allegedly violating Washington’s campaign finance laws. The alleged violation arose from GMA not publicly disclosing the names of member companies that financially contributed to GMA’s advocacy against a ballot initiative regarding food labeling. A Washington state trial court and appellate court upheld the penalty. On appeal to the Washington State Supreme Court, the NAM filed an amicus brief in support of GMA that argues that compelled disclosures must meet exacting scrutiny under the First Amendment to the U.S. Constitution, and that the penalty here fails to satisfy that scrutiny. The NAM’s brief also explains how compelled disclosures of member information can chill public policy advocacy and undermine a robust public debate on important issues.

Unfortunately, on April 16, 2020, the Court rejected the First Amendment claims, upholding the trial court's finding that GMA violated Washington's campaign-contribution laws. However, the Court remanded the case on Eighth Amendment grounds, ordering the Court of Appeals to carefully scrutinize the penalty. On remand, the Court of Appeals held that because the $18 million penalty was within the permissible statutory range, the fine was not excessive. The NAM filed an amicus brief in support of GMA's petition for review of the Eighth Amendment issue by the Washington Supreme Court, which the court granted. As NAM's briefs--both in support of the petition and on the merits--explain, a statutorily compliant penalty can still be constitutionally excessive and a court must still consider whether improper enforcement motive affected the size of the penalty. In this case, GMA's penalty dwarfs all other campaign finance penalties ever issued including toward an organization on the other side of the ballot issue who only was assessed $322,000. If allowed to stand, the penalty in this case would open the door to disproportionate penalties whenever trade groups make a mistake in complying with campaign-finance laws and happen to speak for a business organized in the corporate form. It allows the State, under guise of a statutory penalty, to silence disfavored speech. This result betrays the Constitution’s guarantee that individuals and organizations of any viewpoint can speak without fear of excessive government retaliation.

Unforturnately, on January 20, 2022, the Washington Supreme Court affirmed the Court of Appeals' decision.


Related Documents:
Opinion  (January 20, 2022)
NAM Merits brief on Eighth Amendment  (August 13, 2021)
NAM Petition brief on Eighth Amendment  (March 22, 2021)
NAM brief  (September 6, 2019)

 


Immigration -- 2022



Wash. Alliance of Tech. Workers v. U.S. Dep't of Homeland Security   (D.C. Circuit)

Workforce program for STEM graduates

The NAM filed a response brief in the D.C. Circuit in defense of a program that provides hundreds of thousands of skilled workers for manufacturers and other American businesses. To address a shortfall of certain skilled workers in the American economy, the federal government in 1992 established the "optional practical training" (OPT) program. That program and a subsequent extension for STEM students (STEM OPT) allows foreign-born students to continue their educational training by working in the United States for up to three years after completing college or a graduate degree. Without the OPT program and STEM OPT, manufacturers would be unable to fill critical positions requiring specialized training in engineering, math, technology and the sciences. An anti-immigration activist group sought to invalidate the entire OPT program by suing the U.S. Department of Homeland Security. To help ensure the continued availability of hundreds of thousands of highly skilled workers for manufacturers, the NAM intervened in the case as a defendant. Becoming a defendant allowed the NAM to present the best legal arguments possible in support of the OPT program and STEM OPT. The court granted NAM's motion for intervention in 2019, and on November 30, 2020, the court granted NAM’s request for summary judgment.

The activist group then appealed the ruling to the D.C. Circuit. Happily, in a 2-1 decision issued on October 4, 2022, the D.C. Circuit upheld the validity of the STEM OPT program as a lawful exercise of executive branch authority.


Related Documents:
Denial of Rehearing En Banc  (February 1, 2023)
Opposition to Rehearing En Banc  (December 1, 2022)
Opinion  (October 4, 2022)
NAM brief  (June 11, 2021)

 


International -- 2022



Esso Exploration & Production Nigeria Ltd. & Shell Nigeria Exploration & Production Co. Ltd. v. Nigeria National Petroleum Corp.   (2nd Circuit)

Protecting foreign investments through enforcement of international arbitration awards

The NAM filed an amicus brief seeking to reverse a lower court's refusal to enforce a valid $1.8B arbitral award related to Exxon's off-shore operations in Nigeria that was wrongly set aside by Nigerian courts. Pursuant to the parties' agreement, the award was rendered in Nigeria by a competent panel following fair procedures, yet was erroneously set aside by politically motivated Nigerian courts. The Southern District of New York followed suit, giving deference to the Nigerian set-aside judgment and refusing to enforce the award. On appeal to the 2nd Circuit, the NAM filed an amicus brief arguing that under the New York Convention, a U.S. court should not defer to a foreign court's judgment setting aside an arbitral award where the arbitration involved a state-owned entity, securing the set-aside judgment in its own sovereign courts, based upon parochial grounds far removed from international norms. This litigation is important for all manufacturers that employ arbitration clauses in their international dealings and rely on proper construction of the treaties governing their enforceability and the enforceability of the resulting awards.

On July 8, 2022, the 2nd Circuit concluded that the Nigerian judgments did not strike all parts of the arbitral award. The 2nd Circuit vacated the district court's decision "as to those parts of the award that were not struck by Nigerian judgments" and affirmed on all other grounds. The 2nd Circuit remanded the case to the district court "so that it may first determine precisely which aspects of the Award are enforceable under the Nigerian judgments, and then enter a partial enforcement order based on that determination."


Related Documents:
Decision  (July 8, 2022)
NAM brief  (January 17, 2020)

 


Labor Law -- 2022



Keene v. CNA Holdings, LLC   (South Carolina Supreme Court)

Protecting South Carolina's statutory employer doctrine

The NAM called on the South Carolina Supreme Court to reconsider a decision that leaves countless manufacturers and contractors exposed to unexpected tort liability and upsets the statutory scheme and purpose of having workplace injuries addressed through the no-fault workers’ compensation system. In this wrongful death case involving alleged asbestos exposure, the South Carolina Supreme Court defied 80 years of precedent by upholding a $20M jury verdict against CNA Holdings, even though the decedent was a “statutory employee” of CNA, meaning that he was covered by the workers’ compensation system and barred from pursuing a claim through the civil law tort system. Under the statutory employer doctrine—codified in South Carolina’s workers’ compensation statute—a business which subcontracts out work that is important, necessary, essential or integral to the business is treated as the statutory employer of the subcontractor’s employees and thus responsible for providing workers’ compensation insurance for those employees. That is precisely what CNA did in this case, yet the court deprived CNA of the immunity from civil liability that is the benefit of that bargain.

The NAM filed an amicus brief in support of CAN’s petition for rehearing, emphasizing the significant destabilizing impact on the manufacturing sector should the court’s erroneous construction of the “statutory employer doctrine” not be reconsidered. Our brief further argues that the doctrine must be construed in the broadest manner possible in order to extend workers’ compensation coverage to South Carolina workers, as the state legislature intended.

Unfortunately, in April 2022, the court denied rehearing.


Related Documents:
NAM brief  (November 8, 2021)
Notice of Intent to file amicus brief  (September 13, 2021)

 


OSHA -- 2022



Walsh v. Tampa Electric Co.   (11th Circuit)

OSHA Cannot Ignore Decades of Letters of Interpretation Regarding Emergency Response Requirements

The NAM filed an amicus brief involving the definition of “emergency response” under OSHA regulations and OSHA’s ability to depart from its own interpretation letters upon which employers reasonably rely. NAM’s brief asks the 11th Circuit to reject OSHA’s decision to impose penalties on an energy company for reasonable, previously allowed conduct because OSHA’s position in the case contradicts its past policy as expressed in letters of interpretation—letters relied upon by industry for decades. The case, Walsh v. Tampa Electric Co., involves the definition of “emergency response” under a specific OSHA standard (the Hazardous Waste Operations and Emergency Response (HAZWOPER) standard, 29 CFR 1910.1020(q)). After OSHA initially issued citations for Tampa Electric Company (TECO)’s alleged violation of the HAZWOPER standard in handling an incidental ammonia release, the Occupational Safety and Review Commission (OSHRC) reversed, concluding that OSHA had failed to show that the standard applied. OSHA, in turn, petitioned the 11th Circuit for review.

NAM’s brief argues that adopting OSHA’s newly asserted interpretation of the scope and coverage of the HAZWOPER standard would severely impact operations involving hazardous chemicals across a broad range of industries. More importantly, if adopted, OSHA’s interpretation would not advance safety for employers and employees that manage risks associated with hazardous chemicals on a daily basis. The case is likely to set important precedents that will significantly impact workplace safety for employers in general, and manufacturers in particular. A favorable ruling for employers is especially important at this time, given the Biden administration’s increased enforcement posture.

Happily, on June 22, 2022, the 11th Circuit affirmed OSHRC's decision.


Related Documents:
Decision  (June 22, 2022)
NAM brief  (November 1, 2021)

 


Preemption -- 2022



California Trucking Association, et al. v. Bonta, et al.   (U.S. Supreme Court)

Federal law preempts California's AB-5 for the trucking industry

The NAM filed an amicus brief in support of the California Trucking Associations’ cert petition to the U.S. Supreme Court, asking the Court to hold that California’s Assembly Bill 5 (AB-5)—which radically changed worker classification in the State and effectively requires all independent contractor drivers of motor carriers operating in California to be classified as employees—is preempted by federal law. Passed in 2019, AB-5 adopted the so-called "ABC test" for determining whether a given worker is an independent contractor or statutory employee under the California Labor Code. By design, the ABC test results in many more workers being reclassified as employees for wage and hour laws and other purposes.

Under the Federal Aviation Administration Authorization Act (FAAAA), however, state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property,” are preempted. A federal district accordingly enjoined enforcement of AB-5 against motor carriers, but the Ninth Circuit reversed, deeming AB-5 a "generally applicable labor law," not subject to FAAAA preemption.

The NAM joined a coalition of manufacturers, distributors, wholesalers, retailers, and receivers of goods shipped through interstate commerce in filing an amicus brief in support of Supreme Court review, highlighting the significant burden AB-5 places on interstate commerce and the American economy. Our brief argues that AB-5 will harm the competitive, efficient, and flexible trucking services that Congress afforded U.S. businesses by limiting state interference in the trucking market. The ripple effect from this disruption will harm consumers and the national economy, which are already grappling with delivery delays, product shortages, and empty store shelves caused by the pandemic.

Unfortunately, on June 30, 2022, after calling for the views of the Solicitor General, the Court denied cert.


Related Documents:
NAM brief  (September 10, 2021)

 

Miller v. C.H. Robinson   (U.S. Supreme Court)

Liability for negligent acts of truckers

The NAM filed an amicus brief urging the U.S. Supreme Court to grant cert to reverse a Ninth Circuit decision subjecting freight brokers to tort liability for their selection of carrier, despite the preemptive authority of federal trucking laws as applied to brokers. In this case, the plaintiff was injured in a traffic collision involving a trucking company. He alleged that the broker was negligent in selecting the trucking company because it knew or should have known about the company’s prior regulatory infractions. However, the Federal Aviation Administration Authorization Act (“FAAAA”) regulates shipping by commercial trucks as well as the brokerage services necessary to facilitate that shipping. To that end, the FAAAA preempts certain state laws as they apply to brokers, including state common law claims for negligence, unless they implicate “the safety regulatory authority of the State with respect to motor vehicles.” 49 U.S.C. § 14501(c)(2)(A). The district court dismissed the case after finding the plaintiff’s claims preempted, but the Ninth Circuit reversed, significantly narrowing the federal preemption of state laws that regulate trucking.

The NAM filed an amicus brief in support of Supreme Court review explaining the careful balance that Congress struck in regulating drivers under the FAAAA, and why the plaintiffs’ theory of liability is unworkable in practice. By increasing liability risk in the form of inconsistent state common law tort claims against brokers, which they have almost no ability to manage or control for, the Ninth Circuit’s decision threatens a huge swath of the nation’s economy and offers little or no prospect of improved public safety. Unfortunately, on June 27, 2022, the Court denied cert.


Related Documents:
NAM brief  (May 19, 2021)

 


Product Liability -- 2022



Bader Farms, Inc. v. Monsanto Co. & BASF Corp.   (8th Circuit)

A manufacturer is not liable for harm caused by a product it did not make or sell

The NAM filed an amicus brief urging the Eighth Circuit to reverse a $75 million judgement against BASF and Monsanto that upends the long-standing rule that a manufacturer or seller is liable only for a product it places into the stream of commerce, and not for harm caused by a third party’s product. Proximate cause is a fundamental element for liability to be imposed in any tort case. Under Missouri law and the law of most states, proximate cause is missing when a plaintiff fails to identify the manufacturer or seller of the particular product that caused the plaintiff’s injury. In this case, the trial court misapplied Missouri law by allowing the case to proceed against Monsanto and BASF in the absence of proof that they manufactured the herbicides that allegedly caused damage to Bader’s peach trees. NAM’s brief argues that contrary to the plaintiff’s novel liability theory, Missouri—consistent with the majority rule nationwide—adheres to a traditional proximate cause standard. Forcing companies to pay for injuries caused by others—and allowing the actual tortfeasors to escape liability—improperly alters the parties’ economic incentives and market behavior. Unfortunately, on July 7, 2022, while vacating the punitive damages award, the court affirmed the judgment.


Related Documents:
NAM brief  (March 19, 2021)

 

BP, et al. v. Mayor and City of Baltimore   (4th Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

The NAM filed an amicus brief in the Fourth Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented was whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law.  The NAM's brief argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on April 7, 2022, the Fourth Circuit affirmed the district court's remand order, holding that none of the asserted basis for removal permit the Court to exercise jurisdiction.


Related Documents:
Decision  (April 7, 2022)
NAM brief  (August 13, 2021)

 

City of Hoboken v. ExxonMobil Corp. et al.   (3rd Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

The NAM filed an amicus brief in the Third Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argued that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on August 17, 2022, the Third Circuit affirmed the district court order remanding the case to state court, holding that there is no federal hook to allow the case to be removed to federal court.


Related Documents:
Decision  (August 7, 2022)
NAM brief  (November 22, 2021)

 

State of Delaware v. BP America Inc., et al.   (3rd Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

On March 21, 2022, the NAM filed an amicus brief in the Third Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case, State of Delaware v. BP America Inc., et al., is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argued that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. Further, as is evident from current geopolitical unrest, energy production has significant national security implications. A state court, wielding state law cannot simply decide to stop the sale of fossil fuel.

Unfortunately, on August 17, 2022, the Third Circuit affirmed the district court order remanding the case to state court, holding that there is no federal hook to allow the case to be removed to federal court.


Related Documents:
Decision  (August 17, 2022)
NAM brief  (March 22, 2022)

 

State of Rhode Island v. Shell Prods. Co., et al.   (1st Circuit)

Jurisdiction for climate change "public nuisance" lawsuits

Tthe NAM filed an amicus brief in the First Circuit arguing that public nuisance litigation seeking to drive national energy policy on climate change should not be heard in state court. This case is part of a broader campaign involving more than two dozen cases that have been filed by cities, counties and states. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. The NAM’s brief argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

Unfortunately, on May 23, 2022, the First Circuit affirmed the district court's order remanding the case to Rhode Island state court.


Related Documents:
Decision  (May 23, 2022)
NAM brief  (August 4, 2021)

 


Taxation and State Taxation -- 2022



Whirlpool Financial Corporation, et al. v. Comm'r of Internal Revenue   (6th Circuit)

Seeking rehearing of 6th Circuit's failure to consider decades-long Treasury regulations in ruling against taxpayer

On January 27, 2022, the NAM filed an amicus brief urging the Sixth Circuit to grant rehearing en banc after the court disregarded valid Treasury Department regulations relied upon by manufacturers in running their global operations for over 50 years. This case, Whirlpool v. Comm’r of Internal Revenue, involves a complex international tax issue—foreign base company sales income (FBCSI). Subpart F of the Internal Revenue Code prohibits a U.S. parent company from using sales of finished goods between foreign subsidiaries to generate income in a “tax haven” country—that income is known as FBCSI. Despite an express statutory delegation of authority to Treasury to write the regulations that determine when income qualifies as FBCSI, the 6th Circuit put aside those regulations—which had been around for decades—and held that under the statutory text alone the defendant taxpayer’s subsidiary in Mexico generated FBCSI.

The NAM’s brief argues that the majority’s novel interpretation of the Internal Revenue Code conflicts with over 50 years of tax law. If allowed to stand, the court’s decision could result in hundreds of millions of dollars of unexpected and unjustified taxes, disrupt efficient global business operations, and confuse taxpayers (and the government) concerning how to apply the tax laws. All manufacturers have an interest in the consistent and predictable application of regulations, especially where the administration of tax laws is concerned.

Unfortunately, on March 2, 2022, the Sixth Circuit denied the petition for rehearing.


Related Documents:
NAM brief  (January 27, 2022)

 

Whirlpool Financial Corporation, et al., v. Comm'r of Internal Revenue   (U.S. Supreme Court)

Seeking Supreme Court review of the 6th Circuit's failure to consider decades-long Treasury regulations in ruling against tax payer

The NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a 6th Circuit decision that flouted valid Treasury Department regulations relied upon by manufacturers in running their global operations for nearly 60 years. This case involves a complex international tax issue—foreign base company sales income (FBCSI). The Internal Revenue Code prohibits a U.S. parent company from using sales of finished goods between foreign subsidiaries to generate income in a “tax haven” country—that income is known as FBCSI. Despite an express statutory delegation of authority to Treasury to write the regulations that determine when income qualifies as FBCSI, the 6th Circuit ignored the applicable regulations—which had been around for decades—and held that under the statutory text alone the defendant taxpayer’s subsidiary in Mexico generated FBCSI.

  The NAM’s brief argues that the 6th Circuit’s novel interpretation of the Internal Revenue Code conflicts with nearly 60 years of tax law. If allowed to stand, the court’s decision could result in hundreds of millions of dollars of unexpected and unjustified taxes, disrupt efficient global business operations, and confuse taxpayers (and the government) concerning how to apply the tax laws. All manufacturers have an interest in the consistent and predictable application of regulations, especially where the administration of tax laws is concerned.

  Unfortunately, on November 21, 2022, the U.S. Supreme Court denied cert.


Related Documents:
NAM Brief  (August 8, 2022)

 


Alien Tort Statute -- 2021



Nestle, USA, Inc. v. Doe   (U.S. Supreme Court)

Scope of Alien Tort Statute

The NAM filed amicus briefs urging the U.S. Supreme Court to review and reverse a 9th Circuit decision that imposed overbroad civil liability on food producers under the U.S. Alien Tort Statute. The ATS is an 18th century law that allows non-U.S. citizens to file lawsuits in U.S. federal courts for certain violations of international law connected to U.S.-based conduct. In recent years, human rights roups have used the statute as a tool to bring attention to their causes by targeting name brand companies doing business in developing countries who have taken no part in the targeted practices.

In this case, plaintiffs alleged that the food producers violated the Alien Tort Statute by purchasing cocoa from African farmers alleged to have mistreated their workers. The U.S. Court of Appeals for the Ninth Circuit held that the plaintiffs should be allowed to pursue their claims against the food producers for “aiding and abetting” the alleged violations. The Ninth Circuit’s interpretation of the ATS would open the floodgates to potential claims against manufacturers doing business with foreign suppliers in troubled regions of the globe.

The NAM’s amicus briefs—filed in support of certiorari and later on the merits—highlighted how the Ninth Circuit’s decision deepens a circuit split on the scope of the Alien Tort Statute and discourages U.S. business operations and investment in developing countries. The NAM also urged the Court to adopt a bright-line rule that would bar ATS claims unless the conduct that occurred in the U.S. is itself a tort “committed in violation of the law of nations,” not a routine, lawful activity such as operational and financial decision-making. On June 17, 2021, while declining to adopt a bright-line rule, the Court ruled 8-1 that general corporate activity is insufficient to support a domestic application of the ATS.


Related Documents:
Opinion  (June 17, 2021)
NAM brief  (September 8, 2020)
NAM brief  (October 31, 2019)

 

Cargill v. Doe   (U.S. Supreme Court)

Scope of liability under the Alien Tort Statute

The NAM filed amicus briefs urging the U.S. Supreme Court to review and reverse a 9th Circuit decision that imposed overbroad civil liability on food producers under the U.S. Alien Tort Statute. The ATS is an 18th century law that allows non-U.S. citizens to file lawsuits in U.S. federal courts for certain violations of international law connected to U.S.-based conduct. In recent years, human rights roups have used the statute as a tool to bring attention to their causes by targeting name brand companies doing business in developing countries who have taken no part in the targeted practices. In this case, plaintiffs alleged that the food producers violated the Alien Tort Statute by purchasing cocoa from African farmers alleged to have mistreated their workers. The U.S. Court of Appeals for the Ninth Circuit held that the plaintiffs should be allowed to pursue their claims against the food producers for “aiding and abetting” the alleged violations. The Ninth Circuit’s interpretation of the ATS would open the floodgates to potential claims against manufacturers doing business with foreign suppliers in troubled regions of the globe. The NAM’s amicus briefs—filed in support of certiorari and later on the merits—highlighted how the Ninth Circuit’s decision deepens a circuit split on the scope of the Alien Tort Statute and discourages U.S. business operations and investment in developing countries. The NAM also urged the Court to adopt a bright-line rule that would bar ATS claims unless the conduct that occurred in the U.S. is itself a tort “committed in violation of the law of nations,” not a routine, lawful activity such as operational and financial decision-making. On June 17, 2021, while declining to adopt a bright-line rule, the Court ruled 8-1 that general corporate activity is insufficient to support a domestic application of the ATS.


Related Documents:
Opinion  (June 17, 2021)
NAM brief  (September 8, 2020)
NAM Brief  (October 28, 2019)

 


Class Actions -- 2021



Johnson & Johnson v. Ingham   (U.S. Supreme Court)

Multi-plaintiff toxic tort trials violate Due Process

The NAM filed an amicus brief asking the U.S. Supreme Court to grant cert to define the due process limits on the joinder of claims in civil trials. In this case, a Missouri trial court consolidated 22 personal injury plaintiffs’ claims arising under 12 different states’ laws for a single trial; the result was a staggering $2B verdict, with the jury awarding an identical $25M in compensatory damages to each of the 22 plaintiffs—despite widely varying injuries—and $1.6B in punitive damages. The court erroneously concluded, and the appellate court affirmed, that any prejudice to the defendant was adequately mitigated by hours-long instructions to the jury that it decide each plaintiff’s claim on its own merits.

The NAM’s brief explains that improper joinder of civil cases for trial favors plaintiffs through the repetition of fact patterns and claims, compromises the defendant’s ability to present individual issues, and allows plaintiffs to present a composite picture that obscures weaknesses in individual claims. The Supreme Court’s intervention is needed to prevent further abuses of this procedural device by the plaintiffs’ bar. Unfortunately, on June 1, 2021, the Court denied review.


Related Documents:
NAM brief  (April 5, 2021)

 

TransUnion LLC v. Ramirez   (U.S. Supreme Court)

No injury class

The NAM filed an amicus brief urging the U.S. Supreme Court to stem the rising tide of no-injury class action cases—those where plaintiffs’ attorneys leverage a sympathetic plaintiff to be the face of a class that may in fact contain thousands of unharmed individuals. These actions have become a favorite of the plaintiffs’ bar, in part, because of the myriad federal consumer protection statutes authorizing individuals to sue to vindicate statutory rights. In this case, the lead plaintiff suffered injuries—inability to purchase a car and embarrassment in front of family members—related to an alleged violation of a federal credit reporting statute. Rather than sue for his injuries alone, however, the plaintiff filed a class action seeking to represent 8,000+ people, over 6,000 of whom had never had their information shared with a third-party let alone been denied credit. In other words, although all individuals in the class may have suffered a statutory violation, the majority were not concretely harmed. After a trial focused entirely on the lead plaintiff’s idiosyncratic injury, the jury awarded significant damages to the entire class.

The NAM, joined by the Alliance for Automotive Innovation, American Tort Reform Association, and International Association of Defense Counsel, filed an amicus brief urging the Court to issue a clear ruling outlining the scope and factors a trial court must consider in conducting a rigorous, evidence-based analysis of typicality under Rule 23(a)(3). As manufacturers are acutely aware, the presence of thousands of plaintiffs in a class can increase litigation risk and settlement pressure to the point at which defending against the claims becomes unrealistic. Without a strong ruling from the Court, these cases would continue to proliferate across a wide range of federal and state laws, including in emerging and amorphous areas like privacy and cyber security. On June 25, 2021, in a 5-4 decision, the Court reversed the Ninth Circuit by holding that only plaintiffs concretely harmed by a defendant’s statutory violation—here, the roughly 1,800 out of 8,000 plaintiffs in the class who had their credit reports shared with third parties--have standing to sue. By focusing on Article III standing, the Court avoided diving into difficult questions of typicality and instead went to bedrock principles of jurisprudence, with Justice Kavanaugh writing that “under Article III, an injury in law is not an injury in fact.”


Related Documents:
Opinion  (June 25, 2021)
NAM brief  (February 8, 2021)

 


Discovery -- 2021



General Motors LLC v. Buchanan   (Georgia Court of Appeals)

Challenging plaintiffs' ability to depose high-level corporate employees

The NAM filed an amicus brief in support of an application to the Georgia Court of Appeals to review a discovery order allowing plaintiffs to depose GM's CEO, Mary Barra, despite her lack of direct knowledge of the facts at issue in the case. The plaintiff in this wrongful death suit alleged that faulty electronic stability control technololgy caused the decedent's crash. The trial court granted the plaintiff's demand to depose Barra based on general statements she made publicly and in congressional testimony about her efforts to advance GM's culture of safety. All manufacturers have an interest in preventing abusive depositions of their high-ranking corporate executives. The NAM's brief explains that subpoenaing a corporate executive who has no unique knowledge of a matter is often intended to generate an unwarranted litigation advantage, unconnected to the substantive merits of a case. The brief further argues that review of the trial court's order is critical for promoting responsible discovery and limiting discovery abuse. The court of appeals agreed to hear the case, but, unfortunately, on May 6, 2021, held that the trial court has wide discretion to determine these issues, and by limiting the time for the deposition, the court had adequately minimized the burden on Ms. Barra.


Related Documents:
Opinion  (May 6, 2021)
NAM brief  (November 17, 2020)
NAM brief  (March 3, 2020)

 

In re Polaris, Inc.   (Minnesota Supreme Court)

Protecting attorney-client privilege under Minnesota law

On Thursday, August 14, the MCLA filed an amicus brief urging the Minnesota Supreme Court to review a Court of Appeals’ opinion that would impair manufacturers’ ability to seek effective legal counsel and frustrate the purpose and effectiveness of nearly every regulatory framework. The case involves a report prepared by a company’s outside counsel after the company had been notified that it was under investigation by the Consumer Product Safety Commission (CPSC). The Court of Appeals erroneously concluded that the report was not protected by the attorney-client privilege because it addressed safety and operational issues and was presented to the company’s board of directors.

The NAM filed an amicus brief arguing that the Court of Appeals’ opinion would chill “full and frank” communications between manufacturers and their counsel operating and litigating in Minnesota. As NAM explained, there are countless complex regulatory statutes that, like the CPSA, transform corporate practices and operations into legal issues. Moreover, courts across the country have consistently held that documents prepared by attorneys that evaluate compliance with these statutes and interrelated issues of company culture and operations are protected by the attorney-client privilege. Further, a company’s board of directors is well-situated and uniquely justified to seek and receive legal advice pertaining to compliance matters, especially if those recommendations involve significant new expenses and/or the conduct of corporate officers. On September 29, 2020, the Court granted NAM’s request and agreed to review the appellate court’s troubling opinion. On November 20, 2020 the NAM filed an amicus brief on the merits.

Unfortunately, on December 15, 2021, the Minneosta Supreme Court affirmed the lower court's decision.


Related Documents:
NAM brief  (November 20, 2020)
NAM brief  (August 12, 2020)

 


Environmental -- 2021



New Mexico v. Sterigenics   (N.M. State Trial Ct.)

Public Nuisance Suit Seeks to Undermine Ethylene Oxide Regulations

The NAM filed an amicus brief urging a New Mexico trial court to exercise its discretion, under the doctrine of primary jurisdiction, to dismiss a public nuisance lawsuit brought under the name of the state’s Attorney General that would create a parallel and deeply problematic regulatory regime for medical product sterilization facilities that use ethylene oxide. The facility at issue is already subject to comprehensive regulations and permit conditions developed by the U.S. EPA and the New Mexico Environment Department, but the AG’s suit, led by a prominent national plaintiffs’ law firm, would seek to rewrite those rules to essentially shut down the facility unless it pays up to satisfy the state and its outside law firm. The NAM’s brief argues that allowing ethylene oxide use, management, and emission standards to be fashioned and hammered out in a tort case by a local jury applying malleable public nuisance standards is not in the best interests of health care, sound science, or sensible regulation. Unfortunately, on June 29, 2021, the court allowed the case to proceed.


Related Documents:
NAM brief  (June 4, 2021)

 

Sierra Club v. EPA   (D.C. Circuit)

Defending Clean Air Act trading program for ozone NAAQS

The NAM filed an amicus brief to support EPA’s defense of a trading program for ozone NAAQS pollutants. The Clean Air Act (CAA) requires EPA to establish national ambient air quality standards for six pollutants, including ozone. A 2018 EPA rule allowed companies to trade ozone pollutants with other emitters to meet federal emissions requirements. An environmental group sued to challenge the rule, arguing that the trading program is not allowed by the CAA. NAM members that seek to expand or build a new facility in many areas of the country can benefit greatly from this trading program. Pollutant trading programs like this provide a market-based solution that companies can use to grow their operations while reducing harmful air emissions in the aggregate. The NAM’s amicus brief explains the important and effective role of emissions trading and why such a program complies with the CAA. Unfortunately, on January 29, 2021, the court held that as a matter of statutory construction, the CAA prohibits the program.


Related Documents:
D.C. Cir. Opinion  (January 29, 2021)
NAM brief  (November 8, 2019)

 

United States v. Ameren   (8th Circuit)

Clean Air Act permits for generator repairs

The NAM filed an amicus brief to seek to overturn a district court ruling that erroneously penalized an electric generating facility under the Clean Air Act and improperly imposed additional penalties on a separate and unrelated generation facility. Electric utility company Ameren undertook needed repairs to a coal-fired electric generation unit. The EPA then sued Ameren, claiming that the repairs failed to comply with the Act’s New Source Review provisions, which require permits for “major modifications” to generating units. A federal district court judge agreed with the EPA. For a remedy, the judge ordered Ameren to obtain the permit and ordered a decrease in emissions at a separate Ameren electric generating unit. On appeal to the 8th Circuit, the NAM filed an amicus brief that highlights the problematic consequences of this decision on generators and other facilities that require Clean Air Act permits. Unfortunately, on August 20, 2021, the court affirmed the lower court's liability determination as to one facility and reversed as to the unrelated facility.


Related Documents:
NAM Brief  (January 30, 2020)

 


Expert Testimony -- 2021



In re: Bair Hugger Forced Air Warming Devices Prods. Liability Litig.   (8th Circuit)

Eighth Circuit Erred by Applying the Wrong Standard to Plaintiffs' General Causation Experts

The NAM filed an amicus brief urging the full Eighth Circuit to reconsider a deeply flawed panel opinion applying an obsolete standard to the admissibility of expert testimony and usurping the gatekeeping role of the trial court. This multidistrict litigation involves allegations that 3M’s Bair Hugger patient warming device causes surgical site infections. After conducting a thoughtful and thorough review of plaintiffs’ general causation experts’ opinions—a faithful application of Fed. Rule of Evidence 702—the district court found that the opinions included large analytical gaps and were not generally accepted, and, accordingly, granted summary judgment in favor of 3M. The Eighth Circuit reversed, applying a misunderstood standard found only in the Eighth Circuit dating to pre-Daubert days. Under that standard, it is an abuse of discretion to exclude expert testimony unless the experts’ opinions are “so fundamentally unsupported” that they’re of no help to a jury. This obsolete standard essentially abrogates any discretion a district court has to exclude expert testimony. The NAM filed an amicus brief in support of 3M’s petition for rehearing en banc, arguing that the fundamental fairness of civil jury trials in complex cases hinges on trial courts’ ability to exercise their gatekeeper function in evaluating the reliability of proffered expert testimony. The “so-fundamentally-unsupported” standard shifts the burden to defendants to show both that the evidence was fundamentally unsupported (unreliable) and unable to help the jury (irrelevant), an approach unsupported by the text of Fed. Rule of Evidence 702 and incompatible with Daubert and its progeny. Unfortunately, the court denied en banc review.


Related Documents:
NAM brief  (September 20, 2021)

 

Carl v. Johnson & Johnson   (New Jersey Supreme Court)

Admissibility of expert testimony

The NAM filed an amicus brief in the New Jersey Supreme Court, urging the court to reinforce rigorous trial judge review of complex scientific evidence. The appeal arose after the trial court properly excluded plaintiffs’ expert testimony—involving the alleged association between talc-based baby powder and ovarian cancer—after performing a rigorous review not only of the extensive literature, but more importantly the methodologies used by plaintiffs’ experts to derive their opinion from that literature. The appellate court reversed, holding that the trial court abused its discretion by evaluating the facts and data underlying plaintiffs’ experts’ opinions, a holding that contravenes the NJ Supreme Court’s landmark In re Accutane (2018) decision, which confirmed a trial court’s rigorous, gatekeeping responsibility. On October 5, the NAM filed an amicus brief in support of J&J petition for review, arguing that if not reversed, the appellate court’s decision will leave trial courts with uncertainty as to the gatekeeping role in New Jersey’s many drug, tort, and product lawsuits involving complex issues of medical causation. Unfortunately, on January 26, 2021, the court denied review.


Related Documents:
NAM brief  (October 6, 2020)

 


Free Speech -- 2021



Americans for Prosperity Foundation v. Bonta   (U.S. Supreme Court)

Protecting First Amendment rights of association

The NAM filed an amicus brief to support a petition for certiorari to the U.S. Supreme Court that seeks to overturn a requirement by the California Attorney General that compels public charities to report to the state the names of their contributors. Beginning in 2010, the California Attorney General began demanding that thousands of registered charities annually disclose to the state the individual names and addresses of major donors. A federal district court and the 9th Circuit upheld the requirement. The full 9th Circuit denied en banc review over a five-judge dissent that recognized the requirement “eviscerates the First Amendment protections long established” by the First Amendment to the U.S. Constitution. This issue is important to manufacturers because many of them contribute to charities and belong to associations like the NAM that do not disclose their members but could be compelled to do so based on the 9th Circuit’s reasoning. In support of a petition for certiorari to review and reverse the 9th Circuit holding, the NAM filed an amicus brief that explains the important first amendment principles at stake and how the lower courts failed to appropriately protect those rights. On January 8, 2021 the Court granted cert. The NAM filed a brief on the merits arguing that anonymity is essential for people and companies to freely and effectively speak and associate, and that the Ninth Circuit’s decision invites states to chill disfavored speech by opening trade and advocacy association members to retaliation, including boycotts, harassment, or even threatened or actual violence. Happily, on July 1, 2021, the Court rule in a 6-3 opinion that California’s donor disclosure mandate is facially unconstitutional.


Related Documents:
Opinion  (July 1, 2021)
NAM brief  (March 1, 2021)
NAM Brief  (September 25, 2019)

 

Microsoft Corp. v. United States   (2nd Circuit)

Government access to private email

The NAM filed an amicus brief in the Second Circuit in support of Microsoft's appeal of a district court decision allowing the government to invoke the Stored Communications Act (SCA) to obtain Microsoft's customer’s confidential data stored "in the cloud." Under the SCA, the government is not required to give a customer prior notice that the government is seeking to force a third-party service provider, like Microsoft, to disclose the customer’s data in connection with a law enforcement investigation. And the SCA authorizes—and the government frequently obtains—ex parte gag orders forbidding the third-party provider from notifying its customers of the government’s demand. The NAM’s brief argued that the government's actions violate the First and Fourth Amendments to the Constitution and that the benefits of cloud computing will be jeopardized if private information receives diminished legal protections. On May 14, 2021, the Second Circuit vacated the district court's order after the challenged nondisclosure order expired, rendering the case moot.


Related Documents:
NAM brief  (December 21, 2020)

 


Government Regulation -- 2021



California Restaurant Association v. City of Berkeley   (N.D. Cal.)

Challenging Berkeley's ban on natural gas

The NAM filed an amicus brief in support of a challenge to a Berkeley, California Ordinance which bans the installation of natural gas lines in new construction. The California Restaurant Association (CRA) filed a lawsuit in the Northern District of California challenging the Ordinance as invalid and unenforceable under the federal Energy and Policy and Conservation Act (The Act) and state law and posing “uniquely negative impacts” on the restaurant community which relies heavily on gas appliances. The NAM filed an amicus brief in support of the CRA’s challenge, arguing that the Ordinance is expressly preempted by the Act and that allowing the Ordinance to survive preemption would create exactly the type of regulatory patchwork Congress intended to avoid, especially given that many cities and municipalities have since followed in Berkeley’s footsteps by adopting similar ordinances of their own. These ordinances have the potential to negatively impact any manufacturer that sells, installs, or uses a gas appliance. Unfortunately, on July 6, 2021, the court dismissed the challenge, ruling that CRA failed to demonstrate that EPCA expressly preempted Berkeley’s ordinance because the ordinance “does not directly regulate either energy use or energy efficiency of covered appliances.” An appeal to the Ninth Circuit followed.


Related Documents:
NAM brief  (October 20, 2020)

 

Commonwealth of Pennsylvania v. Chesapeake Energy Corp. and Anadarko Petroleum Corp.   (Pennsylvania Supreme Court)

Pennsylvania AG improperly expands scope of state consumer protection statute

The NAM filed an amicus brief arguing that the Supreme Court of Pennsylvania should reject the state Attorney General's attempt to create new antitrust causes of action and remedies through Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL). The Attorney General filed a lawsuit on behalf of certain Pennsylvania landowners alleging that Chesapeake and Anadarko committed antitrust violations and engaged in other deceptive and misleading conduct in relation to the procurement of natural gas leases. Both the trial and appellate courts allowed the case to proceed even though antitrust violations had never been considered actionable under the UTPCPL and the Pennsylvania General Assembly had repeatedly considered and declined to pass antitrust legislation. The NAM’s amicus brief argued that matters of public policy and the creation of causes of action and remedies are within the exclusive domain of the legislature and that by its plain language, the UTPCPL does not include antitrust causes of action nor permit antitrust remedies. The brief further explained that allowing the AG to maintain this lawsuit threatened to create a chilling effect for the business community in Pennsylvania.

Happily, on March 24, 2021, while failing to reach the antitrust issues presented, the court ruled 6-1 that the UTPCPL cannot be applied to regulate the conduct of energy exploration companies in obtaining gas leases from property owners.


Related Documents:
NAM brief  (January 9, 2020)

 

Montana & Wyoming v. Washington   (U.S. Supreme Court)

State interference with free trade

The NAM filed an amicus brief in support of Montana and Wyoming's Motion for Leave to File a Bill of Complaint in an Original Action in the U.S. Supreme Court involving the state of Washington’s authority to prohibit certain exports from Washington’s coastal ports. Washington state denied several environmental permits necessary to construct a new coal export terminal near Longview, Washington. The denials were improperly based on climate concerns about the use of coal for electricity generation in foreign countries. The state’s actions have dangerous implications for the power of individual states to interfere with interstate and international trade. The NAM filed amicus briefs both at the district court and Ninth Circuit stages arguing that this interference is unconstitutional and harms the national economy. Unfortunately, the courts rejected the plaintiffs' claims. The plaintiffs are now asking the Supreme Court to correct this problem through the exercise of its original jurisdiction to hear disputes between states. NAM once again filed an amicus brief explaining that Washington's action threaten to hurt American workers, inhibit American economic growth, and violate the Constitution’s command that the federal government serve as the sole representative of the United States in foreign trade and foreign affairs. Unfortunately, on June 28, 2021, over the dissent of Justices Thomas and Alito, the Court denied the motion.


Related Documents:
NAM brief  (March 20, 2020)

 

Nat’l Pork Producers & Am. Farm Bureau Fed. v. Ross, et al   (9th Circuit)

Challenging California's improper efforts to regulate the national pork market

The MCLA filed an amicus brief urging the Ninth Circuit to reverse the state of California’s dismissal of the National Pork Producers Council and American Farm Bureau Federation’s challenge to a California ballot initiative that regulates the conduct of farmers, manufacturers, and producers nationwide. Proposition 12 bans the sale of imported pork and veal in California unless farmers and producers outside of California meet strict animal confinement standards set by California voters. The NAM, joined by the U.S. Chamber of Commerce, the Food Manufacturing Institute, the National Cattlemen’s Beef Association, and the National Mining Association argued in the brief that Proposition 12 violates the Commerce Clause by regulating conduct beyond California’s borders, impinging on other states’ sovereign authority to legislate within their own jurisdictions, and, substantially burdening out-of-state pork producers absent a sufficient and legitimate local interest. This litigation is important to all manufacturers because if upheld, Proposition 12 may embolden other states to regulate out-of-state conduct, resulting in a complex web of inconsistent and competing extraterritorial regulations in the agriculture and food industries, and beyond. Unfortunately, on July 28, 2021, the court affirmed the district court’s holding that Proposition 12 does not violate the dormant Commerce Clause.


Related Documents:
Opinion  (July 28, 2021)
NAM brief  (September 30, 2020)

 


Labor Law -- 2021



Mountaire Farms, Inc. v. UFCW   (NLRB)

NLRB reconsiders contract bar doctrine

The NAM filed an amicus brief with the National Labor Relations Board (NLRB) urging the Board to rescind or modify the "contract bar doctrine." The doctrine dictates that once a collective bargaining agreement is executed, no representative elections are permitted for that bargaining unit for up to three years. Further, an employee may only file a decertification petition during a narrow (and confusing) 30-day period between 60 and 90 days before the end of the contract. The rule is not found in the National Labor Relations Act (NLRA), but rather is a creature of NLRB case law. Following invitation from the NLRB, the NAM filed a coalition amicus brief recommending that the Board rescind the doctrine because it interferes with the statutory right of employees to choose or refrain from choosing union representation. In the alternative, the Board should limit the duration of the bar period to just one year, instead of three years. Unfortunately, on April 21, 2021, the NLRB decided to retain its longstanding contract-bar doctrine.


Related Documents:
NAM brief  (October 7, 2020)

 

See’s Candies, Inc. v. Superior Court of California, et al.   (Cal. Ct. App.)

Keeping COVID-19 claims derivative to Workers’ Comp Claims out of the Civil Court System

The NAM filed an amicus letter brief asking the Court of Appeal for California’s Second Appellate District to review a trial court order that improperly creates a Covid-19 exception to the longstanding “derivative injury rule.” That rule establishes workers’ compensation as the exclusive remedy for all claims that are derivative of an employee’s covered workplace injury—including claims for injuries sustained by members of the employee’s household. In this case, the court created a new exception to that bright-line rule for injuries from Covid-19 that allegedly derive from employees who contract the virus in the employer’s workplace and then infect their family members.

The NAM’s brief argues that if the trial court’s rule is allowed to stand, it could subject employers to potentially unlimited tort liability for alleged injuries that the Legislature intended to be addressed in the workers’ compensation system. Not only does the decision have the potential to devastate businesses already struggling to recover from the COVID-19 pandemic, it creates a clear conflict with a recent decision by a California federal court holding that such claims are barred by the exclusive remedy provisions of California’s workers’ compensation system. Unfortunately, on December 21, 2021, the court affirmed the trial court order.


Related Documents:
Opinion  (December 21, 2021)
NAM brief  (August 30, 2021)
NAM brief  (May 21, 2021)

 

UPMC Presbyterian Shadyside v. NLRB   (3rd Circuit)

Court limits on NLRB's subpoena authority

The NAM filed an amicus brief in the U.S. Court of Appeals for the Third Circuit supporting constitutional protections for employer information. The National Labor Relations Board (NLRB) issued subpoenas requesting information purportedly in connection with an NLRB investigation of unfair labor practices. The district court found that those subpoenas are unprecedented in breadth and unrelated to the underlying charges. Limitations on the NLRB’s authority are important to protect the Constitution’s separation of powers and due process requirements and to protect against abuse of subpoena power. The NAM’s brief argues that the NLRB lacks the authority to compel an employer to produce information because that authority is vested exclusively in Article III courts. The Court later held the case in abeyance so that the parties could finalize the terms of a settlement agreement.

 


Product Liability -- 2021



Ford Motor Co. v. Bandemer   (U.S. Supreme Court)

Scope of personal jurisdiction over out of state defendant

The NAM filed an amicus brief to support Ford Motor Co.’s petition for certiorari to the U.S. Supreme Court to clarify the circumstances under which an out-of-state defendant can be sued in state court. A plaintiff sued Ford in Minnesota state court for injuries he sustained while driving in Minnesota. The plaintiff alleged design defect claims and failure to warn claims. Ford defended against jurisdiction in Minnesota state court because all of the alleged wrongful conduct occurred in Michigan, where the car was designed. A Minnesota trial court and the Minnesota Supreme Court affirmed personal jurisdiction over Ford, concluding that the lawsuit related to Ford’s in-state activity in Minnesota. This case is important for manufacturers because a broad interpretation of personal jurisdiction—like that by the Minnesota courts here—would subject manufacturers to litigation in jurisdictions throughout the country. The NAM’s amicus brief explained why such a broad conception of personal jurisdiction is inconsistent with U.S. Supreme Court precedent and why it should be reversed. On January 17, 2020, the Court granted review, combining this case with Ford v. Montana Eighth Judicial District Ct. The NAM filed a brief on the merits on Mar. 6, 2020. Unfortunately, on March 25, 2021, the Court ruled in a 8-0 opinion that "when a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit."


Related Documents:
Opinion  (March 25, 2021)
NAM brief on Merits  (March 6, 2020)
NAM brief  (October 21, 2019)

 

Breaux v. Goodyear Tire & Rubber Co., et al.   (Louisiana Supreme Court)

Sophisticated User Defense

The NAM filed an amicus brief urging the Louisiana Supreme Court to review a decision that places manufacturers at risk of extraordinary liability for user risks they cannot control and harm they did not cause. The sophisticated user defense, which has long existed in Louisiana and around the country, is premised on the theory that a manufacturer has no duty to warn users of a product who possess sophisticated knowledge or professional training necessary to understand the risks associated with use of the product. The doctrine properly places the duty to warn workers of known product risks on the party best situated to ensure their safety: their employers.

In this case, the Court of Appeal departed from that well-established doctrine by subjecting a manufacturer of a non-defective product to liability when the risk at issue—here, zipper ruptures associated with commercial truck tires—is widely known among those who repair truck tires. The NAM filed an amicus brief arguing that manufacturers and others that supply products in Louisiana must be able to rely on Louisiana courts to apply the law correctly, even in difficult cases. If not corrected, the Court of Appeal’s holding will thwart the purpose of the Louisiana Product Liability Act, create confusion among Louisiana courts, and, most importantly, insulate employers from liability even when they fail to safeguard their employees from well-known risks. Unfortunately, on October 5, 2021, the court denied review.


Related Documents:
NAM brief  (June 18, 2021)

 

Burton, et al. v. Armstrong Containers Inc., et al.   (7th Circuit)

Expansion of risk contribution theory

The MCLA filed an amicus brief urging the Seventh Circuit Court of Appeals to reverse the trial court's improper expansion of Wisconsin's risk contribution theory and departure from long-standing tort liability principles for products with inherent risks, which threatens to create open-ended, industry-wide category liability based solely on those inherent risks. The core issue in the case is how to address recent harms allegedly caused by lawful products (here, white lead carbonate pigments used in interior paints) manufactured, marketed and sold at a time when the products were valued despite generally known risks. Rather than pursue the party who created the actual hazardous condition causing the injury, this lawsuit and others like it target the manufacturers merely for having sold the products, often many years ago. The NAM, joined by Wisconsin Manufacturers and Commerce and the Coalition for Litigation Justice, filed an amicus brief arguing that the trial court committed two fatal errors: first, allowing risk contribution theory to apply, thereby spreading liability across multiple companies even if they did not make the product at issue, without following Wisconsin’s requirements for doing so; and, second, relaxing or reversing the burdens of proof for key elements of the underlying causes of action to impose liability solely because the companies were part of an industry that made or sold products that a jury, sitting with decades of hindsight, could find had unacceptable risks. This case is important for all manufacturers because altering causation and other elements of tort and product liability law to create industry-wide category liability undermines the way technology develops and safety measures are undertaken. On April 15, 2021, the 7th Circuit agreed with NAM's position, rejecting the plaintiffs' expansive theory of liability.


Related Documents:
Opinion  (April 15, 2021)
NAM brief  (July 24, 2020)

 

Chevron Corp., et al. v. City of Oakland, CA, et al.   (U.S. Supreme Court)

Public nuisance liability for climate change

The NAM filed an amicus brief urging the U.S. Supreme Court to determine whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. This case is part of a broader campaign by well-funded activists, private law firms, public relations groups, and academics to influence municipalities and others to bring climate tort litigation against energy manufacturers. Here, the city of Oakland, California, sued several energy companies to seek damages for local impacts of climate change, arguing that the defendants’ sale of fossil fuels is a public nuisance that entitles the city to financial compensation. After the defendants removed the case to federal court, a federal district court dismissed the lawsuit. The Ninth Circuit later reversed and remanded the case for further proceedings. The NAM filed an amicus brief in support of the manufacturers' petition for review to the U.S. Supreme Court. The NAM's brief argues that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws. Unfortunately, on June 14, 2021, the Court denied review.


Related Documents:
NAM brief  (March 11, 2021)

 

Ford Motor Co. v. Montana Eighth District Court   (U.S. Supreme Court)

Scope of personal jurisdiction over out-of-state defendants

The NAM filed an amicus brief to support Ford Motor Co.’s petition for certiorari to the U.S. Supreme Court to clarify the circumstances under which an out-of-state defendant can be sued in state court. A plaintiff sued Ford in Montana state court for injuries he sustained while driving in Montana. The plaintiff alleged design defect claims and failure to warn claims. Ford defended against jurisdiction in Montana state court because all of the alleged wrongful conduct occurred in Michigan, where the car was designed. A Montana trial court and the Montana Supreme Court affirmed personal jurisdiction over Ford, concluding that the lawsuit related to Ford’s in-state activity in Minnesota. This case is important for manufacturers because a broad interpretation of personal jurisdiction—like that by the Montana courts here—would subject manufacturers to litigation in jurisdictions throughout the country. The NAM’s amicus brief explained why such a broad conception of personal jurisdiction is inconsistent with U.S. Supreme Court precedent and why it should be reversed. On January 17, 2020, the Court granted review, combining this case with Ford v. Bandemer. On March 6, 2020, the NAM filed an amicus brief on the merits. Unfortunately, on March 25, 2021, the Court ruled in a 8-0 opinion that "when a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit."


Related Documents:
Opinion  (March 25, 2021)
NAM brief on Merits  (March 6, 2020)
NAM brief  (October 19, 2019)

 

Nemirovsky v. Daikin North America, LLC, et al.   (Massachusetts Supreme Judicial Court)

Component part manufacturer liability

The NAM filed an amicus brief urging the Massachusetts Supreme Judicial Court to review and reverse a decision that would subject a manufacturer or seller of a non-defective, merchantable component replacement part to liability solely because the end-product system into which the component was placed failed. This ruling—a substantial departure from traditional component part liability law both in Massachusetts and throughout the country—places companies at risk of extraordinary liability for risks they cannot control and harm they did not cause. The case involves a multi-million-dollar judgment against the seller of replacement fan coils for a custom heating and cooling system after the system began experiencing failure. Even though the component part seller had no role in designing, manufacturing, or selling the original HVAC system, a jury awarded $3.4M in damages—the cost of replacing the entire system.

The NAM filed briefs both in support of review and on the merits, arguing that companies cannot be liable for risks they did not create and cannot control. The lower court’s novel tort theory not only contradicts longstanding liability law, but is also unprincipled, would advance unsound legal policy, and could improperly alter the parties’ economic incentives and market behavior.

Happily, on April 21, 2021, the court granted direct review and on December 16, 2021, the court reversed the lower court's ruling, holding that there are no exceptions to the component part doctrine for products that do not stand-alone or are specialized for a specific end-product.


Related Documents:
Opinion  (December 16, 2021)
NAM brief  (September 15, 2021)
NAM brief  (April 2, 2021)

 

State of Oklahoma v. Johnson & Johnson, et al.   (Oklahoma Supreme Court)

Unprecedented expansion of public nuisance liability

The NAM filed an amicus brief in the Oklahoma Supreme Court arguing that the lower court's significant departure from long-standing public nuisance liability principles threatens open-ended, industry-wide liability for a variety of products that may also have foreseeable risks or inherent externalities, including pharmaceuticals, oil and gas, and household chemicals. In this litigation, state and local governments are pursuing manufacturers involved in the selling of prescription opioid medication seeking to subject them to joint and several industry-wide liability for all costs related to opioid abuse. The Attorney General here is invoking Oklahoma’s public nuisance statute and arguing that, if misleading, marketing and promotion of this legal, highly regulated product could somehow constitute a public nuisance under the statute. As the NAM's brief shows, neither Oklahoma’s public nuisance statute nor common law public nuisance theory, here or elsewhere, imposes such unprincipled, open-ended liability. The NAM's amicus brief further emphasizes that absent wrongful causation, liability law does not impose blame or obligations on manufacturers engaged in the commerce of beneficial, regulated products. This case is important for all manufacturers, because If the lower court’s ruling is allowed to stand, manufacturers could be subject to industry-wide liability in Oklahoma for selling and marketing products with known risks of harm with few if any defenses.

Happily, on November 9, 2021, the court overturned the verdict, finding that the award rested on an improper expansion of state law.


Related Documents:
NAM brief  (October 19, 2020)

 


Punitive Damages -- 2021



Toyota v. Reavis   (Tex. Ct. App.)

Excessive damages following admission of improper "rebuttal" evidence at trial

The NAM filed an amicus brief seeking to reverse a $242 million verdict in a product liability lawsuit against Toyota that resulted from unfair trial procedures. During trial, the court failed to apply established restrictions that traditionally limit admission of “other-incident evidence,” thus allowing the jury to decide whether front seats in the vehicle involved in the underlying accident were defective based on inflammatory evidence including hearsay TV videos involving different alleged defects, in different vehicles, causing different injuries. In addition, the case implicates the Texas Legislature’s decision to afford a presumption of nonliability to defendants whose product designs comply with federally mandated safety standards, as the front seats in question undisputedly complied with federal standards. The MCLA's brief argued that Texas law expressly guards against admission of other-incident evidence, and it affords a meaningful presumption of non-liability for manufacturers who comply with federal safety standards. Unfortunately, on June 3, 2021, the court affirmed the judgment.


Related Documents:
NAM brief  (February 28, 2020)

 


Takings -- 2021



PhRMA v. Williams, et al.   (D. Minn.)

Minnesota's Insulin Affordability Act Violates the Takings Clause of the Fifth Amendment

The MCLA filed an amicus brief in support of PhRMA's challenge to a Minnesota law that constitutes a per se takings of PhRMA's members' property without just compensation in violation of the Fifth Amendment. The law at issue, the Alec Smith Insulin Affordability Act, seeks to achieve a laudable policy goal of improving access to insulin, but does so in an unconstitutional way: forcing pharmaceutical manufacturers to give insulin to state residents, on the state’s prescribed terms, at no charge to the recipients and without compensating the manufacturers in any way. NAM filed an amicus brief in the District of Minnesota arguing that under the U.S. Supreme Court's per se takings doctrine the government has a categorical duty to pay just compensation for physical takings of property and that efforts to distinguish the Act at issue in this case are meritless. As the Court has explained, government cannot force some companies alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. Any holding to the contrary would fly in the face of binding precedent and would undermine the security of property rights not just for insulin manufacturers, but for businesses across every industry sector. Unfortunately, on March 15, 2021, the court granted the state’s motion to dismiss the complaint, holding that the state provides an adequate method for PhRMA’s members to seek compensation for any taking—i.e., by bringing an inverse condemnation suit in state court to seek compensation for having to give away insulin under the statute.


Related Documents:
Opinion  (March 15, 2021)
NAM brief  (October 5, 2020)

 


Taxation and State Taxation -- 2021



National Association of Manufacturers v. U.S. Dep't of the Treasury   (Federal Circuit)

Challenging final duty drawback rule

The U.S. Court of Appeals for the Federal Circuit handed manufacturers a significant victory in August 2021, affirming the U.S. Court of International Trade’s (CIT) decision to strike down a federal regulation that stripped manufacturers of a congressionally-mandated export incentive intended to promote domestic manufacturing. The regulation at issue involves “duty drawback”—the refund of taxes, duties, or fees paid on imported goods when the same or similar goods are exported. By way of example, drawback would allow a distilled spirits company that exports vodka from the United States to claim a refund on taxes and duties paid on the same quantity of imported vodka. These incentives encourage domestic production and have been used by the wine industry since 2004 to increase exports. But despite clear instructions from Congress to expand the program as part of a 2016 trade bill, the Treasury Department issued a rule in 2018 intended to stop the program in its tracks. The NAM successfully challenged the rule in the CIT, and the government appealed to the Federal Circuit.

On August 23, a three-judge panel unanimously affirmed the CIT’s holding, finding that the statutory definition of drawback was unambiguous and thus, inappropriate for administrative interpretation and Chevron deference. The Court noted that drawback is “designed to incentivize exports from the United States and allow U.S. exporters to compete more fairly with overseas competitors.” The NAM’s Senior Vice President and General Counsel, Linda Kelly, applauded the decision, stating, “this program helps manufacturers in America level the playing field when they sell to overseas markets. We look forward to working with our members as they expand their operations and add jobs in the United States in light of today’s decision.”


Related Documents:
Opinion  (August 23, 2021)
NAM response brief  (October 1, 2020)

 


Arbitration -- 2020



GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC   (U.S. Supreme Court)

Enforceability of international arbitration agreements

The MCLA filed amicus briefs in the U.S. Supreme Court at both the petition and merits stages supporting the enforceability of international arbitration agreements. The case involved the cross-border implications of the Federal Arbitration Act (FAA), which established a national policy favoring arbitration by placing arbitration agreements on equal footing with all other contracts. Manufacturers regularly rely on arbitration agreements to ensure predictability and reliability in resolving international trade and investment disputes. The plaintiff in the case sued GE Energy, a subcontractor, over a dispute regarding the construction of a steel plant in Alabama and sought to create a loophole to avoid arbitration, arguing that GE was not a signatory to the main contracts which contained the operative arbitration clauses. In turn, GE argued that it was entitled to enforce the arbitration agreements under the doctrine of equitable estoppel. The district court granted GE’s motion to compel arbitration, but the Eleventh Circuit reversed, holding that under international law, an arbitration agreement can be enforced only by the parties that actually signed the agreement. The NAM’s briefs argued that manufacturers need certainty that international arbitration agreements—just like domestic arbitration agreements— can be enforced through basic principles of contract law. And on June 1, 2020, the Supreme Court unanimously agreed, holding that domestic contract law allows non-signatories to an arbitration agreement to arbitrate disputes arising under that agreement.


Related Documents:
NAM brief  (September 24, 2019)
NAM brief  (March 13, 2019)

 

McArdle v. AT&T Mobility LLC   (9th Circuit)

Arbitration of California public injunction claims

The NAM filed an amicus brief to reverse a 9th Circuit ruling that would eviscerate arbitration agreements in California. The case implicates the question of whether consumer arbitration agreements in California are enforceable if they waive a plaintiff’s right to seek a “public injunction” against the defendant company. California’s consumer protection laws generally allow a consumer to seek a public injunction that compels the defendant company to take public action to remedy the alleged consumer protection violation. In this case, for example, the plaintiffs sought a public injunction compelling AT&T to change its disclosures regarding certain roaming fees. Successful public injunction claims can force companies to undertake major and disruptive changes to their business, products or services. A federal district court and the 9th Circuit invalidated AT&T’s arbitration agreement because it contained a public injunction waiver. AT&T petitioned the full 9th Circuit to review the case en banc. In support of review, the NAM filed an amicus brief that argues the Federal Arbitration Act preempts California law and that requiring arbitration of public injunction claims frustrates and undermines the purpose and benefits of individualized arbitration. On January 14, 2020, the court denied rehearing.


Related Documents:
NAM brief  (August 19, 2019)
NAM brief  (April 2, 2018)

 

Rittmann v. Amazon.com, Inc.   (9th Circuit)

Local delivery driver arbitration

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Ninth Circuit to reverse a district court’s decision holding that the Federal Arbitration Act (FAA), which is a national policy favoring arbitration, does not cover the arbitration agreement of a purely local, intrastate delivery driver. The district court’s approach threatens substantial litigation costs both from future disputes over the FAA’s application and from judicial decisions that deprive businesses and workers of the benefits of the FAA. Arbitration is important to manufacturers because it encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. The NAM’s brief argued that the plain meaning of the FAA does not exempt local delivery drivers from arbitration, and the FAA must be given a precise meaning within historical context. On August 19, 2020, in a disappointing 2-1 decision, the Ninth Circuit held that the delivery drivers fall within the FAA's exemption for interstate transportation workers.


Related Documents:
NAM brief  (August 23, 2019)

 

Tillage v. Comcast Corp.   (9th Circuit)

Arbitration of California public injunction claims

The NAM filed an amicus brief to reverse a 9th Circuit ruling that would eviscerate arbitration agreements in California. The case implicates the question of whether consumer arbitration agreements in California are enforceable if they waive a plaintiff’s right to seek a “public injunction” against the defendant company. California’s consumer protection laws generally allow a consumer to seek a public injunction that compels the defendant company to take public action to remedy the alleged consumer protection violation. In this case, for example, the plaintiffs sought a public injunction compelling Comcast to include certain broadcasting fees in the base monthly price advertised to consumers. Successful public injunction claims can force companies to undertake major and disruptive changes to their business, products or services. A federal district court and the 9th Circuit invalidated Comcast’s arbitration agreement because it contained a public injunction waiver. Comcast petitioned the full 9th Circuit to review the case en banc. In support of review, the NAM filed an amicus brief that argues the Federal Arbitration Act preempts California law and that requiring arbitration of public injunction claims frustrates and undermines the purpose and benefits of individualized arbitration. On January 14, 2020, the court denied rehearing.


Related Documents:
NAM brief  (August 20, 2019)

 

Comcast Corp. v. Tillage; AT&T Mobility LLC v. McArdle   (U.S. Supreme Court)

Arbitration of California public injunction claims

The NAM filed an amicus brief in support of AT&T and Comcast's petition for certiorari to reverse two 9th Circuit rulings in related cases that would eviscerate arbitration agreements in California. The cases implicate the question of whether consumer arbitration agreements in California are enforceable if they waive a plaintiff’s right to seek a “public injunction” against the defendant company. California’s consumer protection laws generally allow a consumer to seek a public injunction that compels the defendant company to take public action to remedy the alleged consumer protection violation. In this case, for example, the plaintiffs sought public injunctions compelling AT&T and Comcast, respectively, to change their disclosures regarding certain fees. Successful public injunction claims can force companies to undertake major and disruptive changes to their business, products or services. The 9th Circuit affirmed lower court rulings invalidating the arbitration agreements because they contained a public injunction waiver. After filing in the Ninth Circuit, NAM filed an amicus brief in support of review that argues that the Federal Arbitration Act preempts California law and that requiring arbitration of public injunction claims frustrates and undermines the purpose and benefits of individualized arbitration. On June 1, 2020, the Supreme Court declined to hear the case.


Related Documents:
NAM brief  (March 30, 2020)

 

Waithaka v. Amazon.com, Inc.; Amazon Logistics, Inc.   (1st Circuit)

Whether local Amazon delivery drivers are exempt from the FAA

The NAM filed an amicus brief in the U.S. Court of Appeals for the First Circuit seeking to reverse the district court's refusal to compel arbitration based on an erroneous finding that the plaintiff, an intrastate delivery driver for Amazon, falls within the Federal Arbitration Act’s (FAA) transportation worker exemption. Like Amazon, manufacturers regularly rely on arbitration agreements in their contractual relationships. The district court’s decision threatens substantial litigation costs resulting both from future disputes over the FAA’s application and from similar rulings that deprive businesses and workers of the benefits of the national policy favoring arbitration. The NAM's amicus brief, filed November 20, 2019, highlights these concerns and explains why the district court's approach contradicts both the text and historical context of the FAA. Unfortunately, on July 17, 2020, the court held that the driver could invoke the exemption, and therefore could not be compelled to arbitrate.


Related Documents:
NAM brief  (November 20, 2019)

 

Wallace, et al., v. Grubhub Holdings, Inc.   (7th Circuit)

Enforcing arbitration of local delivery drivers' wage and hour claims

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Seventh Circuit to uphold a district court’s decision finding that the Federal Arbitration Act (FAA), which is a national policy favoring arbitration, covers the arbitration agreement of a purely local, intrastate delivery driver's wage and hour claims. The plaintiffs had unsuccessfully argued that the drivers are exempt from the statute's coverage because they are transportation workers. But that approach threatens substantial litigation costs both from future disputes over the FAA’s application and from judicial decisions that deprive businesses and workers of the benefits of the FAA. Arbitration is important to manufacturers because it encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. The NAM’s brief argued that the plain meaning of the FAA does not exempt local delivery drivers from arbitration, and the FAA must be given a precise meaning within historical context. On August 4, 2020, the Seventh Circuit agreed, holding that the plaintiff had not demonstrated that the interstate movement of goods was a central part of the job description of the class of workers to which they belong.


Related Documents:
NAM brief  (December 20, 2019)

 


Class Actions -- 2020



Bahamas Surgery Center, LLC v. Kimberly-Clark Corp.   (9th Circuit)

Excessive punitive damages

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Ninth Circuit to reverse the lower court’s decision awarding a judgment of more than $20 million in punitive damages—a 5:1 ratio of punitive to compensatory damages—with no explanation and in a case with only economic harm, no physical harm. The lower court awarded plaintiffs compensatory awards totaling more than $4 million against Kimberly-Clark and added the excessive punitive damages, ignoring constitutional limits and U.S. Supreme Court precedent that generally limits the ratio to 1:1. Excessive punitive damages unjustly punish manufacturers and discourage efficient settlement of cases, especially where, as in this case, no physical harm occurred. The NAM’s brief explains why punitive damages exceeding a 1:1 ratio are inconsistent with constitutional due process and excessive when the harm is purely economic in nature. On July 23, 2020, the Ninth Circuit reversed on other grounds, holding that the plaintiff lacked standing and could not bring claims on behalf of a class.


Related Documents:
NAM brief  (August 29, 2018)

 

Harris v. Union Pacific   (8th Circuit)

Americans with Disabilities Act class action certifications

The NAM filed an amicus brief supporting Union Pacific in the U.S. Court of Appeals for the Eight Circuit in its challenge to overbroad class actions that do not include the required rigorous analysis before a court certifies a class. Union Pacific appealed a lower court order certifying a class of more than 7,000 current and former employees bringing claims under the Americans with Disabilities Act (ADA). The plaintiffs challenged methods of ensuring that workers in safety-critical jobs are fit for duty and do not have a medical condition that could suddenly incapacitate them while operating a train or performing jobs that implicate public safety. This case is significant for manufacturers because resolving ADA claims, and the employer’s defenses, requires individualized assessments before liability under the ADA can be determined. The NAM’s brief argued that the lower court’s approach to class certification would eviscerate class action protections and is not permitted in ADA cases. On March 24, 2020, the court reversed the district court's certification order and held that individualized inquiries in the case could not be addressed in a manner consistent with Rule 23.


Related Documents:
NAM brief  (April 29, 2019)

 

Sullivan v. Saint-Gobain Performance Plastics Corporation   (2nd Circuit)

Certification of issue classes

The NAM filed an amicus brief to overturn a district court’s class certification order that included an improper liability issue class and medical monitoring class. The litigation arises from claims of groundwater contamination alleged to emanate from an industrial facility. The district court certified an “issue class” under Rule 23(c)(4) that focused on liability and a “medical monitoring” class under Rule 23(b)(2). These sub-class certifications paper over significant individualized differences in alleged harms among the individual plaintiffs, and thereby threaten to dramatically expand the scope of class certification under Rule 23. The ruling undermines litigation fairness to defendants, who should not be required to face class action lawsuits involving individualized alleged harms. The NAM filed an amicus brief that explained why Rule 23’s predominance requirement precludes issue class certifications like these. Unfortunately, on January 17, 2020, the court declined to review the class certification order.


Related Documents:
NAM brief  (September 16, 2019)

 


Discovery -- 2020



Actavis Holdco U.S., Inc, et al. v. State of Connecticut, et al.   (U.S. Supreme Court)

Pushing back on grossly overbroad discovery

The NAM filed an amicus brief in support of U.S. Supreme Court review of an overbroad discovery order requiring corporate defendants in a sprawling antitrust multidistrict litigation to produce millions of documents without review for relevance or responsiveness in violation of the Federal Rules of Civil Procedure. The NAM's brief, filed February 28, 2020, argued that the interests of justice are undermined by unnecessarily burdensome discovery order that creates undue pressure to settle. All NAM members have a substantial interest in safeguarding the ability to maintain the confidentiality of corporate files except as required for the just and speedy resolution of litigation on its merits. Unfortunately, on June 15, 2020, the Court denied review.


Related Documents:
NAM brief  (February 28, 2020)

 


Environmental -- 2020



Atlantic Coast Pipeline, LLC v. Cowpasture River Preservation Ass'n   (U.S. Supreme Court)

Unreasonable pipeline permitting restrictions

The NAM filed an amicus brief in support of a petition for certiorari seeking U.S. Supreme Court review and reversal of a 4th Circuit holding that invalidated a federal permit for a major natural gas transmission pipeline that crosses U.S. Forest Service lands. An environmental group sued the U.S. Forest Service to invalidate its permit allowing the Atlantic Coast Pipeline to cross beneath the Appalachian Trail hiking route. A panel of the Fourth Circuit held that the Mineral Leasing Act does not allow agencies to grant rights-of-way for pipelines to cross any stretch of the Appalachian Trail; rather, such approvals must come from a majority vote of the U.S. congress. This holding effectively converts the Appalachian Trail into a 2,200-mile barrier to pipeline construction from Maine to Georgia. The court’s reasoning could also be applied to any one of the dozens of pipelines that currently cross beneath the trail because such pipelines require periodic permit renewals. In support of the pipeline’s petition for Supreme Court review, the NAM filed an amicus brief that explained the legal flaws in the panel’s reasoning and highlighted the important benefits that pipelines provide for manufacturers and the national economy. On October 4, 2019, the court granted review for the 2019-2020 term, and on December 9, 2019, the NAM filed a coalition amicus brief on the merits in support of the pipeline. On June 15, 2020, the Court agreed, reversing the Fourth Circuit and upholding the longstanding precedent allowing infrastructure crossings of the Appalachian Trail.


Related Documents:
NAM brief  (December 9, 2019)
NAM brief  (July 26, 2019)

 

Atlantic Richfield Co. v. Christian   (U.S. Supreme Court)

Preemption of private restoration plans by CERCLA

In May of 2018, the NAM filed an amicus brief to urge the U.S. Supreme Court to review and reverse a Montana Supreme Court decision that undermines the predictability of EPA’s environmental remediation orders. The case arises under the federal Comprehensive Environmental Response, Compensation, and Liability Act (known as “CERCLA” or “Superfund”). Under CERCLA, EPA has the authority to order comprehensive clean up orders for sites containing hazardous wastes. Those orders preempt state and individual efforts to impose remediation requirements. The Montana Supreme Court nonetheless allowed nearby landowners to seek compensation for a remediation plan that conflicts with the EPA’s cleanup order. If not overturned, that decision will undermine the certainty and predictability for manufacturers that own Superfund sites. In support of a petition for review by the U.S. Supreme Court, the NAM filed an amicus brief that explains how the Montana Supreme Court’s decision frustrates environmental remediation. On June 10, 2019, the Court granted review of the case for the Court’s 2019-2020 term. On August 28, 2019, the NAM filed an amicus brief on the merits that supports Atlantic Richfield's arguments on the merits. And on April 20, 2020, the Court held that the landowners needed EPA approval to take remedial action to ensure “a single EPA-led cleanup effort rather than tens of thousands of competing individual ones.” Although the opinion leaves open future state lawsuits related to Superfund sites, the need to obtain prior EPA approval presents a significant obstacle to such challenges—and provides meaningful certainty for manufacturers.


Related Documents:
NAM brief  (August 28, 2019)
NAM brief  (May 31, 2018)

 

County of Maui, Hawaii v. Hawaii Wildlife Fund   (U.S. Supreme Court)

Scope of Clean Water Act jurisdiction

The U.S. Supreme Court should rule that the federal Clean Water Act does not regulate groundwater because the Act by its terms applies only to surface waters and would conflict with other environmental laws specifically tailored to protect groundwater. The U.S. Court of Appeals for the Ninth Circuit held in 2018 that groundwater is jurisdictional under the Clean Water Act, reasoning that groundwater can serve as a conduit to jurisdictional surface waters. Under this "conduit theory" of jurisdiction, certain industrial activities on dry land could give rise to lawsuits alleging such activities polluted nearby surface waters through groundwater connections. On appeal to the U.S. Supreme Court, the NAM’s amicus brief argued that this broad interpretation goes far beyond the scope and intent of the Clean Water Act, interferes with other environmental statutes focused on groundwater protection, would be impossible to implement, and would impose incalculable liability risk on manufacturers and other regulated industries. Unfortunately, in a 6-3 decision, the Court held on April 23, 2020 that the CWA does regulate groundwater "if the addition of the pollutants through groundwater is the functional equivalent of a direct discharge from the point source into navigable waters."


Related Documents:
NAM Brief  (May 16, 2019)

 

Meritor, Inc. v. EPA   (D.C. Circuit)

Superfund vapor intrusion mitigation

The NAM filed an amicus brief in the U.S. Court of Appeals for the DC Circuit challenging the Environmental Protection Agency’s (EPA) decision to place an industrial site on the National Priorities List (NPL) under the Superfund program. The NPL is a list of contaminated sites that EPA has determined have the highest priority for investigation and possible cleanup. The site at issue in this case was placed on the list based solely on subsurface intrusion, also known as “vapor intrusion,” without considering the site’s sub-slab depressurization system used to mitigate vapor intrusion. If upheld, the EPA’s decision to exclude the mitigation system would undermine the efforts of manufacturers who have proactively installed and operated these systems. The NAM’s brief argued that the EPA arbitrarily and unlawfully failed to take into account the active mitigation system and used a residential rather than industrial exposure benchmark. Unfortunately, on July 28, 2020, the court declined to review EPA's decision.


Related Documents:
NAM brief  (April 8, 2019)

 

New York v. EPA   (D.C. Circuit)

Defending current Clean Air Act permits for hundreds of manufacturers

The NAM intervened on behalf of the EPA to defend the EPA’s decision not to impose new Clean Air Act emissions limitations on hundreds of manufacturing facilities throughout the Midwest. In 2018, New York petitioned the EPA to force nine nearby states to impose stringent new air emissions restrictions on manufacturers and other facilities within their borders. The NAM filed coalition comments with the EPA that explained why the EPA should reject the petition, which it did in October of 2019. New York then sued the EPA to overturn the rejection. The NAM -- together with other impacted trade associations and individual companies -- intervened in the case to defend the EPA’s decision and to represent the interests of manufacturers in the litigation, filing an initial proof brief in the D.C. Circuit Court of Appeals on March 5, 2020. Unfortunately, on July 14, 2020, the court vacated EPA's decision and remanded the petition back to EPA for further proceedings.


Related Documents:
NAM brief  (March 5, 2020)

 

Oakland Bulk & Oversized Terminal, LLC v. City of Oakland   (9th Circuit)

Opposing local interference with energy exports

The NAM filed an amicus brief to defend energy producers against efforts by municipalities to ban energy exports from costal ports. In 2016, the city of Oakland, California, passed an ordinance that restricted the construction of a proposed new coal export terminal along the San Francisco Bay. The public explanation for the ordinance was the protection of local health and safety, but the actual rationale for the ban is the city’s ideological objection to the exportation of American coal to global markets. If allowed to stand, this action has dangerous implications for the power of individual cities to interfere with interstate and international trade. The NAM's amicus brief highlights how such restrictions can harm manufacturers and argues that this interference violates the U.S. Constitution. On May 26, 2020, the court held that city's ordinance was invalid, but declined to reach the constitutional arguments.


Related Documents:
NAM brief  (February 15, 2019)

 

Tex. Ass'n of Mfrs. v. CPSC   (5th Circuit)

Challenge to CPSC phthalates rule

On 12/14/17, the NAM and American Chemistry Council, along with local Texas groups, filed a challenge in the Fifth Circuit Court of Appeals to the Consumer Product Safety Commission’s (CPSC) final rule on phthalates, which restricts the phthalate DINP. The CPSC’s decision to restrict DINP was misguided, scientifically inaccurate and the result of a deeply flawed process that fabricated rationales for a predetermined outcome. The Commission should have relied on scientifically reasonable statistics when assessing the exposure data, which demonstrate the cumulative risk of exposure to these phthalates is actually well below any level of concern – even for sensitive populations. DINP, as currently used in commercial and consumer products, does not pose a risk to human health at typical exposure levels. The CPSC’s unfounded decision here could be a slippery slope to restrict other chemicals that special interests find objectionable.

On 2/5/18, the NAM filed a response to the CPSC's motion to dismiss. The NAM's filed its opening brief on 8/20/18 and its reply brief on 12/3/18. On March 1, 2021, a unanimous three-judge panel held that CPSC violated the Administrative Procedure Act by (1) not allowing sufficient opportunity for notice and comment when it shifted its justification for the rule from relying upon an HI=1 at the 95th percentile to relying on spot samples of actual women; and (2) CPSC failed to adequately consider costs and benefits when it continued the interim prohibition on DINP. The Court remanded the rule without vacatur to CPSC to address these shortcomings.


Related Documents:
Opinion  (March 2, 2021)
NAM reply brief  (December 3, 2018)
NAM opening brief  (August 20, 2018)
NAM response  (February 5, 2018)
NAM petition for review  (December 14, 2017)

 

Troy Corporation v. EPA   (D.C. Circuit)

Scope of CERCLA listings

The NAM filed an amicus brief on behalf of Troy Corporation to argue that the EPA’s listing of sites under the Comprehensive Environmental Response, Compensation, and Liability Act should accurately reflect the site’s potential environmental risks and not rely on artificial and inaccurate rules of thumb. The EPA added a creek that runs through and adjacent to Troy Corporation’s manufacturing facility in Newark, NJ to CERCLA’s National Priority List. The listing was based in significant part on the EPA’s assessment that the creek had the potential to contaminate a fishing pier located 13 miles away. That assessment was based solely on regulatory assumptions that Troy rebutted in regulatory comments. In response to those comments, EPA responded that it is entitled to rely on the bright line presumptions in the regulation and need not demonstrate any actual risk of contamination. If such a position is upheld, many manufacturing sites could be listed as “priority” CERCLA sites when they have no actual potential to cause such environmental harm. The NAM’s amicus brief argues that this approach to listing sites violates CERCLA and could adversely impact many manufacturers. Unfortunately, on November 13, 2020, the court denied Troy's petition for review.


Related Documents:
NAM brief  (October 25, 2019)

 


ERISA -- 2020



Putnam Investments, LLC v. Brotherston   (U.S. Supreme Court)

ERISA liability for employer 401(k) plans

The NAM filed an amicus brief supporting a petition for certiorari that asks the Supreme Court to reverse an appellate decision that will expose companies to class-action lawsuits targeting their employee retirement plan offerings. A group of former employees sued their former employer under the Employee Retirement Income Security Act of 1974, claiming the company violated its fiduciary duty under ERISA by offering actively managed mutual funds in the company’s 401(k) plan that ultimately underperformed certain index funds. The U.S. Court of Appeals for the 1st Circuit concluded that the burden of proof rested on the company to disprove loss causation under ERISA, reasoning that a company “can easily insulate itself” from liability by selecting index funds rather than active funds in its 401(k) plan. This holding will encourage class-action plaintiffs to target companies that offer 401(k) plans and will make it more difficult for companies to defend against such litigation. In support of a petition for certiorari to the U.S. Supreme Court, the NAM’s amicus brief identifies the deluge of ERISA litigation already facing companies and explains how the 1st Circuit’s decision will harm plan sponsors and their participants. On January 13, 2020, the Court denied certiorari.


Related Documents:
NAM brief  (February 15, 2019)

 

Intel Corporation Investment Policy Committee v. Sulyma   (U.S. Supreme Court)

Statute of limitations for ERISA claims

In March of 2019, the NAM filed an amicus brief seeking U.S. Supreme Court review of an appellate decision that improperly expands the statute of limitations period for employee lawsuits against their employers under the Employee Retirement Income Security Act. The case arose with a class action claim by a former Intel employee alleging that Intel violated its fiduciary duty under ERISA by investing in risky assets that lost value. A district court dismissed the case because the plaintiff brought his claim after ERISA’s three-year statute of limitations period expired. On appeal to the 9th Circuit, the plaintiff argued that even though he received information about the investments more than three years before the lawsuit, he did not recall reading the documents and therefore lacked “actual knowledge” of the investments necessary to trigger the statute of limitations period. That reasoning somehow persuaded the 9th Circuit to reverse the district court’s dismissal and reinstate the case. The Ninth Circuit’s decision inappropriately expands exposure to potential litigation for manufacturers that sponsor retirement plans. In support of Intel’s petition for Supreme Court review, the NAM filed an amicus brief that explains the harmful implications of the decision on manufacturers and why the Court should grant review. On June 10, 2019, the Court granted review of the case for the Court’s 2019-2020 term, and on August 28, 2019, the NAM filed its amicus brief on the merits. Unfortunately, on February 26, 2020, the Court unanimously affirmed the Ninth Circuit’s interpretation of the three-year statute of limitations provision.


Related Documents:
NAM brief  (August 28, 2019)
NAM brief  (April 3, 2019)

 


Expert Testimony -- 2020



Walsh v. BASF   (Pennsylvania Supreme Court)

Accepted standards for expert testimony

The NAM filed an amicus brief in the Pennsylvania Supreme Court supporting review of a wrongful-death suit against multiple pesticide manufacturers to determine whether the lower courts improperly tossed expert testimony. The trial court struck the plaintiffs experts’ testimony as unsupported because the experts gave novel scientific testimony without showing they followed methods generally accepted by the scientific community. The Superior Court reversed the trial court, and BASF appealed. This case is important because manufacturers frequently confront expert opinions involving exposure to allegedly toxic substances, and those expert opinions need to conform to generally accepted scientific and medical standards. The NAM’s brief argued that the Superior Court failed to respect the discretionary role of judicial gatekeeping to consider the reliability of expert methodology in a case-specific context. Unfortunately, on July 21, 2020, the court affirmed the Superior Court's ruling and remanded the case to the trial court.


Related Documents:
NAM brief  (May 14, 2019)

 


Government Regulation -- 2020



Nat'l Pork Producers Council & Amer. Farm Bureau Fed. v. Ross, et al.   (S.D. Cal)

Challenging California's improper efforts to regulate the national pork market

The MCLA filed an amicus brief urging the Southern District of California to reject the state of California’s motion to dismiss the National Pork Producers Council and American Farm Bureau Federation’s challenge to a California ballot initiative that regulates the conduct of farmers, manufacturers, and producers nationwide. Proposition 12 bans the sale of imported pork and veal in California unless farmers and producers outside of California meet strict animal confinement standards set by California voters. The NAM, joined by the U.S. Chamber of Commerce, the Food Manufacturing Institute, the National Cattlemen’s Beef Association, and the National Mining Association argued in the brief that Proposition 12 violates the Commerce Clause by regulating conduct beyond California’s borders, impinging on other states’ sovereign authority to legislate within their own jurisdictions, and, substantially burdening out-of-state pork producers absent a sufficient and legitimate local interest. This litigation is important to all manufacturers because if upheld, Proposition 12 may embolden other states to regulate out-of-state conduct, resulting in a complex web of inconsistent and competing extraterritorial regulations in the agriculture and food industries, and beyond. Unfortunately, the court granted the State's motion.


Related Documents:
NAM brief  (March 6, 2020)

 

North American Meat Institute v. Becerra, et al.   (9th Circuit)

Challenging California's effort to regulate conduct wholly outside its borders

The NAM filed an amicus brief urging the Ninth Circuit Court of Appeals to review a lower court's refusal to enjoin a California ballot initiative that discriminatorily regulates the conduct of farmers, manufacturers, and producers nationwide. Proposition 12 bans the sale of imported pork and veal in California unless farmers and producers outside of California meet strict animal confinement standards set by California voters. The NAM, joined by the U.S. Chamber of Commerce and the Food Manufacturing Institute (FMI), argued in the brief that Proposition 12 violates the Commerce Clause by (1) leveling the playing field to the benefit of California producers over out-of-state producers; (2) regulating conduct beyond California’s borders, impinging on other states’ sovereign authority to legislate within their own jurisdictions; and, (3) substantially burdening out-of-state producers absent a sufficient and legitimate local interest. This litigation is important to all manufacturers because if upheld, Proposition 12 may embolden other states to discriminate against out-of-state interests, resulting in a complex web of inconsistent and competing extraterritorial regulations in the agriculture and food industries, and beyond. Unfortunately, on October 16, 2020, the Ninth Circuit affirmed the lower court's ruling.


Related Documents:
NAM brief  (January 10, 2020)

 


Immigration -- 2020



Purdue University v. Department of Labor   (D.D.C.)

Challenging a DOL rule intended to damage the H-1B program

Citing the COVID-19 pandemic as a pretext for emergency rulemaking, the Department of Labor issued a rule in mid-October 2020 creating a series of new restrictions on the H-1B visa program that would have slammed the door on talented workers in hard to fill specialty and technical roles. (The Department of Homeland Security issued a companion rule not challenged in this case). The rule was especially unsound because it was directly issued as a final rule, with no notice or opportunity to provide comment on its harmful impacts despite cost estimates that put the rule among the most expensive federal rules ever issued. The NAM joined with the U.S. Chamber of Commerce and TechNet to file an amicus brief in support of the lawsuit, arguing that the rule is unlawful and hugely detrimental to American competitiveness.


Related Documents:
NAM brief  (October 30, 2020)

 

Department of Homeland Securitv. Regents of the University of California   (U.S. Supreme Court)

Workforce protections for DACA recipients

The NAM filed an amicus brief to support the Deferred Action for Childhood Arrivals program (DACA) against efforts to end the program and remove 800,000 individuals from the American workforce. Established by the Obama administration in 2012, DACA allows undocumented immigrants who had been brought to the United States as children to apply for protection from deportation and permission to work in the United States. In 2017, the Trump administration announced plans to terminate DACA. In January of 2018, a federal judge in California blocked that termination and the 9th Circuit affirmed. The government petitioned the U.S. Supreme Court for review, which the court granted for its October 2019 term. This issue has a significant impact to NAM members, many of whom face workforce challenges that would be made far worse if 800,000 individuals suddenly lose their work authorization. The NAM joined a multi-industry and multi-employer amicus brief to highlight valuable the contributions that individuals with DACA status provide to manufacturers and to the entire U.S. economy and society. On June 18, 2020, the Court agreed, holding that the Administration's decision to rescind DACA was arbitrary and capricious under the Administrative Procedure Act and that the program would continue.


Related Documents:
NAM Brief  (October 3, 2019)

 

Wash. Alliance of Tech. Workers v. U.S. Dept. of Homeland Security   (D.D.C.)

Workforce program for STEM graduates

The NAM moved to intervene in a lawsuit that seeks to end a program that provides hundreds of thousands of skilled workers for manufacturers and other American businesses. To address a shortfall of certain skilled workers in the American economy, the federal government in 1992 established the "optional practical training" (OPT) program. That program and a subsequent extension for STEM students (STEM OPT) allows foreign-born students to continue their educational training by working in the United States for up to three years after completing college or a graduate degree. Without the OPT program and STEM OPT, manufacturers would be unable to fill critical positions requiring specialized training in engineering, math, technology and the sciences. An anti-immigration activist group sought to invalidate the entire OPT program by suing the U.S. Department of Homeland Security. To help ensure the continued availability of hundreds of thousands of highly skilled workers for manufacturers, the NAM asked a federal court to allow our intervention in the case as a defendant. Becoming a defendant allowed the NAM to present the best legal arguments possible in support of the OPT program and STEM OPT. The court granted NAM's motion for intervention in 2019, and on November 30, 2020, the court granted NAM’s request for summary judgment, effectively terminating the activists’ lawsuit.


Related Documents:
Opinion Granting Summary Judgment  (January 28, 2021)
NAM Reply in Support of Summary Judgment  (January 24, 2020)
NAM Motion for Summary Judgment  (November 25, 2019)
NAM Reply in Support of Intervention  (November 8, 2018)
NAM Motion for Intervention  (October 18, 2018)

 


Jurisdiction -- 2020



Hammons v. Ethicon   (Pennsylvania Supreme Court)

Jurisdiction over out-of-state defendants

The NAM filed an amicus brief on behalf of medical device manufacturers to argue that manufacturers should be immune from being sued in states where they do not do business. Even though plaintiff’s injuries did not occur in Pennsylvania and her claims did not relate to any of defendant’s contacts in the state, a Pennsylvania trial court allowed her case over an out-of-state defendant. This case is significant for manufacturers that operate only in one state or region in the United States, and who should not be subject to being sued across the country. The NAM’s brief in the Pennsylvania Supreme Court argued that recent U.S. Supreme Court rulings do not permit state courts to exercise jurisdiction over companies based on activities in a state that are unrelated to a claim. Unfortunately, on October 21, 2020, the court disagreed, holding that the imposition of personal jurisdiction in the case satisfied constitutional requirements.


Related Documents:
NAM brief  (June 21, 2019)

 


Labor Law -- 2020



Franze v. Bimbo Bakeries USA, Inc.   (2nd Circuit)

Defending the independent contractor model

The NAM filed an amicus brief to seek to uphold a district court ruling granting summary judgment for defendant Bimbo Foods Bakeries in a putative class action brought by delivery drivers who allege that the company misclassified them as independent contractors and, as a result, they are entitled to overtime pay and other benefits guaranteed to employees under the Fair Labor Standards Act (FLSA) and related New York state labor laws. A federal district court applied a well-established set of factors to determine whether the drivers were independent contractors or employees including the degree of control exercised by the alleged employer over the drivers, the drivers’ opportunity for profit or loss and their investment in the business, and the degree of skill and independent initiative required to perform the work, among others, ultimately concluding that the drivers were indeed independent contractors. Many manufacturers contract with independent contractors and have a significant interest in the proper interpretation of laws that implicate the distinction between employees and independent contractors. On appeal to the 2nd Circuit, the NAM filed a coalition amicus brief which explains that the independent contractor business model is common across a diverse range of industries and offers significant benefits to businesses and contractors alike. On Sept. 15, 2020, the court affirmed the lower court's summary judgment ruling in favor of the defendant.


Related Documents:
NAM brief  (February 10, 2020)

 

General Motors, LLC and Charles Robinson   (NLRB)

When profane outbursts and offensive statements lose the protection of the NLRA

The NAM filed an amicus brief with the National Labor Relations Board (NLRB) urging the Board to reconsider its standards for determining whether an employee's profane outbursts or offensive statements of a racial or sexual nature lose the protection of the National Labor Relations Act (NLRA). The NLRB invited interested amici to file briefs after prior Board decisions in which extremely profane or racially offensive language was judged not to lose the protection of the NLRA were met with frequent criticism. Those decisions were grossly out of touch with the realities of today's workplace and the interests of employers in ensuring workplaces are free from harassment, discrimination, and bullying. In response to the specific questions posed by the Board, the NAM's brief, filed November 12, 2019, argues that (1) there are instances of employee misconduct that are so egregious that they should automatically result in the forfeit of the NLRA's protection; (2) employers are not required to tolerate insubordination, particularly where racially or sexually charged language is used; (3) the "norms" of the workplace cannot be used as an excuse to protect harassment and incivility; (4) the Board should abandon the standard applied in prior cases to the extent it protects sexual or racially offensive language that would otherwise not be tolerated simply because it occurs in the context of picketing; and (5) the Board should afford great weight to civil rights and antidiscrimination laws, and the requirements they place on employers.

On July 21, 2020, the Board issued a decision holding that the Wright Line, 251 NLRB 1083 (1980) standard applies to abusive conduct cases. Under that standard, the NLRB "General Counsel must make an initial showing that (1) the employee engaged in Section 7 activity, (2) the employer knew of that activity, and (3) the employer had animus against the Section 7 activity[.]" If the General Counsel meets her burden, "the burden of persuasion shifts to the employer to prove it would have taken the same action even in the absence of the Section 7 activity."


Related Documents:
Board Decision  (July 21, 2020)
NAM brief  (November 12, 2019)

 

Nat’l Women’s L. Ctr. v. OMB   (D.C. Circuit)

EEO-1 Component 2 pay data reporting

The NAM filed an amicus brief urging the U.S. Court of Appeals for the D.C. Circuit to reverse the U.S. District Court for the District of Columbia's refusal to delay the deadline for filing the Revised EEO-1 Report “Component 2” pay data. The district court also should not have crafted its own remedy that ignored the significant deficiencies in the record. Component 2 creates an administrative burden for employers who will now be forced to bear the costs of complying with the requirements. The NAM’s brief argued that the EEOC had previously recognized that changes to EEO-1 require significant time and expense, the record showed questionable public benefits and the data should not be required until EEOC can preserve confidentiality.


Related Documents:
NAM brief  (August 26, 2019)

 


Patents, Copyrights and Trademarks -- 2020



Amgen v. California Correctional Health Care Services   (Cal. Ct. App.)

Protection of trade secrets

The NAM filed an amicus brief in the California Court of Appeals to protect against disclosure of price change information for pharmaceutical products. California passed a law that requires pharmaceutical companies to disclose contemplated price changes to, among others, state agencies 60 days before implementation of the price change. Several pharmaceutical companies made the disclosures. News outlets then sought the information under a public information request. The companies obtained a preliminary injunction, arguing that the pricing information at issue is a protected trade secret and thus not subject to disclosure until the planned price increase goes into effect. California appealed the injunction. In support of the pharmaceutical industry, the NAM’s amicus brief argued that trade secrets are exempt from disclosure under the California law, and that such an exemption protects the legitimate interests of businesses, administrative agencies, and the public. Unfortunately, on April 9, 2020, the Court of Appeals reversed the preliminary injunction.


Related Documents:
NAM brief  (September 25, 2019)

 

Ass'n for Accessible Medicines v. Becerra   (9th Circuit)

Challenging a California law that makes reverse-payment settlements between brand-name and generic manufacturers presumptively anticompetitive

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit seeking to reverse the district court’s refusal to enjoin a California law which makes reverse-payment settlements between brand-name and generic drug manufacturers presumptively anticompetitive and imposes a $20 million minimum penalty on individuals who negotiate such settlements. Reverse-payment settlements are critically important to pharmaceutical manufacturers as they allow generics to enter the market, while fairly protecting patent holders and encouraging expensive and lengthy drug research and development. The law also conflicts with a recent U.S. Supreme Court decision (FTC v. Actavis), which refused to hold reverse-payment settlements presumptively unlawful. A federal district court rejected the Association for Accessible Medicine's suit challenging the law. On appeal to the Ninth Circuit, the NAM's amicus brief, filed February 6, 2020, highlights how the California law undermines federal law and stands as an obstacle to the explicit aims of Congress. Unfortunately, on July 24, 2020, the Ninth Circuit dismissed the suit for lack of standing under Article III.


Related Documents:
NAM brief  (February 6, 2020)

 

Title Source, Inc. v. HouseCanary, Inc.   (Tex. Ct. App.)

Limiting excessive punitive damage awards

The NAM filed an amicus brief to persuade a Texas appellate court to reverse a $740 million jury verdict in a business dispute involving a joint venture in Texas. The case arose from an agreement between two technology companies over a $5 million contract involving house valuation software. After the defendant terminated the contract, the plaintiff company sued and alleged misappropriation of trade secrets. The court’s admission of unreliable expert testimony and inflammatory attacks on the defendant company led a jury to award the plaintiff $740 million in damages, including $470 in punitive damages. If not overturned, this award threatens to chill the creation of productive joint business ventures in Texas. The NAM’s amicus brief argued that no evidence supports the punitive damage award, and that the award is constitutionally excessive under Texas and U.S. Supreme Court precedent. On June 3, 2020, the court agreed, reversing the trial court judgement and remanding the case for a new trial.


Related Documents:
NAM brief  (September 12, 2019)

 


Preemption -- 2020



Miller v. C.H. Robinson Worldwide   (9th Circuit)

Liability for negligent acts of truckers

The NAM filed an amicus brief to argue that the 9th Circuit should hold that businesses that hire independent trucking companies to transport goods are not liable for the negligent acts of those independent truckers. An individual was injured in a traffic collision involving a trucking company hired by a freight broker. The injured person argued that the broker was negligent in selecting the trucking company because it knew or should have know about the company’s prior regulatory infractions. The freight broker responded that the hiring directly concerns the services a freight broker provides under the Federal Aviation Administration Authorization Act of 1994 (FAAAA), and therefore preempts state law, including state common law for negligence. The district court agreed. On appeal to the 9th Circuit, the NAM’s amicus brief that explained the careful balance that congress struck in regulating drivers under the Act, and why the plaintiffs’ theory of liability is unworkable in practice. Unfortunately, on September 28, 2020, the Ninth Circuit reversed the district court's holding, narrowing the federal preemption of state laws that regulate trucking.


Related Documents:
NAM brief  (November 13, 2019)

 


Product Liability -- 2020



2711 Hollywood Beach Condominium Ass'n v. NIBCO, Inc.   (Florida Court of Appeals)

Product liability for building components

The NAM filed an amicus brief in the Florida court of appeals to preserve Florida’s rule limiting tort liability for manufacturers of building products and materials. The developer of a residential condominium building in Florida improperly combined metal and PVC pipes in the building’s sprinkler system, causing the system to leak. The condo association, which purchased the building from the developer, then sued the developer and the pipe manufacturers under tort and contract theories of liability. The condo association did not claim that the pipes themselves were defective; rather, it asserted that the pipe manufacturers had a duty to warn about the alleged incompatibility of the pipes being installed together. A trial court ruled that Florida’s “economic loss rule” limits the condo association’s claims against the pipe manufacturers to contract and warranty claims and bars tort-based claims because the pipes did not injure people or other property. A broader rule would expose manufacturers to significantly more potential liability and could force them to raise prices or seek expensive liability insurance. On appeal, the NAM filed an amicus brief in support of the pipe manufacturers to preserve Florida’s economic loss rule and contain the potential for open-ended tort liability for the misuse of building products and materials. On September 16, 2020, the court affirmed the trial court's ruling, holding that the case "falls squarely within the parameters of the rule."


Related Documents:
NAM brief  (June 7, 2019)

 

Avco Corp. v. Sikkelee   (U.S. Supreme Court)

Federal Aviation Administration preemption of state law design-defect claims

The NAM filed an amicus brief in the U.S. Supreme Court urging review of a lower court opinion that a jury may hold Avco liable under state law for alleged defects in 1969 Federal Aviation Administration (FAA)-approved designs of part of a plane engine. The question before the Court is whether the FAA preempts state-law design-defect claims in the aviation industry, which is what Congress intended. This is important for manufacturers because a consistent safety standard is vital for regulation of critical modes of transportation. The NAM’s brief argued that the FAA’s requirement of prior approval of any aircraft or aircraft component design preempts state law that requires a design change because simultaneous compliance with state and federal law is impossible. On January 13, 2020, the Court denied review.


Related Documents:
NAM brief  (April 22, 2019)

 

City of Oakland v. BP   (9th Circuit)

Public nuisance liability for climate change

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit to oppose misguided efforts to impose “public nuisance” liability on energy manufacturers. The city of Oakland, California, sued several energy companies to seek damages for local impacts of climate change, arguing that the defendants’ sale of fossil fuels is a public nuisance that entitles the city to financial compensation. This theory of liability poses a grave risk for manufacturers because it would impose liability on manufacturers despite a plaintiff’s inability to prove the manufacturer actually caused the plaintiff’s injuries. A federal district court dismissed the lawsuit. On appeal to the Ninth Circuit, the NAM’s amicus brief explains how Supreme Court precedent forecloses such lawsuits by recognizing the federal legislature as the appropriate branch of government to set national energy policy, including addressing climate change. Our brief also highlights the extensive technological innovations that manufacturers have already deployed to reduce carbon emissions, and which they will continue to pursue to address climate change and other environmental challenges. Unfortunately, on May 26, 2020, the court reversed the district court's dismissal and remanded the case for further proceedings.


Related Documents:
NAM brief  (May 17, 2019)

 

City of Pomona v. SQM North America Corp.   (9th Circuit)

Unlimited historical liability

The NAM filed an amicus brief in the U.S. Court of Appeals for the 9th Circuit addressing the “risk-benefit” test for strict products liability as applied to historically used products. The City of Pomona, California, claims that a fertilizer product sold more than 70 years ago contained small amounts of naturally occurring perchlorate that contaminated the city’s groundwater supply. The resolution of this question has the potential to impact manufacturers because it involves the proper legal standard for strict product liability for historically used products. The NAM’s brief argues that a defendant cannot be liable for risks based on science and technology not available at the time a product was manufactured. On February 6, 2020, in a disappointing ruling, the Ninth Circuit held that jurors are allowed to consider risks that were not, and could not have been, known to the manufacturer at the time of manufacture. On March 2, 2020, after SQM filed a petition for rehearing en banc, the NAM filed an amicus brief in support of rehearing. Unfortunately, on March 17, 2020, the court denied rehearing.


Related Documents:
NAM brief  (March 2, 2020)
NAM brief  (December 21, 2018)

 

Coffman et al. v. Armstrong Int'l, Inc., et al.   (Tennessee Supreme Court)

Urging the Tennessee Supreme Court to adopt a stream of commerce bright line rule for asbestos failure to warn claims

The NAM filed an amicus brief in the Tennessee Supreme Court supporting an appeal of an appellate court decision holding that equipment manufacturers may owe a duty to warn end users about alleged hazards in asbestos-containing external insulation or replacement gaskets and packing made or sold by third parties and affixed to the equipment post-sale. Some courts have held that manufacturers are only liable for products they themselves put in the stream of commerce. Other courts, including the U.S. Supreme Court in a 2019 maritime case, have adopted a foreseeability-based test that focuses on whether the later incorporation of an asbestos product was “required” for the pump, valve, etc. to work. Here, the Tennessee appellate court, relying on a 2008 asbestos take-home exposure case, applied a foreseeability-based test that is even more permissive than the U.S. Supreme Court standard for maritime cases. This case is important for all manufacturers whose products are used with potentially hazardous products sold by third parties. The NAM filed a coalition brief arguing that traditional tort principles do not support liability for harms caused by third parties and that such a duty would be costly and unpredictable, undermine consumer safety, increase non-asbestos tort cases, and fail to prevent future harm. On January 4, 2021, the court agreed and held that the manufacturers ”cannot be held liable for injuries resulting from products they did not make, distribute, or sell.”


Related Documents:
TN Supreme Court Opinion  (January 4, 2021)
NAM brief  (April 13, 2020)

 

Devey & Dupree v. Johnson & Johnson   (South Carolina Supreme Court)

Curbing Prejudicial Multi-Plaintiff Trials

The NAM filed a coalition amicus brief in the South Carolina Supreme Court arguing that the risk of prejudice to defendants and due process concerns demand reversal of a trial court order consolidating two very different personal injury actions. In this case, a personal injury case brought by a cancer-free, young, living female with no known exposures to asbestos and a type of cancer that typically has no known external cause was erroneously consolidated for trial with a wrongful death case involving an elderly man who was occupationally exposed to asbestos, had various types of cancer, and allegedly died from a type of cancer that is associated with occupational exposure to asbestos. The coalition brief highlights the significant prejudices to tort defendants that flow from consolidation of dissimilar cases and the various ways courts across the country have banned or sharply limited consolidation. Not only does consolidation in such cases make trials more complex and less efficient, it invites juries to conflate evidence that is specific to each person and improperly return a punitive damages award based on the totality of the evidence heard. This case is important for all corporate defendants that want to ensure that South Carolina’s tort system is fair, protects defendants’ due process rights, and reflects sound policy. Soon after the NAM filed its amicus brief, plaintiffs settled the cases with J&J on favorable terms.


Related Documents:
NAM brief  (August 17, 2020)

 

Lewis v. Lead Industries Ass'n   (Illinois Supreme Court)

No-injury class actions for medical testing

The NAM filed an amicus brief in the Illinois Supreme Court to overturn an appellate ruling that would expose manufacturers to open-ended lawsuits where the plaintiffs suffered no actual harm. Plaintiffs sued several NAM member companies, claiming those companies conspired to hide the potential harms of lead pigment in paints and other products. The only alleged harm the plaintiffs could allege, however, was the cost of blood tests for lead exposure. The tests did not reveal any elevated lead levels, so the plaintiffs sought to recover the costs of the tests—even though Medicaid paid for the entire cost of the tests. An Illinois trial court ruled against the plaintiffs, but an Illinois appellate court reversed, concluding that the cost of the tests could establish harm even though the federal government covered the costs. If not reversed by the Illinois Supreme Court, this precedent could expose manufacturers to limitless potential liability for a range of no-injury class action lawsuits. The NAM’s amicus brief explains the potential ramifications of this litigation for manufacturers and explains why the appellate ruling should be reversed.On May 21, 2020, the court issued a strong opinion agreeing with NAM that plaintiffs who do not suffer any economic loss cannot bring a tort action that is based on a claim that alleges solely an economic injury and no physical injury or property damage.


Related Documents:
NAM brief  (April 23, 2019)

 

McGinnis v. C.R. Bard, Inc.   (N.J. Super. Ct. App. Div.)

Allowing evidence of conformance with FDA’s safety standards

The NAM filed an amicus brief supporting an appeal of a trial court’s ruling that evidence of a U.S. Food and Drug Administration (FDA) medical device 510(k) approval process, which determined a device is safe and effective, may be excluded from evidence in a personal injury lawsuit. After the trial court excluded the evidence, including on the question of punitive damages for egregious conduct, the jury awarded large compensatory and punitive damages. This case is important because manufacturers could be adversely impacted if courts reach liability decisions based on an improper understanding of the principles of safety and effectiveness that underlie each 510(k) clearance. The NAM’s brief argued that Congress and the FDA established the 510(k) process to ensure the safety of medical devices and that evidence of a manufacturer’s conformance with the FDA’s safety standards is essential to a fair determination of product defects and punitive damages. On March 2, 2021, the court agreed, vacating the verdicts and remanding the case for a new trial.


Related Documents:
NJ Supreme Court Opinion  (July 25, 2023)
Opinion  (March 2, 2021)
NAM brief  (May 23, 2019)

 

Roverano v. John Crane, Inc.   (Pennsylvania Supreme Court)

Apportionment of asbestos liability

The NAM filed an amicus brief in the Pennsylvania Supreme Court that seeks to uphold application of a Pennsylvania law that fairly apportions asbestos liability on companies in proportion to their fault rather than applying a pro-rata approach that would impose excessive liability on some manufacturers. The case arose from an employee’s lawsuit against 30 companies for asbestos exposure. A Pennsylvania trial court found six companies liable and divided the employee’s damages equally among the six companies. The court failed to comply with Pennsylvania’s “Fair Share Act,” which requires courts to apportion asbestos liability based on each defendant’s relative fault in causing a plaintiff’s injuries. By contrast, a pro-rata approach unfairly imposes more liability on some manufacturers than they legally bear responsibility for. On appeal to the Pennsylvania Supreme Court, the NAM’s amicus brief argues that asbestos liability should follow the Fair Share Act and argues against other legal loopholes that impose heightened financial damages on manufacturers. Unfortunately, the court ruled that the act requires per capita apportionment.


Related Documents:
NAM brief  (November 16, 2018)

 

In re: Genentech, Inc. Herceptin (Trastuzumab) Marketing and Sales Practices Litigation   (10th Circuit)

Preemption of state law claims for biologic medication regulated by the FDA

The NAM filed an amicus brief in the 10th Circuit in support of a drug manufacturer in an appeal that implicates how biologic medications are sold and dosed. The defendant manufacturer, Genentech, is a biotechnology company dedicated to developing medicines for people with serious and life-threatening diseases. One of those medications is Herceptin, which treats breast cancer. Herceptin is approved as a biologic drug, which is subject to a similar FDA approval process and labeling requirements as other prescription drugs. A series of lawsuits filed under Oklahoma and other state laws by cancer centers allege that Herceptin’s labeling misrepresents the amount of Herceptin in a vial. The FDA, however, has approved the quantity indicated on the label. Federal regulations and the FDA’s approval permits a variance between the amount stated on the label and the contents of the vial. The district court granted the defendant’s motion for summary judgment on preemption grounds, finding the state law claims were preempted by the federal Food and Drug Act. On appeal to the 10th Circuit, the NAM filed an amicus brief that explains how the FDA utilizes its expert judgment to specifically approve and regulate the sale and dispensing of biologic drugs, and how allowing states to impose conflicting requirements would harm public health and increase the costs of treatment. Unfortunately, on May 29, 2020, the court reversed the district court's ruling and remanded the case for further proceedings.


Related Documents:
NAM brief  (October 11, 2019)

 


Punitive Damages -- 2020



McKiver v. Murphy-Brown, LLC   (4th Circuit)

Private nuisance lawsuits for food production operations

The NAM filed an amicus brief in the U.S. Court of Appeals for the 4th Circuit to overturn a district court ruling that imposed punitive damages on a pork production facility in North Carolina under a "private nuisance" theory of liability. The case began with a lawsuit by property owners who reside near the facility in North Carolina, alleging that aspects of the facility’s operations are a private nuisance under tort common law. A federal district court ruled for the plaintiffs and awarded compensatory damages and millions of dollars in additional punitive damages. On appeal to the 4th Circuit, the NAM filed an amicus brief that explained why nuisance liability and punitive damages are inappropriate when companies comply with applicable environmental regulations, and further explained North Carolina’s extensive statutory and regulatory control over pork production facilities in North Carolina. This case has important implications for food producers and all manufacturers because the legal standard for what constitutes a “nuisance” under tort law will vary from jury-to-jury, risking the imposition of significant liability—including punitive damages—for manufacturers engaged in legal and thoroughly-regulated conduct. On November 19, 2020, the court vacated the punitive damages award and remanded the case for a rehearing on that issue.


Related Documents:
NAM brief  (March 6, 2019)

 


RICO Act -- 2020



Takeda Pharm. Co. Ltd, et al. v. Painters & Allied Trades District Council 82 Health Care Fund, et al.   (U.S. Supreme Court)

Abusive civil RICO suits must be reined in

The NAM filed an amicus brief in support of a petition for certiorari to review a Ninth Circuit ruling that threatens to expand the use of civil RICO claims.

The case arose as a putative class action brought by Actos patients and third-party payors (TPP) alleging that they would not have purchased Actos had they known about the increased risk of bladder cancer. Specifically, they allege that Takeda, which manufactures Actos, and Lilly, which previously co-marketed it, conspired to commit mail and wire fraud under RICO by intentionally misleading physicians, consumers, and TPPs to believe that Actos did not increase a person’s risk of developing bladder cancer. Notably, both the patient plaintiffs and the TPP’s insureds used Actos safely and without any adverse side effects.

Relying on Seventh Circuit precedent, the district court dismissed the RICO claims with prejudice based on lack of proximate cause, as well as the state law claims for similar reasons. The Ninth Circuit reversed, fully acknowledging the “apparent circuit split among four of [its] sister circuits” regarding the proximate cause issue but concluded that no matter the roles of independent actors in causing each plaintiff’s claimed injury, it was “foreseeable” that the conduct alleged would increase drug sales overall. On the standing issue, the Ninth Circuit, following its own established circuit precedent, by holding that anyone who pays for a product has standing to sue for a full refund merely by alleging that the payment would not have been made if a risk or defect had been disclosed. The NAM and ATRA filed an amicus brief arguing that the pharmaceutical industry, and manufacturing in general, should not be subjected to abusive litigation that hampers their ability to innovate and grow and that a sound and fair legal system requires remedies to be focused on persons with direct, actual harms, particularly the RICO statute because of its powerful and potentially crippling treble damages remedy. Unfortunately, on June 8, 2020, the Court denied cert.


Related Documents:
NAM brief  (March 27, 2020)

 


Taxation and State Taxation -- 2020



Altera Corp. et al. v. Commissioner of Internal Revenue   (U.S. Supreme Court)

IRS rule change threatens double taxation on cross border transactions

The NAM filed an amicus brief in support of Altera Corporations' petition for certiorari to reverse the Ninth Circuit and uphold the Internal Revenue Service’s (IRS) “arm’s-length transaction standard.” The Commissioner of the IRS departed from this longstanding approach in a policy shift, thus destroying the established precedent and reducing its effectiveness. Under the arm’s-length standard, a transaction was judged by looking at how the parties priced it as if they were two independent entities, not parts of the same group of related entities. The Ninth Circuit held that the Commissioner did not exceed his rule-making authority and that his rule was entitled to deference. On March 6, 2020, the NAM filed a coalition amicus brief in support of Altera's writ petition arguing that the decision below raises unsettling questions about the tax treatment of countless international transactions.Unfortunately, on June 22, 2020, the Supreme Court denied cert.


Related Documents:
NAM brief  (March 6, 2020)

 

Ford Motor Co. v. United States   (U.S. Supreme Court)

Ford seeks to take van tariff engineering case to the U.S. Supreme Court

The NAM filed an amicus brief in support of Ford's petition for certiorari to reverse a decision that will generate uncertainty for tariff determinations for imported products, including imported automobiles. The case arose from Ford Motor Co.’s imports of the Transit Connect van. After importing the vans as passenger vehicles, Ford reconfigured the vans to allow their use as cargo vans. The U.S. Customs and Border protection applied a 25% tariff on the vehicles, concluding that the vans are properly classified as trucks subject to a 25% tariff rather than a passenger vehicle subject to a much lower 2.5% tariff. Ford challenged the tariff determination in the U.S. Court of International Trade and prevailed. On appeal, however, the Federal Circuit reversed, concluding that the ultimate intended use of the vehicles as cargo vans supported the higher tariff rate. After also filing at the federal circuit en banc level, the NAM filed an amicus brief in support to identify the uncertainty that manufacturers will face if tariffs are imposed based on possible subsequent reconfigurations of goods rather than their actual condition as imported. Unfortunately, on June 29, 2020, the Court denied review.


Related Documents:
NAM brief  (March 19, 2020)

 

National Association of Manufacturers v. United States Department of the Treasury   (U.S. Court of International Trade)

Challenging final duty drawback rule

The NAM sued to challenge a federal regulation that strips manufacturers of a congressionally-mandated tax incentive to increase domestic manufacturing and exports. The regulation at issue involves “duty drawback”—the refund of taxes, duties, or fees paid on imported goods when the same or similar goods are exported. By way of example, drawback would allow a distilled spirits company that exports vodka from the United States to claim a refund on taxes and duties paid on the same quantity of imported vodka. These incentives encourage domestic production and have been used by the wine industry since 2004 to increase exports. Despite a clear statutory mandate from congress in 2016 legislation, a recent federal rule disallows certain categories of drawback claims for distilled spirits, wine, beer, and other products. The NAM's lawsuit seeks to invalidate the rule and require a replacement rule that reflects congress’ clear intent in allowing such claims. On January 24, 2020, the court struck down the rule, a major victory for drawback claimants.


Related Documents:
NAM reply brief  (September 23, 2019)
NAM opening brief  (June 24, 2019)
NAM Complaint  (April 17, 2019)

 


Administrative Procedure -- 2019



Kisor v. Wilkie   (U.S. Supreme Court)

Scope of judicial deference to agency regulations

The NAM filed an amicus brief in support of certiorari to the U.S. Supreme Court in a case involving judicial deference to administrative agencies’ interpretations of their own regulations. The case arose from a veteran’s lawsuit against the Veterans’ Administration over his post-service benefits. The sole legal question before the Supreme Court is whether the landmark case of Auer v. Robbins (S. Ct. 1997) should be overturned. Auer held that reviewing courts should give “extreme deference” to administrative agencies’ interpretations of their own regulations. This so-called “Auer deference” allows agencies to promulgate vague regulations then enjoy broad judicial deference to their own interpretation of their regulation. This case has important implications for manufacturers because a favorable ruling by the Supreme Court would discourage agencies from promulgating vague regulations and would give more certainty to manufacturers that their own reasonable interpretations of regulations will be upheld in response to a government enforcement proceeding or other regulatory action. The NAM’s brief in support of certiorari explained how extreme judicial deference to agencies harms manufacturers. On December 10, 2018, the Court granted certiorari to hear the case. The NAM then submitted an amicus brief on the merits that reinforced our arguments for why the doctrine should be abolished. On June 26, 2019, the Court declined to overrule the doctrine but substantially narrowed its application. This ruling will result in more regulatory certainty and clarity for manufacturers.


Related Documents:
NAM brief  (January 31, 2019)
NAM brief  (August 1, 2018)

 


Alien Tort Statute -- 2019



Doe v. Nestle   (9th Circuit)

Scope of Alien Tort Statute

The NAM filed an amicus brief to oppose a class action lawsuit that seeks to impose overbroad civil liability on manufacturers under the U.S. Alien Tort Statute. The lawsuit alleges that major food producers violated the Alien Tort Statute by purchasing cocoa from African producers engaged in criminal conduct and human rights violations. The defendant food producers moved to dismiss the complaint. A federal district court granted the motion to dismiss, finding that the complaint seeks an improper extraterritorial application of the Alien Tort Statute because the alleged violations occurred in Africa. On appeal, the U.S. Court of Appeals for the Ninth Circuit held that the plaintiffs should be allowed to pursue their claims against the major food producers for "aiding and abetting" the cocoa producers' alleged violations. The Ninth Circuit reasoned that the major business decisions about the cocoa purchases and related payments were made within the United States, and therefore a domestic application of the Alien Tort Statute is appropriate. This interpretation of the Alien Tort Statute would open the floodgates to potential claims against manufacturers for any payments to foreign suppliers whom a plaintiff could allege is involved in any conduct that violates international norms. Over the past two decades, companies have been named as defendants in hundreds of these types of lawsuits. The suits are typically litigated for a decade or more, imposing substantial legal and reputational costs on corporations that operate in developing countries and chilling further investment. A class-action lawsuit on such a basis could impose massive settlement pressure on companies involved in no wrongdoing whatsoever. Such a precedent would enrich opportunistic trial lawyers while harming manufacturers and doing nothing to alleviate violations of international law. The NAM's amicus brief supports en banc review by identifying the harmful consequences this decision would have on all manufacturers. On July 6, 2019, the court denied en banc review.


Related Documents:
NAM brief  (December 7, 2018)

 


Antitrust -- 2019



United States v. AT&T, Inc.   (D.C. Circuit)

Support for efficient vertical mergers

The NAM filed an amicus brief supporting AT&T in the United States Court of Appeals for the District of Columbia Circuit. The government appealed the district court’s determination that AT&T’s merger with Time Warner is unlikely to “substantially lessen competition.” Preserving flexibility to pursue efficient mergers and promoting predictable and transparent antitrust enforcement is important to all of industry. The NAM’s brief argued that mergers such as this increase efficiency and benefit consumers, and clear merger standards are important to provide the business community with confidence to invest in transactions that have the potential to lower prices and benefit everyone. The D.C. Circuit rejected the government's challenge.


Related Documents:
NAM brief  (September 27, 2018)

 


Class Actions -- 2019



Ahold, U.S.A. v. Warner Chilcott PLC   (1st Circuit)

Antitrust liability for branded pharmaceutical manufacturers

The NAM filed an amicus brief to argue against overbroad antitrust liability for pharmaceutical manufacturers that settle patent infringement litigation with potential generic competitors. A group of plaintiffs brought a class action lawsuit against the manufacturer of a branded contraceptive pill, arguing that a litigation settlement agreement between the branded manufacturer and a potential generic competitor delayed market entry for the generic product and artificially maintained prices for the branded product. Only 26 wholesalers purchased the branded product. Courts generally require at least 40 plaintiffs to meet the numerosity requirement of class certification. The plaintiffs’ counsel sought to expand the size of the plaintiff class by including wholesale purchasers of other generic contraceptive pills made by another manufacturer. They argued that under the “umbrella theory” of antitrust injury, antitrust violators who limit output thereby bring about higher market prices for related products. By this logic, the group of potential plaintiffs increased from 26 to 47. A federal district court accepted that reasoning and certified the class action. The defendants sought immediate review from the U.S. Court of Appeals for the First Circuit. The NAM’s amicus brief in support of review explains why the umbrella theory of antitrust injury is invalid and identifies the harms to manufacturers if such a theory is upheld. On December 17, 2019, the parties filed a notice of settlement with the court.


Related Documents:
NAM brief  (July 23, 2019)

 

Behr Dayton Thermal Products v. Martin   (U.S. Supreme Court)

Reasonable class action certification standards

The NAM filed an amicus in support of a petition to certiorari to the U.S. Supreme Court to ask the court to reverse an appellate ruling that would expose manufacturers to overbroad class action lawsuits. The case involves class action litigation arising from alleged groundwater contamination by manufacturers in Dayton, Ohio. The Sixth Circuit court of appeals found that the proposed class of plaintiffs lacked the requirements for class certification but nonetheless certified seven legal issues for class treatment. This overbroad interpretation of class certification threatens manufacturers by allowing a far broader range of claims to be brought against manufacturers than federal law allows. The NAM's amicus brief asks the Supreme Court to take the case and reverse the appellate holding. On March 18, 2019, the Court denied certiorari.


Related Documents:
NAM brief  (November 13, 2018)

 

FCA US LLC and Harman Int’l Industries, Inc. v. Flynn   (U.S. Supreme Court)

No harm class action standing

The NAM filed an amicus brief to oppose class action standing where there is no harm. A class of plaintiffs allege that Jeep infotainment systems have cyber-security “vulnerabilities” that render the subject vehicles “more” susceptible to hacking than other vehicles, though no FCA US vehicle has ever been hacked in real world conditions. This case raises important and unsettled questions regarding standing and class certification standards, which threaten to open the floodgates to class action lawsuits over every connected product in which consumers could allege that the product they own is “defective” because it is more “vulnerable” to a hack than other similar products even if no hack has ever occurred in real world conditions. The NAM’s brief explains why certifying a class for a mere risk of a “hack” is not a violation of a manufacturers’ standard of care, is not compensable harm and circumvents clear precedent. The Supreme Court declined to hear the case.


Related Documents:
NAM brief  (October 29, 2018)

 

Philip Morris v. Boatright   (U.S. Supreme Court)

Due process limits on class actions

The NAM filed an amicus brief asking the U.S. Supreme Court to review cases on the constitutional due process limits on class-action litigation involving R.J. Reynolds and Philip Morris. The lower courts allowed a jury determination on general liability in one case to prevent a defense in another case as to whether each of a manufacturer’s products was defective. If allowed to stand, these decisions have the potential to improperly expose manufacturers to burdensome litigation without the proper opportunity to defend themselves. The NAM has previously filed amicus briefs in related cases, also arguing that class-action defendants have a due process right to a judicial determination of every element of a claim. The Supreme Court denied the petition for certiorari.


Related Documents:
NAM brief  (December 20, 2018)

 

R.J. Reynolds Tobacco Co. v. Searcy   (U.S. Supreme Court)

Due process limits on class actions

The NAM filed an amicus brief asking the U.S. Supreme Court to review cases on the constitutional due process limits on class-action litigation involving R.J. Reynolds and Philip Morris. The lower courts allowed a jury determination on general liability in one case to prevent a defense in another case as to whether each of a manufacturer’s products was defective. If allowed to stand, these decisions have the potential to improperly expose manufacturers to burdensome litigation without the proper opportunity to defend themselves. The NAM has previously filed amicus briefs in related cases, also arguing that class-action defendants have a due process right to a judicial determination of every element of a claim. The Supreme Court denied the petition for certiorari.


Related Documents:
NAM brief  (December 20, 2018)

 


Communications -- 2019



Mozilla Corp. v. FCC   (D.C. Circuit)

Repeal of the 2015 net neutrality rule

The NAM filed an amicus brief in the U.S. Court of Appeals for the D.C. Circuit supporting the Federal Communications Commission’s (FCC) repeal of the 2015 net neutrality rule. In August, a group of plaintiffs sued alleging the FCC unlawfully overturned the 2015 rule by mischaracterizing how the internet access works. Manufacturers are the beneficiaries of a global broadband infrastructure, which has transformed the way they operate, providing numerous opportunities to create and market innovative products and services. The NAM’s brief explains that regulating broadband providers as common carriers is unwise, and the FCC’s change promotes investment that is critical to developing the next generation of technologies. In a win for manufacturers, on October 1, 2019, the court upheld the repeal.


Related Documents:
NAM brief  (October 18, 2018)

 


Discovery -- 2019



BouSamra v. Excela Health   (Pennsylvania Supreme Court)

Attorney–client privilege for non-lawyers

The NAM filed an amicus brief in the Pennsylvania Supreme Court arguing that documents shared between counsel and non-lawyers working with a company on a complex legal issue should be privileged. The issue is whether company conversations with public relations and legal counsel are privileged when determining how best to represent the company. Privilege over documents should not be waived merely because they are shared with public relations professionals to ensure that the company’s comments in the media are consistent with their legal positioning. It serves the interests of justice to extend the attorney–client privilege and work product doctrine so that businesses can properly integrate the lawyering and communications aspects of high-profile litigation. The Pennsylvania Supreme Court held that the attorney-client privilege can extend to communications among a company, its outside counsel, and a public relations firm involved in the matter


Related Documents:
NAM brief  (March 12, 2018)

 


Environmental -- 2019



American Farm Bureau Federation v. EPA   (S.D. Texas)

Challenging Waters of the United States regulation

The NAM and 13 other organizations sued the EPA and the U.S. Army Corps of Engineers in 2016 to challenge the agencies’ 2015 rule defining the scope of jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). The 2015 WOTUS rule exerts jurisdiction over a staggering range of waters and dry landscape features -- large and small; permanent, intermittent, or ephemeral; flowing or stagnant; natural or manmade; and interstate or intrastate. The NAM’s complaint argues that the rule exceeds the Clean Water Act and the United States Constitution.

The 2015 WOTUS rule defines which waters and land areas require a permit under the Clean Water Act for discharges of pollutants to those areas. The rule’s definitions and prohibitions are complex and vague, and often require case-by-case determinations by the agencies. Manufacturers will be required to undertake expensive and laborious efforts to determine whether landscape features on their property are jurisdictional. Penalties for unpermitted discharges (which can include simply moving dirt or mud without a permit) are tens of thousands of dollars per day, per violation.

The U.S. Court of Appeals for the Sixth Circuit initially asserted jurisdiction to hear the various legal challenges to the 2015 WOTUS rule. Due to questions about that Court’s authority to decide these cases, however, the NAM asked the United States Supreme Court to rule that federal district courts in fact are the proper venue for challenges to the 2015 WOTUS rule. In a unanimous decision issued on January 22, 2018, the Supreme Court ruled in the NAM’s favor, declaring that challenges to jurisdictional rules under the Clean Water Act must proceed in the federal district courts. That decision gave manufacturers and other regulated industries long-needed clarity on judicial resolution of rulemakings under the Clean Water Act. That clarity will expedite future litigation under the Clean Water Act.

While that procedural wrangling unfolded, the agencies began the regulatory process of rescinding the 2015 WOTUS rule and replacing it with a new jurisdictional rule. To ensure that the 2015 WOTUS rule does not come back into effect while the agencies complete their rule replacement process, the agencies issued a rule on February 6, 2018, that delays the effectiveness of the 2015 WOTUS rule until February 2020. In August 2018, a federal court enjoined that rule, which bring the 2015 WOTUS rule back into effect in the 26 states not already subject to a stay of the rule.

On October 18, 2018, the NAM filed our motion for summary judgment, which seeks to invalidate the 2015 WOTUS rule in its entirety. Our brief argues that the rule violates federal law and the U.S. Constitution, and should be invalidated in its entirety.

In a major win for manufacturers, on May 28, 2019, the court ruled that the EPA violated the law by issuing the rule without adequate notice and opportunity to comment on the proposed rule. The court remanded the rule to the agency to re-propose the rule and provide adequate opportunity to comment.


Related Documents:
Motion for Reconsideration  (July 25, 2019)
NAM Reply  (December 3, 2018)
NAM Reply  (November 7, 2018)
NAM Motion  (October 18, 2018)
NAM Motion  (February 7, 2018)
NAM Opposition to Motion to Dismiss  (May 13, 2016)

 

Appalachian Voices v. FERC   (D.C. Circuit)

Federal review of new energy infrastructure projects

The NAM filed an amicus brief in support of the Mountain Valley Pipeline, a major new natural gas transmission pipeline to bring natural gas from the Marcellus shale region to manufacturers, electricity generators, and other consumers in the eastern United States. The U.S. Federal Energy Regulatory Commission (FERC) approved the pipeline under Section 7 of the Natural Gas Act. Environmental groups sued to challenge that authorization, arguing that FERC's environmental review under the National Environmental Policy Act (NEPA) should have quantified the greenhouse gas emissions impacts of all possible downstream uses of the natural gas. If courts interpret NEPA as imposing that requirement, the approval process for major energy infrastructure projects will only become more complex, delayed, and uncertain as FERC undertakes a speculative GHG analysis that environmental groups would inevitably challenge in court to delay project commencement. The NAM's amicus brief argued that NEPA does not compel a GHG analysis for every new energy infrastructure project, and that FERC properly exercised its discretion in determining that GHG emissions are not indirect effects of its approval of the Mountain Valley Pipeline. On February 19, 2019, the U.S. Court of Appeals for the D.C. Circuit upheld FERC's approval, concluding that FERC's consideration of the potential emissions impacts was reasonable under NEPA.


Related Documents:
NAM brief  (November 27, 2018)

 

California Communities Against Toxics v. EPA   (D.C. Circuit)

Streamlined air permitting under the Clean Air Act

The NAM filed an amicus brief to defend the EPA’s withdrawal of a prior EPA policy known as "once in, always in" that imposed unreasonable and unlawful regulatory burdens on manufacturers under the Clean Air Act. In January of 2018, the EPA issued a guidance memorandum withdrawing the prior policy for the classification of major sources of hazardous air pollutants under section 112 of the Clean Air Act. With the new guidance, sources of hazardous air pollutants previously classified as “major sources” may be reclassified as “area” sources when the facility limits its potential to emit below major source thresholds. The new policy promotes regulatory clarity and reduces burdens for manufacturers while continuing to ensure stringent and effective controls on hazardous air pollutants. Environmental groups sued to challenge the policy change. The NAM filed an amicus brief in support of the EPA. Our brief explains how the policy change will continue to preserve air quality while removing unlawful and excessive regulatory burdens on manufacturers. In a win for manufacturers, on August 20, 2019, the court dismissed the challenge, finding the guidance was not final agency action subject to judicial review.


Related Documents:
NAM brief  (January 14, 2019)

 

California Communities Against Toxics v. EPA   (D.C. Circuit)

Hazardous waste recycling

The NAM intervened in a lawsuit by environmental groups that seeks to constrain manufacturers' ability to recycle hazardous waste. The plaintiffs challenged a 2018 rule by the U.S. Environmental Protection Agency (EPA) that removed significant burdens on manufacturers to recycle hazardous waste under the federal Resource Conservation and Recovery Act (RCRA). Those burdens had been removed in the 2018 rule as a result of successful NAM litigation in 2017 that challenged an earlier EPA regulation that unreasonably burdened manufacturers. Hazardous waste recycling is important to many segments of the manufacturing industry because it allows companies to reuse or repurpose chemicals, minerals, or other products that otherwise would require disposal (typically at significant expense). By intervening on behalf of EPA, the NAM sought to preserve the 2018 rule and to bring the voice of manufacturers to the litigation. On July 2, 2019, the D.C. Circuit, in a unanimous ruling, rejected the plaintiffs’ challenge. This ruling preserves a safe and cost-effective means for companies to recycle hazardous waste.


Related Documents:
NAM Motion  (July 12, 2018)

 

Center For Biological Diversity v. EPA   (5th Circuit)

Protecting offshore energy development

The NAM filed an amicus brief opposing environmental groups' efforts to invalidate a critical Clean Water Act permit for offshore oil and natural gas development. The case involves EPA's reissuance of a regional general permit under the Clean Water Act that authorizes certain pollutant discharges from offshore oil and natural gas platforms in the Gulf of Mexico. EPA's environmental review in support of that permit adopted a recent environmental analysis of the Gulf of Mexico by another federal agency. The plaintiffs argue that federal law required EPA to perform a separate and redundant environmental review. If their argument prevails, EPA would be required to undertake time-consuming environmental reviews for a range of new energy infrastructure projects and any other economic activity that could impact the environment. Those delays would in turn delay new projects. In support of the defendant EPA, the NAM filed an amicus brief that highlights the importance of oil and natural gas development to the national economy and energy security and argues that EPA's adoption of the related environmental review is lawful, appropriate, and consistent with past practice. In a win for manufacturers, on August 30, 2019, the court dismissed the plaintiff's claims for lack of standing.


Related Documents:
NAM brief  (September 28, 2018)
NAM brief  (August 23, 2018)

 

Cowpasture River Preservation Ass'n v. U.S. Forest Service   (4th Circuit)

Unreasonable pipeline permitting restrictions

The NAM filed an amicus brief in support of en banc review by the U.S. Court of Appeals for the Fourth Circuit to reverse a panel holding that invalidated a federal permit for a major natural gas transmission pipeline that crosses U.S. Forest Service lands. An environmental group sued the U.S. Forest Service to invalidate its permit allowing the Atlantic Coast Pipeline to cross beneath the Appalachian Trail hiking route. A panel of the Fourth Circuit held that the Mineral Leasing Act does not allow agencies to grant rights-of-way for pipelines to cross any stretch of the Appalachian Trail; rather, such approvals must come from a majority vote of the U.S. congress. This holding effectively converts the Appalachian Trail into a 2,200-mile barrier to pipeline construction from Maine to Georgia. The court’s reasoning could also be applied to any one of the dozens of pipelines that currently cross beneath the trail because such pipelines require periodic permit renewals. In support of the intervenor Atlantic Coast Pipeline’s petition for en banc review by the Fourth Circuit, the NAM filed an amicus brief that explained the legal flaws in the panel’s reasoning and highlighted the important benefits that pipelines provide for manufacturers and the national economy. On February 25, 2019, the Fourth Circuit denied en banc review.


Related Documents:
NAM brief  (February 19, 2019)

 

Environmental Defense Fund v. EPA   (D.C. Circuit)

TSCA inventory reset intervention

The MCLA intervened in a lawsuit by environmental groups that seeks to overturn an EPA rule implementing the Toxic Substances Control Act (TSCA). The rule, “TSCA Inventory Notification (Active-Inactive) Requirements,” governs the process whereby the EPA must update the list of chemicals used in commerce in the United States. The EPA’s final rule allowed companies to keep certain information about the chemical free from public disclosure on confidentiality grounds. An environmental group sued to challenge the rule, arguing that the EPA failed to comply with various procedural requirements in promulgating the rule and that the rule unlawfully shields information from public disclosure. The confidentiality of chemical information is critically important to chemical manufacturers. To help defend the rule, the MCLA intervened in the case. On June 26, 2019, the D.C. Circuit Court of Appeals rejected all but one of the plaintiffs’ claims. It broadly upheld the confidentiality aspects of the rule of greatest concern to chemical manufacturers. Given the EPA’s relatively minor procedural misstep on only one aspect of the rule, the court allowed the rule to continue in force while the EPA addresses the procedural error.


Related Documents:
NAM intervenor brief  (May 31, 2018)
Motion to Intervene  (October 2, 2017)

 

Georgia v. Wheeler   (S.D. Ga.)

Challenge to WOTUS rule

In 2015, a coalition of states led by Georgia sued the U.S. Environmental Protection Agency (EPA) to challenge an EPA regulation governing jurisdictional "Waters of the United States" (WOTUS) under the Clean Water Act. Soon after Georgia filed suit, the court stayed the litigation while a separate federal appellate court asserted jurisdiction to resolve the case. In January of 2018, the U.S. Supreme Court ruled that challenges to the WOTUS rule should be heard in federal district courts. The Georgia district court thereafter reopened the case to allow Georgia's suit to proceed.

The NAM's litigation coalition moved to intervene in the case to bring the voice of manufacturers to the case. The 2015 WOTUS rule defines which waters and land areas require a permit under the Clean Water Act for discharges of pollutants to those areas. The rule’s definitions and prohibitions are complex and vague, and often require case-by-case determinations by the agencies. Manufacturers will be required to undertake expensive and laborious efforts to determine whether landscape features on their property are jurisdictional. Penalties for unpermitted discharges (which can include simply moving dirt or mud without a permit) are tens of thousands of dollars per day, per violation.

On July 10, 2018, the Court granted the NAM's intervention. On August 31, 2018, the NAM filed its motion for summary judgment with the court, and on September 26, 2018, filed a motion for a nationwide injunction against the rule. In a major win for manufacturers, the court on August 21, 2019, invalidated the rule on procedural and substantive grounds, including that the regulation seeks to impose federal jurisdiction beyond the limits imposed by the Clean Water Act.


Related Documents:
NAM brief  (December 24, 2018)
NAM Motion  (September 26, 2018)
NAM Motion  (August 31, 2018)
NAM Complaint  (June 29, 2018)
NAM Motion  (June 29, 2018)

 

In re: PennEast Pipeline Company LLC   (3rd Circuit)

State interference with energy development

The NAM filed an amicus brief to oppose New Jersey’s efforts to stop construction of a major new proposed natural gas pipeline to deliver natural gas from Pennsylvania to the eastern United States. The proposed PennEast Pipeline is natural gas transmission pipeline to bring abundant and low-cost natural gas from northeastern Pennsylvania to manufacturers, power generators, and other customers in New Jersey and throughout the eastern United States. The state of New Jersey resisted the pipeline's exercise of eminent domain under the federal Natural Gas Act, arguing that the 11th Amendment to the U.S. Constitution prohibits federal courts from effectuating the eminent domain over lands in which the state has a property interest (such as a conservation easement). If New Jersey's argument prevails, it would give that state and others a unilateral veto over federally approved natural gas transmission pipelines. Those vetoes would restrict future pipeline infrastructure development, leading to lower availability of natural gas and increased costs to manufacturers for natural gas, electricity, and other products derived from natural gas. The NAM's amicus brief explains the practical implications of New Jersey's argument and argues why the 11th Amendment does not support the state's interpretation. In a troubling decision for manufacturers, the Third Circuit on September 10, 2019, held that New Jersey's sovereign immunity bars eminent domain proceedings against New Jersey under the Natural Gas Act. On October 29, 2019, our coalition petitioned the court for rehearing and rehearing en banc, in which we highlighted the 3rd Circuit's significant disruption of new energy infrastructure development and why the full 3rd Circuit court should hear the case en banc. Unfortunately, the court denied en banc review.


Related Documents:
NAM brief  (October 29, 2019)
NAM brief  (May 15, 2019)

 

Lighthouse Resources Inc. v. Inslee   (W.D. Wash.)

State interference with free trade

The NAM filed an amicus brief in a case involving the state of Washington’s authority to prohibit certain exports from Washington’s coastal ports. Washington state denied several environmental permits necessary to construct a new coal export terminal near Longview, Washington. The denials were improperly based on climate concerns about the use of coal for electricity generation in foreign countries. The state’s actions have dangerous implications for the power of individual states to interfere with interstate and international trade. The NAM’s amicus brief argued that this interference is unconstitutional and harms the national economy. Unfortunately, the district court rejected the plaintiffs' claims. The plaintiff appealed to the 9th Circuit, where the NAM filed another amicus brief on their behalf.


Related Documents:
NAM brief  (March 11, 2019)
NAM brief  (May 3, 2018)

 

Martinez v. Colo. Oil & Gas Conservation Comm'n   (Colorado Supreme Court)

Colorado oil and gas permits

In April of 2018, the NAM filed an amicus brief that asked the Colorado Supreme Court to reverse an appellate ruling that required the Colorado Oil and Gas Conservation Commission (COGCC) to consider a rulemaking request that would have effectively banned oil and natural gas development in Colorado. A group of Colorado residents filed the rulemaking proposal for the purpose of restricting fossil fuel development, and hydraulic fracturing in particular. On January 14, 2019, the Colorado Supreme Court ruled that the COGCC properly rejected the rulemaking proposal. This ruling benefits energy producers and manufacturers in Colorado and beyond by ensuring the continued supply of abundant and cost-effective energy.


Related Documents:
NAM brief  (April 2, 2018)
NAM brief  (May 18, 2017)

 

Murray Energy Corp. v. EPA   (D.C. Circuit)

Challenging 2015 ozone standard

In 2015 the NAM sued the U.S. Environmental Protection Agency to challenge its final rule lowering the ozone National Ambient Air Quality Standard (NAAQS) from 75 to 70 parts per billion. The rule could be one of the most expensive in history and burden manufacturers by limiting their air emissions and ability to grow and expand operations. The NAM seeks to invalidate the standard and secure an instruction from the court to raise the standard. The court stayed litigation in April 2017 to allow the new presidential administration to determine whether to revise the standard. On August 1, 2018, EPA announced that it would not revise the standard but instead expedite the consideration and issuance of the 2020 NAAQS standard. In August of 2019, the D.C. Circuit upheld the 2015 ozone NAAQS standard of 70 ppb against claims by environmental groups that the standard is too lax, but also rejected arguments by the NAM and other industry groups and states that the standard is too strict and fails to properly account for background sources of ozone. This ruling avoids the serious economic consequences that would have come with the court mandating a lower standard.


Related Documents:
Opposition Motion to Intervene  (July 17, 2017)
Industry Reply Brief  (September 14, 2016)
Intervenor Brief  (August 17, 2016)
Opening Brief  (April 22, 2016)

 

Natural Resources Defense Council v. EPA   (D.C. Circuit)

Defending regulatory clarity for Clean Air Act permits

The NAM intervened in a legal challenge by environmental groups to a policy by the U.S. Environmental Protection Agency that clarifies manufacturers' permitting obligations under the Clean Air Act. The lawsuit seeks to invalidate an EPA interpretive memorandum that identifies factors to guide a facility’s determination of whether separate physical or operational changes to the facility constitute a single project” under the EPA’s New Source Review (NSR) permitting program. Determining the extent of a project under NSR is important for many manufacturers because combining several pollution sources at a facility can trigger NSR permitting requirements that mandate expensive air pollution control technologies. The NAM intervened as a defendant on behalf of the EPA to help defend the interpretation and preserve regulatory clarity for manufacturers. On June 25, 2019, the environmental plaintiffs moved to dismiss their case. Although their dismissal motion did not state the reasons, we infer that our intervention arguments might have caused them to realize the weakness of their case.


Related Documents:
NAM Motion  (February 13, 2019)

 

Otsego 2000 v. FERC   (D.C. Circuit)

Greenhouse gas analysis of pipelines

The NAM filed an amicus brief to argue that the Federal Energy Regulatory Commission (FERC), when reviewing a pipeline company’s permit application for a new pipeline infrastructure project, does not have a categorical obligation under federal law to forecast the speculative greenhouse gas impacts of possible uses of the natural gas by unknown and unknowable customers of the natural gas. The case arises from FERC’s approval of upgrades to an existing natural gas pipeline in New York state. In reviewing the environmental impacts of those upgrades under the National Environmental Policy Act (NEPA), FERC declined to undertake a speculative analysis of the greenhouse gas impacts of the possible uses of the natural gas by the ultimate customers of the gas. An environmental group sued FERC to challenge that determination. In FERC’s defense, the NAM filed an amicus brief to support FERC’s approach of determining on a case-by-case basis whether a greenhouse gas analysis is appropriate for a particular energy infrastructure project. This approach is important to manufacturers because it avoids prolonged and speculative environmental reviews that opposition groups can use as a basis to challenge and delay new energy infrastructure development. On May 9, 2019, the court found the plaintiffs lacked standing and therefore dismissed the case.


Related Documents:
NAM brief  (February 1, 2019)

 

Puget Soundkeeper Alliance v. Wheeler   (W.D. Wash.)

Challenge to delayed implementation of EPA's 2015 "Waters of the U.S." rule and waste treatment exclusion

The NAM intervened in a legal challenge by environmental groups to the EPA’s delayed implementation of the 2015 rule governing jurisdictional “Waters of the United States” (WOTUS) under the Clean Water Act, and to that rule’s jurisdictional exception for waste treatment systems. After a change in presidential administrations in early 2017, the EPA delayed the effective date of the 2015 WOTUS rule until February 2020. The purpose of that delay was to preserve the pre-rule status quo while the EPA proposes and finalizes a replacement WOTUS rule. A coalition of environmental groups sued to challenge that delay. On November 26, 2018, the court found that the delay failed to comply with applicable procedural requirements. The court invalidated the delay rule, thereby causing the 2015 WOTUS rule to come back into effect.

After this procedural win, the environmental plaintiffs then turned their attention to the merits of the 2015 WOTUS rule. In May of 2019, the plaintiffs filed a motion for summary judgment to seek to invalidate the 2015 WOTUS rule’s exception of waste treatment systems from Clean Water Act jurisdiction. Waste treatment systems are essential elements of various industrial operations. They are used in mining, power generation, pulp and paper mills, manufacturing, infrastructure, and a host of other activities. Waste treatment systems prevent pollution by treating, settling, retaining, or removing pollutants before being discharged into rivers, lakes, streams, or other waters. The NAM’s litigation coalition filed a motion opposing the plaintiffs’ summary judgment motion. In our brief we explained the environmental benefits of waste treatment systems and the Clean Water Act’s express allowance and process for creating and issuing permits for those systems. We also attacked the plaintiffs’ standing to bring the challenge.

In a great win for manufacturers, the court on November 25, 2019, dismissed the plaintiffs' case for lack of standing.


Related Documents:
NAM brief  (May 29, 2019)
NAM Motion  (June 28, 2018)

 

South Carolina Coastal Conservation League v. Wheeler   (D.S. Car.)

Applicability of "Waters of the United States" rule

On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional "Waters of the United States" under the Clean Water Act (2015 WOTUS rule). A coalition of environmental groups sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule. On August 16, 2018, the court ruled in the plaintiffs' favor, finding that EPA violated the Administrative Procedure Act by failing to request and consider comments on the flaws of the 2015 WOTUS rule and by refusing to consider the substantive implications of suspending the rule.


Related Documents:
NAM brief  (July 6, 2018)

 

West Virginia v. EPA   (D.C. Circuit)

Challenging EPA's Clean Power Plan

In 2015, the NAM challenged the EPA’s Clean Power Plan, a rule that went beyond the EPA’s legal authority to regulate carbon dioxide emissions under the Clean Air Act. Before the rule became effective, the U.S. Supreme Court stayed the rule pending the resolution of the litigation. Then, in 2017, the D.C. Circuit held the litigation itself in abeyance to allow the incoming administration to decide whether to rescind or revise the rule. The EPA proposed a replacement rule—the Affordable Clean Energy Rule—in August 2018. A final rule issued in June 2019. With the Clean Power Plan rule replaced by the Affordable Clean Energy Rule, the parties moved to dismiss the case. On September 17, 2019, the court dismissed the case as moot.


Related Documents:
NAM reply brief  (April 22, 2016)
NAM merits brief on core legal issues  (February 19, 2016)

 


False Claims Act -- 2019



Cochise Consultancy v. United States   (U.S. Supreme Court)

Statute-of-limitations for private false claims act cases

The NAM filed an amicus brief in the U.S. Supreme Court urging a limited time frame for private relators to bring False Claims Act (FCA) cases. The FCA establishes two distinct statute-of-limitations periods: six years for relators’ claims and up to ten years for claims brought by a government official or with the knowledge of a government official. The U.S. Supreme Court considered the issue of whether the “government knowledge” period of ten years applies only when the government intervenes in the case or whether that period also applies to relators even when the government has chosen not to pursue the claim. The shorter statute of limitations would reduce the number of very old claims that manufacturers would be forced to defend—at significant expense and with the disadvantage of faded memories. The NAM’s brief argued that a relator in an FCA action is limited to the six-year statute of limitations, but the Court held that the longer limit of up to ten years applies.


Related Documents:
NAM brief  (January 9, 2019)

 


Free Speech -- 2019



American Beverage Association v. City of San Francisco   (9th Circuit)

Compelled speech for food and beverage advertising

In 2015, the City of San Francisco enacted an ordinance that requires large warnings on advertisements for certain beverages containing added sugar. The warnings declare that "Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay." Groups representing the affected industries sued in federal court to enjoin the ordinance. They lost at the trial level but won on their initial appeal. The city is now seeking a further appeal to the full United States Court of Appeals for the Ninth Circuit. The legal issues in this case will have far-reaching implications for manufacturers. If governments like San Francisco’s can force manufacturers to speak out against the very products they create or compel companies to spread controversial messages on their products or advertising, companies’ voices could be silenced, and their business harmed. The NAM filed an amicus brief in support of the beverage companies that fights back against the city’s ordinance and the larger problem of regulation through compelled speech. Our brief explains how the ordinance violates the First Amendment to the U.S. Constitution by impermissibly compelling commercial speech. On February 1, 2019, the court ruled for the plaintiff on its free speech claims.


Related Documents:
NAM brief  (March 5, 2018)

 

CTIA v. The City of Berkeley, California   (U.S. Supreme Court)

Standard of judicial review for compelled commercial speech

The NAM filed an amicus brief in support of a petition for certiorari to overturn a city ordinance that compels commercial speech in violation of the First Amendment to the U.S. Constitution. The City of Berkeley, California, required mobile phone retailers to post in-store warnings about alleged risks of cellular phone radiation. The wireless industry’s trade association sued to challenge the ordinance, arguing it violated the store owners’ free speech rights. The U.S. Court of Appeals for the Ninth Circuit upheld the standard, reasoning that commercial speech is subject to the least rigorous level of judicial review. The U.S. Supreme Court granted review and summarily reversed, ordering the 9th Circuit to reconsider its decision in light of intervening Supreme Court caselaw governing compelled speech. The 9th Circuit again upheld the ordinance by applying a relaxed standard of review that requires only that the compelled speech is reasonably related to any “more than trivial” governmental interest. In support of the association’s second petition for certiorari to the U.S. Supreme Court, the NAM filed an amicus brief seeking review and reversal of the 9th Circuit’s overly permissive review standard for compelled commercial speech. Our brief explained how the 9th Circuit’s lax standard will inflict significant harm on businesses and why the ordinance is unconstitutional. On December 9, 2019, the court denied certiorari.


Related Documents:
NAM Brief  (November 5, 2019)

 


Government Regulation -- 2019



American Fuel & Petrochemical Manufacturers v. O'Keeffe   (U.S. Supreme Court)

Restriction on the free trade of energy

The NAM filed an amicus brief in support of a petition for certiorari to the U.S. Supreme Court to oppose Oregon’s economic discrimination against transportation fuels manufactured outside of Oregon, and to defend the free trade of fuels and other manufactured products within the United States. The case involves Oregon’s “Clean Fuel Program,” which ascribes a “carbon intensity” score to all fuels and requires higher-scoring fuels to pay a financial penalty to sell those fuels in Oregon. Oregon officials responsible for the program acknowledged that one purpose of the program was to discriminate against fuels manufactured outside of Oregon. A federal district court and the U.S. Court of Appeals for the Ninth Circuit upheld the program. An association representing the oil refining industry petitioned the U.S. Supreme Court to review the case. The NAM’s amicus brief in support of certiorari argues that the Oregon law improperly seeks to regulate energy production in other states, and that the lower courts failed to properly scrutinize the program and find that it violates the U.S. Constitution’s prohibition against a state’s economic discrimination against products made out-of-state. Our brief also highlights the problematic consequences for manufacturers if states may enact a patchwork of similar economic restrictions on the free trade of transportation fuels and other manufactured products. On May 13, 2019, the Court denied certiorari.


Related Documents:
NAM brief  (February 8, 2019)

 


Immigration -- 2019



Save Jobs USA v. Department of Homeland Security   (D.C. Circuit)

H-4 visa work authorization for spouses

The NAM filed an amicus brief in the U.S. Court of Appeals for the DC Circuit supporting employers in their efforts to retain highly skilled workers. Spouses of H-1B skilled workers who have been approved for permanent residence can apply for and receive H-4 visas allowing them to work in the United States. If this rule were invalidated, manufacturers would lose access to leading talent, harming their ability to remain competitive in the world economy. A federal district court ruled that the plaintiffs lacked standing to bring the case. On appeal to the D.C. Circuit, the NAM's amicus brief highligted the positive effects of the H-4 program. On November 8, 2019, the D.C. Circuit reversed the lower court's holding on standing and remanded the case to the lower court to allow the case to proceed on the merits.


Related Documents:
NAM brief  (April 8, 2019)

 


Insurance coverage -- 2019



R.T. Vanderbilt Co. v. Hartford Accident & Indemnity Co.   (Connecticut Supreme Court)

Insurance coverage issues for asbestos claims

The NAM filed two separate but related amicus briefs in the Connecticut Supreme Court to argue against restrictive limitations on insurance coverage for asbestos claims. The case involves personal injury claims against a manufacturer for alleged asbestos exposure. The company’s insurers denied coverage, and the manufacturer sued the insurer to compel payment. A Connecticut trial court and appellate court issued a mixed ruling that held in the manufacturers’ favor on some grounds but not others. Questions of insurance policy interpretation and the common law for asbestos claims are important to manufacturers operating in Connecticut and elsewhere. On appeal to the Connecticut Supreme Court, the NAM filed an amicus brief that highlights the importance of this issue for manufacturers and argued in favor of liability coverage for the manufacturer. On October 4, 2019, the court ruled in the company's favor on three out of four of its arguments, delivering a significant win for companies that face asbestos claims.


Related Documents:
NAM brief  (January 10, 2019)
NAM Brief  (November 13, 2018)

 


Jurisdiction -- 2019



ExxonMobil v. Healey   (U.S. Supreme Court)

Personal jurisdiction for subpoenas

The NAM filed an amicus brief to oppose the power of state attorneys general to subpoena out-of-state corporations over issues that are unrelated to the company’s activity in the state. The Massachusetts attorney general issued a subpoena to ExxonMobil that sought decades of communications related to climate change.The company challenged the subpoena, arguing that its in-state activity was not sufficiently related to the scope of the subpoena. The Massachusetts Supreme Court upheld the subpoena despite the tenuous connection between the focus of the subpoena (climate change) and the company’s limited in-state activity (licensing agreements with independently-owned gas stations). That low bar for jurisdiction over out-of-state defendants threatens all manufacturers by massively expanding the range of courts through which plaintiffs or government officials may pursue claims against manufacturers. The NAM’s amicus brief in support of the company's petition for certiorari to the U.S. Supreme Court argues that subpoenas like this are valid only when the nature of the company’s in-state conduct has a substantial relationship with the focus of the subpoena. On January 7, 2019, the Court denied certiorari.


Related Documents:
NAM petition  (October 11, 2018)

 


Labor Law -- 2019



BNSF Railway Co. v. EEOC   (U.S. Supreme Court)

ADA definition of disability for preemployment screenings

The NAM filed an amicus brief with the U.S. Supreme Court urging the court to reject expansion the scope of the Americans with Disabilities Act (ADA) “regarded as” prong of the definition of “disability.” This litigation arises from an Equal Employment Opportunity Commission (EEOC) charge after BNSF withdrew a conditional offer of employment because the company lacked enough information to determine whether an applicant suffered from an impairment that could limit his ability to perform the essential functions of the position. If allowed to stand, the decision would impose significant costs and expose employers to uncontrolled liability. A Supreme Court decision in this case would resolve a circuit split between the Ninth Circuit and other circuits that have considered this question. The NAM’s brief argued that 1) under the Ninth Circuit’s reasoning, an employer that requires an employee to undergo an individualized medical examination “for the purposes of determining whether he has an impairment” will be deemed to per se perceive the employee as having such an impairment and “regard” the employee as disabled; 2) other circuits have rejected this logic; and 3) that the Ninth Circuit’s holding improperly imposes the costs of medical examinations on employers. On November 13, 2019, the Court denied certiorari.


Related Documents:
NAM brief  (April 3, 2019)

 

Boeing v. Int'l Ass'n of Machinists and Aerospace Workers   (NLRB)

Supporting appeal of fractured, small union bargaining unit determination

The NAM filed an amicus brief to support Boeing’s request for the National Labor Relations Board (NLRB) to review its finding that a small group of employees constituted a unit appropriate for collective bargaining. The Boeing Company’s 787 Dreamliner manufacturing facility in South Carolina employs approximately 3,000 production and maintenance employees, who have twice voted against joining a union. The NLRB Regional Director directed the election for a subset of employees at the plant. If the Regional Director’s decision stands, manufacturers could have their workforces artificially fractured into smaller bargaining units in violation of the “community of interest” standard required in making bargaining unit determinations. The NAM’s amicus brief argues that the Regional Director improperly applied a standard that had been overturned and that the fragmented unit creates an artificial barrier that separates employees and departments and frustrates the ability to maintain stable labor relations. On September 9, 2019, the NLRB reversed the regional director's decision, concluding that he misapplied the governing test for whether a subset of employees can bargain separately from the larger workforce.


Related Documents:
NAM brief  (July 16, 2018)

 

Busk v. Integrity Staffing Solutions, Inc.   (U.S. Supreme Court)

Compensation for security screenings

The NAM filed an amicus brief with the U.S. Supreme Court urging review of a lower court decision that Nevada and Arizona employers were obligated to compensate warehouse workers for time spent going through security screenings at the end of the day. That decision identified a federal standard for compensable “work” under the Fair Labor Standards Act independent of the Portal to Portal Act; the court held that Nevada and Arizona did not have to take the Portal to Portal Act into account because neither state adopted the Act. If allowed to stand, that decision would have adverse consequences for businesses who would incur significant liability from the opportunistic plaintiffs’ bar or significant costs in revamping their procedures to try to avoid liability. The NAM’s brief argued that the decision undermines Supreme Court precedent and that it will invite significant financial implications for employers across the country. On October 7, 2019, the court denied certiorari.


Related Documents:
NAM brief  (April 5, 2019)

 

Caesars Entertainment Corp. v. Int'l Union of Painters   (NLRB)

Protection of employer email systems

The NAM filed an amicus brief before the National Labor Relations Board (NLRB) in response to the NLRB’s request for input on whether to reconsider legal precedent that held that employees who have been given access to their employer’s email system for work-related purposes have a presumptive right to use that system for union communications. The NAM’s brief argues that employers should be allowed to safeguard their electronic communications for legitimate business interests, including to minimize distractions in the workplace, to prevent misuses of communications systems, to guard against data security vulnerabilities and to address other liabilities. On December 17, 2019, the NLRB agreed, and reinstated the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


Related Documents:
NAM brief  (October 1, 2018)

 

Cellco Partnership v. NLRB   (9th Circuit)

Restriction on use of email in employee handbooks

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit supporting employers’ right to limit what information is sent on work emails. The case arises from a decision by the National Labor Relations Board (NLRB) that deems illegal portions of Verizon's workplace Code of Conduct that restricts employee use of company email because the NLRB believes the policies violate employee rights to discuss wages, hours and terms of employment. This case is important because manufacturers need to be able to adopt reasonable workplace regulations. The NAM’s brief argues that the ruling ignores the rights of employers to establish safe and productive workplaces and secure email systems, creates legal and practical problems for employers of all sizes, and infringes First Amendment speech rights. On September 24, 2018, the court held the case in abeyance pending the NLRB's reconsideration of the standard set forth in Purple Communications Inc., 361 N.L.R.B. 1050 (2014), which held that employees who have been given access to their employer’s email system for work-related purposes have a presumptive right to use that system, on nonworking time, for communications protected by NLRA Section 7. On December 17, 2019, the NLRB issued its decision, agreeing with the NAM and reinstating the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


Related Documents:
NAM brief  (November 16, 2017)

 

Communication Workers v. NLRB   (9th Circuit)

Use of company email by employees

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit supporting restrictions on the use of company email systems by employees. This case arises from a 2014 decision by the National Labor Relations Board (NRLB) that if a company allows employees to use their email system, the employees have a statutory right to use the system on nonworking time for a wide range of messages and companies have limited oversight authority. This is important for manufacturers because the 2014 NLRB decision allows for extensive workplace distractions and personal misuse of business communication systems. The NAM’s brief argues that the ruling creates legal and practical problems for employers of all sizes, is unnecessary in today's world of social media and free email accounts, and infringes First Amendment speech and Fifth Amendment property rights. On September 24, 2018, the court held the case in abeyance pending the Board’s decision in a separate case, Caesars Entertainment Corp. v. Int’l Union of Painters, which similarly involved the NAM as amicus. The Caesars decision, issued on December 17, 2019, followed the NAM's rationale and reinstated the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


Related Documents:
NAM amicus brief  (October 10, 2017)

 

Marathon v. NLRB   (6th Circuit)

Unreasonable union document requests

The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to support Marathon Petroleum in its appeal from a National Labor Relations Board (NRLB) decision that required Marathon to produce documents during a union discussion. The underlying issue is whether “meet and discuss” means “bargain” under labor law. Marathon agreed to meet and discuss over outside contractors but not to bargain. Manufacturers and their employees rely on maintaining a fair and balanced system for economic growth and job creation. The NAM’s brief argues that the NLRB abuses its discretion by finding that Marathon incurred a bargaining obligation by agreeing to meet and discuss with the union. The Sixth Circuit agreed with Marathon, denied enforcement of the NLRB decision and remanded the case to determine if Marathon had any duty to bargain with the union over outside contractors.


Related Documents:
NAM brief  (December 26, 2018)

 

McDonald's v. Serv. Emp.'s Int'l Union   (NLRB)

NLRB preclusion standards

The NAM filed an amicus brief urging the National Labor Relations Board (NLRB) to uphold specific, well-established recusal standards. This case involves the Service Employees International Union’s (SEIU) attempt to force two republican NLRB members to recuse themselves because their former law firms represented clients with similar issues as the issues in this case, even though neither NRLB member nor their former law firms served as counsel for any of the parties in this case. This “issue preclusion” standard advocated by the SEIU is an extraordinary departure from established recusal procedures, is irreconcilable with federal regulations and unmanageable as a practical matter. The NAM’s brief explains why prior recusal standards should be upheld to allow the NLRB to efficiently decide the many matters it confronts without fundamentally altering how it functions. On November 19, 2019, the NLRB issued its Ethics Recusal Report, which largely upholds the prior recusal standards advocated by the NAM and establishes a new filing obligation requiring all parties appearing before the Board to file an organizational disclosure statement. The report also adopts a written Board member disqualification protocol and determines that Board members can challenge the agency’s ethics official recusal determination and insist on participating in a particular case (though this, according to the report, should be very rare). On December 12, 2019, the Board denied the SEIU's recusal motion.


Related Documents:
NAM brief  (August 28, 2018)

 

Nat’l Women’s L. Ctr. v. OMB   (D.D.C.)

EEO-1 Component 2 pay data reporting

The NAM filed an amicus brief urging the U.S. District Court for the District of Columbia to delay the deadline for filing the Revised EEO-1 Report “Component 2” pay data. Because Component 2 significantly expands the data fields employers must submit, employers need sufficient time to revise their systems, implement new procedures and train employees in order to collect the data. Component 2 creates an administrative burden for employers who will now be forced to bear the costs of complying with the requirements. The NAM’s brief argued that the EEOC has previously recognized that changes to EEO-1 require implementation time; 2) employers reasonably relied on EEOC’s direction and did not take the steps need to comply with collection of the data; 3) consistent with these reasons employers should receive sufficient time to prepare for the revised EEO-1; and 4) the data should not be required until EEOC can preserve confidentiality. The court declined to delay the filing deadline.


Related Documents:
NAM summation  (April 22, 2019)
NAM brief  (April 4, 2019)

 

Nevada v. U.S. Dep’t of Labor   (5th Circuit)

Defending the overtime preliminary injunction from a collateral attack

The NAM filed an amicus brief on behalf of Chipotle Mexican Grill, supporting the nationwide injunction of the overtime rule. The plaintiff in this case filed suit against her employer, Chipotle, alleging violations of the new overtime rule, which had been enjoined by an Eastern District of Texas judge. The judge who issued the nationwide injunction held the plaintiff in contempt. The plaintiff is now appealing the contempt order, arguing that she was not within the judge’s jurisdiction and cannot be held in contempt. If the contempt order is vacated, it would functionally invalidate the nationwide injunction of the overtime rule because it would allow employees to sue employers for non-compliance. The 5th Circuit vacated the contempt order because the court lacked jurisdiction over the plaintiff.


Related Documents:
NAM brief  (July 13, 2018)

 

Parker Drilling Management Services v. Newton   (U.S. Supreme Court)

Employment liability on the outer continental shelf

The NAM filed an amicus brief in the U.S. Supreme Court to overturn an appellate court ruling that workers on offshore drilling platforms may bring state-law labor and employment claims. An employee located on an offshore drilling platform in federal waters on the Outer Continental Shelf sued his employer—an offshore drilling services company—alleging the employer failed to pay the employee for his non-working “standby” time on the platform. The employee argued that California’s labor laws entitled him to payment for the standby time. The drilling company countered that federal labor laws applied because the platform is located on the Outer Continental shelf. A district court ruled that federal law applies, but the U.S. Court of Appeals for the 9th Circuit reversed. The drilling company petitioned the U.S. Supreme Court for review. The NAM filed an amicus brief in support of review. The Court granted review, and on June 10, 2019, concluded that federal labor law applies because the Outer Continental Shelf Lands Act broadly preempts state labor and employment laws. This decision restores certainty for offshore platform owners and operators and removes the specter of hundreds of millions of dollars in unwarranted wage-and-hour liability.


Related Documents:
NAM brief  (February 27, 2019)
NAM brief  (October 26, 2018)

 

Taylor v. Burlington Northern Santa Fe Railway Co.   (Washington State Supreme Court)

Whether obesity is an impairment under Washington state law

The NAM filed an amicus brief in the Washington State Supreme Court arguing that obesity is not a legally protected disability unless the obesity is the result of a physiological disorder. The U.S. Court of Appeals for the 9th Circuit sent a certified question to the Washington State Supreme Court asking whether obesity is an impairment under Washington law to resolve allegations by a plaintiff that his denial of employment because he was obese constituted discrimination. An adverse ruling on this question could affect employee relations and a wide variety of business interactions negatively and could impose significant costs and uncertainty on Washington businesses. The NAM’s brief argues that defining obesity as a “per se” disability would encompass 40 percent or more of the adult population, would be at odds with legislative intent and would place significant burdens on employers. The court held that obesity is always an “impairment” under Washington law, regardless of whether obesity is related to an underlying medical condition.


Related Documents:
NAM brief  (January 14, 2019)

 

United Nurses & Allied Professionals   (NLRB)

Union dues spent on lobbying

The NAM filed an amicus brief with the National Labor Relations Board arguing against treating lobbying as a core union function and significantly altering the current way employees exercise their rights to object to union dues expenditures for political activities. Mandatory union dues may be used only to support union activities germane to collective bargaining, contract administration and grievance adjustment, and may not be used for political speech that conflicts with the First Amendment rights of the union members who pay dues. This case is important because union dues should not be used to promote political causes to which employee's object. Our brief argued that lobbying is not a core union function, the Supreme Court has already decided the issue and employees should not be compelled to fund these political activities. The NLRB agreed, and on March 1, 2019, issued a decision holding that lobbying activities are not so related to the Union’s representational duties to employees as to justify the compelled financial support of those activities.


Related Documents:
NAM brief  (February 19, 2013)

 

UPS Ground Freight v. NLRB   (D.C. Circuit)

As-applied challenge of the ambush election rule

The NAM filed an amicus brief in support of UPS in the first as-applied challenge of the ambush election rule. In 2014, the National Labor Relations Board (NLRB) issued the election rule, which elevated speed above due process and transparency. Shortly thereafter, because the Election Rule failed to balance other important policy objectives, the NAM brought a facial challenge to the rule in the U.S. District Court for the District of Columbia, which rejected the challenge based on its belief that the rule would be applied in a fair manner. A fair, transparent and thorough election process is important for manufacturing employees to be able to have an informed choice whether they want to be represented by a union. The NAM’s brief argues that this case serves as a prime example of how the rule has been applied to deny employers due process, such as by failing to resolve a voter eligibility issue before the election and denying an appropriate hearing. The D.C. Circuit held that there was no defect in the Board’s decision to certify the Union and consequently denied UPS’s petition for review.


Related Documents:
NAM brief  (October 22, 2018)

 

Zino v. Whirlpool Corp.   (6th Circuit)

Whether collective bargaining agreement entitles retirees to vested healthcare benefits for life.

The NAM filed an amicus brief supporting Whirlpool in this appeal to the Sixth Circuit. The issue is whether a collective bargaining agreement provides health benefits for life absent explicit language that the agreement provides for such benefits. Previously, the Sixth Circuit has provided conflicting holdings in similar cases, at times holding that the collective bargaining agreements do not provide such lifetime benefits and at times reading them into the agreement. However, in Tackett, the Supreme Court held that using ordinary contract principles, parties to collective bargaining agreements would not intend retiree benefits to vest for life if not explicitly stated in the agreement. The NAM encouraged the Sixth Circuit to provide a clear standard that does not conflict with Tackett, which it did by holding on February 15, 2019, that the agreement did not provide lifetime health benefits.


Related Documents:
NAM brief  (January 12, 2018)

 


Product Liability -- 2019



Pfizer Inc. v. Adamyan   (U.S. Supreme Court)

Mass action litigation fairness

The NAM filed an amicus brief in support of a petition for certiorari seeking U.S. Supreme Court review and reversal of an appellate decision that undermines the efficient resolution of “mass action” lawsuits under the Class Action Fairness Act (CAFA). The case involves claims by over 4,000 plaintiffs alleging that Lipitor caused them to develop Type II diabetes. The plaintiffs brought the claims in state court. The state court judge proposed to remove the case to federal court under a CAFA provision that allows removal of such “mass actions” when claims for monetary relief by more than 100 people “are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” 28 U.S.C. 1332(d)(11)(B)(i). A federal judge rejected the proposed removal, however, finding that that statutory language allows only plaintiffs -- not state court judges -- to propose to remove mass actions to federal court. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed. In support of the defendant’s petition for Supreme Court review, the NAM filed a coalition amicus brief that identifies the problematic consequences of the Ninth Circuit’s decision for manufacturers that face mass action claims. On October 7, 2019, the court denied certiorari.


Related Documents:
NAM brief  (July 25, 2019)

 

Air and Liquid Systems v. DeVries   (U.S. Supreme Court)

Overbroad asbestos liability

The NAM filed an amicus brief on behalf of a metal parts manufacturer to argue against overbroad asbestos liability for companies whose products do not contain asbestos. Individual plaintiffs who worked on ocean vessels sued manufacturers of metal parts used in the vessels. The defendant’s parts did not contain asbestos but were later combined with other third-party parts that did, which the plaintiffs claimed caused them to develop lung disease.

The U.S. Court of Appeals for the Third Circuit found the metal component manufacturers liable for the plaintiffs' injuries, concluding that it was "reasonably foreseeable" that the metal components would be integrated with asbestos components on the ship. If not reversed, that liability standard could impose limitless potential liability on manufacturers whose products do not even contain asbestos. That same theory could also be used to hold manufacturers liable for third-party products beyond the asbestos context. The U.S. Supreme Court granted review. The NAM filed an amicus brief in support of the company to argue against this overbroad scope of liability that could hurt manufacturers by making them liable for asbestos exposure for manufacturing products that do not even contain asbestos.

On March 19, 2019, the Court rejected the 3rd Circuit's overbroad holding that would have imposed liability on manufacturers whenever it is "foreseeable" that their products might be integrated with other third-party products that could cause harm. Instead, the Supreme Court ruled that a manufacturer only has a duty to warn when the manufacturer's product requires incorporation of another part (such as asbestos) that the manufacturer knows or has reason to know is likely to make the integrated product dangerous.


Related Documents:
NAM brief  (July 16, 2018)

 

Burningham v. Wright Medical Group   (Utah Supreme Court)

Product liability for medical devices

The NAM filed an amicus brief in the Utah Supreme Court that seeks to relieve medical device manufacturers of overbroad product liability. The legal issue before the court is whether medical device manufacturers should be held strictly liable for any harms caused by their products, or instead whether plaintiffs must prove the manufacturer negligently designed or manufactured the device. The NAM’s amicus brief argued the latter standard should apply because a strict liability standard would stifle innovation and drive life-saving medical devices from the market. On September 5, 2019, the court declined to issue a blanket rule that a negligence standard applies, holding instead that the standard of liability should be determined by the factfinder on a case-by-case basis.


Related Documents:
NAM brief  (October 5, 2018)

 

Nguyen v. Nissan North Apmerica   (9th Circuit)

Class action damages for automotive manufacturers

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit to argue that courts should reject class action lawsuits that seek to extract excessive damages from automobile manufacturers for automotive parts that might deteriorate prematurely in some vehicles. The case arises from a class action lawsuit claiming that Nissan failed to disclose a design defect in the transmission of several of its vehicle models. The plaintiffs sought damages totaling the cost of replacing every potential impacted part in every potentially-affected vehicle. A federal district court denied the plaintiffs’ request for class certification because granting the plaintiffs such a financial recovery would overcompensate the plaintiffs because only a portion of vehicle owners experienced transmission problems, and even then, the parts worked as intended for long periods of time. The plaintiffs asked the U.S. Court of Appeals for the Ninth Circuit to review the district court’s denial of class certification, and the court agreed to consider the appeal. This case has important implications for manufacturers because if the Ninth Circuit agrees with the plaintiffs’ reasoning, then any alleged product defect could impose potential liability and settlement pressure on manufacturers far beyond the actual harm caused by the alleged product defect. The MCLA’s amicus brief argued against such potential excessive damages and explained why the district court properly denied class certification. On July 26, 2019, the Ninth Circuit reversed the district court, concluding that class certification could proceed.


Related Documents:
NAM brief  (February 4, 2019)

 

Pfizer v. Superior Court of Los Angeles   (U.S. Supreme Court)

Personal jurisdiction defenses

The NAM filed an amicus brief in support of a petition for certiorari to the U.S. Supreme Court to review and reverse a California state court ruling that allowed nonresident plaintiffs to sue a pharmaceutical company despite a lack of personal jurisdiction. In response to thousands of lawsuits against Pfizer involving its drug Lipitor, Pfizer sought to remove the cases to federal court. That effort was ultimately unsuccessful, at which point Pfizer sought to dismiss the case for lack of personal jurisdiction. The state court ruled that Pfizer filed its motion to dismiss too late and therefore waived its personal jurisdiction defense. Such a ruling unfairly penalizes defendants for raising legitimate defenses at appropriate times in litigation. In complicated and multi-year litigation, defendants should not be compelled to exercise all defenses at the outset. The NAM’s amicus brief argued that the Court should grant the petition and reverse the California court’s ruling. On November 25, 2019, the court denied certiorari.


Related Documents:
NAM brief  (October 3, 2019)

 

Pneumo Abex LLC v. Jones   (Illinois Supreme Court)

Manufacturer civil conspiracy liability

The NAM filed an amicus brief with the Illinois Supreme Court in an asbestos case appeal to explain that civil conspiracy claims should not be used to impose liability on innocent manufacturers for the actions of others when the manufacturer did not commit an unlawful act. After the trial court granted summary judgment for the defendants, the appellate court incorrectly ruled that plaintiffs presented sufficient evidence from which a reasonable jury could find an underlying agreement to hide product hazards. This litigation is important for manufacturers because entire industries could be held liable for a plaintiff’s injuries, without sufficient evidence. The NAM’s brief argues that the plaintiffs’ claim is an attempt to expand civil conspiracy without proof of an agreement to commit an unlawful act, courts have previously rejected these attempts, and if this ruling is allowed to stand, it will introduce an unprecedented expansion of litigation in Illinois. On December 19, 2019, the court agreed and reversed the appellate court's decision.


Related Documents:
NAM brief  (February 1, 2019)

 

Torres v. BNSF   (New Mexico Court of Appeals)

Asbestos take-home exposure

The NAM filed an amicus brief in the New Mexico Court of Appeals arguing that manufacturers should not owe a duty of care to people exposed to toxic substances outside of the workplace. Imposition of a duty on premises owners to prevent off-site exposures to asbestos or other toxic substances in the workplace would lead to potentially limitless and indefinite liability. Further, such a duty would substantially burden the remaining but increasingly remote defendants in decades old asbestos litigation. Courts in many states have articulated strong public policy reasons for rejecting a duty, and, in fact, courts in states like New Mexico that do not focus on foreseeability as part of the duty analysis have uniformly rejected take-home asbestos exposure claims. The case was dismissed on March 8, 2019.


Related Documents:
NAM brief  (February 12, 2018)

 


Punitive Damages -- 2019



Lindenberg v. Jackson Nat'l Life Ins. Co   (6th Circuit)

Limits on punitive damages

The NAM filed an amicus brief urging the full U.S. Court of Appeals for the Sixth Circuit to rehear a decision that invalidated Tennessee’s statutory limit on excessive punitive damages awards. A Sixth Circuit panel ruled that the limit on punitive damages was contrary to the Tennessee Constitution because it violated the right to a jury trial and separation of powers. If upheld, manufacturers facing lawsuits under Tennessee law will be exposed to significant and unwarranted liability exposure. The NAM’s brief argued that the ruling is inconsistent with Tennessee’s longstanding presumption that statutory enactments are constitutional, contrary to the vast majority of state courts and conflicts with every federal circuit that has considered the constitutionality of a state limit on damages. In 2016, the NAM filed two other amicus briefs in this line of cases. On March 28, 2019, the court denied en banc review.


Related Documents:
NAM brief  (January 23, 2019)

 


Securities Regulation -- 2019



First Solar, Inc. v. Mineworkers' Pension Scheme   (U.S. Supreme Court)

Loss causation proof in private securities actions

The NAM filed an amicus brief in the U.S. Supreme Court urging it to review a case on securities losses from alleged fraud. The lower court’s ruling set forth a broad loss-causation standard under which there is no need to establish that any alleged fraud was ever disclosed to the market, which directly conflicts with other decisions that have required a plaintiff show that the market became aware of the existence of fraud or, at least, of the facts that the defendant allegedly misrepresented. Courts should require proof that an act or omission of the defendant caused the loss for which the plaintiff seeks to recover damages. If successful, this argument could lead to even more federal securities class actions. The NAM’s brief explains why the law and precedent does not support this theory of liability and highlights the need to promote fair markets that support capital for business growth. On June 24, 2019, the Court denied certiorari.


Related Documents:
NAM brief  (September 5, 2018)

 


Taxation and State Taxation -- 2019



Altera v. Commissioner of IRS   (9th Circuit)

IRS rule change threatens double taxation on cross border transactions.

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Ninth Circuit to uphold the Internal Revenue Service’s (IRS) “arm’s-length transaction standard.” The Commissioner of the IRS departed from this longstanding approach in a policy shift, thus destroying the established precedent and reducing its effectiveness. Under the arm’s-length standard, a transaction was judged by looking at how the parties priced it as if they were two independent entities, not parts of the same group of related entities. The NAM’s brief argued that the longstanding, consistent approach was key to avoiding double taxation on cross border transactions. The Ninth Circuit held that the Commissioner did not exceed his rule-making authority and that his rule was entitled to deference. Altera filed a petition for rehearing en banc, and the NAM filed an amicus brief in support of rehearing. On November 12, 2019, the court denied rehearing en banc.


Related Documents:
NAM brief  (August 1, 2019)

 

Ford Motor Co. v. United States   (Federal Circuit)

Clarity and consistency in tariff determinations for imports

The NAM filed an amicus brief to seek to reverse an appellate decision that will generate uncertainty for tariff determinations for imported products, including imported automobiles. The case arose from Ford Motor Co.’s imports of the Transit Connect van. After importing the vans as passenger vehicles, Ford reconfigured the vans to allow their use as cargo vans. The U.S. Customs and Border protection applied a 25% tariff on the vehicles, concluding that the vans are properly classified as trucks subject to a 25% tariff rather than a passenger vehicle subject to a much lower 2.5% tariff. Ford challenged the tariff determination in the U.S. Court of International Trade and prevailed. On appeal, however, the Federal Circuit reversed, concluding that the ultimate intended use of the vehicles as cargo vans supported the higher tariff rate. Ford sought en banc review by the full Federal Circuit, and the NAM filed an amicus brief in support to identify the uncertainty that manufacturers will face if tariffs are imposed based on possible subsequent reconfigurations of goods rather than their actual condition as imported. On October 16, 2019, the court denied en banc review.


Related Documents:
NAM brief  (August 9, 2019)

 


Antitrust -- 2018



Pfizer Inc. v. Rite Aid   (U.S. Supreme Court)

Antitrust scrutiny for pharmaceutical reverse payments

The NAM filed an amicus brief in the U.S. Supreme Court urging it to review a lower court decision accusing Pfizer of making an illegal reverse payment to keep a generic version of the cholesterol drug Lipitor off the market. Antitrust scrutiny should apply only to “large” and “unjustified” reverse payments made to a patent challenger in an effort to persuade the challenger to stay out of the market, and the lower court's decision extended antitrust scrutiny to “commonplace” and “traditional” settlements by focusing on just one aspect of the agreement. The ability of the pharmaceutical companies to efficiently settle disputes is highly beneficial to the public, and speculative antitrust challenges will needlessly chill such settlements. The NAM's brief urged the Supreme Court to provide greater guidance on what qualifies as an impermissible reverse payment and what facts plaintiffs must include in a complaint to plausibly allege anticompetitive conduct in order to subject a pharmaceutical patent settlement to antitrust scrutiny. Providing such direction would be helpful to manufacturers so that they can protect their intellectual property rights in ways consistent with the antitrust laws and avoid improper antitrust challenges to their patent settlements.The U.S. Supreme Court issued a brief order declining to review.


Related Documents:
NAM brief  (December 22, 2017)

 


Arbitration -- 2018



Epic Systems Corp. v. Lewis   (U.S. Supreme Court)

Permissibility of class-action waivers and mandatory arbitration provisions

The NAM filed two amicus briefs in the U.S. Supreme Court regarding the permissibility of class-action waivers and mandatory arbitration provisions in employment contracts. Class-action waiver and arbitration provisions are permissible under the Federal Arbitration Act (FAA), and arbitration encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. The NAM’s briefs argued that arbitration provisions are valuable to employers and employees, that arbitration agreements are governed under the FAA and that courts should not defer to incorrect interpretations of the law. The Court upheld the enforceability of arbitration agreements that waive an employee’s right to participate in class action lawsuits against the employer.


Related Documents:
NAM brief on the merits  (June 16, 2017)

 

Ernst & Young, LLP v. Morris   (U.S. Supreme Court)

Permissibility of class-action waivers and mandatory arbitration provisions

The NAM filed two amicus briefs in the U.S. Supreme Court regarding the permissibility of class-action waivers and mandatory arbitration provisions in employment contracts. Class-action waiver and arbitration provisions are permissible under the Federal Arbitration Act (FAA), and arbitration encourages efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. The NAM’s briefs argued that arbitration provisions are valuable to employers and employees, that arbitration agreements are governed under the FAA and that courts should not defer to incorrect interpretations of the law. The Court upheld the enforceability of arbitration agreements that waive an employee’s right to participate in class action lawsuits against the employer.


Related Documents:
NAM brief on the merits  (June 16, 2017)

 

Five Star Senior Living, Inc. v. Mandviwala   (U.S. Supreme Court)

Federal Arbitration Act preemption of California claims

The NAM filed an amicus brief asking the U.S. Supreme Court to review and reject California’s rule prohibiting arbitration of Private Attorneys General Act (PAGA) claims. The California Supreme Court held that California public policy precludes enforcement of an agreement that requires PAGA claims to be submitted to arbitration and that California’s policy is not preempted by the Federal Arbitration Act (FAA). This holding means representative PAGA claims will likely become even more common, resulting in the effective invalidation of millions of arbitration agreements that are governed by the FAA. The NAM’s brief argued that arbitration agreements allow disputes to be resolved promptly and efficiently while avoiding the costs associated with traditional litigation. Such arbitration is speedy, fair, inexpensive and less adversarial than litigation in court. Unfortunately, the U.S. Supreme Court denied review.


Related Documents:
NAM brief  (April 26, 2018)

 


Benefits -- 2018



CNH Industrial N.V. v. Reese   (U.S. Supreme Court)

Interpretation of benefits provided in a collective bargaining agreement

The NAM filed an amicus brief supporting CNH Industrial’s appeal to the Supreme Court of an adverse decision involving its obligation to provide lifetime healthcare benefits for retirees. The issue in the case is whether a collective bargaining agreement that does not expressly provide for lifetime vesting of such benefits can be interpreted to include them. The NAM’s brief argued that while the Supreme Court has already addressed this issue in the Tackett case in 2015, the U.S. Court of Appeals for the Sixth Circuit struggled to properly implement that ruling and improperly tipped the scales in favor of employees. The case is important for companies with similar provisions in their collective bargaining agreements. The U.S. Supreme Court granted the petition for certiorari and issued a per curiam decision reversing the Sixth Circuit and rendering judgment in CNH’s favor.


Related Documents:
NAM brief  (November 6, 2017)

 


Civil Procedure -- 2018



Davidson v. Kimberly-Clark Corp.   (9th Circuit)

Standing requirements for an injunction relating to product labeling

The NAM filed an amicus brief asking the full U.S. Court of Appeals for the Ninth Circuit to review a three-judge panel’s decision granting a plaintiff standing for an injunction when it was not clear she had any actual or imminent injury. The case implicates the question of whether hypothetical or conjectural injury was sufficient to allow the suit to proceed, and it is important to manufacturers because such an expansive theory of standing encourages abusive, lawyer-driven litigation in which plaintiffs’ lawyers pursue meritless claims in the hope that the costs and risks of litigation will drive businesses to settle. The NAM’s brief argued that the panel decision lowered the bar for showing harm and encourages class-action litigation over product labeling by plaintiffs who will never buy the product in question. Unfortunately, the Ninth Circuit denied the request to rehear the case.


Related Documents:
NAM brief  (November 13, 2017)

 

In re New York City Asbestos Litigation   (New York Supreme Court)

Punitive damages in asbestos cases

The NAM filed an amicus brief supporting the appeals of several companies seeking to vacate or modify a New York City Case Management Order (CMO) that rejected the New York City Asbestos Litigation practice of deferring punitive damages claims. In 2017, a New York City administrative judge issued a CMO governing certain procedures for handling complex asbestos litigation. If upheld, the CMO could jeopardize compensation for future plaintiffs and threaten the viability of companies involved in the litigation. The NAM’s brief argued that 1) the CMO should be rejected, or at a minimum modified to continue the longstanding practice, 2) that the court should also modify the CMO to require plaintiffs to file all eligible asbestos trust claims early in the discovery process and 3) the court should specify that trust claims materials are admissible in asbestos cases which would help prevent manipulation and abuse of the trust claim and litigation process. Unfortunately, the court declined to modify the CMO.


Related Documents:
NAM brief  (October 10, 2017)

 


Class Actions -- 2018



Case v. American Honda Motor Co.   (California Supreme Court)

Overbroad class action certifiction

The NAM filed an amicus brief opposing an overbroad class action lawsuit against an automotive manufacturer. A group of plaintiffs sued Honda, alleging that some of its vehicles are prone to transmission failure. A California trial court denied the plaintiffs class certification because the vast majority of them suffered no transmission problems whatsoever. An appeals court reversed, finding that the plaintiffs need only articulate a “theory of the case” to obtain class certification. If that standard is allowed to stand, manufacturers in California could be faced with massive and unwarranted potential liability in product defect lawsuits. In support of Honda’s request for the California Supreme Court to review the case, the NAM’s brief argued that courts should authorize class action lawsuits only when the plaintiffs suffer actual harm and that harm is shared by the other plaintiffs in the proposed class. The California Supreme Court denied the petition for review.


Related Documents:
NAM letter  (September 27, 2018)

 

GlaxoSmithKline LLC v. Louisiana   (U.S. Supreme Court)

Sovereign immunity and duplicative state government suits

The NAM filed an amicus brief in support of GlaxoSmithKline’s (GSK) petition for certiorari to the U.S. Supreme Court seeking review of an appellate court’s decision that allowed the state of Louisiana to sue GSK after the state received benefits from a class action settlement involving the same claims. At issue was whether the state can be bound by the settlement agreement when it claimed sovereign immunity from litigation under the Eleventh Amendment. Certainty and fairness in class actions settlements are important to manufacturers who seek litigation closure. The NAM’s brief explained why the Supreme Court should have reviewed the case to resolve the conflict between the appellate decision and numerous other decisions holding that sovereign immunity does not extend beyond claims filed against a state. GSK agreed to a favorable settlement with the state, and as a result of the settlement, the U.S. Supreme Court dismissed the petition for review.


Related Documents:
NAM brief  (August 8, 2018)

 

Grayson v. General Electric Co.   (2nd Circuit)

Class certification without harm

The NAM filed an amicus brief in an appeal to the U.S. Court of Appeals for the Second Circuit of a large class-action suit against General Electric (GE) over alleged consumer misrepresentations regarding their microwave ovens. The suit contended that the glass on certain ovens broke after nine years and the owners paid more than they should have paid. The NAM’s brief argued that the court improperly certified a class that includes all owners, 99% of whom never experienced glass breakage, and that includes disparate claims by customers who are covered by differing state consumer protection laws. The class was also improperly certified because less than 20% of the class members could be identified. The Second Circuit unfortunately denied the appeal.


Related Documents:
NAM brief  (March 28, 2017)

 

Martin v. Behr Dayton Thermal Products   (6th Circuit)

Class action certification standards

The NAM filed an amicus brief on behalf of manufacturers to reverse a ruling by a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit that would expose manufacturers to overbroad class action lawsuits. The case involved class action litigation arising from alleged groundwater contamination by manufacturers in Dayton, Ohio. The Sixth Circuit panel found that the proposed class of plaintiffs lacked the requirements for class certification but nonetheless certified seven legal issues for class treatment. This misguided interpretation of class certification threatens manufacturers by allowing a wider range of claims to be brought against manufacturers than federal law allows. The NAM’s brief argued that the full Sixth Circuit Court of Appeals should reverse the panel ruling because the panel’s extreme position is inconsistent with class certification requirements. The Sixth Circuit denied en banc review, and the company filed a petition for certiorari with the U.S. Supreme Court, which also denied review.


Related Documents:
NAM brief  (August 6, 2018)

 

R.J. Reynolds Tobacco Co. v. Graham   (U.S. Supreme Court)

Challenging the use of a broad design defect ruling from a decertified class action

The NAM filed an amicus brief urging the U.S. Supreme Court to reverse a lower court ruling that allowed individual plaintiffs to rely on a jury finding of design defect from the preliminary stage of a prior class action case. A jury found that some cigarettes made by many companies over four decades were defectively designed, which is an essential element of the case. However, the class was later decertified, and individual suits began. A company should not be barred from contesting a design defect issue in a subsequent case unless that issue was specifically decided as to that company and its products beforehand. Otherwise, plaintiffs can avoid proving essential elements of their claim on facts specific to them and can rely on previous judicial determinations based on facts which do not clearly apply to their individual case. The NAM’s brief argued that preventing defendants from contesting the core basis of their liability violates due process and that the original jury determination was so broad and general that it would be unfair to hold a company liable for design defects without looking at each individual product. The Supreme Court denied the petition for certiorari.


Related Documents:
NAM brief  (October 19, 2017)

 

Scharfstein v. BP West Coast Products   (Ore. Ct. App.)

Class action statutory damages award

The NAM filed an amicus brief in the Oregon Court of Appeals supporting BP in an appeal of a class action statutory damages award that was grossly excessive and disproportionate to actual damages. The plaintiffs alleged that BP violated Oregon’s Unlawful Trade Practices Act by failing to display a 35-cent charge the stations imposed on debit card purchases; however, class plaintiffs did not claim that consumers lacked notice of the 35-cent fee (there was plenty of notice throughout the gas station), but instead argued that the state’s gasoline pricing rule required notice on the stations’ street signs or fuel dispensers. Businesses are at a risk of significant and unwarranted liability exposure without a statutory limit on punitive damages. The NAM’s brief argued that the 14th Amendment has been recognized to limit statutory damages for over a century, when, as here, the damages assessed against BP bear no relationship to the gravity of its conduct, the harm caused by that conduct or any other consideration that could rationally justify a large punishment. Unfortunately, the court rejected the challenge as untimely.


Related Documents:
NAM Brief  (November 22, 2016)

 


Communications -- 2018



Hodgin v. UTC Fire & Security Americas Corp.   (4th Circuit)

Manufacturer liability for third-party telemarketing calls

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit addressing the issue of vicarious liability for alleged telemarketing calls made by third party dealers that sold equipment. The court below held that UTC and Honeywell could not be held vicariously liable under the Telephone Consumer Protection Act (TCPA) for the complained-of telemarketing calls placed by “authorized dealers” as UTC and Honeywell, were only the manufacturers of the equipment, and had no control over the calls whatsoever. Holding otherwise would have serious economic consequences and could punish manufacturers for a wide range of unlawful conduct by third parties that they do not control. The NAM’s brief argued that for vicarious liability to be established, a principal-agent relationship must have existed, and that it is clear from both contractual language and the general nature of the manufacturer’s relationship with the third-party dealers that no such relationship existed. The Fourth Circuit agreed with the NAM by affirming the lower court’s decision.


Related Documents:
NAM brief  (September 1, 2017)

 


Discovery -- 2018



Cooper Tire & Rubber Co. v. Koch   (Georgia Supreme Court)

Less strict standard for sanctions against spoliation for plaintiffs

The NAM filed an amicus brief in the Georgia Supreme Court supporting Cooper Tire & Rubber Co. in an appeal of a product liability judgement and urging the court to apply objective spoliation standards equally to plaintiffs and defendants. In the underlying product liability case alleging a tire tread separation, the plaintiff preserved as evidence only the “carcass” of the tire and allowed parts of the detached tread, the wheel, the three other tires and the vehicle to be destroyed. The destroyed evidence would have allowed Cooper Tire & Rubber Co. to better defend itself. The NAM’s brief argued that a different spoliation standard for plaintiffs and defendants improperly skews the scales of justice, will make product defect claims harder to defend and could result in false findings of defect that can lead to redesigns of products in ways that are less safe. The court held that the plaintiff has a duty to prevent spoliation of evidence only when a reasonable person would do so while the defendant must preserve evidence whenever it can be anticipated that a person could be contemplating litigation.


Related Documents:
NAM amicus brief  (January 17, 2017)

 

Kiobel v. Cravath, Swaine & Moore LLP   (2nd Circuit)

Foreign confidential document discovery

The NAM filed an amicus brief supporting Shell in an appeal in the U.S. Court of Appeals for the Second Circuit. The case concerned a district court’s authority to order the New York-based law firm representing Shell to turn over documents produced under a confidentiality order in prior litigation for use in a Dutch court suit against Shell. The NAM’s brief drew the court’s attention to the serious consequences such discovery could have for attorney-client communications and to litigants’ confidence in confidentiality stipulations. The Second Circuit reversed the district court's order requiring production of the documents.


Related Documents:
NAM brief  (April 20, 2017)

 

Regents of the Univ. of Cal. v. Affymetrix, Inc.   (Federal Circuit)

Privileged attorney communications

The NAM filed an amicus brief in the U.S. Court of Appeals for the Federal Circuit to protect attorney-client privilege for manufacturers. The plaintiffs sought privileged communications between the defendant company and a third-party supplier. The defendant company sought to withhold the documents on privilege grounds under the common interest doctrine. A district court granted the plaintiffs’ discovery request, reasoning that the third-party supplier was not represented by its own legal counsel, which broke the privilege. The district court’s holding set a troubling precedent that could sow uncertainty, encourage protracted and expensive discovery fights and expose confidential communications to a courtroom adversary. The NAM’s brief argued that the purposes of the attorney-client privilege and common-interest doctrine do not support a separate-representation requirement, and separate representation is often inefficient and unduly burdensome. Unfortunately, the court denied the mandamus petition.


Related Documents:
NAM brief  (November 5, 2018)

 


Environmental -- 2018



Airborn, Inc. v. OSHA   (8th Circuit)

Challenging OSHA's beryllium standard

The NAM and other associations and companies involved in the manufacture or use of beryllium filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit seeking an administrative stay of U.S. Occupational Safety and Health Administration’s (OSHA) new rule regulating beryllium and to reopen the rulemaking record. Beryllium is critical to some manufacturing processes and products, and OSHA did not adequately address industry’s concerns about overly restrictive provisions of the new rule.The NAM requested that the effective date of the standards be delayed for six months, and that OSHA re-open the rulemaking record to allow comment on the substantial changes made between issuance of the proposed rule and adoption of the final rules, and to allow the new Secretary of Labor to take office and have adequate time to consider the standards in accordance with a new policy to freeze and review all holdover regulations. OSHA agreed to undertake a new rulemaking to propose and implement sweeping changes to the regulation that will benefit companies that manufacture and use beryllium.


Related Documents:
NAM Motion  (June 23, 2017)

 

Chamber of Commerce v. EPA   (10th Circuit)

Jurisdictional issue in challenge to Waters of the US rule

The NAM filed an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in an appeal to a court ruling which held that challenges to the EPA’s rule establishing jurisdiction over waters of the United States should be heard in appellate courts, rather than in district courts. Federal law specifies that, while most lawsuits are filed in trial courts, a few types of suits must be filed directly in the federal courts of appeals; however, the statute that provides appellate jurisdiction for certain challenges to EPA regulations does not apply to this challenge. Resolving this procedural issue is an important first step in resolving substantive arguments by many states and members of the business community against EPA’s decision to assert jurisdiction over many areas of the country previously not under their jurisdiction. The NAM’s brief argued that the district court erred when it deferred to the U.S. Court of Appeals for the Sixth Circuit’s jurisdictional decision and that the district court, in fact, had jurisdiction over plaintiffs’ complaint. On January 22, 2018, the Supreme Court ruled unanimously in favor of the NAM's position in a case that determined that district courts, rather than appellate courts, should be the first courts to hear challenges to the new regulation defining the waters of the United States.


Related Documents:
NAM brief  (July 8, 2016)

 

Constitution Pipeline Company v. New York   (U.S. Supreme Court)

State veto authority over interstate natural gas pipelines

The NAM filed an amicus brief in the U.S. Supreme Court in support of Constitution Pipeline Company’s authority to construct a new natural gas pipeline from Pennsylvania to New York State. New York rejected the proposed pipeline because the state disagreed with the pipeline’s proposed route. Because routing decisions for natural gas pipelines are within the power of the Federal Energy Regulatory Commission, New York’s denial improperly encroached on FERC’s siting authority. The NAM’s brief argued that the Supreme Court should hear this case because New York’s rejection violates the law and would harm manufacturers and other users of natural gas. Unfortunately, the Court denied certiorari.


Related Documents:
NAM Brief  (February 20, 2018)

 

Georgia v. McCarthy   (11th Circuit)

Which court has jurisdiction to decide Waters of the US challenges?

This is one of several cases filed in various courts challenging the EPA's new rule regarding the scope of its jurisdiction over land in the United States that is subject to permitting requirements of the Clean Water Act. The issue on appeal before the 11th Circuit is whether a federal appeals court has jurisdiction to hear challenges to the rule in the first instance.

The NAM and others in a coalition of organizations challenging the EPA rule argued that nothing in the Clean Water Act says that our challenge should go first to the appeals court. Rather, we argued that a federal district court is the proper forum for filing suit. Only a few exceptions are written into the Clean Air Act, and none of them applies in the challenge to the waters rule.

The court ruled on August 16, 2017, to stay the case pending the outcome of the Sixth Circuit's jurisdictional determination. On January 22, 2018, the U.S. Supreme Court ruled that jurisdiction over the various WOTUS challenges belong in the district courts. The 11th Circuit thereafter remanded the case back to the district court.


Related Documents:
NAM amicus brief  (September 21, 2015)

 

Hawaii Wildlife Fund v. County of Maui   (9th Circuit)

Opposing conduit theory under Clean Water Act

The NAM filed an amicus brief in the Ninth Circuit to oppose a district court decision that broadly interpreted the scope of liability under the Clean Water Act. The district court adopted a liability theory, the "conduit theory," which stated that any pollutants released to dry land or underground that might seep into groundwater then to nearby surface waters are an illegal "discharge" under the Clean Water Act (CWA). That ruling could impose incalculable liability risk on manufacturers and other regulated industries. The NAM’s brief argued that the CWA clearly distinguishes between point sources and nonpoint sources, and the conduit theory impermissibly extends the EPA's authority. Unfortunately, the Ninth Circuit affirmed the district court’s ruling.


Related Documents:
NAM amicus brief  (March 28, 2016)

 

Kentucky Waterways Alliance v. Kentucky Utilities Co.   (6th Circuit)

"Conduit theory" of liability under the Clean Water Act

The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to oppose lawsuits by environmental plaintiff groups that sought to massively expand manufacturers’ liability under the Clean Water Act. In a lawsuit against electric generation facilities, the plaintiffs argued that federal jurisdiction applies to all groundwater throughout the United States (in addition to certain categories of surface waters). If that theory of jurisdiction prevails, manufacturers could be subject to massive and unpredictable liability for any impacts their operations may have on groundwater. The NAM’s amicus brief argued against this overbroad theory of liability. The Sixth Circuit ruled against the plaintiffs and in favor of manufacturers by rejecting the plaintiffs’ claims and holding that the Clean Water Act does not apply to discharges to groundwater.


Related Documents:
NAM brief  (May 4, 2018)

 

Monsanto Co. v. Office of Envtl. Health Hazard Assessment   (California Supreme Court)

Constitutional problems for Prop 65 chemical listings

The NAM filed an amicus brief in support of Monsanto urging the California Supreme Court to grant review of this case to address the serious constitutional questions presented by California’s Proposition 65, which maintains a list of chemicals that can potentially cause cancer, birth defects and other reproductive harm. If a product contains or produces any of the chemicals on that list, manufacturers are required to place a warning label on that product before it may be sold in California. In addition, Proposition 65 requires that a chemical be automatically listed if the International Agency for Research on Cancer (IARC) classifies it as carcinogenic. What chemicals are listed is important because of the costs borne by manufacturers and the public by the listing of a chemical under Proposition 65. The NAM’s brief argued that substances listed under Proposition 65 should be based on sound and generally-accepted science and that delegating that authority to IARC is unconstitutional. Unfortunately, the California Supreme Court denied review of this case.


Related Documents:
NAM brief  (June 28, 2018)

 

Murray Energy Corp. v. EPA   (6th Circuit)

Rule broadening definition of "waters of the United States"

The NAM intervened in a group of consolidated cases challenging a final rule from the EPA defining its jurisdiction over navigable “Waters of the United States” under the Clean Water Act (CWA). Federal law specifies that, while most lawsuits are filed in federal district courts, some suits must be filed directly in the federal courts of appeals. The statute that provides appellate jurisdiction for certain challenges to EPA regulations does not apply to the WOTUS challenge, though the EPA argued that it did. Prompt resolution of this jurisdictional issue was important so that the WOTUS case could proceed expeditiously through the courts. The NAM’s brief explained that certain legal challenges, such as this issue, belong in the federal district courts and argued that this is not the type of appeal from agency rulemakings under the CWA that is limited to the federal appeals courts by statute. On January 22, 2018, the Supreme Court held that jurisdiction properly belongs in the federal district courts.


Related Documents:
Industry brief on the merits  (November 1, 2016)

 

National Association of Manufacturers v. U.S. Dep't of Defense   (U.S. Supreme Court)

Appeal of Waters of the United States (WOTUS) jurisdictional issue

The MCLA secured a 9–0 victory in the U.S. Supreme Court that resolved a procedural obstacle that had delayed the appropriate federal court from considering legal challenges to the Environmental Protection Agency’s (EPA) 2015 “Waters of the United States” (WOTUS) Rule. This legal win cleared the path for the MCLA’s lawsuit to invalidate the rule to proceed in federal district court, where the U.S. District Court for the Southern District of Texas ultimately invalidated the rule and remanded it back to the EPA for reproposal.


Related Documents:
NAM merits reply brief  (September 11, 2017)
NAM merits brief  (April 27, 2017)

 

Natural Resources Defense Council v. EPA   (2nd Circuit)

Supporting EPA in NRDC challenge to TSCA Section 5

The NAM intervened in a lawsuit in the U.S. Court of Appeals for the Second Circuit to support the EPA’s new regulations on chemicals under the updated Toxic Substances Control Act (TSCA). The Natural Resources Defense Council (NRDC) claimed that the new standards put consumers at risk of harmful exposure. In this case, NRDC challenged Section 5 of TSCA, which deals with the risk assessment standard for significant new use rules (SNURs) for chemicals. This challenge could have been harmful to manufacturers by potentially hindering approvals of new uses of chemicals. The NAM intervened to support EPA and attacked NRDC’s standing to bring the case. The NAM argued that the proposed rule is not subject to challenge, is consistent with TSCA and would protect human health and the environment. Soon after the NAM filed its principal brief in the case, NRDC moved to dismiss its case with prejudice, which the court granted.


Related Documents:
NAM response  (August 28, 2018)
NAM intervenor brief  (August 14, 2018)
NAM Motion  (February 5, 2018)

 

Sierra Club v. EPA   (D.C. Circuit)

Boiler MACT reconsideration rule

The NAM intervened in a case before the U.S. Court of Appeals for the D.C. Circuit involving a 2015 EPA Rule regarding environmental restrictions on industrial boilers. The rule requires maximum achievable control technology (MACT) for equipment to reduce emissions of hazardous air pollutants, taking into consideration the cost of achieving such reductions. There are two primary issues in the case: (1) whether the EPA properly established a minimum standard level of 130 parts per million (ppm) of carbon monoxide for certain boiler emissions and; (2) whether the EPA reasonably established work practice standards for periods of startup and shutdown where it is impracticable to determine compliance with numerical standards during those periods. Manufacturers would bear a large burden and financial hardship if the Sierra Club prevailed in its challenge to this rule. Our brief argued that EPA properly justified setting the limit at 130 ppm for carbon monoxide as a proxy for hazardous air pollutants The court held that the 130 ppm limit is reasonable and also held that the rule’s flexibility on emissions during startup and shutdown of the boilers is reasonable and consistent with the Clean Air Act. The plaintiffs filed a petition for rehearing with the court, which the NAM opposed, and the court denied the rehearing request.


Related Documents:
NAM Petition  (June 5, 2018)
NAM intervenor brief  (November 16, 2016)
NAM motion to intervene  (February 18, 2016)

 

Tennessee Clean Water Network v. Tennessee Valley Authority   (6th Circuit)

Conduit theory of liability for pollutants

The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to oppose lawsuits by environmental plaintiff groups that sought to massively expand manufacturers’ liability under the Clean Water Act. In a lawsuit against electric generation facilities, the plaintiffs argued that federal jurisdiction applies to all groundwater throughout the United States (in addition to certain categories of surface waters). If that theory of jurisdiction prevails, manufacturers could be subject to massive and unpredictable liability for any impacts their operations may have on groundwater. The NAM’s amicus brief argued against this overbroad theory of liability. The Sixth Circuit ruled against the plaintiffs and in favor of manufacturers by rejecting the plaintiffs’ claims and holding that the Clean Water Act does not apply to discharges to groundwater.


Related Documents:
NAM brief  (February 7, 2018)

 

Upstate Forever v. Kinder Morgan   (4th Circuit)

"Conduit theory" of liability under the Clean Water Act

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit to support Kinder Morgan’s request for a rehearing of a lawsuit by environmental plaintiff groups that sought to expand the scope of liability under the Clean Water Act. The case involved a pipeline release of gasoline to dry land, which then allegedly migrated through groundwater to a nearby stream. The plaintiffs alleged that the gasoline seepage to the stream violated the Clean Water Act. This case is significant for manufacturers because the plaintiffs’ theory would impose massive liability for any pollution to dry land (no matter how insignificant) that migrates through groundwater to nearby surface waters. The plaintiffs lost in federal district court but prevailed on appeal to the Fourth Circuit. The NAM’s brief explained how the Fourth Circuit’s decision conflicts with Supreme Court and appellate court precedent. The Fourth Circuit denied the petitions for rehearing and rehearing en banc.


Related Documents:
NAM brief  (May 3, 2018)

 

Weyerhaeuser v. U.S. Fish and Wildlife Service   (U.S. Supreme Court)

Government overreach under the Endangered Species Act

The NAM filed an amicus brief in the U.S. Supreme Court to oppose government overreach under the Endangered Species Act (ESA) that restricts land use in the name of helping an endangered species that does not even live on the land. The U.S. Fish and Wildlife Service (FWS) declared 1,544 acres of private property in Louisiana as “critical habitat” for the dusky gopher frog, which does not live on that property and could not even survive there under current conditions. Such designations can significantly harm manufacturers and other landowners by severely restricting land use activities and driving up permitting costs and delays. The NAM’s brief in support of the landowner argued that FWS exceeded its statutory authority under the ESA and highlighted how FWS’s actions imposed significant harm and business uncertainty on manufacturers. The Supreme Court issued a largely favorable decision for manufacturers and remanded to the lower court the question of whether the property at issue even qualifies as habitat for the frog (a question that suggests the answer is “no”) and ruled that an agency’s critical habitat designation is subject to judicial review.


Related Documents:
NAM brief  (April 30, 2018)

 


Expert Testimony -- 2018



Bradford v. CITGO Petroleum   (Louisiana Supreme Court)

Necessity for expert testimony in toxic tort cases

The NAM filed an amicus brief urging the Louisiana Supreme Court to review a claim where the plaintiffs alleged adverse health effects resulting from a release of oil and gas from CITGO’s Lake Charles, Louisiana refinery in 2006. The plaintiffs did not offer expert testimony establishing the levels of their exposure to oil or gas from the release or even that any exposure was possible given the time and location of their alleged exposures. Nevertheless, the presiding judge awarded each plaintiff damages because she found the plaintiffs’ claims to be “very credible.” CITGO appealed to the Louisiana Court of Appeals, which affirmed the trial judge’s findings. CITGO then appealed to the Louisiana Supreme Court, in which it argued that the plaintiffs were required to provide expert testimony regarding their alleged injuries. An unreasonably low legal standard for establishing liability threatens to expose defendants to significant and unwarranted financial liability. The NAM’s brief explained the significant negative impacts of the appellate decision on manufacturers and provided strong legal arguments against such a lax liability standard. Unfortunately, the Louisiana Supreme Court denied review.


Related Documents:
NAM brief  (February 9, 2018)

 


Free Speech -- 2018



CTIA v. The City of Berkeley, California   (U.S. Supreme Court)

Government-compelled speech about speculative hazards from cell phones

The NAM filed an amicus brief in a U.S. Supreme Court case that involved a Berkeley, California, city ordinance that required mobile phone retailers to post warnings about alleged risks of cellular phone radiation. An association sued to challenge the ordinance, arguing it violated the store owners’ free speech rights; however, the U.S. Court of Appeals for the Ninth Circuit ruled against the owners, concluding that government-compelled commercial speech is subject to the least rigorous level of judicial review. If left to stand, that precedent could harm manufacturers by allowing the government to dictate how manufacturers speak about their own products. The NAM’s brief argued that compelled speech should be subject to strict judicial scrutiny. The Supreme Court summarily reversed the Ninth Circuit and ordered it to reconsider its decision. On remand, the Ninth Circuit declined to stop enforcement of the ordinance.


Related Documents:
NAM brief  (February 9, 2018)

 

In re Murphy-Brown LLC   (4th Circuit)

Gag order restraints on free speech

The NAM filed an amicus brief seeking to persuade the U.S. Court of Appeals for the Fourth Circuit to invalidate a judicial gag order that limited manufacturers’ free speech rights. A federal judge issued the gag order, without prompting by either party, to restrain corporate speech in several major cases against pork producers in North Carolina. Manufacturers are frequently subject to litigation that attracts media attention, and they must be able to convey information accurately to the public about a case and their products to defend their company and products in the court of public opinion. The NAM’s amicus brief explained the harms to manufacturers if the gag order stood. The Fourth Circuit vacated the order and cited the NAM’s amicus brief in support of its holding.


Related Documents:
NAM brief  (August 6, 2018)

 


Government Regulation -- 2018



Public Citizen, Inc. v. Trump   (D.D.C.)

Standing to challenge Exec. Order on 2-for-1 regulatory relief

The NAM filed an amicus brief supporting President Trump’s Executive Order 13771, which begin the process of making government regulation more efficient by requiring, with certain exceptions, government agencies to repeal two outdated or ineffective regulations for every new regulation. The executive order focused on low-yield regulations that fail to provide sufficient societal benefits when compared to their compliance costs. Federal regulations impose 297,696 separate restrictions on manufacturers’ operations and cost an average of $19,564 per employee. The NAM’s brief emphasized the importance of making the regulatory system efficient and described the way the order was an extension of a bipartisan history of executive orders with the same goals. The brief also highlighted important recent successes in similar regulatory budgeting efforts in the United Kingdom and Canada. For example, in its first two years, the UK’s “one-in, one-out” policy in 2011 reduced annual net costs to business by nearly £1 billion without causing significant economic, environmental or public health impacts. The court dismissed the challenge on standing grounds, which is a win for regulatory reform.


Related Documents:
NAM brief  (June 12, 2017)

 


International -- 2018



European Comm'n v. Stichting Greenpeace Nederland   (European Court of Justice)

Intellectual Property

The NAM intervened in an appeal before the European Court of Justice that could have set a dangerous precedent for intellectual property protection. The plaintiffs requested the public disclosure of a massive amount of confidential business information relating to certain pesticides and herbicides used both in the U.S. and Europe, particularly glyphosate. This case had broad implications, not only for the crop protection industry, but for many, if not all U.S. chemical manufacturers operating both in the U.S. and in Europe. The NAM filed six motions/statements with additional legal and technical information to supplement the primary parties’ arguments. The court ruled completely in the NAM’s favor.


Related Documents:
NAM Oral Statement  (March 23, 2018)
NAM Observations  (February 2, 2017)
NAM Oral Statement  (February 4, 2016)
NAM Statement in Intervention  (April 14, 2015)
NAM Annexes  (April 13, 2015)
NAM Motion to Intervene  (April 18, 2014)

 

TCE Television Taiwan Ltd. v. Taoyuan Cty. Former RCA Emp.s Solicitude Ass'n   (Taiwan Supreme Court)

International legal norms and corporate separateness in Taiwan

The NAM filed a Civil Report Brief in the Taiwan Supreme Court supporting General Electric (GE) in a case it fought for fourteen years. Decades ago, GE purchased a subsidiary, RCA-Taiwan, which produced chemicals in a factory in Taiwan prior to GE’s acquisition. Years later, a lower court in Taiwan attempted to hold GE liable for the alleged prior harms of RCA-Taiwan, which was then appealed to the Taiwan Supreme Court. The NAM’s brief explained why the lower court’s ruling violated international norms of corporate law and how Taiwan’s legal system traditionally encouraged foreign investment by honoring the principle of corporate separateness and providing foreign investors with lawful assurance that their liabilities relating to those investments would be limited to the amount invested – a fundamental principle of corporate law. Unfortunately, the Taiwan Supreme Court held GE liable for the obligations of RCA-Taiwan and applied Taiwan’s law in a manner that is harmful to the critical interests of Taiwan in supporting its manufacturing industry and attracting foreign investment.


Related Documents:
NAM brief  (April 3, 2018)

 

United States v. Microsoft Corp.   (U.S. Supreme Court)

Search warrant issued under the Stored Communications Act

The NAM filed an amicus brief in the U.S. Supreme Court supporting Microsoft in its litigation against the Department of Justice (DOJ) stemming from a U.S. government warrant for access to e-mail stored by Microsoft on a server in Ireland. The U.S. Court of Appeals for the Second Circuit previously held that the Stored Communications Act does not authorize courts to enforce the warrant and that the government should follow the Mutual Legal Assistance Treaty adopted by Ireland the United States in 2001, but that ruling was appealed to the Supreme Court. Protection of confidential information is important to all businesses, including manufacturers. The NAM’s brief argued that enforcement of the warrant would harm economic and security interests and that the warrant, issued under the Stored Communications Act, could not compel Microsoft to produce information stored outside of the United States. In 2018, after the passage of the Clarifying Lawful Overseas Use of Data Act, the Supreme Court declared the case moot with a direction for the district court to vacate the ruling against Microsoft.


Related Documents:
NAM brief  (January 18, 2018)

 


Jurisdiction -- 2018



Align Corp. v. Boustred   (U.S. Supreme Court)

Judicial jurisdiction over out-of-state defendants

The NAM filed an amicus brief in the U.S. Supreme Court in a case involving the question of whether a manufacturer may be sued in a state in which the manufacturer has no operations or business presence. A foreign toy manufacturer sold its products to a U.S.-based distributor, who then sold the toys to retailers throughout the United States. The Colorado Supreme Court ruled that the foreign manufacturer could be sued in Colorado state court despite the manufacturer having no business presence in the state. The NAM’s brief argued against court jurisdiction over out-of-state defendants that have no business presence in the state other than third parties simply selling their products in the state. The U.S. Supreme Court denied certiorari.


Related Documents:
NAM brief  (April 2, 2018)

 

Hughes v. United States   (U.S. Supreme Court)

Controlling holding of split Supreme Court decisions

The NAM filed an amicus brief in the U.S. Supreme Court addressing the question of how federal courts should interpret split decisions from the Supreme Court where fewer than five justices agree on a common rationale for deciding a case. One example of such a decision of importance to manufacturers is the Court’s 4-1-4 decision in Rapanos v. United States, which involves the scope of federal jurisdiction over “waters of the United States” under the Clean Water Act. Lower courts have taken divergent approaches to interpreting such split decisions, which has caused confusion and chaos. Clarity in this case would help make any new “waters of the United States” rule less susceptible to legal challenge and provide needed clarity for other laws and regulations, thereby fostering certainty for manufacturers. The NAM’s brief highlighted Rapanos as the poster child for why the Court must resolve this judicial confusion and supplied the Court with arguments to protect the validity of the “waters of the United States” rule. The Court resolved the merits of the case without addressing the interpretive questions, which is a missed opportunity that will result in continued confusion among the lower courts in interpreting split decisions from the Supreme Court.


Related Documents:
NAM brief  (January 26, 2018)

 


Labor Law -- 2018



Alvarado v. Dart Container Corp.   (California Supreme Court)

Proper formula for computing overtime pay

The NAM filed an amicus brief with the California Supreme Court in support of Dart Container Corp. in its dispute regarding the proper formula for calculating overtime wages. This is an appeal from a lower court decision which held that Dart Container was correct to use the federal overtime formula when it calculated wages because, although the federal law did not preempt state law, there was no valid state law specifying a formula to calculate overtime. Employers should not be penalized because of the ambiguity of state law when trying to pay their employees fairly. The NAM's brief argued that no California law provides guidance to calculate overtime on bonuses, and in the absence of such a law, courts should look to federal regulations for guidance and employers should be able to rely on existing law. Unfortunately, the California Supreme Court held that the lower court erred in finding that there was no state law specifying a formula to calculate overtime.


Related Documents:
NAM brief  (September 28, 2016)

 

Associated Builders & Contractors v. Perez   (E.D. Ark.)

DOL Persuader Rule chills employer and employee communications

The NAM challenged the Department of Labor’s (DOL) Persuader Rule, which required employers, third-party lawyers and other labor consultants to disclose their relationships more frequently than under the 50-year-old "bright line" standard. The new rule required employers to file reports if consultants provided guidance to employers even if the consultants did not contact employees directly. If upheld, the rule would have restricted manufacturers’ ability to communicate with their workforce and would have resulted in employers not seeking counsel for guidance on important employer and employee related questions. The NAM’s brief argued that the Rule was arbitrary and capricious, unconstitutionally overbroad under the First Amendment, vague under the Fifth Amendment and interfered with ethical duties to maintain confidentiality. In July 2018, the DOL officially rescinded the Rule.


Related Documents:
NAM Motion to Stay Brief  (December 12, 2016)
NAM Memorandum  (April 2, 2016)
NAM Motion  (April 1, 2016)
NAM Complaint  (March 30, 2016)

 

Browning-Ferris Indus. v. NLRB   (D.C. Circuit)

What constitutes a "joint-employer"

The NAM filed an amicus brief in the D.C. Circuit supporting Browning-Ferris in its appeal from an adverse decision by the National Labor Relations Board (the Board) in a dispute regarding the legal standard that should apply when determining whether two or more companies are “joint employers” under federal labor law. The Board abandoned its longstanding legal standard for joint employer determinations, replacing it with a new standard that evaluated whether an entity exercised indirect control over the means or manner of the employees’ work and terms of employment, or whether the entity had the potential to exercise such control. If upheld, the new standard would unreasonably expand the companies deemed to be an individual’s employer and impose employment obligations and liabilities on those employers. The NAM’s brief argued that the longstanding “direct control” standard should remain the standard for determining joint employment and that the Board’s loosened standard subjected companies to unmerited liability, without providing the same benefits as the old rule. The D.C. Circuit upheld the Board’s consideration of “reserved right to control” and “indirect control” in the joint-employer inquiry but remanded the case to the NLRB for it to adequately define what constitutes control.


Related Documents:
NAM amicus brief  (June 14, 2016)

 

Cooper Tire & Rubber Co. v. NLRB   (8th Circuit)

Challenging NLRB ruling that racist statements are not grounds for firing

The NAM filed an amicus brief defending an employer’s right to implement and follow anti-discrimination and anti-harassment policies in an employment termination appeal. A National Labor Relations Board (NLRB) decision reinstated a Cooper Tire employee who was fired for using racial epithets toward replacement workers while the employee was on the picket line. Employers have a moral and legal obligation to protect the employees’ right to be free from discrimination and harassment in the workplace. The NAM’s brief urged the court to reverse the NLRB decision and establish that there is no statutory protection for racist or discriminatory statements made on the picket line and that protecting these statements is contrary to federal policies against discrimination and harassment. Unfortunately, the court deferred to the NLRB’s decision because the harassment took place in the context of picket-line activities during a strike.


Related Documents:
NAM brief  (September 29, 2017)

 

DirecTV v. Hall   (U.S. Supreme Court)

Joint employer liability under FLSA

The NAM filed an amicus brief urging the U.S. Supreme Court to review a case addressing standards applicable to joint employment liability under the Fair Labor Standards Act (FLSA). The U.S. Court of Appeals for the Fourth Circuit’s ruling would treat any business as an FLSA joint-employer if the business is “not completely disassociated” from a worker’s direct employer and applies even if a business has no direct relationship with the employee, or if the business has only a limited relationship. That ruling unreasonably expands the scope of companies deemed to be an individual’s employer and imposes employment obligations and liabilities on those employers. The NAM’s brief explained that the Supreme Court should hear the case to bring uniformity to joint employment liability standards and avoid the potential imposition of extensive unanticipated liability on the many employers impacted by this new rule. Although the Supreme Court denied certiorari, the National Labor Relations Board overturned the Browning-Ferris case that initially broadened the definition of a joint employer.


Related Documents:
NAM amicus brief  (July 6, 2017)

 

Emerson Electric Co. v. Superior Court of California   (U.S. Supreme Court)

Federal OSHA preemption of state unfair competition law

The NAM filed an amicus brief in the U.S. Supreme Court supporting Emerson Electric Co.’s request for review of the California Supreme Court’s decision that enforcement actions under California’s Unfair Competition Law (UCL) are not preempted by the federal Occupational Safety and Health Act (OSH Act). The OSH Act subjects employers and employees to one set of workplace safety regulations and imposes uniform health and safety requirements. States may regulate and enforce additional workplace safety only pursuant to a federally approved plan that avoids duplicative and counterproductive regulation. One California county sidestepped an approved state plan to seek additional penalties against Emerson for an alleged workplace violation. That circumvention could set a dangerous precedent for manufacturers by allowing counties to impose duplicative and conflicting workplace requirements on manufacturers. The NAM’s amicus brief argued that the federal OSH Act preempts such conflicting requirements and asked the U.S. Supreme Court to hear and reverse the decision, but the U.S. Supreme Court declined review.


Related Documents:
NAM brief  (July 27, 2018)

 

McAdams v. Marquette University   (Wisconsin Supreme Court)

Right of employers to terminate employees for disruptive conduct

The NAM filed an amicus brief on behalf of Marquette University in a case involving the authority of a private employer to terminate an employee for conduct that violates the employment contract between the employee and employer. The NAM’s brief argued that private employers should remain free to discipline employees for conduct or speech that disrupts or adversely affects the employer’s mission, and where an employment contract establishes a process to resolve disciplinary disputes, courts should not disrupt that process. The Wisconsin Supreme Court ruled 4-2 that Marquette breached its employment contract with the professor by suspending him.


Related Documents:
NAM brief  (March 21, 2018)

 

Newton v. Parker Drilling Management Services, Inc.   (9th Circuit)

Applicability of state employment laws on the outer continental shelf

The NAM filed an amicus brief arguing for en banc review of a decision by a panel of the U.S. Court of Appeals for the Ninth Circuit that held that workers employed on drilling platforms on the outer continental shelf (OCS) may bring claims under state wage and hour laws. The panel’s holding not only sharply departs from the settled expectations of both employers and employees working on OCS platforms, it also creates hundreds of millions of dollars of potential retroactive liability for employers and invites lawsuits in an area long understood to be under exclusive federal authority. The NAM’s brief argued that the panel opinion disrupts existing employer-employee relationships formed in reliance on longstanding interpretations of the Outer Continental Shelf Lands Act and that the decision improperly elevates state law to supremacy over federal law, conflicting with congressional intent and inviting states to frustrate offshore oil and natural gas development. The court denied the petition for rehearing en banc; however, the court issued a stay on the mandate that allows OCS platform workers to bring claims under state law pending the filing of a petition for a writ of certiorari in the U.S. Supreme Court.


Related Documents:
NAM brief  (April 2, 2018)

 

Solus v. Superior Court of California   (California Supreme Court)

Federal OSHA preemption of state unfair competition law

The NAM filed an amicus brief urging the California Superior Court to hold that federal preemption prohibited a district attorney’s action under California’s Unfair Competition Law (UCL). The district attorney sought civil penalties, in addition to those already imposed by the California Division of Occupational Safety and Health, against a manufacturer under the state’s unfair competition law and fair advertising law. This litigation is concerning to manufacturers that are already subjected to federal workplace safety regulations, which impose uniform, deliberate and predictable health and safety requirements, because they would be subjected to duplicative and counterproductive regulation. The NAM’s brief argued that 1) the lawsuit is preempted by federal law, which determines the regulations and enforcement methods for workplace safety standards in California; 2) the UCL is inconsistent with California’s approved penalty structure for workplace safety violations; and 3) the court should require pre-approval under the state plan of unfair competition claims for workplace safety violations. Unfortunately, the California Supreme Court held that the UCL was not preempted by the federal Occupational Safety and Health Act.


Related Documents:
NAM brief  (May 28, 2015)

 


Patents, Copyrights and Trademarks -- 2018



Australia - Certain Measures Concerning Trademarks   (World Trade Organization)

Challenging Australia's Plain Packaging Law

The NAM filed a letter with a World Trade Organization (WTO) adjudicative panel in support of challenges by various countries to Australia’s Tobacco Plain Packaging Act of 2011, which restricts the use of trademarks in marketing tobacco products and prohibits all distinctive elements of packaging. The consolidated cases were an effort to have Australia's law declared inconsistent with international trade agreements. Trademarks enable the public to identify and recognize goods or services, help companies associate their reputations with their products and are an effective mechanism to protect against counterfeiting and consumer deception. Our letter also explained why Australia cannot meet its substantial burden to demonstrate that the restriction is justified, since the measure will not contribute materially to its objectives and there are less restrictive means of achieving them. Unfortunately, the WTO panel held that the Australian law may continue to restrict trademark use in tobacco product marketing.

 


Product Liability -- 2018



General Motors LLC v. Bavlsik   (U.S. Supreme Court)

Opposing damages-only retrial after impermissible compromise verdict

The NAM filed an amicus brief in support of General Motors in a case involving the standards a court must apply to require a new trial when the previous trial ended in a “compromise verdict.” Compromise verdicts arise when a jury cannot agree on the defendant’s liability but, out of sympathy for the plaintiff, the jury awards the plaintiff a small monetary damages award. In this case, a jury rendered a compromise verdict in a product liability case against GM, and the court ordered a new trial but only on the question of damages (rather than liability). A damages-only retrial by a new jury could result in a massive and improper damages award. The NAM’s amicus brief argues against damages-only retrials in circumstances such as this. The Supreme Court denied certiorari.


Related Documents:
NAM brief  (April 2, 2018)

 

ConAgra Grocery Products Co. v. California   (U.S. Supreme Court)

"Public nuisance" liability

The NAM filed an amicus brief in the U.S. Supreme Court on behalf of paint manufacturers to oppose an overbroad “public nuisance” theory of product liability. The case involves lawsuits by several California counties against companies that previously sold lead paint. A California court concluded that the plaintiffs could establish over $1 billion in liability against the companies under a “public nuisance” theory of tort liability. That theory is dangerous for manufacturers because it does not require plaintiffs to prove reliance or causation and could lead to crushing damage awards in other lawsuits against manufacturers. The NAM’s brief supported the companies’ request for review by the Supreme Court. Unfortunately, the Court declined to review the case.


Related Documents:
NAM brief  (August 17, 2018)

 

City of Modesto v. Dow Chemical Co.   (California Supreme Court)

Concerns of generalized causation over direct evidence

The NAM filed an amicus brief urging the California Supreme Court to grant review in a case involving industry-wide liability for a dry-cleaning solvent. Various courts have shown a growing interest in nuisance cases, especially in California, and this case raised the question of whether a company can be held liable for nuisance even when there is no proof connecting culpable conduct to the particular harm. The City of Modesto sought damages for contamination of soil and groundwater by dry-cleaner releases of a perchloroethylene (PCE) dry-cleaning solvent. If handled properly, PCE solvents can be used safely and without environmental contamination, and no evidence existed that the PCE manufacturers, including Dow, were directly involved in the use of the solvents at the dry-cleaner sites. The NAM’s brief argued that allowing a generalized notion of causation to supplant proving direct evidence raises deep concerns for all manufacturers that lawfully manufacture, market and distribute beneficial, though potentially hazardous, products. The court denied review.


Related Documents:
NAM brief  (March 12, 2018)

 

Condon v. Advance Thermal Hydronics, Inc.   (N.J. Super. Ct. App. Div.)

Allowing non-settling defendants to present cross-claim proofs

The NAM filed an amicus brief in support of the trial court’s decision to allow non-settling defendants to present cross-claim proofs in a case concerning apportioning liability for asbestos exposure between multiple defendants. The issue is whether settled defendants remain “parties” for purposes of allowing non-settling defendants to present cross-claim proofs and enable the jury to apportion fault among all defendants (settled and non-settling) that may have contributed to the plaintiff’s harm. The presentation of cross-claim proofs against settled defendants is critical to help ensure that non-settling defendants do not bear an unfair and disproportionate burden and to preserve assets for future claimants that could be threatened if current plaintiffs are able to receive large, windfall recoveries for their injuries in the tort system. The NAM’s brief argued that 1) providing windfall recoveries to plaintiffs would harm manufacturers; 2) windfall recoveries threaten potential recoveries for future plaintiffs; and 3) non-settling defendants should be allowed to introduce settled defendants’ prior deposition testimony to prove their cross claims. In a win for manufacturers, the appellate court vacated the jury verdict against one of the remaining defendants.


Related Documents:
NAM brief  (November 24, 2015)

 

Alcon Laboratories v. Cottrell   (U.S. Supreme Court)

Fighting class-action abuse over "wasted" medication

The NAM filed an amicus brief in the U.S. Supreme Court in a class action lawsuit against manufacturers of eye droppers that dispense glaucoma medication. The suit alleged that the droppers dispense droplets that are too big for the average human eye to absorb, and therefore the “wasted” medication defrauds consumers. The plaintiffs’ logic could extend to various other items that plaintiffs could allege over-dispense or under-dispense a product. To help protect manufacturers against having to face these baseless claims, the NAM’s brief supported the defendant manufacturers in support of a petition for certiorari. Our brief argued that the plaintiffs failed to establish any real injury, their claims are preempted by federal law and that allowing cases like this to move forward would invite abusive class-action litigation. The Court denied certiorari.


Related Documents:
NAM brief  (April 23, 2018)

 

Dolin v. GlaxoSmithKline LLC   (7th Circuit)

Brand manufacturer's "innovator" liability

The NAM filed an amicus brief supporting GlaxoSmithKline in a tort case on appeal to the U.S. Court of Appeals for the Seventh Circuit. Plaintiffs prevailed below in asking the court to hold GSK liable for tort damages for a generic product that injured the plaintiffs, even though GSK made the name brand of the drug and did not participate in the selling or manufacturing of the generic drug. Imposing liability for products that a company did not manufacture or sell would deter innovation and stunt the growth of the pharmaceutical industry. Pharmaceutical manufacturers would have to consider a higher level of risk when innovating, which may increase the cost or lower the availability of lifesaving and life-enhancing medicines. The NAM’s brief asked the Seventh Circuit to hold to the longstanding principle that defendants cannot be held liable for tort damages for products they did not sell or manufacturer, despite plaintiff’s desire to create an exception for the pharmaceutical industry. The Seventh Circuit reversed the judgment against GSK and concluded that GSK could not be held liable because the U.S. Food and Drug Administration actively prohibited GSK from adding the plaintiff’s desired warning.


Related Documents:
NAM brief  (January 29, 2018)

 

Duffy v. CBS Corp.   (Maryland Court of Appeals)

Statute of repose for asbestos cases

The NAM filed an amicus brief in the Maryland Court of Appeals urging the court to uphold a statute of repose for improvements to real property and reject a carve out for manufacturers. A statute of repose establishes an absolute bar to a claimant’s legal action; the absolute legal bar has been upheld by the vast majority of courts, including challenges based on state constitutions. These statutes are especially important to manufacturers that would otherwise be held perpetually liable for improvements to real property. The NAM’s brief explained that statutes of repose for improvements to real property, such as the law at issue, represent an important component of a balanced liability system. The Maryland Court of Appeals held that the statute of repose does not bar asbestos personal injury claims when the plaintiff’s last exposure to asbestos-containing products occurred before the statute of repose was enacted.


Related Documents:
NAM brief  (November 7, 2017)

 

Evans v. NACCO Materials Handling Group, Inc.   (Virginia Supreme Court)

Admissibility of expert evidence

The NAM filed an amicus brief in the Supreme Court of Virginia asking the court to reaffirm established rules governing the admissibility of expert testimony and contributory negligence. This case concerned the trial court’s admission of expert testimony despite the expert testifying to an opinion without having conducted any testing or independent analysis, and admitting that the product at issue met government and industry standards for operation. Expert testimony and contributory negligence standards must be applied equally to both plaintiffs and defendants. The NAM’s brief argued that, in order to be admissible, expert testimony must be predicated upon both a sufficient factual foundation and a sufficient scientific foundation, neither of which were present in this case. Furthermore, the NAM urged the court to affirm the trial court’s finding of contributory negligence because NACCO demonstrated that the plaintiff’s negligence was the proximate cause of the accident, and the plaintiff’s own expert admitted that the decedent in the case was not certified to use the lift truck. The Virginia Supreme Court ruled 7-0 in NAACO's favor, finding that the plaintiff’s evidence failed as a matter of law to establish a design defect.


Related Documents:
NAM brief  (June 27, 2017)

 

Gustavsen v. Alcon Laboratories, Inc.   (1st Circuit)

Class action to recover for "wasted" medication

The NAM filed an amicus brief in the U.S. Court of Appeals for the First Circuit in a class-action lawsuit brought by individuals suing over eye droppers for glaucoma medication. The suit alleged that the droppers dispense droplets that are too big for the average human eye to absorb, and therefore the “wasted” medication defrauds consumers. The plaintiffs’ logic could extend to various other items that plaintiffs could allege over-dispense or under-dispense a product. To help protect manufacturers against having to face these baseless claims, the NAM’s brief argued that the plaintiffs failed to establish any real injury and therefore have no right to bring this case, that their claims are preempted by federal law and that allowing cases like these to move forward would invite abusive class-action litigation. The First Circuit ruled against the plaintiffs, finding that their state-law claims are preempted by federal law.


Related Documents:
NAM brief  (April 11, 2018)

 

Juni v. A.O. Smith Water Prods. Co.   (New York Court of Appeals)

Opposing any exposure theory of causation in asbestos case

The NAM filed an amicus brief in the New York Court of Appeals opposing the “any” exposure theory of causation in this asbestos liability case. The lower courts in New York rejected plaintiffs’ argument that any exposure to asbestos is enough to prove causation after the plaintiffs argued that mechanics and their family members should only need to prove that they were exposed to any amount of asbestos in order to relieve them from having to prove causation or harm. An imposition of a duty of care to third parties will permit potentially limitless and indefinite liability. The NAM’s brief urged the court to reject the “any” exposure theory and instead require the plaintiffs to show that workers were exposed to enough asbestos to actually cause harm in order to prevail in their case. In a win for manufacturers, the Appeals Court agreed with the NAM’s arguments and ruled against plaintiffs.


Related Documents:
NAM brief  (January 24, 2018)

 

Miller v. Ford Motor Co.   (Oregon Supreme Court)

Court undermining statute of repose

The NAM filed an amicus brief in the Oregon Supreme Court supporting Ford Motor Company in a lawsuit brought by an Oregon plaintiff alleging that a used car was defective because it had an electrical issue more than eleven years after the original sale date. Oregon’s statue of repose declares that a product is non-defective as a matter of law if it remained in use for ten years without showing a defect. However, a lower court determined that this provision allowed for no statute of repose for a product produced in a state without a statute of repose, such as the Ford car at issue, which makes doing business in Oregon much less attractive for manufacturers. The NAM’s brief argued that the Oregon Supreme Court should reverse the lower court’s statute of repose interpretation because it is contrary to legislative intent and has far-reaching negative implications for any manufacturers doing business in Oregon. The court unfortunately ruled that when the state of manufacture did not have a statute of repose, then there is no governing statute of repose at all.


Related Documents:
NAM brief  (November 16, 2017)

 

People v. Conagra Grocery Products Co.   (California Supreme Court)

Validity of public nuisance claims

The NAM filed an amicus letter urging the California Supreme Court to review a lower court’s ruling and require plaintiffs to prove unreasonable interference and causation to prevail on their lead paint public nuisance claim. This case was appealed to the California Supreme Court on the issue of whether manufacturers that sold lead paint more than 65 years ago should face liability under a public nuisance theory for promoting their products at that time. The court below held that defendants could be held liable simply based on circumstantial evidence at the time the paint was sold that lead paint could be harmful, which could open the door to a range of lawsuits against manufacturers. The NAM’s letter urged the California Supreme Court not to apply knowledge we have now to the actions of manufacturers decades ago when the information was not available and argued that plaintiffs should be required to prove causation between a specific company’s product and the harm suffered, as is traditionally required in public nuisance cases. Unfortunately, the California Supreme Court declined to review this case, so the decision of the lower court stands.


Related Documents:
NAM letter  (January 19, 2018)

 

Quisenberry v. Borgwarner Morse Tec, Inc.   (Virginia Supreme Court)

Liability for take-home exposure to asbestos

The NAM filed an amicus brief asking the Virginia Supreme Court to expand the universe of people to whom employers owe a duty of care under tort law. This issue was put before the court as a certified question of whether an employer owes a duty of care to the family member of an employee who alleges exposure to asbestos from the work clothes of the employee at a shipyard, where such exposure takes place off of the employer’s premises and the employer has no relationship with the family member. This case is important because imposition of a duty on employers to prevent off-site exposures to asbestos (and presumably other toxic substances) could lead to potentially boundless and indefinite liability. The NAM’s brief explained that such a duty would substantially burden the still-solvent but increasingly remote defendants in the asbestos litigation and that a duty finding here also could open the door to lawsuits against employers over any number of hazards that workers carry off-site. In a 4-3 decision, the Virginia Supreme Court held that the shipyard does owe a duty of care to prevent employees from carrying asbestos fibers home.


Related Documents:
NAM amicus brief  (February 23, 2018)

 

Rafferty v. Merck & Co.   (Massachusetts Supreme Judicial Court)

Innovator liability

The NAM filed an amicus brief urging the Massachusetts Supreme Court to reject a claim by a consumer over alleged injuries from a drug made by another company. The drug is a generic version of one originally made by Merck but now sold by competitors. The overwhelming majority of courts that have addressed this issue have rejected such “innovator liability,” and making innovators liable for injuries alleged to occur from the consumption of generics would expose them to massive liability. The NAM’s amicus brief argued that brand-name manufacturers do not owe a duty to users of generic medicines and that imposing such an obligation is bad social policy and fundamentally unfair. The Massachusetts Supreme Court upheld the trial court, holding that “where the failure to warn is with respect to a drug that Merck has never advertised, offered to sell, or sold,” it would unreasonably expand the limits of products liability.


Related Documents:
NAM brief  (August 25, 2017)

 

Ramsey v. Georgia Southern Univ. Advanced Dev. Center   (Del.)

Manufacturer liability for take-home exposure to asbestos

The NAM filed an amicus brief urging the Delaware Supreme Court to affirm the lower court’s ruling in an asbestos litigation regarding manufacturer liability for take-home exposure to asbestos. The plaintiffs argued that employers and premises owners owed a duty of care to warn the family members of workers exposed to asbestos through contact with occupationally exposed workers or their clothing. Allowing such a claim could bring a flood of claims, and manufacturers have limited options to warn those third parties. The NAM’s brief explained that manufacturers are too far removed to have a duty to warn such remote parties. Unfortunately, the Delaware Supreme Court reversed recent precedent by holding that employers can be liable for take-home asbestos exposures.


Related Documents:
NAM brief  (December 15, 2017)

 


Taxation and State Taxation -- 2018



BNSF Ry. Co. v. California State Board of Equalization   (N.D. Cal.)

Opposing $45 fee on rail shipments of hazardous materials

The NAM submitted a declaration supporting BNSF and Union Pacific Railroads in their suit against California following the imposition of a $45 per car fee for transportation of hazardous materials. The new law, which only applies to rail shipments, requires railroads to collect the fee from their customers and turn it over to the state with the proceeds of the fee to be used for hazmat training and equipment. This matter is important because imposing a new fee will increase costs to rail customers and unlawfully interfere with interstate commerce. The declaration described the disadvantages to shippers, customers and railroads from the new charge and explained how the charge runs contrary to the long-standing benefits of federal preemption of transportation-related state statutes that help manufacturers by keeping transportation costs affordable and competitive. The U.S. Court of Appeals for the Ninth Circuit affirmed the lower court’s decision, which granted a preliminary injunction against the fee and issued a stay of the case.


Related Documents:
Declaration of Robyn Boerstling (NAM)  (August 1, 2016)
Motion for preliminary injunction  (August 1, 2016)
Complaint  (July 29, 2016)

 


Class Actions -- 2017



Conagra Brands, Inc. v. Briseno   (U.S. Supreme Court)

Class action certification

The NAM filed an amicus brief urging the U.S. Supreme Court to grant review of a class action certification case that could remedy a circuit split and defend fair class action standards for all class members. The litigation involved whether a class of plaintiffs, which includes purchasers over ten years and across eleven states, can be certified if there is no reliable way to find class members, short of an unmanageable series of mini-trials. Many NAM members are defendants in class actions and are therefore interested in ensuring that courts rigorously analyze whether a plaintiff has satisfied the requirements for class certification before certifying a class. The NAM’s brief argued that the circuit split encourages plaintiffs to circumvent ascertainability requirements adopted in four circuits by filing nationwide or multi-state class actions in the U.S. Court of Appeals for the Ninth Circuit and that the decision imposes a burden on businesses without benefiting absent class members. Unfortunately, the Supreme Court denied certiorari, leaving the issue unresolved.


Related Documents:
NAM amicus brief  (May 12, 2017)

 

Cottrell v. Alcon Laboratories, Inc.   (3rd Circuit)

Class action to recover for "wasted" medication

The NAM filed a brief in the U.S. Court of Appeals for the Third Circuit to support manufacturers in a class action litigation suit brought by plaintiffs who did not allege physical injury or that the product was ineffective. Instead, the plaintiffs claimed that Alcon’s medicated eyedroppers caused financial harm because the eyedroppers dispensed more liquid than required for treatment. This argument could encourage speculative class action litigation challenging business practices that could be portrayed as potentially inefficient. The NAM’s brief argued that the plaintiffs’ claim is speculative and did not identify a recognizable harm. Unfortunately, the court did not agree with NAM’s argument and reversed the lower court’s dismissal.


Related Documents:
NAM brief  (September 28, 2016)

 

Graham v. R.J. Reynolds Tobacco Co.   (11th Circuit)

Defending due process rights in preclusion cases

The NAM filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit arguing that the lower court violated the defendant’s due process rights when it discarded the longstanding principle that preclusion is only acceptable when identical issues have been actually and necessarily decided. The lower court’s decision, which allowed the plaintiffs’ claims to proceed without requiring a showing that any specific theory or issue was decided, was at odds with the traditional test for issue and claim preclusion. That ruling had the potential to dramatically transform the law of preclusion and improperly increase the liability exposure of manufacturers by relieving plaintiffs of the burden of proving fundamental elements of their causes of action.

The NAM’s brief argued that the lower court’s decision eliminated due-process protections and businesses’ fundamental right to defend themselves when they are sued, and that it endangered American business because these rulings could authorize the use of any general verdict against defendants in mass-tort proceedings to foreclose litigation over basic liability issues as to all defendants and all products for the entire time they were on the market. The Eleventh Circuit unfortunately reimagined the lower court’s decision with an even more fundamental error and found each defendant liable as to every product during the entire forty-year period at issue and further held that this “finding” must be given issue preclusive effect.


Related Documents:
NAM brief  (April 22, 2016)

 

In re Flonase Antitrust Litigation   (3rd Circuit)

Sovereign immunity and duplicative state government suits

The NAM filed an amicus brief in the U.S. Court of Appeals for the Third Circuit brief opposing Louisiana’s attempt to file a lawsuit against GlaxoSmithKline stemming from the company’s Flonase marketing. The State of Louisiana previously received a settlement, as a member of a class, from GlaxoSmithKline. This case could establish a precedent allowing states to recover damages twice for the same conduct and could prolong litigation and bring uncertainty to the finality of settlements. The NAM’s amicus brief argued that Louisiana can be bound by the settlement agreement even when it claims sovereign immunity from litigation under the Eleventh Amendment. Unfortunately, the Third Circuit did not agree with NAM’s argument but held that Louisiana retained the ability to sue because, pursuant to the Eleventh Amendment, Louisiana did not waive its sovereign immunity.

 

International Paper Co. v. Kleen Products LLC   (U.S. Supreme Court)

Presumption of classwide antitrust impact

The NAM filed an amicus brief in the U.S. Supreme Court urging it to consider a class certification approved by the U.S. Court of Appeals for the Seventh Circuit. In the proceedings below, the district court applied, and the Seventh Circuit approved, a presumption of class-wide antitrust injury based on alleged price increases that occurred in an unrepresentative price index despite extensive evidence showing that the index price did not reflect the prices that individual class members actually paid. This case raises concerns that manufacturers in industries which feature price indexes will be exposed to expansive class action antitrust liability. The NAM’s brief explained that the Seventh Circuit departed from Supreme Court precedent when it approved a presumption of class-wide injury to avoid individualized inquiries that would otherwise preclude class certification. Unfortunately, the Supreme Court declined to hear the case.


Related Documents:
NAM brief  (February 3, 2017)

 

Microsoft Corp. v. Baker   (U.S. Supreme Court)

Class certification

The NAM filed two amicus briefs urging the U.S. Supreme Court to affirm its precedent limiting review of class action certification decisions. After the named plaintiffs voluntarily dismissed their defective design claims with prejudice, they appealed the district court ruling that denied class certification. This litigation is important to manufacturers because piecemeal appeals from a single district court proceeding can prolong litigation, thereby increasing litigation costs. The NAM’s brief argued that 1) the case was moot after the parties agreed to dismiss the action with prejudice, 2) the district court’s holding ignored Supreme Court precedent regarding piecemeal appeals and 3) the holding was at odds with proper interpretation of the statue. In a win for manufacturers, the Supreme Court agreed with the NAM’s arguments.


Related Documents:
NAM amicus brief on the merits  (March 18, 2016)
NAM brief in support of petition  (November 11, 2015)

 


Criminal Liability -- 2017



DeCoster v. United States   (U.S. Supreme Court)

Prison sentence under Responsible Corporate Officer Doctrine

The NAM filed a brief with the U.S. Supreme Court in support of two corporate officers who were subject to criminal liability solely as a result of their position. Jack and Peter DeCoster, respectively the owner and Chief Operating Officer of Quality Egg LLC, pled guilty as Responsible Corporate Officers to violating the Food, Drug, and Cosmetic Act (FDCA) by unknowingly introducing eggs containing salmonella into interstate commerce. This standard imposes strict liability on C-level executives and holds executives liable for every unwitting decision by employees. The NAM’s brief argued that the Court should reconsider the Park standard, which imposes criminal liability on managerial officers regardless of their knowledge or participation in the FDCA violation. Unfortunately, the Supreme Court declined to review the case.


Related Documents:
NAM amicus brief  (February 10, 2017)
NAM amicus brief  (July 28, 2015)

 


Discovery -- 2017



Goodyear Tire & Rubber Co. v. Haeger   (U.S. Supreme Court)

Penalties for discovery misconduct

The NAM filed an amicus brief in the U.S. Supreme Court urging the court to review an appellate ruling that upheld a high penalty imposed on a company for alleged misconduct by their lawyers during the discovery phase of a lawsuit. The Ninth Circuit upheld a $2.7 million award imposed against Goodyear as sanctions for failing to turn over a document in discovery. If upheld, this decision could have subjected manufacturers, who generate large amounts of data, to considerable sanctions if an error occurs during a discovery request. The NAM’s brief argued that that failure to require a direct causal link between a litigant’s alleged discovery violations and compensatory damages to other parties will lead to abusive sanctions, particularly for manufacturers. The court overturned the $2.7 million award and remanded the case to the lower courts for determination of the appropriate sanction.


Related Documents:
NAM brief  (November 21, 2016)

 


Environmental -- 2017



American Petroleum Institute v. EPA   (D.C. Circuit)

Challenging EPA's new rules on definition of solid waste

The NAM challenged two final regulations promulgated by the Environmental Protection Agency (EPA) that define hazardous solid waste and would impose stringent regulatory obligations governing waste generation, treatment, storage, disposal and permitting. The EPA asserted jurisdiction to regulate solid and hazardous waste under the Resource Conservation and Recovery Act (RCRA), which defined “hazardous waste” as “solid waste” that may pose a danger to human health or the environment. The definition is important to manufacturers that reuse materials in the manufacturing process, as well as for disposal and recycling procedures. The NAM sued the EPA to resolve concerns related to new affirmative duties and conditions on in-process materials that are not discarded. The NAM argued that EPA’s attempt to regulate materials that are not yet waste exceeds the agency’s authority. In a win for manufacturers, the court held that that some of the requirements imposed on companies using third-party recyclers exceeded the EPA's statutory authority and improperly presumed that recycled materials were discarded simply because the recyclers did not meet various paperwork requirements.


Related Documents:
NAM reply brief  (May 19, 2016)
Opening brief of industry petitioners  (December 9, 2015)

 

California Chamber of Commerce v. California Air Resources Board   (California Supreme Court)

Challenging CARB cap-and-trade auction allowance revenues

The NAM asked the California Supreme Court to review a case challenging a greenhouse gas cap-and-trade auction system created by California’s Air Resources Board (CARB) as an unauthorized tax disguised as a regulatory action. This was an appeal of an adverse decision where the lower court held that revenues collected by CARB from California businesses, which must acquire greenhouse gas emissions allowances from the state in order to remain in business, are not taxes subject to Proposition 13. Proposition 13 requires an authorization by two-thirds of the legislature. This decision brings uncertainty to California manufacturers who are now unsure of the application to any other financial exactions. The NAM argued that the California Supreme Court did not apply existing precedent to assess whether a charge imposed for regulatory purposes is a tax, and by rejecting that precedent, the court provided a roadmap for the evasion of Proposition 13. Furthermore, the lower court’s holding defies precedent, the record evidence and common sense, and taken to its logical conclusion, would mean that virtually all taxes are “voluntary.” Unfortunately, the California Supreme Court declined to hear this appeal.


Related Documents:
NAM reply brief  (June 26, 2017)
NAM petition for review  (May 16, 2017)

 

Chemical Manufacturers Association v. EPA   (U.S. District Court for the District of Columbia)

Superfund

This suit, filed by the NAM, CMA, American Automobile Manufacturers Association, American Petroleum Institute, Electronics Industry Association, and the Chamber of Commerce of the United States, challenges an EPA policy that allows municipalities to avoid some liability for Superfund cleanup costs. It affects all companies at "co-disposal" Superfund sites (with both industrial and municipal wastes), by allowing municipalities to escape liability by paying a fixed price for cleanup costs. The suit was dismissed by U.S. District Court for the District of Columbia for lack of jurisdiction (EPA's policy was not "final agency action") on 11/16/98. A similar suit filed in the D.C. Circuit was stipulated for dismissal on 7/2/98 by the EPA.

 

Constitution Pipeline Co. v. New York State Dep't of Envtl. Conservation   (2nd Circuit)

Supporting FERC approval of pipelines

The NAM filed an amicus brief in the U.S. Court of Appeals for the Second Circuit supporting Constitutional Pipeline in an energy infrastructure litigation suit after New York state denied a permit for construction of a natural gas pipeline through part of the state, although the Federal Energy Regulatory Commission (FERC) approved the project. The Clean Water Act permit was denied after extensive environmental, safety and economic review, and approval by FERC. This litigation is important to manufacturers because state intervention can impede the efficient, transparent and predictable approval of natural gas pipelines even when those projects have been approved by other agencies. The NAM’s brief argued that FERC conducted a thorough review process that assessed the environmental impact of the pipeline as required by the National Environmental Policy Act and the Natural Gas Act and that although states should play an important role in the pipeline approval process, states should not be permitted to override FERC’s assessment of a pipeline’s benefits and environmental impact. Unfortunately, the court rejected the arguments and deferred to the judgment of state officials.


Related Documents:
NAM brief  (July 19, 2016)

 

Ohio Valley Env'l Coalition, Inc. v. Fola Coal Co.   (4th Circuit)

Effect of water quality standards on existing CWA permit shield

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit arguing that courts should not apply new conditions to an existing National Pollution Discharge Elimination System (NPDES) water discharge permit when the regulatory agency has already considered those conditions and did not require them in the permit. Although West Virginia’s permit included boilerplate language that prohibited discharges that cause violations of state water quality standards, the district court used the boilerplate language to convert those water quality standards into enforceable effluent limits in the permit. That decision is important as NAM members who hold these permits with similar boilerplate language may now be subjected to civil and criminal penalties and injunctive action. The NAM’s brief argued that Fola was entitled to protection from the permit and that the district court’s interpretation usurps the state’s authority to establish water quality standards. Unfortunately, the Fourth Circuit did not agree with NAM’s arguments, leaving current permit holders liable for discharges that are otherwise permitted at the time of issuance.


Related Documents:
NAM amicus brief  (April 20, 2016)

 

Orange Cty. Water Dist. v. Sabic Innovative Plastics US, LLC   (California Supreme Court)

Erroneous expansion of California Superfund liability

The NAM filed an amicus brief urging California’s Supreme Court to review a series of cases that grant a private right of action to impose liability for environmental remediation, regardless of prior remediation efforts and regulatory action. Historically, California businesses were able to rely on state agency direction when remediating contaminated sites, potentially obtaining a “No Further Action” letter that signified the sites were safe for productive economic use; businesses would only face liability for additional remediation in exceedingly rare cases. Private liability for environmental remediation undermines the relationship between businesses and regulators and discourages proactive remediation efforts. The NAM’s brief explained that these cases will discourage both voluntary remediation and swift compliance with regulators’ Remedial Action Plans, which runs counter to the interest of California citizens and discourages cooperation between businesses and regulators. Unfortunately, the California Supreme court denied review.


Related Documents:
NAM letter  (October 13, 2017)

 

Sciscoe v. Enbridge Gathering (North Texas), L.P.   (Texas Supreme Court)

Preemption of tort claims for permitted emissions

The NAM submitted an amicus letter urging the Texas Supreme Court to grant review of a lower court decision that did not clarify whether the Federal Clean Air Act and the Texas Clean Air Act preempt state tort law claims for damages. The issue stemmed from an earlier claim where residents near natural gas compressor stations and a metering station sued alleging that the facilities interfered with their rights by generating noise and fumes. If tort law claims like these are not preempted by the federal or state Clean Air Act, manufacturers would be exposed to massive additional liability. The NAM argued that both the Federal Clean Air Act and the Texas Clean Air Act preempt state tort claims for damages against facilities lawfully operating under the regulations. The matter remains unsettled as the court dismissed petitioners appeal on other grounds.


Related Documents:
NAM brief  (November 9, 2015)

 

Sierra Club v. EPA   (D.C. Circuit)

Defending EPA's sulfur dioxide regulation against accelerated enforcement

The NAM intervened in a suit brought by the Sierra Club and Natural Resources Defense Council against the EPA for its regulation on sulfur dioxide (SO2). The regulation, published August 5, 2013, designated 29 areas as “nonattainment” for SO2 based on recorded air quality monitoring data, and the EPA announced its intention to address the rest of the country in separate regulations in the future. The modeling predictions urged by the Sierra Club would allow areas to be designated as nonattainment when in fact they are not. That would increase the number of such areas, and manufacturers would have to spend billions of dollars to achieve far greater emission reductions than would be required if designations were based on actual air quality monitoring data. The NAM intervened to help secure a more positive regulation for manufacturers. A district court approved a consent decree requiring the EPA to include any areas with stationary sources that emitted more than 16,000 tons of SO2 in 2012 and extending the timeline for the EPA to promulgate a new rule. The deadline is now December 31, 2020, which will allow for real-life modeling data to be used instead of the Sierra Club's recommendation of computer modeling. This is a favorable outcome for manufacturers. The consent decree was appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed the district court’s approval.


Related Documents:
Motion to Intervene  (November 4, 2013)

 

Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers   (D.D.C.)

Continuing to delay pipelines is unnecessary and harmful

The NAM filed an amicus brief supporting the continuance of Dakota Access Pipeline (DAPL) operations. The litigation arose from alleged deficiencies in National Environmental Policy Act review, assessment and analysis following a procedural error in the U.S. Army Corps’ Environmental Assessment. This issue is important to manufacturing as halting DAPL would significantly impede access to crude oil on which manufacturers heavily rely. The NAM’s brief argued that halting operations due to a procedural error is not an appropriate remedy but would instead produce serious and irreparable harm including harm to energy businesses, states benefiting from DAPL operations and individuals employed through DAPL. The court agreed with the NAM’s arguments that the pipeline should be permitted to continue operations while the U.S. Army Corps of Engineers conducted further NEPA review.


Related Documents:
NAM brief  (July 17, 2017)

 

TransCanada Keystone XL Pipeline, LP v. Kerry   (S.D. Texas)

Challenge to Executive authority to block Keystone XL Pipeline

The NAM filed an amicus brief in support of TransCanada’s challenge to the Obama Administration’s disapproval of a cross-border permit for the Keystone XL pipeline. The denial violates the separation of powers and would directly affect U.S. trade with other nations. The NAM’s brief argued that the president’s justification for denial was not based on national security but was instead intended to regulate foreign commerce, which is an impermissible exercise of the foreign affairs power to usurp Congress’s authority over foreign commerce. This matter was dismissed as moot when the new administration granted the pipeline permit.


Related Documents:
NAM amicus brief  (May 9, 2016)

 


Expert Testimony -- 2017



O'Banion v. Ford Motor Co.   (Indiana Supreme Court)

Expert witness standard in Indiana

The NAM filed an amicus brief in the Indiana Supreme Court supporting Ford Motor Company in a suit regarding Indiana’s evidentiary rules of expert testimony. This litigation stems from an Indiana Court of Appeals holding that applied higher standards to expert scientific testimony as compared to engineering or other highly technical knowledge. This is important because jurors place significant weight on expert testimony; therefore, engineering or other highly technical testimony should be subject to the same standards. The NAM’s brief argued that Indiana courts should follow the majority of state courts in ensuring that engineering testimony is “based on reliable principles” before the testimony is presented to a jury. The court did not agree with the majority approach but followed the minority in allowing an engineer’s testimony to reach the jury.


Related Documents:
NAM brief  (October 9, 2015)

 


False Claims Act -- 2017



United States ex rel. Customs Fraud Investigations LLC v. Victaulic Co.   (U.S. Supreme Court)

False Claims Act pleading standard

The NAM filed an amicus brief in the U.S. Supreme Court urging the Court to consider a case from the U.S. Court of Appeals for the Third Circuit involving False Claims Act (FCA) qui tam pleading standards. The issue arises from a circuit split where eleven court of appeals have adopted conflicting tests to evaluate the sufficiency of a relator’s complaint. The pleading standard applies to manufacturers who contract, either directly or indirectly, with the federal government, thus subjecting them to increased litigation. The NAM’s brief explained that the Third Circuit’s qui tam pleading standards for alleging an FCA claim is the most lenient of those adopted by any circuit and would therefore require the pleading party to show nothing more than an opportunity for fraud by a business. Unfortunately, the Supreme Court denied the petition for certiorari, declining to resolve the circuit split.


Related Documents:
NAM amicus brief  (June 22, 2017)

 


Free Speech -- 2017



Microsoft v. U.S. Dep't of Justice   (W.D. Washington)

Government access to private email

The NAM filed an amicus brief in the U.S. District Court for the Western District of Washington on behalf of Microsoft Inc. in its litigation against the Department of Justice’s (DOJ) attempts to search Microsoft customer’s data. DOJ’s violated Microsoft customers’ privacy, and DOJ’s use of Electronic Communications Privacy Act (ECPA) gag orders violates the Constitution. The DOJ sought to search data belonging to Microsoft customers without a warrant and used the ECPA to impose a gag order to bar third-party service providers from notifying customers that the government had sought access to the data. The NAM’s brief argued that the DOJ's actions violated the First and Fourth Amendments to the Constitution and that the benefits of cloud computing will not be fully realized if private information receives diminished legal protections. In a win for manufacturers, the court granted Microsoft’s motion to dismiss.


Related Documents:
NAM amicus brief  (September 2, 2016)

 

National Association of Manufacturers v. SEC   (U.S. District Court for the District of Columbia)

Challenging law and SEC rule on Conflict Minerals

The NAM challenged the conflict minerals rule issued by the Securities and Exchange Commission (SEC) in August 2012. The challenge was transferred from the U.S. Court of Appeals for the D.C. Circuit to the U.S. District Court for D.C. The rule harmed manufacturers because it required misleading and stigmatizing public statements unfairly linking products to human rights violations. The NAM argued that the SEC incorrectly interpreted the statute, which required reporting of certain minerals that “did originate” in and around the Democratic Republic of the Congo (DRC), to cover minerals that “may have originated” there. In April 2017, the D.C. District Court entered final judgment declaring the SEC regulations on conflict minerals unconstitutional to the extent that the statute and the rule require regulated entities to report to the SEC and to state on their websites that any of their products “have not been found to be ‘DRC conflict free.’”

 


Government Contracting -- 2017



United States ex rel. Harman v. Trinity Industries, Inc.   (5th Circuit)

FCA liability despite compliance with federal requirements

The NAM filed an amicus brief in a product liability suit in the U.S. Court of Appeals for the Fifth Circuit urging the court to reverse a $663 million lower court judgement against Trinity Industries for allegedly defrauding the federal government despite the government’s determination that Trinity’s product had consistently complied with the applicable federal requirements. This case is important to manufacturers as NAM members contract directly and indirectly with the government. The NAM’s brief argued that 1) the claim was not a False Claims Act (FCA) claim because the government expressly disagreed the claim was false and 2) the decision created uncertainty and devastating consequences for businesses both in terms of financial costs and in reputational harm from an unwarranted FCA suit. In a win for manufacturers, the Fifth Circuit overturned the lower court’s ruling, thus lessening the likelihood that a business would be held liable under the FCA after relying on authoritative assurance of compliance from the government.


Related Documents:
NAM amicus brief  (March 28, 2016)

 


Government Regulation -- 2017



National Resources Defense Council v. U.S. Consumer Product Safety Commission   (S.D.N.Y.)

Intervention in suit forcing CPSC rulemaking on phthalates

The NAM filed a motion to intervene in a chemical litigation suit against the Consumer Product Safety Commission (CPSC) arguing that the plaintiffs lacked standing because the plaintiffs could not provide evidence that they suffered an injury or future injury. The plaintiffs sued the CPSC after a missed deadline to force the CPSC to move forward with a final rulemaking process to ban certain phthalates from the market. The NAM intervened on behalf of manufacturers. Our brief argued that the plaintiffs could neither establish a showing of credible harm, nor show a link between their alleged harm and the procedural delay in implementing the rule. This litigation forced CPSC to expedite its review process and backtrack on its previously stated view of the amount of time needed to implement a scientifically sound rule. The parties settled the case by signing a consent decree that required the CPSC to vote on a final phthalates rule by October 18, 2017.


Related Documents:
Additional Reply Brief  (May 5, 2017)
Reply Brief  (April 25, 2017)
Motion to Intervene  (April 6, 2017)
Motion to Dismiss  (April 6, 2017)

 


Jurisdiction -- 2017



Abbott Labs., Inc. v. Schmidt   (Missouri Supreme Court)

Venue for multiple out-of-state plaintiffs joined in one suit

The NAM filed an amicus brief urging the Missouri Supreme Court to overturn a ruling that allows out-of-state plaintiffs access to St. Louis trial courts. The plaintiffs brought suit against Abbott Labs, in a Missouri trial court, alleging that there were inadequate warnings on an FDA-approved prescription drug; however, the plaintiffs’ injuries did not occur within Missouri. This case brings uncertainty to manufacturers that conduct business in Missouri and encourages forum shopping among plaintiffs. The NAM’s brief argued that the plaintiffs were not injured in Missouri, therefore, venue was improper and the plaintiffs could not use joinder to circumvent venue rules. The court did not address whether venue was proper and affirmed the trial court’s judgment.


Related Documents:
NAM Amicus Brief  (February 28, 2017)

 

BNSF Ry. Co. v. Tyrrell   (U.S. Supreme Court)

Clarifying "at home" provision of general jurisdiction

The NAM filed an amicus brief urging the U.S. Supreme Court to safeguard manufacturers’ due process rights by affirming that a company was not “at-home” for jurisdictional purposes where the company is not incorporated or has not established its principal place of business. The appeal stems from two separate workplace injury claims against BNSF in Montana under the Federal Employers’ Liability Act (FELA) where the Montana Supreme Court held that the “at home” requirement applies only to foreign (outside the United States) defendants and that FELA’s venue provision supersedes constitutional due process limits on jurisdiction. As manufacturers continue to expand their distribution chains, jurisdiction and venue are important to manufacturers who can become subject to burdensome lawsuits in states where they do not have continuous and systematic contact. The NAM’s brief argued that Montana’s application of jurisdiction violates the “at home standard” and that expanding jurisdiction encourages forum shopping. In a win for manufacturers, the U.S. Supreme Court held that simply transporting trains through a state, without any other connection, is insufficient under the due process clause of the 14th Amendment to allow a court to exercise jurisdiction over a defendant.


Related Documents:
NAM brief  (March 6, 2017)
NAM brief  (October 28, 2016)

 


Labor Law -- 2017



Banner Health Sys. v. NLRB   (D.C. Circuit)

Challenging NLRB decision undermining confidentiality of investigatory interviews

The NAM filed an amicus brief in support of an employer’s right to manage internal company investigations of employee misconduct. This case stemmed from a previous National Labor Relations Board (NLRB) decision where Banner Health Systems instructed employees to maintain confidentiality during ongoing investigations of employee misconduct. This issue is important to manufacturers because their business operations would be disrupted by employees discussing the details of a sensitive internal company investigation. The NAM’s brief argued that the NLRB’s ruling would burden employers by requiring them to justify the need for investigatory confidentiality at a point where such justification would be almost impossible. Although the decision is narrowly tailored, the outcome is a win for manufacturers as the court did not opine on the NLRB’s case-by-case approach to justify employer confidentiality.


Related Documents:
NAM amicus brief  (January 21, 2016)

 

EEOC v. Day & Zimmermann NPS, Inc.   (D. Conn.)

EEOC interference with employer free speech

The NAM filed an amicus brief supporting manufacturers’ employment rights in an Equal Employment Opportunity Commission (EEOC) claim against an employer for retaliation and interference under the Americans with Disabilities Act (ADA) based on a letter sent from the employer to employees identified as witnesses advising the employees of their rights during a disability discrimination investigation. Not only would the EEOC’s interpretation have negatively impacted the employer/employee relationship by making it more difficult for manufacturers to provide information to employees, but the interpretation also violated employers’ constitutional rights to communicate with employees. The NAM’s brief argued that the EEOC’s action was unlawful because the letter did not violate the ADA and that the EEOC interfered with the employer’s First Amendment right to communicate with its employees. The parties settled the case.


Related Documents:
NAM brief  (October 28, 2016)

 

FedEx Home Delivery v. NLRB   (D.C. Circuit)

Delivery service contractors as employees

The NAM filed an amicus brief in support of FedEx’s position that delivery service contractors working for FedEx were independent contractors, not employees of FedEx. The facts of this case were “materially indistinguishable” from a prior case where the U.S. Court of Appeals for the District of Columbia Circuit determined that a group of delivery service contractors were not FedEx employees, but were independent contractors under the National Labor Relations Act. This case is important as worker classification may have broad ramifications affecting the use of independent contractors and partnerships between manufacturers and commercial vehicle drivers are a key asset. The NAM’s brief explained that worker classification issues directly impact all segments of the economy and more directly, the trucking industry. In a win for manufacturers, the court ruled against the plaintiffs.


Related Documents:
NAM brief  (August 17, 2015)

 

International Brotherhood of Boilermakers v. NASSCO Holdings Inc.   (Cal. Ct. App.)

Notice requirements under the California WARN Act

The NAM filed an amicus brief in the California Court of Appeals to challenge the California WARN ACT, which requires employers to provide 60-days’ notice before any “mass layoff, relocation, or termination.” This is an appeal from a lower court decision which held that NASSCO violated the WARN Act when it failed to provide required notice before informing 90 employees that they should not return to work for four to five weeks. California manufacturers, particularly those with cyclical employees or staffing requirements that ebb and flow, need certainty in meeting their staffing needs. The NAM’s brief argued that the court erred by reading “layoff” in the Act to include a furlough — a brief break during which about 90 employees (less than 3% of NASSCO’s workforce) did not earn wages but nevertheless remained as NASSCO employees. Unfortunately, the court did not agree with this view but instead affirmed the lower court’s decision, requiring an employer to provide 60 days’ notice prior to a mass layoff, even if the layoff is not permanent and is for less than six months.


Related Documents:
NAM brief  (May 1, 2017)

 

Mendoza v. Nordstrom, Inc.   (California Supreme Court)

Understanding California's Day-of-Rest law

The NAM filed an amicus brief supporting Nordstrom Inc. in an employment litigation suit to defend reasonable rest periods for manufacturing employees under California labor law. The plaintiff argued that Nordstrom violated California labor laws when the company failed to provide statutorily guaranteed rest days. The issues in this case are 1) whether employees are statutorily required to take a rest on a defined weekly basis, rather than an undefined consecutive period; and 2) whether an employer may permit an employee to independently choose to decline a rest day. This case is important for manufacturers because it implicates employers’ ability to reasonably manage their workforce and allow flexible rest days to accommodate both the needs of the employer and the employee. The NAM’s brief argued that a defined workweek is the proper and most reasonable framework for calculating the required day of rest and the law should be interpreted to encourage employee flexibility and autonomy in scheduling. The court agreed with the NAM’s arguments, which allows manufacturers to continue to provide employees with flexible scheduling options.


Related Documents:
NAM brief  (November 30, 2015)

 

Nevada v. U.S. Dept. of Labor   (5th Circuit)

Appeal of DOL's new overtime rule

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit asking the court to uphold a preliminary injunction of a Department of Labor (DOL) overtime rule that would place significant economic burdens on businesses. The overtime rule would have increased the minimum salary exemption thresholds by more than 100% from $23,660 to $47,476 annually. If the injunction was not upheld, more than 4.2 million employees, many of them in manufacturing, would have immediately lost their exempt status causing economic harm to both employers and employees. The NAM’s brief argued that the DOL’s overtime rule is inconsistent with decades of regulations and failed to consider the business community’s legitimate interests. The court granted a motion by the DOL to dismiss the appeal, and the DOL reopened the rulemaking process.


Related Documents:
NAM amicus brief  (January 24, 2017)

 

Plano Chamber of Commerce v. Perez   (E.D. Tex.)

Challenging DOL's new overtime rule

The NAM sued the Department of Labor (DOL) to challenge its overtime rule. The rule was scheduled to become effective on December 1, 2016 and would have increased the minimum salary exemption threshold for executive, administrative or professional employees by more than 100%, from $23,660 to $47,476 annually. This case is important as more than 4.2 million employees, many of them in manufacturing, would have immediately lost their exempt status causing economic harm to both employers and employees. The NAM argued that the rule exceeded the DOL’s authority under the Fair Labor Standards Act, and as such the rule is invalid. In a win for manufacturers, the judge granted summary judgement allowing business to continue to operate without a detrimental impact.


Related Documents:
NAM Opposition Motion to Intervene  (December 15, 2016)
NAM Opposition Motion to Stay  (December 15, 2016)
NAM Reply Brief  (November 21, 2016)
NAM Response  (October 21, 2016)
NAM Motion to Consolidate  (October 17, 2016)
NAM Summary Judgment Brief  (October 14, 2016)
NAM Complaint  (September 20, 2016)

 

The Boeing Company v. National Labor Relations Board   (9th Circuit)

Employee confidentiality in workplace investigations

The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit challenging a National Labor Relations Board (NRLB) holding that prohibits employers from recommending employee confidentiality during workplace investigations. The NLRB disapproved of a Boeing form which recommended that employees refrain from discussing a case with any other Boeing employee, other than company representatives investigating the issue or the employee’s union representative. If upheld, this holding would have undermined the ability of employers and employees to engage in confidential workplace investigations for legitimate business purposes. The NAM’s brief explained that the NLRB’s holding infringes on employers’ free speech rights and impedes employers’ abilities to conduct effective workplace investigations. The court remanded the case back to the district court because the NLRB established new rules after the case was filed.


Related Documents:
NAM amicus brief  (May 23, 2016)

 

Volkswagen Group of Am., Inc. v. United Auto Workers, Local 42   (D.C. Circuit)

Application of Specialty Healthcare to maintenance employee union micro unit

The NAM filed an amicus brief in the U.S. Court of Appeals for the D.C. Circuit supporting Volkswagen in a collective bargaining dispute with the United Auto Workers (UAW). The UAW brought the complaint after Volkswagen opposed the creation of a micro-bargaining unit exclusively for maintenance employees; UAW argued that because maintenance employees “share a unique function” they are readily identifiable and therefore should be recognized as a bargaining unit. This litigation is important to manufacturers because micro-bargaining units disrupt highly integrated manufacturing operations. The NAM’s brief argued that the Specialty Healthcare case, which reversed 70 years of precedent and instated a new standard for determining a collective bargain unit, should not apply because that case is inconsistent with the statue and the legislative history. After the National Labor Relations Board (NLRB) issued a revised ruling in another case, the D.C. Circuit remanded this case back to the NLRB for reconsideration.


Related Documents:
NAM amicus brief  (February 2, 2017)

 

Williams v. S.C. (Marshalls of CA)   (California Supreme Court)

Discovery limits under California's Private Attorney General Act

The NAM filed an amicus brief urging the California Supreme Court to uphold longstanding discovery rules and to limit the delegation of state enforcement power to private plaintiffs to protect the public’s interest in an employment litigation case. The plaintiff brought this litigation against Marshalls under California’s Private Attorneys General Act (PAGA), alleging that Marshalls failed to provide its employees with meal and rest breaks or premium pay in lieu thereof, to provide accurate wage statements, to reimburse employees for necessary business-related expenses and to pay all earned wages during employment. Manufacturers need civil litigation and workplaces laws in California that are balanced, reflect sound public policy and respect due process. Allowing private plaintiffs to pursue discovery demands broader than their allegations contributes to the growth of opportunistic lawsuits, which harm manufacturers and California’s economic climate. The NAM’s brief argued that allowing private plaintiffs to leverage PAGA without first laying the factual and legal foundation for their claims goes around longstanding discovery rules, and the delegation of state enforcement power to private plaintiffs must be safeguarded to protect the public’s interest. Unfortunately, the court did not agree with NAM’s arguments.


Related Documents:
NAM amicus brief  (May 6, 2016)

 


OSHA -- 2017



North America's Bldg. Trades Unions v. OSHA   (D.C. Circuit)

Challenging OSHA's Silica Rule

The NAM intervened in a challenge a new Occupational Safety and Health Administration (OSHA) crystalline silica rule, which imposed crushing regulatory burdens on manufacturers. The new rule cut the current permissible crystalline silica exposure limit in half and required employers to implement costly engineering controls. The NAM has members in each of the 24 manufacturing industry subsectors that are affected by the rule. The NAM intervened against OSHA but sought to work with OSHA to make this a feasible, effective rule with a clear justification based on reliable, current data. The NAM argued that the rule relies on out-of-date economic data and drastically underestimated the costs that will be inflicted on manufacturers and the entire economy. Unfortunately, the court upheld OSHA’s new silica regulation, leaving the industry to bear the draconian burden of compliance.


Related Documents:
Industry Reply Brief  (March 3, 2017)
Industry Joint Brief  (February 24, 2017)
Industry opening brief  (November 18, 2016)
NAM motion to intervene  (May 2, 2016)
NAM petition for review  (May 2, 2016)

 

Texo ABC/AGC, Inc. v. Perez   (N.D. Tex.)

Challenging OSHA's injury and illness rule

The NAM filed a lawsuit on Friday, July 8, 2016, to challenge the Labor Department’s Occupational Safety and Health Administration (OSHA) workplace injury and illness New Rule. The NAM’s complaint challenges the New Rule’s prohibitions and limits on employer safety incentive programs and drug testing programs.

By encouraging all employees, including supervisors, to improve workplace safety, incident-based safety incentive programs jump start a change in culture that results in a prompt and sustained decrease in accident frequency and severity. Without these incident-based safety incentive programs, instituting a culture of safety in the workplace is much more slow and difficult and seldom leads to the same dramatic reductions in serious accidents.

On July 12, 2016, the NAM filed a preliminary injunction motion seeking to prohibit OSHA from implementing the New Rule, which will otherwise take effect on August 10, 2016, causing irreparable harm to many thousands of employers across the country. The New Rule irreparably harms employers and employees by making their workplaces less safe and increasing the likelihood of workplace injuries and fatalities. OSHA’s main goal is to eliminate or minimize the frequency and severity of workplace injuries, illnesses and deaths--this misguided New Rule does not accomplish that goal.

On 8/19/16, the government filed its opposition to our motion for preliminary injunction, claiming that there is no irreparable harm in limiting employment programs designed to protect worker safety. Their motion further argues that the balance of hardships and public interest both counsel in favor of allowing OSHA to ban injury-based incentive programs and post-injury drug testing. The government's arguments against preliminary injunction lack common sense and would only serve to increase worker injuries.

On 9/2/16, the NAM filed a reply to the government's opposition. Our reply argued that OSHA's claim of unlimited Congressional authority is both dangerous and wrong. OSHA fails to justify the "anti-safety" provisions of the New Rule, which is ripe for review and remains arbitrary and capricious. Contrary to OSHA's opposition, the criteria for a preliminary injunction are met, and manufacturers and the public will be irreparably harmed if the New Rule is implemented.

On 9/27/16, the NAM filed a response to the government's objections to the scope of relief requested, and, on 11/1/16, the NAM filed a supplemental brief in support of the nationwide scope of preliminary injunction.

On 11/28/16, the judge unfortunately denied our preliminary injunction motion without reaching the merits. The government then moved to dismiss. We also filed an amended complaint on 2/8/17, which caused the judge to dismiss the government's motion to dismiss as moot. OSHA has proposed delaying the compliance date to 12/1/17. On 6/30/17, in response to an OSHA motion for an indefinite stay of proceedings, the judge issued an unusual order “administratively closing” the case.


Related Documents:
NAM response to stay  (March 31, 2017)
NAM amended complaint  (February 8, 2017)
NAM motion to dismiss  (January 18, 2017)
NAM supplemental brief  (November 1, 2016)
NAM response to objection  (September 27, 2016)
NAM preliminary injunction  (July 12, 2016)
NAM preliminary injunction memorandum  (July 12, 2016)
NAM complaint  (July 8, 2016)

 


Patents, Copyrights and Trademarks -- 2017



In re Wellbutrin XL Antitrust Litigation   (3rd Circuit)

Antitrust scrutiny of patent litigation settlements

The NAM filed an amicus brief in a patent litigation matter urging the U.S. Court of Appeals for the Third Circuit to support flexible settlement agreements, which avoid costly and complex litigation. The plaintiffs alleged that a proposed patent litigation settlement agreement was anticompetitive under the antitrust laws. The development of legal rules that enable parties to efficiently resolve disputes and avoid lengthy litigation that delays a product’s entry into the consumer market is important for manufacturers. The NAM’s brief argued that courts should encourage flexibility in settlement terms and that agreements by the brand manufacturer not to compete with the authorized generic manufacturer, for a limited time, is akin to a routine patent license and therefore not anticompetitive. In a win for manufacturers, the Third Circuit held that the plaintiffs failed to show that they had an “antitrust injury” because they could not prove that their injuries were caused by the settlement agreement.

 

Eli Lilly and Co. v. Canada   (ICSID)

NAFTA challenge of Canada’s promise-utility doctrine for patents

The NAM filed an amicus brief in an international tribunal supporting Eli Lilly in its dispute with the Canada involving the scope of patent protections for pharmaceutical products. Lilly’s claims against the Canadian government arose from a new patentability requirement under Canadian law, the “promise utility doctrine,” which imposed heightened requirements on patents for pharmaceutical products. The doctrine harmed pharmaceutical companies because Canadian courts used the doctrine to invalidate more than 25 patents. The NAM’s brief supported Lilly’s argument that the promise utility doctrine discriminates against patents, and therefore, Canada was in breach of its obligations under the North American Free Trade Agreement (NAFTA). The tribunal found in Canada’s favor; however, it did not address whether Canada was in breach of its obligations under NAFTA or address the core investment and intellectual property issues at the heart of the case.


Related Documents:
NAM brief  (February 12, 2016)

 


Product Liability -- 2017



California v. Conagra Grocery Products Co.   (Cal. Ct. App.)

Validity of public nuisance claims

The NAM filed an amicus brief in the California Court of Appeals supporting lead pigment manufacturers against lawsuits by ten California cities and counties alleging that lead paint is a “public nuisance” and therefore the manufacturers are liable for all remediation costs to remove lead paint in those counties. This case could expand the law of public nuisance bringing uncertainty to manufacturers and opening the door to litigation against any industry with a malleable standard for the tort of public nuisance. The NAM’s brief explained that the trial court’s decision 1) expanded the law of public nuisance and stripped away traditional product liability elements and defenses; 2) watered down the government’s burden of proof by allowing suits against companies based solely on the fact that the products had foreseeable risks of harm; and 3) flew against public policy by allowing California governments to bring public nuisance based on private harms. Unfortunately, the Court of Appeal affirmed the trial court’s ruling and held that the companies were liable for remediation, but limited remediation to houses built before 1951.

 

Cerveny v. Aventis, Inc.   (10th Circuit)

Preemption of drug labeling challenge

The NAM filed an amicus brief to support manufacturers rights in complying with federal labeling regulation in a pharmaceutical litigation suit. The plaintiffs alleged that the drug Clomid failed to provide sufficient warning labels about use before pregnancy. This decision would have imposed dueling labeling requirements on manufacturers subjected to product labeling litigation. The NAM’s brief argued that the Food, Drug & Cosmetic Act (FDCA) preempted any state-law requirement that would require a company to change a label without complying with federal law. In a win for manufacturers, the court determined that the claims regarding the failure to warn are preempted by federal law; however, the case was remanded back to the lower court to further address claims related to the FDA’s prior language on Clomid’s risk.


Related Documents:
NAM brief  (September 19, 2016)

 

Ford Motor Co. v. Trejo   (Nevada Supreme Court)

Reasonable alternative design test for liability involving complex products

The NAM filed an amicus brief in the Nevada Supreme Court urging the court to adopt the “reasonable alternative design” test with a risk-utility component rather than the historical “consumer expectation test” in a complex product design liability litigation involving a rollover accident. This was an appeal from a lower court judgement which awarded the plaintiffs damages based on strict product liability theory. The test supported by the NAM encourages manufacturers to continue to be innovative and design products to optimize safety. The NAM’s brief supported this position and urged the Nevada Supreme Court to instead support a “reasonable alternative design” test with a risk-utility component that allows companies to design optimally safer products and provides the factfinder with an objective standard for evaluating whether a proposed alternative design for a complex product would have resulted in an overall safer product. The Nevada Supreme Court did not agree with the NAM’s arguments and declined to adopt a risk-utility test for strict product liability design defect claims.


Related Documents:
NAM brief  (November 19, 2015)

 

Juni v. A.O. Smith Water Prods. Co.   (N.Y. App. Div.)

Opposing any exposure theory of causation in asbestos case

The NAM filed an amicus brief urging a New York appellate court to uphold a lower court’s rejection of the plaintiff’s exposure theories in an asbestos litigation. The lower court dismissed the plaintiff’s claims that mechanics, who were engaged in work with brakes, clutches and gaskets, as well as their family members, suffered harm because they were exposed to small amounts of chrysotile asbestos contained in those parts. It is important to manufacturers that the standards applied in asbestos litigation are consistently applied. The NAM’s brief argued that the plaintiff’s “no safe dose” theory for a carcinogen was not scientifically sound because dose assessment is critical to all toxins and the plaintiff’s argument of mere exposure was insufficient to prove the case. In a win for manufacturers, the appellate court upheld the lower court’s decision.


Related Documents:
NAM reply brief  (July 15, 2016)
NAM brief  (March 30, 2016)

 

T.H., a Minor v. Novartis Pharm.   (California Supreme Court)

Brand name manufacturer liability after divestiture

The NAM filed a brief urging the California Supreme Court to reject “innovator liability,” a theory that seeks to hold pharmaceutical manufacturers of brand name drug products liable for injuries caused by competing generic products. The issue in this case is whether the brand name manufacturer of a pharmaceutical drug that divested all ownership interest in the drug can be held liable for injuries caused years later by another manufacturer’s generic version of that drug. The ruling could subject a manufacturer that invents a product to perpetual liability for harms caused, not by its own product, but for comparable products made and sold by entirely different businesses. The NAM’s brief argued that innovator liability should not be allowed to circumvent fundamental principles of liability law against product manufacturers, and the court should follow other federal and state courts in rejecting innovator liability. Unfortunately, the court held that the brand-name drug manufacturer can be liable for alleged harms caused by the generic version sold by a third party.


Related Documents:
NAM brief  (December 7, 2016)

 

Taylor v. Intuitive Surgical, Inc.   (Washington State Supreme Court)

Learned intermediary duty to warn

The NAM filed an amicus brief in the Washington Supreme Court to argue against expanding the “learned intermediary” duty to warn in products liability law. The plaintiff appealed from a lower court holding that Intuitive Surgical Inc. was not required to notify the hospital that bought the surgical device about risks because the manufacturer properly notified the doctor who used it. Medical device manufacturers are concerned about expanded requirements to warn multiple parties about potential risks of using a device and potential increased liability. The NAM’s brief argued that Intuitive did not have a direct duty to warn the plaintiff or the hospital of risks associated with the device because the physician was the learned intermediary and that the court should maintain the fault-based failure-to-warn standard for all prescription medical products rather than a strict liability standard. Unfortunately, the Washington Supreme Court found that the company had a duty to warn both the hospital that bought the device and the doctor who used it, and that the learned intermediary doctrine only applies to warnings that are owed to patients, not hospitals.


Related Documents:
NAM brief  (April 22, 2016)

 


RICO Act -- 2017



Sidney Hillman Health Ctr. v. Abbott Labs., Inc.   (7th Circuit)

RICO drug pricing case -- proximate cause issue

The NAM filed an amicus brief arguing that pharmaceutical companies should not be subject to treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO) for injuries allegedly arising from misrepresentations to doctors about the efficacy of a prescription drug. A group of plaintiffs sued pharmaceutical company Abbott Labs alleging that the company’s misrepresentations about the drug, Depakote, caused the plaintiffs’ injuries under RICO. If courts allow RICO claims against pharmaceutical manufacturers for alleged misrepresentations to doctors, the potential liability could chill the development of new medications and impair patient safety. The NAM’s brief argued that multiple intervening factors broke any causal link between the defendant’s statements and plaintiffs’ injuries, thus the plaintiffs’ injuries were not directly caused by the defendants’ statements. In a win for manufacturers, the court accepted NAM’s argument and held that any connection between misrepresentations to doctors and claims for damages by third-party payors is too remote to prove causation.


Related Documents:
NAM amicus brief  (June 12, 2017)

 


Securities Regulation -- 2017



Deykes v. Cooper-Standard Auto. Inc.   (6th Circuit)

Whistleblower definition must apply across all Dodd-Frank provisions

The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit in a case addressing the definition of a whistleblower under the Dodd–Frank Wall Street Reform and Consumer Protection Act, which is implemented by the Securities and Exchange Commission (SEC). The litigation follows a district court ruling against Deykes, an employee who filed a Dodd-Frank retaliation claim based on his internal reporting of alleged violations of the Foreign Corrupt Practices Act even though he did not meet the definition of a whistleblower. This litigation raises issues of direct concern to manufacturers, many of which are publicly-traded companies and subject to the jurisdiction of the Securities and Exchange Commission. The NAM’s brief explained that the statutory definition of “whistleblower” must be applied across all provisions of Dodd-Frank, including that law’s anti-retaliation provisions. The court granted the appellee's stipulation to voluntarily dismiss the case before oral arguments were held.


Related Documents:
NAM brief  (April 21, 2017)

 

Leidos, Inc. v. Indiana Pub. Ret. Sys. v. Indiana Pub. Ret. Sys.   (U.S. Supreme Court)

Liability for securities fraud under Section 10(b)

The NAM filed two amicus briefs in the U.S. Supreme Court in this case concerning the U.S. Court of Appeals for the Second Circuit’s ruling on liability for securities fraud under Section 10(b) of the Securities Exchange Act of 1934 based on a failure to disclose adverse “trends” and “uncertainties” in the “Management Discussion & Analysis” section of Item 303. The Second Circuit extended the private right of action to omissions of material fact that do not render a statement misleading. Many manufacturers are publicly traded companies and this ruling could expose manufacturers to increasing liability. The NAM’s brief argued that manufacturers may be subject to private suits for securities fraud for failing to disclose information that may not be material and could be exposed to “fraud-by-hindsight” litigation if shrewd plaintiffs allege that an event was known to management as being reasonably likely to occur. The Supreme Court did not hear the case because the parties settled.


Related Documents:
NAM brief on the merits  (June 28, 2017)
NAM brief supporting review  (November 30, 2016)

 


Settlement Agreements and Consent Decrees -- 2017



Automated Industrial Machinery, Inc. v. Christofilis   (Ill. App. Ct.)

Illinois courts refuse to enforce restrictive covenants

The NAM filed an amicus brief in an Illinois appellate court in support of manufacturer trade secrets. Automated Industrial Machinery (AIM) brought suit after an employee, who worked for AIM for thirteen years, left AIM five months after signing a non-compete agreement and opened a competing business. An Illinois lower court found the non-compete agreement unenforceable due to lack of adequate consideration since the employee had signed it less than two years before leaving. The NAM’s brief argued that the appellate court should reject a two-year bright line rule in favor of a fact-specific totality of the circumstances analysis to determine whether an employee’s continued employment is adequate consideration to support a non-compete agreement. The appellate court held that the defendant was not subject to the non-compete because the five months of employment at issue in this case was not a “substantial period of time.” This sets a detrimental precedent that Illinois manufacturers should wait two years after employees sign confidentiality agreements before exposing confidential information.


Related Documents:
NAM brief  (March 22, 2017)

 

General Motors LLC v. Elliott   (U.S. Supreme Court)

Validity of bankruptcy sale of assets "free and clear"

The NAM filed an amicus brief in the U.S. Supreme Court supporting manufacturers’ rights in a bankruptcy suit that attempted to hold General Motors liable for pre-bankruptcy claims. A lower court held GM liable for product liability claims arising from an ignition switch defect five years before the sale of the company’s assets in bankruptcy. This ruling will make it difficult for companies to receive value for assets in bankruptcy and unfairly places liability on parties without fault. The NAM’s brief argued that disallowing the “free and clear” sale provision undermines the integrity of asset sales in bankruptcy, negatively impacts debtors, creditors and buyers, and that the decision below also violates a technical provision in bankruptcy law that requires the issuance of a stay prior to revoking the “free and clear” finding in a sale order. Unfortunately, the Supreme Court declined to hear the appeal.


Related Documents:
NAM amicus brief  (January 17, 2017)

 


Taxation and State Taxation -- 2017



Chamber of Commerce v. Internal Revenue Service   (W.D. Tex.)

Challenging IRS inversion limitations

The NAM filed an amicus brief in a lawsuit challenging the immediate implementation of the “multiple domestic entity acquisition rule” because the rule effectively circumvents congressional intent to curtail the Treasury’s authority to eliminate inversions. The Treasury and Internal Revenue Service (IRS) ignored the tax code and the Administrative Procedure Act’s (APA) notice and comment requirements by rendering the rule immediately effective. The rule exacerbates uncertainty in tax law and undermines manufacturers’ abilities to compete and succeed in the global marketplace; therefore, manufacturers must have the ability to comment before the rule is implemented. The NAM’s brief argued that 1) the United States cannot insulate itself from a pre-enforcement review under the APA, 2) the Treasury has promulgated a rule that is beyond the scope of its regulatory authority and 3) under the APA’s language there is not “clear and convincing evidence” of congressional intent to protect the Treasury or IRS from court action. The court agreed with the NAM’s arguments and held that the language of the APA mandates that even temporary rules are subject to notice and comment requirements.


Related Documents:
NAM brief  (November 8, 2016)

 

ETC Marketing, Ltd. v. Harris County Appraisal Dist.   (U.S. Supreme Court)

State taxation of temporarily stored natural gas

The NAM filed a brief urging the U.S. Supreme Court to review a circuit court split over whether it is permissible for states and municipalities to levy taxes on natural gas while the gas remains in transit. This litigation stems from a Supreme Court of Texas holding which levied taxes on large quantities of temporarily stored natural gas while in interstate transit. This issue is important because imposing new state and local taxes on natural gas will harm both interstate commerce and natural gas consumers. The NAM’s brief argued that taxes on natural gas while it is in transit violate the “in-transit” principle of the Commerce Clause which mandates that goods that remain in the transit process cannot be locally taxed. Unfortunately, the Supreme Court denied the petition for certiorari leaving consumers to bear the burden of high costs.


Related Documents:
NAM brief  (October 20, 2017)

 

Naifeh v. Oklahoma   (Oklahoma Supreme Court)

Whether a regulatory fee is actually a new tax

The NAM filed an amicus brief in support of Naifeh’s claim that Oklahoma Senate Bill 845 is a tax rather than a fee and must therefore be enacted following the mandated procedures. Naifeh alleges that SB 845 was intended to raise revenue; therefore, as the bill levied a tax and not a fee, SB 845’s passage did not comply with the mandated procedures. Manufacturers should not be unfairly targeted by onerous taxes imposed by states in an attempt to balance the state’s budget for the next fiscal year. The NAM’s brief argues that the fee, imposed on each pack of cigarettes, is actually a tax and as such required approval by a three quarters supermajority of the legislature prior to implementation. The court agreed with NAM’s arguments and held that as the primary purpose of the fee was to raise revenue, it must therefore be enacted following the tax-enactment procedures mandated by the Oklahoma Constitution.


Related Documents:
NAM amicus brief  (July 21, 2017)

 

Sonoco Prods. Co. v. Dep't of Treasury, Michigan   (U.S. Supreme Court)

Challenging retroactive withdrawal from Multistate Tax Compact

The NAM filed an amicus brief in the U.S. Supreme Court urging the Court to hear an appeal challenging Michigan’s repeal of a tax provision that had allowed multistate companies to use a standard three-factor formula to compute taxes. The appeal arises from a lower court ruling that allowed Michigan to renege on its obligations under the Multistate Tax Compact, which was designed to prevent double taxation. Multistate companies could now be liable for more than $1 billion in extra taxes. The NAM’s brief argued that the compact was a binding contract and that imposing retroactive tax liability could have detrimental implications for businesses that reasonably relied on the tax scheme. Unfortunately, the Supreme Court declined to review the case.


Related Documents:
NAM amicus brief  (December 23, 2016)

 


Alien Tort Statute -- 2016



Nestle USA, Inc. v. Doe   (U.S. Supreme Court)

Validity of suit under Alien Tort Statute

The NAM filed an amicus brief supporting Nestle USA and urging the U.S. Supreme Court to clarify the reach of the Alien Tort Statute. This appeal followed a U.S. Court of Appeals for the Ninth Circuit decision that split with other federal courts of appeals on three legal issues: whether U.S. courts should entertain extraterritorial litigation, whether there is a well-defined consensus that corporations can be sued for violations of the Law of Nations; and the extent of knowledge or intent that a business must have to be liable for the acts of others. The NAM’s brief argued that the decision below 1) ignores a prior Supreme Court ruling; 2) invites international friction by expanding the scope of the Alien Tort Statue; and 3) is inconsistent with generally accepted principles of international law on intentional wrongdoing and corporate liability. Unfortunately, the Court denied the petition for review.

 


Antitrust -- 2016



McWane, Inc. v. FTC   (U.S. Supreme Court)

Antitrust legal standards that apply to exclusive dealing arrangements

The NAM filed an amicus brief urging the U.S. Supreme Court to provide guidance on exclusive dealing arrangements between distributors. The Federal Trade Commission brought an enforcement action against a ductile pipe fittings manufacturer alleging that the manufacturer violated antitrust laws because it monopolized the domestic pipe fittings market by announcing that it might temporarily suspend its traditional rebate to any distributors who sold products from other manufacturers and cease providing its domestic pipe fittings to distributors who purchased domestic pipe fittings from competitors. This litigation is important to manufacturers because lack of clarity regarding the legality of exclusive-dealing arrangements discourages manufacturers and suppliers from entering into those arrangements, which in turn chills pro-competitive conduct. The NAM’s brief highlighted the importance of exclusive dealing arrangements and their pro-competitive traits. Unfortunately, the Court declined to hear this appeal.


Related Documents:
NAM amicus brief  (December 30, 2015)

 

Mylan Pharm. Inc. v. Warner Chilcott Pub. Ltd. Co.   (3rd Circuit)

IP protections for incremental pharmaceutical innovations

The NAM filed an amicus brief supporting manufacturers’ rights to innovation in a pharmaceutical litigation suit and arguing that the manufacturer is not liable for anticompetitive conduct by patenting incremental innovations. The plaintiff brought this antitrust lawsuit alleging “product hopping” that ostensibly provided no significant improvements but prevented filling prescriptions automatically with generics. If accepted, this theory would have created a rule that is at odds with antitrust law and severely hindered innovation. The NAM’s brief argued that 1) a robust intellectual property regime is critical to creative activity and investments necessary to innovate; and 2) intellectual property developers often will make the necessary investments only if they are able to recover the costs. In a win for manufacturers, the court held against the appellant.


Related Documents:
NAM amicus brief  (December 21, 2015)

 


Civil Procedure -- 2016



Konstantin v. 630 Third Avenue Assocs.   (New York Court of Appeals)

Opposing asbestos case consolidations in New York

The NAM filed an amicus brief in the New York State Court of Appeals urging the court to review the troubling practice of consolidating asbestos litigation suits that are neither factually similar nor legally similar. In this case, the trial court consolidated two asbestos-related personal injury cases that featured dissimilar factors including different worksites, occupations, products, types and duration of exposure, liability theories and defendants, counsels and witnesses. Consolidating cases with dissimilar factors is highly prejudicial towards manufacturers and creates administrative and jury biases that result in verdicts at abnormally large amounts. The NAM’s brief argued that, because the facts of the cases are dissimilar, combining them is unlikely to increase judicial efficiency but is instead highly prejudicial, thus raising due process concerns. Unfortunately, the appeal was rejected on procedural grounds leaving the issue unresolved.


Related Documents:
NAM amicus brief  (February 29, 2016)

 

Spokeo, Inc. v. Robins   (U.S. Supreme Court)

Article III injury-in-fact standing requirement for statutory injuries

The NAM filed an amicus brief urging the U.S. Supreme Court to reverse a U.S. Court of Appeals for the Ninth Circuit decision that erroneously conflated injury-in-law with injury-in-fact for purposes of Article III standing in an alleged violation of the Fair Credit Reporting Act (FCRA). In this case, Robins alleged that Spokeo violated the FCRA when it published inaccurate information on its website about Robins’ education and income. This decision might invite abusive class action litigation in which plaintiffs’ attorneys could amass huge classes of plaintiffs, most or none of whom would have actually suffered any negative consequences as a result of the alleged FCRA violation. The NAM’s brief argued that statutory injury-in-law is not a substitute for Article III injury-in-fact because Congress does not have the ability to abrogate the constitutional standing requirements. The Supreme Court remanded the case back to the Ninth Circuit, which then found that Robins had alleged a sufficient concrete harm to establish an injury-in-fact.


Related Documents:
NAM brief  (July 9, 2015)

 


Class Actions -- 2016



Brown v. Electrolux Home Prods., Inc.   (11th Circuit)

Class action certification without injury

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Eleventh Circuit to review a class action certification where the trial court improperly certified a class of plaintiffs that included individuals who were not harmed and individuals who may never be harmed by the product at issue. The plaintiffs alleged that they overpaid for front loading washers because they were more likely than top-loading washers to develop mold and odors. This matter is important to manufacturers because improper class certification places undue pressure on companies to settle otherwise meritless cases. The NAM’s brief argued that the trial court improperly took the position that all doubts about certifying a class should be resolved in favor of certification and should have instead, followed the U.S. Supreme Court’s view that class actions remain “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” In a win for manufacturers, the Eleventh Circuit held that class certification was improperly granted and remanded the case to the lower court.

 

Dow Chemical Co. v. Industrial Polymers, Inc.   (U.S. Supreme Court)

Commonality of damages suffered by purchasers in antitrust class actions

The NAM filed an amicus brief urging the U.S. Supreme Court to review a class action certification in an antitrust conspiracy certified solely based on presumptions of class-wide injury. This appeal came after a lower court denied the defendant the opportunity to rebut a presumption that all plaintiffs, purchasers of urethane foam, suffered the same damages as a result of the antitrust conspiracy even though each purchaser negotiated an individual price with the manufacturers. This case threatened to expose businesses to the risk of staggering class judgments and even for those who manage to defeat liability, substantially higher litigation costs. The NAM’s brief argued that 1) in class actions, parties have the right to raise any claim or defense specific to the individual class member; and 2) the lower court’s decision impeded due process and threatened to permit any conspiracy to be certified as a class action, thus potentially expanding the scope of class liability. This case settled on February 26, 2016.


Related Documents:
NAM brief  (April 15, 2015)

 

Terrill v. Electrolux Home Prods., Inc.   (11th Circuit)

Class action certification without injury

The NAM filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit supporting Electrolux Home Prods., Inc. in its appeal of a lower court’s certification of a class of plaintiffs that included parties who were not harmed or were unlikely to be harmed by the alleged defect. The plaintiffs alleged that they overpaid for the appliances because front loading washers were more likely than top-loading washers to develop mold and odors. This matter is important to manufacturers because improper class certification places undue pressure on companies to settle otherwise meritless cases. The NAM’s brief argued that 1) the court ignored evidence showing that the vast majority of class members would be unable to assert or prevail on any claim because more than 99% of them never experienced any moldy odors; 2) many plaintiffs knew of the issue prior to purchase because it was widely publicized; and 3) many plaintiffs received a free warranty replacement of the allegedly defective part. In a win for manufacturers, the appeals court held that the class was certified improperly and remanded the case back to the trial court to determine whether there were sufficient common issues of causation.


Related Documents:
NAM amicus brief  (November 1, 2013)

 


Communications -- 2016



United States Telecom Ass'n. v. Federal Communications Commission   (D.C. Circuit)

Net Neutrality

The NAM filed an amicus brief supporting the telecommunications industry and opposing the Federal Communications Commission’s (FCC) reclassification of broadband service providers as telecommunications services subject to common carrier regulations. This litigation was a challenge to the FCC’s net neutrality rule, which reclassified and regulated broadband service providers as common carriers. That rule discouraged investment, stifled innovation and invited uncertainty for companies trying to predict how they may do business. The NAM’s brief argued that 1) the FCC’s reclassification must be set aside because it was contrary to the Communications Act of 1934; 2) the reclassification was promulgated in violation of the Administrative Procedure Act; and 3) broadband providers “rates” and “practices” would be subject to the broad and ambiguous standards, which would decrease the variety and quality of internet services. Unfortunately, the court rejected the challenges.


Related Documents:
NAM brief  (August 5, 2015)

 


Environmental -- 2016



Alaska Wilderness League v. Jewell   (9th Circuit)

Validity of BOEM permit for exploratory drilling in Chukchi Sea

The NAM filed an amicus brief supporting oil and gas exploratory drilling that complied with the National Environmental Policy Act (NEPA). Environmental groups challenged the issuance of a permit by the Bureau of Ocean Energy Management (BOEM) allowing exploratory drilling by Shell in Alaska. This case is important because attempts to prevent oil and gas exploration significantly impact access to energy sources and stifle job growth. The NAM’s brief argued that the Outer Continental Shelf (OCS) Lands Act was specifically designed to expedite OCS exploration and development and that BOEM properly approved Shell's revised exploration plan pursuant to NEPA. Shell terminated its exploratory efforts, and the court granted the parties' request to dismiss the case as moot.


Related Documents:
NAM brief  (September 25, 2015)

 

American Chemistry Council v. EPA   (D.C. Circuit)

Challenging EPA regulation of boilers for area sources (boiler GACT)

The NAM challenged an Environmental Protection Agency (EPA) final rule on hazardous air pollutants, which imposes burdensome regulatory requirements on boilers, incinerators and process heaters. The rule requires “generally available control technologies” (GACT) or management practices to reduce emissions of hazardous air pollutants, taking into consideration the cost of achieving such reductions. This rule imposes costly compliance requirements on manufacturers subject to the rule. The NAM argued that 1) the EPA did not have sufficient data to property calculate an emissions standard based on the best performing 12% of combustions units as statutorily required but instead used the Upper Prediction Limit (UPL) methodology to estimate the emissions limits based on fewer data points; and 2) by requesting a voluntary remand, the EPA effectively conceded that the methodology used to calculate the UPL standards is flawed. While the court rejected the NAM’s arguments in 2016, it ordered the agency to provide further justification for some of its conclusions.


Related Documents:
Brief of Industry Intervenor-Respondents  (December 23, 2014)
Opening Brief of Industry Petitioners (incl. NAM)  (August 26, 2014)
NAM Reply Brief in support of motion for affirmative relief  (April 17, 2014)
NAM motion for affirmative relief  (March 13, 2014)
Petition for Reconsideration  (April 1, 2013)

 

American Farm Bureau Federation v. EPA   (U.S. Supreme Court)

EPA micromanagement of state water discharges

The EPA has exerted control over land uses in the Chesapeake Bay watershed by dictating the minute details of what can be discharged into it and reserving to itself authority to approve any future changes necessary to allow for state and local adjustments to the mix of land uses within their jurisdictions. Congress neither envisioned nor authorized this expansion of EPA’s authority in the Clean Water Act.

This micromanagement upends the model Congress intended for the Clean Water Act. Local businesses throughout the Chesapeake Bay watershed must now comply with a regulatory scheme that imposes new federal burdens on businesses and industry formerly regulated by the states, impedes state programs to address state water quality issues, and limits opportunities for growth and innovation. Allowing the EPA’s control to stand would provide the EPA nearly unchecked power over land use decisions affecting local businesses throughout the nation.

The NAM filed an amicus brief urging the Supreme Court to review an adverse decision from the Third Circuit that allows such micromanagement by the EPA. Our brief argued that this overreach is not authorized by the Clean Water Act because it makes individual permit holders responsible for excess effluents from others. It severely constrains companies with discharge permits and delays revisions and approvals, disfavoring innovation and growth and curtailing development.

On Feb. 29, the Court declined to review this appeal.


Related Documents:
NAM amicus brief  (December 9, 2015)

 

American Forest & Paper Ass'n. v. EPA   (D.C. Circuit)

Challenging EPA's CISWI regulations

The NAM challenged the Environmental Protection Agency’s (EPA) new regulations on commercial and industrial solid waste incineration (CISWI) units that impose stricter emissions limits on industrial, commercial and institutional boilers. The new rule amended a rule previously issued in 2011 by placing further restrictions on materials used as fuels or ingredients in combustion units. The regulations will impose additional costs on manufacturers that will now require additional resources to remain compliant with the regulations. The NAM argued that 1) the EPA failed to account for variability in waste materials when classifying best-performing units; 2) the EPA should consider emissions occurring during startups, shutdowns and malfunctions when determining whether emissions limits are achievable; and 3) the EPA does not have legal authority to impose recordkeeping requirements through the CISWI rule on operators who combust non-hazardous secondary materials that are not waste. Although the court rejected the NAM’s arguments, it ordered the agency to provide further justification for some of its conclusions.


Related Documents:
NAM Reply Brief in support of motion for affirmative relief  (April 17, 2014)
NAM motion for affirmative relief  (March 13, 2014)
NAM Petition for Review  (April 29, 2011)

 

American Petroleum Institute v. EPA   (D.C. Circuit)

Challenging EPA greenhouse gas regulation (tailoring Step 3)

The NAM challenged an Environmental Protection Agency (EPA) effort to interpret its authority with the “Tailoring Rule,” which attempts to regulate greenhouse gas emissions from stationary sources. After earlier interpretations of the rule caused absurd consequences, the EPA raised thresholds to impact only the largest emitters of greenhouse gases. The rule will impose significant administrative and cost burdens on manufacturers. The NAM argued that 1) the EPA could have adopted a more reasonable interpretation of its power so as to avoid the absurdities the rule attempts to mitigate; 2) although the EPA tried to avoid these absurd results by modifying the express statutory thresholds defining who is regulated, the action is outside of the EPA’s legal authority; and 3) as the rule is at odds with Congress’s intent when it enacted the Clean Air Act, the court must avoid agency interpretations that undermine the purpose of the law. The parties voluntarily dismissed this case in February 2016.

 

BCCA Appeal Group, Inc. v. City of Houston   (Texas Supreme Court)

Preemption of Houston's air regulation

The NAM filed an amicus brief urging the Supreme Court of Texas to overturn a lower court ruling that allowed the City of Houston to run its own clean air enforcement office. BCCA Appeal Group, Inc. sued after the City of Houston issued an ordinance allowing criminal prosecutions, without following the procedures required by the Texas Water Code and mandating that all facilities be registered with the city. If upheld, the regulation would have subjected manufacturers to inconsistent enforcement requirements and multiple permit systems at the local level. The NAM’s brief argued that such local enforcement is preempted under provisions of the Texas Constitution by the Texas Clean Air Act. The court agreed with NAM’s arguments that Houston may not subject companies to criminal penalties that conflict with the requirements of the Texas Clean Air Act.

 

In re Deepwater Horizon   (5th Circuit)

Standard for punitive damages in Clean Water Act litigation

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting BP’s challenge to a district court’s improper findings of fact and conclusion of law. Under a procedure known as multidistrict litigation (MDL), most cases in federal courts involving the Deepwater Horizon accident were sent to a single district court in Louisiana for consolidated pretrial proceedings. The MDL district court correctly determined that under the Fifth Circuit’s standard BP was not liable for punitive damages but incorrectly opined that BP would be liable in other circuits where some of the cases consolidated in the MDL originated and may ultimately return for trial. That incorrect comment had the potential to undermine the efficiency and fairness established through the MDL procedure and create judicial inefficiencies. The NAM’s brief argued that the MDL judge wrongly opined on the availability of punitive damages under standards applied by other circuits and instead should have focused only on the law of the Fifth Circuit. The case was dismissed by stipulation of the parties.


Related Documents:
NAM brief  (June 8, 2015)

 

JELD-WEN, Inc. v. EPA   (D.C. Circuit)

Challenging EPA regulation of boilers and process heaters (boiler MACT)

The NAM challenged an Environmental Protection Agency (EPA) final rule on hazardous air pollutants, which would impose burdensome regulatory requirements on boilers, incinerators and process heaters. Because the rule requires the “maximum degree of reduction” in emissions of hazardous air pollutants achievable, taking into consideration the cost of achieving such reductions, the rule also requires “maximum achievable control technology” (MACT) for such equipment. This rule is burdensome, will impose additional costs and require additional resources for industrial sectors subject to the rule. The NAM argued that 1) the startup work practices were incorporated into the new rules without giving key stakeholders adequate opportunity to comment; 2) important safety considerations for the regulated community were overlooked in the definitions; 3) the rule failed to take account of the importance of encouraging efficient and cost effective use of resources; 4) the fuel requirements in the rule do not incorporate national goals of safeguarding fuel diversity; and 5) the EPA does not have legal authority to impose the energy assessment requirement. This case was consolidated with U.S. Sugar Corp. v. EPA, a similar challenge to EPA’s boiler MACT regulations, and in 2016, that court rejected all industry arguments, finding that the EPA's approach was reasonable.


Related Documents:
Statement of Issues  (May 2, 2013)
NAM Petition for Review  (April 1, 2013)

 

Lennox Int'l, Inc. v. U.S. Dep't of Energy   (5th Circuit)

Challenging Dept. of Energy efficiency standards for walk-in coolers and freezers

The NAM filed an amicus brief in a challenge to a new Department of Energy (DOE), energy-efficiency standard for walk-in coolers and freezers. The new standard used a calculation of the “social cost of carbon” when aggregating purported benefits of the standard but was, however, not subjected to peer review, thus calling into question the quality and accuracy of the data used. This issue is important to manufacturers because DOE violated established requirements that influential information used by federal agencies to inform public policy decisions be developed through a transparent process. The NAM’s brief argued that the “social cost of carbon” estimates were developed by an ad-hoc interagency working group operating behind closed doors and outside the purview of notice-and-comment rulemaking or other meaningful public scrutiny. The case settled and was dismissed in 2016.

 

National Association of Manufacturers v. EPA   (EPA)

Petition for stay of EPA's Clean Power Plan Rule

The NAM petitioned the Environmental Protection Agency (EPA) to issue an administrative stay to delay the effective date of the Clean Power Plan rule until a court rules on the rule’s legality. The rule, issued as a regulation of greenhouse gases from electric utility generating units, went much further than regulation of electric power plants. If the rule were to take effect, manufacturers would see their costs increase and some trade-exposed industries might be forced to relocate production overseas. The NAM’s petition argued that 1) the rule was already causing irreparable harm by forcing the closure of vast numbers of existing coal-fired generating units, constituting the backbone of the American electric grid; 2) that legal challenges to the rule are likely to prevail in court, since the Clean Air Act expressly forbids EPA from regulating existing fossil fuel-fired generating; and 3) the rule imposed standards of performance for the entire energy sector, rather than only for the individual sources of greenhouse gases from the power plants themselves. Although the EPA denied our petition, the U.S. Supreme Court issued a nationwide stay of the rule on Feb. 9, 2016, until the litigation over the rule is completed. Further developments in this case can be found .


Related Documents:
NAM Petition for Administrative Stay  (October 23, 2015)

 

North Dakota v. Heydinger   (8th Circuit)

Challenge to Minnesota's Next General Energy Act restricting out-of-state electricity

The NAM filed an amicus brief in the U.S. Court of Appeals for the Eight Circuit challenging a Minnesota regulation, the Next Generation Energy Act (NGEA), which would have placed significant burdens on coal-fueled facilities and unlawfully regulated out-of-state commerce. The NGEA, sought to regulate and impose energy and environmental policies on electricity generated in other states by prohibiting importing electricity into Minnesota from any new large energy facility that would contribute to statewide power sector carbon dioxide emissions. If upheld, this matter would have caused uncertainty to manufacturers in the energy sector and others impacted by the NGEA. The NAM’s brief argued that 1) the law would substantially impede the interstate market for electricity in violation of the Commerce Clause; 2) the law could spur other states to adopt similar laws, which could result in a web of inconsistent and clashing local regulations that would destroy the national common market and impose untold costs on manufacturers and other consumers; and 3) the law was unconstitutional because it purported to allow a state to ban imported products based solely on how they were produced in other states. In a win for manufactures, the Eighth Circuit struck down Minnesota's law.

 

Pakootas v. Teck Cominco Metals, Ltd.   (9th Circuit)

Expansive interpretation of CERCLA

The NAM filed an amicus brief opposing the expansion of arranger liability under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). This is an appeal from a lower court holding that a Canadian company was liable as an “arranger” of the “disposal” of the hazardous materials under CERCLA after airborne particles from its mining operations landed on the earth and water of the United States. As emissions can travel long distances by air, expanding arranger liability will expose manufacturers to expensive litigation. The NAM’s brief argued that both the plain text of CERCLA and controlling precedent make it clear that the statutory definition of “disposal” is not satisfied by the mere emission of hazardous substances into the air, even if portions of the emissions later come to rest at a facility. In a win for manufacturers, the U.S. Court of Appeals for the Ninth Circuit reversed the trial court’s holding.


Related Documents:
NAM amicus brief  (August 11, 2015)

 

Portland Cement Ass'n v. EPA   (D.C. Circuit)

Challenging EPA regulation of CISWI

The NAM challenged the Environmental Protection Agency’s (EPA) 2013 final rule on commercial and industrial solid waste incineration (CISWI) units, which imposes stricter emissions limits on industrial, commercial and institutional boilers. The rule follows a 2011 rule that also imposed restrictions on materials used as fuels or ingredients in combustion units. The rules will impose additional costs and require sectors impacted by the rule to provide additional resources to remain compliant. The court consolidated this case into , a challenge to the 2011 rule on CISWI units, where the NAM argued that 1) the EPA failed to account for variability in waste materials when classifying best-performing units; 2) the EPA should consider emissions occurring during startups, shutdowns and malfunctions when determining whether emissions limits are achievable; and 3) the EPA could not impose recordkeeping requirements through the CISWI rule on operators that combust non-hazardous secondary materials that are not waste. Although the court rejected the NAM’s arguments, it ordered the agency to provide further justification for some of its conclusions.


Related Documents:
NAM Petition for Review  (April 8, 2013)

 

U.S. Army Corps of Engineers v. Hawkes Co.   (U.S. Supreme Court)

When courts may review CWA jurisdictional decisions

The NAM filed an amicus brief urging the U.S. Supreme Court to support manufacturers’ rights to respond to jurisdictional decisions that impose additional costs and reduce the feasibility of constructing infrastructure. Under the Clean Water Act (CWA), a manufacturer must obtain a permit from the U.S. Army Corps of Engineers before discharging any dredged or fill material into waters of the United States that are subject to federal regulatory jurisdiction; however, the Corps has broadly construed the CWA to prohibit any productive use, improvement, alteration or repair of property without first obtaining a permit. This case provided the opportunity for manufacturers to request judicial review of Army Corps or Environmental Protection Agency decisions that may exceed those agencies' jurisdiction. The NAM’s brief argued that the regulated community must be afforded an early opportunity to respond to overly aggressive jurisdictional determinations and requested that the court resolve uncertainty over the scope of the CWA. In a win for manufacturers, the Court agreed with the NAM.


Related Documents:
NAM brief  (March 1, 2016)

 

U.S. Sugar Corp. v. EPA   (D.C. Circuit)

Challenging EPA's boiler MACT regulations

The NAM challenged the Environmental Protection Agency’s (EPA), Boiler Maximum Achievable Control Technology (MACT) standard used to regulate emissions of hazardous air pollutants generated by boilers. The challenge came after EPA issued the final MCAT rule; however, the EPA did not have enough data to properly calculate an emissions standard based on the statutory requirement. This decision will impose enormous costs on key industrial sectors. The NAM argued that the EPA exceeded its authority in imposing an energy assessment requirement on portions of the facility that are not part of the defined source category (boilers and process heaters); 2) the emissions limitations are unlawful because they have not been achieved in practice; 3) the standards are not achievable because they were set without accounting for malfunctions; 4) EPA improperly established a numeric emission limitation for organic pollutants rather than a work practice as it has done in a comparable rule; and 5) EPA failed to justify its reversal of previously established health-based limits for hydrogen chloride. In 2016, the court rejected all industry arguments, finding that the EPA's approach was reasonable.


Related Documents:
NAM Brief in Response to Environmental Petitioners  (December 17, 2014)
Opening Brief of Industry Petitioners  (August 12, 2014)
NAM Reply Brief in Support of Affirmative Relief  (April 17, 2014)
NAM Petition for Review  (April 29, 2011)
NAM Petition for Administrative Stay  (April 27, 2011)

 

West Virginia v. EPA   (U.S. Supreme Court)

Supreme Court grants stay pending litigation of EPA's Clean Power Plan

The NAM filed an application for an immediate stay of the final rule for existing electric utility generating units pending litigation over the rule in the U.S. Court of Appeals for the District of Columbia Circuit. The Environmental Protection Agency’s (EPA) Clean Power Plan attempted to aggressively transform the domestic energy generation industry in violation of the Clean Air Act. If upheld, this rule would have imposed significant regulatory costs on manufacturers, thereby threatening global competitiveness. The NAM’s brief argued that the rule is far in excess of EPA’s statutory authority under the Clean Air Act and would cause irreparable harms to NAM members if a stay was not granted. In a win for manufacturers, the Supreme Court granted the stay.


Related Documents:
Coalition Reply Supporting Stay  (February 4, 2016)
Coalition Application for Stay  (January 27, 2016)

 


Expert Testimony -- 2016



ExxonMobil Corp. v. New Hampshire   (U.S. Supreme Court)

Challenging trial by formula

The NAM filed an amicus brief urging the U.S. Supreme Court to review a water pollution decision that upended well-settled due process principles. The appeal followed after the trial court departed from longstanding legal principles when it permitted the state of New Hampshire to hold Exxon liable for contamination involving the gasoline additive MTBE in private wells across the state, including non-existent potential future wells, based only on evidence from a small sample of wells and some statistical extrapolation by an expert witness. All manufacturers have a right to receive due process protection at trial and not be subjected to results-oriented shortcuts at trial such as “trial by formula.” The NAM’s brief argued that 1) the lower court’s decision cannot be reconciled with principles of due process that protect defendants at trial; 2) the case provides an opportunity for the Court to clarify that the due process clause forbids “trial by formula”; and 3) “trial by formula” distorts outcomes and encourages speculative litigation. The Supreme Court declined to hear this appeal.


Related Documents:
NAM amicus brief  (February 22, 2016)

 

Motorola, Inc. v. Murray   (D.C. Court of Appeals)

Standard for admissibility of expert testimony in DC

The NAM filed two amicus briefs urging the District of Columbia Court of Appeals to review a claim regarding the admissibility of expert testimony in product litigation. This is an appeal of a lower court decision that permitted the “Frye test” rather than using the “Daubert test” in determining the admissibility of expert testimony. This litigation is important to manufacturers because liability decisions should be based on credible evidence. The NAM’s brief argued that 1) the Daubert standard is more in line with current D.C. law and is a fairer and more realistic test of expert testimony; 2) adoption of the updated standard would position D.C. courts to be better gatekeepers against unreliable expert testimony; and 3) moving to the “Daubert” standard would level the playing field for D.C. based businesses, who are at a competitive disadvantage by being subject to the “Frye” standard. In a win for manufacturers, the court agreed with NAM’s arguments.


Related Documents:
NAM brief  (October 24, 2014)

 


False Claims Act -- 2016



AT&T, Inc. v. United States ex rel. Heath   (U.S. Supreme Court)

Whether False Claims Act pleadings must include specific false claims allegations

The NAM filed an amicus brief supporting AT&T Inc. in its petition to the U.S. Supreme Court seeking review of an alleged False Claims Act (FCA) violation where the relator’s pleading did not include facts about any express or implied false claims, nor alleged any personal knowledge of the supposed improper conduct. The issue is whether relators filing FCA claims must include specific allegations of false claims in their pleadings. Unwarranted and excessive FCA claims increase the expense and disruption of burdensome discovery and protracted litigation for manufacturers. The NAM’s brief argued that that a circuit split encourages speculative claims and forum shopping and urged the Court to step in to resolve the split and clarify that FCA claims must, at a minimum, include an allegation of a specific false claim. Unfortunately, the Supreme Court declined review.


Related Documents:
NAM brief  (October 23, 2015)

 

Universal Health Services, Inc. v. United States   (U.S. Supreme Court)

Opposing false certification litigation under the False Claims Act

The NAM filed an amicus brief urging the U.S. Supreme Court to reject suits under the “implied false certification” theory, which allows False Claims Act (FCA) lawsuits without intent to defraud the government. This is an appeal from a U.S. Court of Appeals for the First Circuit ruling that took a broad view of what may constitute a “false or fraudulent” claim, after the respondent filed a qui tam lawsuit alleging that Universal Health had violated the FCA. This case raised concerns for manufacturers that the rapid rise in qui tam claims would subject them to increased litigation. The NAM’s brief argued that Congress did not intend for regulatory or contractual violations to be deemed false or fraudulent claims under the FCA, thus the broad interpretation of the FCA is at odds with congressional intent, and that the FCA’s intent is to hold those who knowingly intend to defraud the government accountable. In a win for government contractors, the Court held that the First Circuit’s interpretation was too broad.


Related Documents:
NAM amicus brief  (January 26, 2016)

 


Free Speech -- 2016



Grocery Manufacturers Ass'n v. Sorrell   (D. Vt.)

Vermont labeling law for genetically engineered products

The NAM filed a lawsuit challenging Vermont’s genetically modified organism labeling law as unconstitutional. Vermont required labels on products that contain genetically engineered plants and prohibited such products from being labeled as natural. This litigation is important because labeling food with these disclosures would stigmatize certain foods and require that manufacturers implement expensive separate labeling systems, stock-keeping units and Vermont-specific distribution chains. The NAM’s brief argued that 1) compelled speech violates the First Amendment guarantee of freedom to speak and freedom to not speak; 2) any such requirement must accomplish a compelling government interest and be the least restrictive means possible and 3) the Vermont government did not meet these requirements. The case became moot after President Obama signed the National Bioengineered Food Disclosure Standard, which preempted the state law.


Related Documents:
Reply Brief in Support of Motion for Prelim. Injunction  (December 5, 2014)
NAM Opposition to Motion to Dismiss  (September 11, 2014)
Memo in Support of Motion for Preliminary Injunction  (September 11, 2014)
NAM Complaint  (June 12, 2014)

 

Grocery Manufacturers Ass'n v. Sorrell   (2nd Circuit)

First Amendment limits on government-mandated labelling disclosures and restrictions

The NAM filed an appeal in the U.S. Court of Appeals for the Second Circuit of a district court’s refusal to grant a preliminary injunction in a constitutional challenge to Vermont’s genetically engineered food labeling law. Vermont required labels on products that contain genetically engineered plants and prohibited such products from being labeled as natural. This litigation affected companies that sell food products nationwide, since establishing distribution networks to supply products with unique labels in Vermont is very difficult and expensive. The NAM’s brief argued that the district court should have granted a preliminary injunction because intermediate scrutiny should apply to this highly controversial issue, the law does not serve a substantial government interest and the law further does not directly advance Vermont’s asserted interests because it is exceedingly vague and replete with exemptions. The NAM filed a stipulation dismissing the appeal after President Obama signed the National Bioengineered Food Disclosure Standard, which preempted the state law.


Related Documents:
NAM Reply Brief  (September 8, 2015)

 


Government Regulation -- 2016



Deere & Co. v. New Hampshire   (U.S. Supreme Court)

Expansion of protectionist state legislation to equipment dealers

In 2013, New Hampshire enacted amended legislation to redefine “motor vehicle” as including “equipment,” which “means farm and utility tractors, forestry equipment, industrial equipment, construction equipment, farm implements, farm machinery, yard and garden equipment, attachments, accessories, and repair parts.” This subjected equipment manufacturers to New Hampshire’s protectionist state automobile dealer legislation that imposes artificially high costs on out-of-state manufacturers and consumers, solely for the benefit of in-state dealers, and bars recovery of those costs in New Hampshire. The legislation also retroactively voids conflicting provisions of existing contracts between manufacturers and their dealers.

Equipment manufacturers appealed New Hampshire’s protectionist state legislation all the way to the U.S. Supreme Court. The NAM filed a brief urging the U.S. Supreme Court to hear this case concerning the expansion of protectionist state auto dealer laws to include equipment dealers. This unjustified legislation upends constitutionally protected contracting rights and damages manufacturer-dealer relationships. Protectionist state legislation is anti-competitive and harms consumers. This case presents the Court an opportunity to ensure that statutes voiding private contracts are meaningfully reviewed to assess the merits of a purported public benefit against the harms of the economic restriction.


Related Documents:
NAM brief  (May 19, 2016)

 

United Student Aid Funds, Inc. v. Bible   (U.S. Supreme Court)

To overturn Auer case deferring to agency interpretations of their own regulations

The NAM filed an amicus brief urging the U.S. Supreme Court to review a case where a lower court afforded deference to an agency interpretation of a rule that was offered for the first time in an amicus curiae brief during litigation. If courts defer to agency interpretations of their own opinions offered for the first-time during litigation, agencies will be disincentivized to provide regulatory clarity and predictability in rulemaking necessary for business planning. The NAM’s brief argued that: the Administrative Procedure Act allocates interpretive authority to the courts; and; deferring to agency interpretations is inconsistent with the allocation of powers in the Constitution and undermines an important check on the excesses of the legislative and executive branches of government. Unfortunately, the Supreme Court denied the review.

 


International -- 2016



Microsoft Corp. v. United States   (2nd Circuit)

Search warrant issued under the Stored Communications Act

The NAM filed an amicus brief in support of Microsoft’s challenge to the Department of Justice’s (DOJ) request to gain access to digital personal information stored on a server in Ireland using the Stored Communications Act, rather than the proper legal channels. This is an appeal to a lower court decision that held that the government can use a search warrant, issued under the Stored Communications Act, to gain access to digital information within the control of a U.S. based internet service provider but stored on a foreign server. If upheld, this decision would have had a chilling effect on the ability of U.S. companies to compete internationally. The NAM’s brief argued that the government’s position would significantly deter the use of remote data management technologies by businesses and individuals and that there is no legal basis for the government’s request. The court held that the Stored Communications Act does not authorize courts to enforce the warrant.


Related Documents:
NAM brief  (December 15, 2014)

 


Jurisdiction -- 2016



Bristol-Myers Squibbhuntn Company v. Superior Court (Anderson)   (California Supreme Court)

Business and industry opposes finding of California jurisdiction

The NAM filed an amicus brief in the California Supreme Court to safeguard manufacturers’ due process rights. The NAM’s involvement followed a California court decision to extend specific jurisdiction to force a non-resident corporate defendant to appear in California courts because the corporation had engaged in “substantial, continuous economic activity” in California. If upheld, this decision would have dramatically increased manufacturers’ exposure to liability. The NAM’s brief argued that it is unreasonable and unlawful to extend jurisdiction to the California court system when neither the plaintiffs nor defendants are residents of the state. While the California Supreme Court did not hold in NAM’s favor, the U.S. Supreme Court later overturned that holding.


Related Documents:
NAM brief  (June 10, 2015)
NAM letter  (September 25, 2014)

 

Merritt v. Texaco Inc.   (La. Ct. App.)

Corporate registration in state does not confer general jurisidiction

A judge in Louisiana ruled that Hunt Refining Co. could be sued there by an out-of-state plaintiff for alleged exposure to benzene in Mississippi, on the theory that the company can be sued for any claims arising elsewhere in the country because the company registered to do business in Louisiana. This theory that a company is subject to general jurisdiction was rejected by the U.S. Supreme Court two years ago, and the MCLA filed an amicus brief in this case asking a Louisiana appeals court to reverse the lower court's decision. Companies do not give up fundamental due process rights by registering to do business in a state, and allowing general jurisdiction in this case could turn Louisiana into a magnet for forum shopping in mass tort or other cases.

The case was dismissed in July.


Related Documents:
NAM brief  (July 15, 2016)

 


Labor Law -- 2016



Augustus v. ABM Sec. Serv., Inc.   (California Supreme Court)

Prohibiting on-call rest periods

The NAM filed two amicus briefs with the California Supreme Court, in an employment litigation suit, to defend reasonable rest periods for manufacturing employees under California labor laws. The plaintiff alleged that while on-call rest periods are allowed under California law, an employer cannot satisfy its obligation to relieve employees from duties during rest periods when the employer nonetheless requires its employees to remain on call. This limitation could present manufacturers with operational uncertainty and impose additional costs. The NAM’s briefs argued that: under the plain language of the governing statutes and regulations, employers need not relieve employees of all duty during rest breaks because California wage regulations treat rest breaks differently than meal breaks; and the legislative history of the relevant statutes and regulations confirmed that California law authorizes on-call rest breaks. Unfortunately, the California Supreme Court denied the petition for rehearing.


Related Documents:
NAM amicus letter supporting reconsideration  (January 12, 2017)
NAM amicus brief  (November 23, 2015)

 

Constellation Brands US Operations, Inc. v. NLRB   (2nd Circuit)

Standard for determining bargaining units

The NAM filed an amicus brief supporting Constellation Brands in a collective bargaining dispute stemming from the application of the National Labor Relations Board’s (NLRB) new Specialty Healthcare doctrine. The NLRB determined that 46 winemaking cellar employees within a completely integrated production facility constituted an appropriate bargaining unit because they were “readily identifiable as a group” that “shared a community of interest.” This litigation is important to manufacturers because under the new standard, employers would have multiple bargaining agreements that make it difficult to address employee concerns and halt operations until those concerns are addressed. The NAM’s brief argued that 1) the NLRB wrongly decided Specialty Healthcare, which should be overruled because the Specialty Healthcare rule grants too much deference to the union’s proposed unit; 2) Specialty Healthcare represents a radical departure from the NRLB’s longstanding precedent and encourages a multiplicity of fractured units within workplaces throughout the country; and 3) in deciding Specialty Healthcare the NLRB violated the Administrative Procedure Act. Although the court upheld the Specialty Healthcare standard, it found the regional director did not apply the standard correctly.


Related Documents:
NAM brief  (December 16, 2015)

 

District of Columbia v. U.S. Dep't of Labor   (D.C. Circuit)

Davis Bacon Act does not apply to private construction projects

The NAM filed an amicus brief in a labor litigation lawsuit to oppose the Department of Labor’s (DOL) application of the Davis-Bacon Act, which requires “prevailing wages” for construction workers on public buildings or public works projects funded by the federal or D.C. government, to a private construction project. This is an appeal after DOL ruled that the City Center DC project was subject to the 1931 Davis-Bacon Act. If left unchecked, the DOL’s attempt to apply the Davis-Bacon Act to the private construction industry would have had a significant and potentially negative impact on private industry, the government and the economy. The NAM’s brief argued that DOL’s application of the Davis-Bacon Act to a private construction project was contrary to the language of the Act and that it was an unprecedented attempt to expand the scope of the Davis-Bacon Act into the private construction industry. The court applied common sense reasoning to reject DOL’s expansion of federal law.


Related Documents:
NAM brief  (March 11, 2015)

 

In re Cooper Tire & Rubber Company   (NLRB)

ALJ rules that racist statements are not grounds for firing

The NAM filed an amicus brief defending employers’ rights to implement and follow anti-discrimination and anti-harassment policies in an employment litigation suit. The litigation arose from Cooper Tire’s discharge of an employee for racist statements made by the employee while on a picket line. Manufacturers have a moral and legal obligation to ensure that employees are free of discrimination and harassment in the workplace. The NAM’s brief argued that 1) the National Labor Relations Act (NLRA) should not protect racist comments, regardless of where or when the comments are made; 2) the National Labor Relations Board (NLRB) cannot force employers to violate other federal statutes through its protection of racist speech used on a picket line; and 3) employers need to be able to rely on and apply their legitimate anti-discrimination and anti-harassment policies. Unfortunately, the NLRB held that although the employee’s “statements most certainly were racist, offensive and reprehensible,” they did not forfeit the protection of the NLRA.


Related Documents:
NAM brief  (August 20, 2015)

 

In re Kellogg Brown & Root, Inc.   (D.C. Circuit)

Privilege for investigations supervised by in-house lawyers

The NAM filed an amicus brief supporting employers’ rights to protect sensitive communications between employees and an employer’s counsel. This case involves an in-house investigation of tips alleging potential False Claims Act violations where, although the company provided 100,000 pages of documents during the discovery phase, the trial judge ordered that 89 documents identified as privileged be disclosed. If upheld, this precedent will penalize companies for adopting internal compliance programs and force companies to either risk a waiver of attorney-client privilege or to forego legal advice. The NAM’s brief argued that 1) a communication with counsel should be protected provided that the predominant or primary purpose of the communication is for securing legal advice; and 2) if these communications were to lose their privilege solely because they were part of a compliance investigation, “required by regulatory law’” many regulatory programs would be frustrated. In 2014, the appellate court overruled the trial court’s decision and ruled that the communications were protected by the attorney-client privilege. The trial court again ruled against the privilege assertions, and the NAM filed a second amicus brief in 2015 supporting mandamus to the appellate court. In a win for manufacturers, the appellate court reversed the district court for a second time.


Related Documents:
NAM brief  (January 30, 2015)
NAM brief  (March 19, 2014)

 

In re Miller & Anderson   (NLRB)

Defining multi-employer bargaining units

The NAM filed an amicus brief opposing the creation of a joint bargaining unit composed of employees employed solely by one of the entities that comprise a joint employer without the consent of both employers. In this case, a union filed a petition seeking to represent a “multi-employer” bargaining unit consisting of employees from Miller & Anderson and temporary employees from a staffing company. This matter is important to manufacturers because a bargaining model where one entity has no employment relationship with all bargaining unit employees creates conflicting interests that are disruptive to productive bargaining. The NAM’s brief argued that any bargaining unit seeking to include employees employed solely by one of the constituent entities that comprise a joint employer is, of necessity, a multi-employer unit, which requires consent of both employers. The National Labor Relations Board decided that the union was not required to obtain consent from both employers and that it would apply traditional community-of-interest factors to determine if such a joint union is appropriate.


Related Documents:
NAM brief  (September 18, 2015)

 

In re Space Exploration Technologies Corp.   (Dept. of Labor Admin. Rev. Bd.)

Scope of Davis-Bacon Act coverage when government property is involved

The NAM filed an amicus brief supporting Space X in its challenge against an extension of the scope of Davis-Bacon Act coverage. The Department of Labor (DOL) alleged that because the lessor, SpaceX, was located on government property, Space X was therefore subject to the prevailing wage requirements of the Davis-Bacon Act. If left unchecked, the DOL’s attempt to apply the Davis Bacon Act to the private construction industry would have had a significant and potentially negative impact on private industry, the government and the economy. The NAM’s brief argued that the DOL’s application of the rule to a private construction project is contrary to the language of the act and that the DOL’s interpretation was an improper attempt to expand the scope of the Davis-Bacon Act into the private construction industry. The National Labor Relations Board remanded this case to the DOL’s Wage and Hour Division for further proceedings.


Related Documents:
NAM brief  (February 18, 2014)

 

In re The Boeing Company   (NLRB)

Camera-enabled devices in non-restricted areas

The NAM filed an amicus brief with the National Labor Relations Board (NLRB) supporting an employer’s right to properly manage its workforce during employee demonstrations and to adequately safeguard its manufacturing processes. The plaintiffs alleged that Boeing violated the National Labor Relations Act (the Act) by videotaping employee marches within production facilities on four separate occasions and that Boeing violated the Act when it promulgated and maintained a procedure prohibiting use of employees’ personal camera-enabled devices on site without a valid camera permit approved by security. If upheld, this decision would have significantly infringed on an employer’s ability to safeguard proprietary materials and monitor employee safety. The NAM’s brief argued that 1) photographing or videotaping employees on company premises did not violate the Act because Boeing maintained legitimate reasons to observe the marches; and 2) similarly, the restriction of camera enabled devices on company property did not violate the Act because Boeing had a legitimate business need to protect its manufacturing process. The NLRB concluded that Boeing violated the Act by videotaping employee marches but lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices.


Related Documents:
NAM brief  (June 12, 2014)

 

International Union of Painters v. Great Wash Park LLC   (Nevada S. Ct.)

Trespass is not protected union activity

The NAM filed an amicus brief supporting the rights of property owners to access state courts in a dispute regarding third-party trespassers. The owner sought relief from trespass, under state law in a Nevada trial court after the defendants, a labor organization, used projection bombing to beam giant images onto the owner’s property. Effective trespass laws are necessary to protect property owners from trespass. The NAM’s brief argued that 1) the “photobombers” effectively took control of the physical space on which the image was displayed; 2) that state law property claims are not preempted by federal labor laws; 3) labor speech is not privileged over other types of speech; and 4) projection onto private property not only constitutes trespass but also takes property owners’ fundamental ownership rights. Unfortunately, the Nevada Supreme Court declined to hear this appeal.


Related Documents:
NAM brief  (September 2, 2015)

 

Macy's, Inc. v. NLRB   (5th Circuit)

Fifth Circuit case to reverse micro-unit determination

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting Macy’s, Inc., in a collective bargaining dispute. In this case, the National Labor Relations Board applied the Specialty Healthcare standard to conclude that sales employees in the fragrance and cosmetic departments at a Macy’s location were an appropriate bargaining unit. This litigation is important to manufacturers because smaller bargaining units will render it virtually impossible for an employer to oppose the organizing effect and make it more difficult to address employee concerns. The NAM’s brief argued that the application of the Specialty Healthcare doctrine, which reversed 70 years of precedent and instated a new standard for determining a collective bargaining unit, should not apply because the standard is inconsistent with the National Labor Relations Statue and the legislative history. Unfortunately, the court upheld the Specialty Healthcare standard.


Related Documents:
NAM brief  (April 27, 2015)

 

Nestle Dreyer's Ice Cream Co. v. National Labor Relations Board   (4th Circuit)

Overturning the NLRB's "overwhelming community of interest" test for bargaining units

The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit supporting Nestle Dreyer's Ice Cream Co. (Dreyer) in a collective bargaining dispute after the lower court held that Dreyer’s technical refusal to bargain violated the National Labor Relations Act (the Act). The litigation followed Dreyer’s refusal to bargain after the National Labor Relations Board’s (NLRB) certification of the petitioned-for unit, which consisted solely of maintenance employees. This case is important because to simply allow the instant certification of a maintenance-only unit would be a disservice to employers, employees and orderly collective bargaining. The NAM’s brief argued that the court should reverse the NLRB’s decision because the NLRB1) erroneously failed to give proper consideration to the bargaining history that included a broader unit of maintenance and production employees; 2) relied on the “overwhelming community of interest” test announced in Specialty Healthcare, which was inconsistent with prior doctrine; and 3) Incorrectly made the extent of organization a controlling factor in unit determination. The court denied Nestle Dryer’s petition for review.


Related Documents:
NAM brief  (January 13, 2015)

 

Tyson Foods, Inc. v. Bouaphakeo   (U.S. Supreme Court)

Uninjured class members should be excluded

The NAM filed an amicus brief with the U.S. Supreme Court in a class action litigation urging the Court to determine whether a certified class may include uninjured claimants. The plaintiffs sued Tyson foods alleging injury and damages under the Fair Labor Standards Act (FLSA) and seeking overtime wages for time spent dressing and removing protective gear; however, the plaintiffs used statistical modeling to create a fictional plaintiff as the basis of class certification. The rise of no injury class plaintiffs is troublesome to manufacturers because it subjects them to increased litigation from plaintiffs who can hide the deficiencies of individual class member claims. The NAM’s brief urged the Supreme Court to set a bright-line rule against the inclusion of uninjured class members and argued that individuals without injuries do not have a claim. The Supreme Court affirmed the lower court’s ruling but did so on narrow grounds and did not reach the issue that was central to the NAM’s amicus brief.


Related Documents:
NAM brief  (August 14, 2015)
NAM brief  (April 20, 2015)

 

Volkswagen Group of Am., Inc. v. United Auto Workers, Local 42   (NLRB)

Application of Specialty Healthcare to maintenance employee micro unit

The NAM filed an amicus brief with the National Labor Relations Board supporting Volkswagen in a collective bargaining dispute with the United Auto Workers (UAW). The UAW brought the complaint after Volkswagen opposed the creation of a micro-bargaining unit exclusively for maintenance employees. UAW argued that because maintenance employees “share a unique function” they are readily identifiable and therefore should be recognized as a bargaining unit. This litigation is important to manufacturers because multiple bargaining agreements make it difficult to address employee concerns. The NAM’s brief argued that the application of the Specialty Healthcare doctrine, which reversed 70 years of precedent and instated a new standard for determining a collective bargain unit should not apply because the standard is inconsistent with the statute and the legislative history and that the decision in this case fails to even comply with the standard as set forth in Specialty Healthcare. The NLRB rejected Volkswagen’s request for review, but the case was appealed to the U.S. Court of Appeals for the D.C. Circuit, which remanded the case for reconsideration.


Related Documents:
NAM brief  (December 23, 2015)

 


Patents, Copyrights and Trademarks -- 2016



In re Loestrin 24 FE Antitrust Litigation   (1st Circuit)

Supporting patent dispute settlements as pro-competitive

The NAM filed an amicus brief in a pharmaceutical patent litigation settlement dispute to urge the appellate court to affirm a district court ruling allowing a patent litigation settlement agreement between a brand manufacturer and two generic pharmaceutical manufacturers. The plaintiffs alleged that the settlement agreement violated antitrust laws, although the agreement allowed the generic manufacturers to enter the market before the patent expired. This case is important to manufacturers across the economy that rely on flexibility in settling patent disputes to avoid expensive and unnecessary litigation. The NAM’s brief argued that courts must ensure that a challenge to a settlement agreement is actually plausible before allowing the case to proceed and that plaintiffs must allege enough facts to make an overall anticompetitive effect plausible. The appeals court, however, vacated the district court's decision and remanded the case for the district court to decide the issue of the application of the plausibility standard.


Related Documents:
NAM amicus brief  (August 27, 2015)

 

SmithKline Beecham Corp. v. King Drug Co.   (U.S. Supreme Court)

Antitrust scrutiny of patent litigation settlements

The NAM filed an amicus brief in a pharmaceutical patent litigation settlement dispute urging the U.S. Supreme Court to resolve uncertainty regarding the kinds of settlements that can trigger lawsuits. The plaintiffs appealed a settlement between a brand pharmaceutical manufacturer and a generic pharmaceutical manufacturer after the parties settled patent litigation using a procompetitive licensing arrangement. This case is important because manufacturers rely on settlements to avoid unnecessary litigation. The NAM’s brief argued that 1) patent owners should be allowed to reach reasonable agreements with competitors to settle their disputes; 2) third parties should not be allowed to appeal the settlement by merely alleging that the settlement contains a specific licensing arrangement; and 3) parties must not be forced to choose between lengthy and expensive patent litigation if they do not settle a patent challenge and lengthy and expensive antitrust litigation if they do. The Court declined to hear this appeal.


Related Documents:
NAM brief  (March 31, 2016)

 


Preemption -- 2016



Alliance of Automobile Manufacturers, Inc. v. Currey   (U.S. Supreme Court)

Prohibition on recovering state-imposed dealer costs

The NAM filed an amicus brief urging the U.S. Supreme Court to reverse the U.S. Court of Appeals for the Second Circuit’s affirmation of the dismissal of claims against Connecticut’s protectionist automobile dealer state legislation. The issue in this litigation is whether Connecticut’s prohibition on manufacturers from raising prices in Connecticut to account for added costs imposed by the state violates the Dormant Commerce Clause. This litigation is important because protectionism is anticompetitive, inconsistent with innovation and advancement, and harmful to consumers. The NAM’s brief argued that Connecticut’s legislation is protectionist and therefore anticompetitive, harms consumers and is implemented solely for the benefit of in-state dealers. Unfortunately, the Supreme Court declined review.


Related Documents:
NAM brief  (November 9, 2015)

 


Product Liability -- 2016



Amato v. Crane Co.   (Pennsylvania Supreme Court)

Standard of liability in failure-to-warn asbestos case

The NAM filed an amicus brief urging the Pennsylvania Supreme Court to adopt modern product liability standards already followed by most other state courts. The issue was what legal standard applies to determine liability in failure to warn cases and whether juries in design defect cases should be allowed to consider whether a product was “unreasonably dangerous.” This litigation increases uncertainty for Pennsylvania manufacturers as to their obligations to warn consumers when products are not unreasonably dangerous. The NAM’s brief argued that juries should be permitted to consider what a manufacturer knew about a particular danger in strict liability failure to warn cases as is allowed in modern product liability standards followed by a majority of state courts. Unfortunately, the court dismissed the appeal and did not reach a decision.


Related Documents:
NAM brief  (March 14, 2016)

 

CertainTeed Corp. v. Fletcher   (Georgia Supreme Court)

Liability of manufacturers for take-home occupational exposure of customer's employee to asbestos

The NAM filed an amicus brief in the Georgia Supreme Court opposing the expansion of product liability law and the assertion of a duty to warn household members of workers who may come into contact with asbestos. The plaintiffs in this case sought to hold manufacturers liable for failing to warn third party household members of workers at companies that use their products about asbestos risks. If successful, the litigation would have set adverse precedent and expose manufacturers to unlimited liability in asbestos litigation. The NAM’s brief argued that product manufacturers owe no duty of care to third party household members of employees exposed to asbestos through contact with occupationally exposed workers or contact with their clothes. In a win for manufacturers, the court properly denied what would have been a dramatic expansion of product liability law.


Related Documents:
NAM brief  (March 14, 2016)

 

Davis v. Honeywell Int'l, Inc.   (California Supreme Court)

Any exposure theory of asbestos liability

The NAM filed an amicus brief urging the California Supreme Court to ensure that rules applied to asbestos and other toxic tort cases are consistent with well-established tort law, sound science and good policy. This case is an appeal from a lower court decision that violated these principles by permitting liability based on questionable causation testimony, which is rejected by an increasing number of courts. This case is important because manufacturers should receive fair trials, based in sound legal rules that are consistent with well-established tort law. The NAM’s brief urged the court to clarify the evidence needed to satisfy the “substantial factor” in causing the plaintiff’s injury and reject the “any exposure” theory as a basis for asbestos causation because that theory does not meet the legal requirements for exposure liability, is unfair to defendants, and encourages excessive lawsuits. Unfortunately, the court denied the petition for review.


Related Documents:
NAM brief  (April 29, 2016)

 

Dummitt v. A. W. Chesterton   (New York Court of Appeals)

Duty to warn about hazards in products made by other manufacturers

The NAM filed an amicus brief in an asbestos litigation suit to oppose imposing manufacturer liability for failure to warn purchasers about potential harms from exposure to asbestos-containing products created by others when used in conjunction with the manufacturer’s product. A ship worker claimed exposure to asbestos from repairing valves and secured a judgment against a manufacturer of metal parts on the theory that the manufacturer should have warned that asbestos was hazardous, although the company neither installed the asbestos components, nor required the use of asbestos to properly operate the valves. This case could open the door for a new round of legal cases that would hold manufacturers who did not manufacture a product containing asbestos liable. The NAM’s brief argued that the litigation runs contrary to well settled law that manufacturers are not liable for failure to warn about hazards from other products except in very limited circumstances and that the court should follow other courts which have held that manufacturers are not liable for harms caused by post sale addition of asbestos containing replacement parts. Unfortunately, the court did not agree with NAM’s arguments.


Related Documents:
NAM amicus brief  (October 8, 2014)

 

Haver v. BNSF Ry. Co.   (California Supreme Court)

Liability for take-home exposure to asbestos

The NAM filed an amicus brief urging the court to reject an extension of the duty of care to remote third parties in a California asbestos lawsuit. This was the second case before the California Supreme Court where the plaintiffs alleged that a duty of care extended to off-site contact by immediate family members, visitors, guests or others with whom an employee who was exposed to a hazardous substance may come into contact. Any imposition of a duty of care to third parties permit potentially limitless and indefinite liability. The NAM’s brief argued that there is no need to stretch tort law to provide a remedy to remote third parties and explained the impact of bankruptcies on tort defendants. The court held that it is reasonably foreseeable that workers exposed to asbestos fibers at work may act as carriers that could harm household members; therefore, employers or the owner of the property where the employee worked are liable for any injuries caused by asbestos.


Related Documents:
NAM brief  (March 11, 2015)

 

Kesner v. Superior Court   (California Supreme Court)

Liability for take-home exposure to asbestos

The NAM filed an amicus brief urging the court to reject an extension of the duty of care to remote third parties in a California asbestos lawsuit where the plaintiffs alleged that a duty of care extended to off-site contact by immediate family members, visitors, guests, or others with whom an employee who was exposed to a hazardous substance may come into contact. Any imposition of a duty of care to third parties imposes potentially limitless and indefinite liability. The NAM’s brief argued that there is no need to stretch tort law to provide a remedy to remote third parties and explained the impact of bankruptcies on tort defendants. The court held that it is reasonably foreseeable that workers exposed to asbestos fibers at work may act as carriers that could harm household members; therefore, employers or the owner of the property where the employee worked are liable for any injuries caused by asbestos.


Related Documents:
NAM brief  (March 11, 2015)

 

Linert v. Ford Motor Co.   (Ohio Supreme Court)

Post-sale duty to warn

The NAM filed an amicus brief urging the Ohio Supreme Court to reverse a lower court decision that imposed a post-marketing duty to warn consumers based on post-sale safety improvements. This is an appeal of a lower court decision requiring a manufacturer to warn consumers, post-sale, of any known risk in using a product, including instances where the product is not defective, the risk of harm is unlikely and insubstantial, and the risk asserted is the difference between the product and a newer improved product. If upheld, this decision could disincentivize product improvements. The NAM’s brief argued that a post-marketing duty to warn requires consideration of the likelihood and seriousness of potential harm, not merely that there is any known risk, and that the decision to penalize manufacturers with mandatory warnings for product improvements also amounts to a court-crafted “innovation tax.” In a win for manufacturers, the court held that manufacturers do not have a post-sale duty to warn about risks associated with a product that are not discovered until after the product has been sold and that are not likely to pose a serious risk.

 

Occidental Chemical Corporation v. Jenkins   (Texas Supreme Court)

Forever liability for improvements to real estate

The NAM filed two amicus briefs rejecting an expansion of the duty of care and urging the Texas Supreme Court to reject “perpetual liability” after a lower court imposed that liability on a former owner of real property. This is an appeal from a lower court decision imposing liability on the former owner of a chemical manufacturing plant, Occidental Chemical Corporation, for plaintiff’s injury while operating plant machinery, even though the injury occurred after Occidental sold the plant. If upheld, the decision would have caused Texas business and property owners significant uncertainty and introduced an unprecedented expansion of litigation risk for “negligence,” even if a personal injury occurred long after the owner relinquished control of the property. The NAM’s briefs argued that the lower court’s decision broke from clearly established Texas law and set a dangerous precedent that weakened Texas’s robust manufacturing economy. In a win for manufacturers, the Texas Supreme Court ruled that Occidental breached no duty of care to Jenkins.


Related Documents:
NAM brief  (February 13, 2015)
NAM amicus letter  (April 24, 2014)

 

Rost v. Ford Motor Co.   (Pennsylvania Supreme Court)

Challenging "any exposure" theory in asbestos case

The NAM filed an amicus brief urging the Pennsylvania Supreme Court to reverse a trial court judgment that allowed expert testimony on asbestos causation without requiring an assessment of the dose required to cause injury or identifying how much exposure occurred. The plaintiff, a maintenance worker doing non-asbestos work thirty feet from brake repair work involving asbestos, alleged that his proximity to the brake repair work was sufficient evidence of causation. His expert witness also testified that such proximity is sufficient to prove causation. The NAM’s amicus brief argued that experts should not be allowed to speculate that any exposure is enough to find liability and that the plaintiffs experts failed both steps of a causation assessment: identifying how much exposure occurred and citing to competent studies. Unfortunately, the court upheld the trial court’s judgment.

 

Scapa Dryer Fabrics, Inc. v. Knight   (Georgia Supreme Court)

"Any exposure" liability

The NAM filed an amicus brief challenging attempts by the trial bar to reduce or eliminate the legal requirement that a plaintiff prove a defendant actually caused his or her injury and urging the court to ensure that legal rules applied to asbestos and other toxic tort cases are consistent with well-established tort law, sound science and good policy. This case is an appeal of a trial court decision which permitted a witness to testify that any exposure to a hazardous substance in excess of background levels is a substantial contributing factor in the development of mesothelioma. This litigation is important to manufacturers because loose expert testimony standards often result in jury verdicts that are out of touch with sound science and tort principles. The NAM’s brief argued that a plaintiff’s experts must demonstrate, through a competent scientific assessment, that the plaintiff received a dose sufficient to cause the disease at issue and that a trial judge should not perform the role of experts, including assisting the jury in determining how much exposure from a particular workplace event is enough. In a win for manufacturers, the court held that any exposure to a hazardous material like asbestos is insufficient to prove that the exposure caused an injury.

 

Suttner v. Crane Co.   (New York Court of Appeals)

Duty to warn about hazards in products made by other manufacturers

The NAM filed an amicus brief in an asbestos litigation suit to oppose imposing manufacturer liability for failure to warn purchasers about potential harms from exposure to asbestos-containing products created by others when used in conjunction with the manufacturer’s product. A former employee of an automobile component manufacturer claimed exposure to asbestos from repairing valves and secured a judgment against a manufacturer on the theory that the manufacturer should have warned that asbestos was hazardous, although the company neither installed the asbestos components, nor required the use of asbestos to properly operate the valves. This case could open the door for a new round of legal cases that would hold manufacturers who did not manufacture a product containing asbestos liable. The NAM’s brief argued that the litigation runs contrary to well settled law that manufacturers are not liable for failure to warn about hazards from other products except in very limited circumstances and that the court should follow other courts which have held that manufacturers are not liable for harms caused by post sale addition of asbestos containing replacement parts. Unfortunately, the court did not agree with NAM’s arguments.


Related Documents:
NAM brief  (June 19, 2015)

 


Punitive Damages -- 2016



Lindenberg v. Jackson Nat'l Life Ins. Co.   (Tennessee Supreme Court)

Limiting excessive punitive damages awards

The NAM filed an amicus brief urging the Tennessee Supreme Court to uphold a statutory limit on excessive punitive damages awards. The policy was implemented as a result of the expanding availability, size and unpredictability of those awards. Businesses are at a risk of significant and unwarranted liability exposure without a statutory limit on punitive damages. The NAM’s brief argued that statutory limits are needed to temper the expansion of punitive damages awards and that not only is the statutory limit on punitive damages constitutional, but it also promotes public confidence in the civil justice system and promotes sound economic policy. The Tennessee Supreme Court did not decide the constitutionality of the statute but remanded the case back to the lower court, which found that the law is consistent with the right to jury trial and separation of powers under the Tennessee Constitution.


Related Documents:
NAM amicus brief  (April 15, 2016)

 

Lindenberg v. Jackson Nat'l Life Ins. Co.   (W.D. Tenn.)

Limiting excessive punitive damages awards

The NAM filed an amicus brief supporting manufacturers’ rights and urging a Tennessee court to uphold a state statutory limit on excessive punitive damages. This litigation arises from a 2011 Tennessee General Assembly decision to adopt reasonable limits on punitive damage awards. Without a statutory limit on punitive damages, businesses are at a risk of significant and unwarranted liability exposure. The NAM’s brief argued that the statutory enactment is within the legislature’s authority to render public policy decisions and that the legislature’s decision furthers the legislative interest in facilitating a balanced and fair civil justice system. On remand, the district court found that the law is consistent with the right to jury trial and separation of powers under the Tennessee Constitution.


Related Documents:
NAM brief  (April 15, 2016)

 

Lompe v. Sunridge Partners, LLC   (10th Circuit)

Considerations of wealth of defendant when assessing punitive damages

The NAM filed an amicus brief arguing against consideration of a defendant’s wealth when determining whether punitive damages exceed constitutional limits. A lower court assessed punitive damages of $22.5 million, a sum above U.S. Supreme Court precedent, against an apartment owner and manager for injuries resulting from carbon monoxide poisoning from a faulty furnace. Caps on punitive damages are necessary to safeguard against excessive jury awards that negatively impact shareholders, customers and employees. The NAM’s brief argued that 1) courts should not use evidence of wealth to increase the constitutional limit of a jury’s punitive damages award; 2) evidence of wealth does not provide a consistent or meaningful measure for evaluating the constitutionality of a punitive damages award; and 3) if wealth is relevant, it is a mitigating factor or limited to cases where the defendant’s wealth stems from the conduct that harmed the plaintiff. The U.S. Court of Appeals for the Tenth Circuit reduced the size of the punitive damages award using the factors outlined by the U.S. Supreme Court.


Related Documents:
NAM amicus brief  (April 17, 2015)

 


RICO Act -- 2016



In re: Avandia Marketing v. Allied Services Division Welfare Fund   (U.S. Supreme Court)

What constitutes an injury under RICO

The NAM filed a brief urging the U.S. Supreme Court to review a case involving Racketeer Influenced and Corrupt Organizations Act (RICO) claims by third-party payors seeking damages reimbursement of monies spent for prescriptions. The plaintiffs’ lawsuit sought damages, even though the product worked and no physical injuries occurred, and argued that they overpaid for the drug in comparison to other alternatives because certain risks were not disclosed. If courts allow RICO claims against pharmaceutical manufacturers, the potential liability could chill the development of new medications and cause manufacturers uncertainty about the proper standard for causation under RICO. The NAM’s brief argued that further guidance is needed because of the uncertainty about the proper standard for causation under RICO, which incentivizes abusive, speculative and burdensome litigation against manufacturers of all kinds. Unfortunately, the Supreme Court declined to review the case.


Related Documents:
NAM brief  (March 10, 2016)

 


Settlement Agreements and Consent Decrees -- 2016



Elliott v. General Motors LLC   (2nd Circuit)

Validity of bankruptcy sale of assets "free and clear"

The NAM filed an amicus brief urging the U.S. Court of Appeals for the Second Circuit to review an adverse bankruptcy ruling, which held that the new General Motors (GM) may be responsible for claims from the old GM if the claimants did not receive adequate notice of the sale order in the bankruptcy proceeding. This litigation queries whether the new GM is still responsible, five years later, for accident claims and economic loss claims arising from an ignition switch defect. The bankruptcy ruling undermines the price companies reorganized in bankruptcy can obtain when selling their assets and discourages potential buyers from purchasing the assets of such companies. The NAM’s brief argued that the ruling undermines the “free and clear nature” of the bankruptcy code and imposed liability on a good faith purchaser for the debtor’s violations. Unfortunately, the Second Circuit held that the new GM may be responsible for claims that did not receive adequate notice of the sale order in the bankruptcy proceeding.


Related Documents:
NAM amicus brief  (August 10, 2016)

 


Taxation and State Taxation -- 2016



Gillette Co. v. California Franchise Tax Board   (U.S. Supreme Court)

Challenging California's partial withdrawal from Multistate Tax Compact

The NAM filed an amicus brief urging the U.S. Supreme Court to review the state of California’s decision to partially withdraw from the Multistate Tax Compact. The Compact creates a uniform system of taxation for companies with business in multiple states. The decision to withdraw from the pact harms manufacturers who chose to expand into California based on the predictable and uniform system of taxation by states that have agreed to the Multistate Tax Compact. The NAM’s brief argued that the Compact does not allow partial withdrawal from the Compact’s obligations and that manufacturers have relied on the Compact as a source of predictable taxation rules. Unfortunately, the Court declined to hear the review.


Related Documents:
NAM amicus brief  (June 30, 2016)

 

Kimberly-Clark Corp. v. Minnesota Comm'r of Rev.   (U.S. Supreme Court)

Challenging Minnesota's partial withdrawal from Multistate Tax Compact

The NAM filed an amicus brief urging the U.S. Supreme Court to review the state of Minnesota’s decision to repudiate some of the Multistate Tax Compact’s provisions. That decision is at odds with the Compact’s language, which sets forth that a state may withdraw only by repealing the Compact in its entirety. The lower court held that Minnesota’s decision to repudiate some of the Compact’s provisions was permissible because when a state becomes a member of the Compact, it makes no “unmistakable promise” to abide by all of the Compact’s terms. That decision seriously undermines the predictability and uniformity of state taxation. The NAM’s brief argued that 1) long-term tax predictability is of immense business importance; 2) the Multistate Tax Compact offers such predictability and uniformity; and 3) that Minnesota should honor the agreement it joined. Unfortunately, the Court declined to hear the case.


Related Documents:
NAM amicus brief  (November 28, 2016)

 


Administrative Procedure -- 2015



Perez v. Mortgage Bankers Association   (U.S. Supreme Court)

Administrative law

The NAM and coalition associations filed a Supreme Court brief in Perez v. Mortgage Bankers Association. On March 9, 2015 the Court issued a decision in this case with a wide ranging impact on administrative law by significantly expanding the authority of regulatory agencies. The case concerned whether a federal government agency must get the public’s reaction before it changes a rule that interprets one of its own existing regulations. As a general rule a federal agency must engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act (APA) before it can significantly alter an interpretive rule that articulates an interpretation of an agency regulation.

Unfortunately, agencies are able to take advantage of a variety of exceptions to this rule and avoid meaningful public participation by promulgating vague legislative rules and then interpreting those rules to reach the potentially controversial regulatory outcomes that the agencies seek. This strategy is purposefully designed to avoid public input. Further, agencies know they are shielded from legal challenges because the court must accept an agency interpretation as long as they are not patently incompatible with the statutory or regulatory text. The result of this process is ambiguity and uncertainty on how to comply with the law by public. This opinion from the Court allows agencies to reverse their definitive, relied-upon interpretations without notice and comment making the situation even worse.

The NAM brief argued that agencies should be required to follow the requirements of notice and comment before reversing their definitive, relied-upon interpretations because in such situations the agency has effectively amended a legislative rule. Business should be allowed to rely upon the interpretive rules that increasingly affect its day-to-day operations but this decision adds further ambiguity.


Related Documents:
NAM brief  (October 16, 2014)

 


Alien Tort Statute -- 2015



Doe v. Nestle USA, Inc.   (9th Circuit)

Corporate liability for aiding and abetting under Alien Tort Statute

The Alien Tort Statute continues to be a source of substantial concern for manufacturers that do business abroad and that are alleged to assist regimes accused of various human rights violations. The ATS allows federal courts in the U.S. to hear cases by foreign nationals who allege violations of international law. This case involves allegations that various companies assisted the government of the Ivory Coast to force children to work on cocoa plantations.

The NAM and 4 international law professors joined together in an amicus brief urging the Ninth Circuit to reject opening up the statute to broad claims. We argued not only that the Supreme Court has very narrowly interpreted the kind of conduct that violates international law, but also that the plaintiffs' claims in this case are based on a standard for aiding and abetting liability that does not reflect a well-established, specifically defined and universally agreed-upon rule of customary international law. In addition, settled customary international law does not recognize corporate entity liability, and the ATS should not be extended to imply private rights of action that have a significant potential for interference with the conduct of foreign affairs by the political branches of government.

On December 19, 2013, the Ninth Circuit vacated the district court’s opinion and remanded the case to the trial level for further proceedings. The circuit court concluded that corporations can be held liable under the ATS. The court also determined that a corporation does not need to purposefully act to be liable for aiding and abetting. Rather, any assistance that has a substantial effect, even if the corporation did not specifically intend to aid and abet the crime, is grounds for liability.

However, this decision has been appealed to the full Ninth Circuit for further review, and on Oct. 27, 2014, the NAM filed an amicus brief supporting review. The 3-judge panel announced a standard of criminal intent for an accessory to a crime that infers the defendant has a purpose of facilitating a crime if it has a profit-seeking motive. Our amicus brief argued that this ruling conflicts with the decisions of other federal courts and has no support in international law. Unless corrected, this standard “exposes businesses to the risk of liability for any commercial relationship in countries alleged to have engaged in human rights violations, even when that relationship is entirely lawful as a matter of American foreign economic policy.”

We also argued that the recent Supreme Court decision in Kiobel limits the power of U.S. courts to hear cases arising from activities occurring abroad. That decision recognized a presumption against applying U.S. law extraterritorially to claims arising under the Alien Tort Statute, and there must be claims that “touch and concern the territory of the United States” which are of “sufficient force” to displace the presumption. The Ninth Circuit misapprehended this ruling, claiming that the presumption against extraterritoriality does not apply to ATS claims.

Both of these issues are of exceptional importance and affect many companies that have been caught up in ATS allegations. The Ninth Circuit declined to rehear this case on 5/6/15, with 8 judges dissenting.


Related Documents:
NAM brief in support of rehearing  (October 27, 2014)
NAM brief  (October 7, 2011)

 


Antitrust -- 2015



Motorola Mobility LLC v. AU Optronics Corp.   (U.S. Supreme Court)

Extraterritorial reach of U.S. antitrust law

This case involves a private antitrust suit against foreign manufacturers of LCD display screens for mobile phones. The Seventh Circuit rejected a claim by Motorola Mobility for against foreign manufacturers alleged to have fixed the prices of the screens before selling them to Motorola through its foreign subsidiaries, who then included the components in the phones destined for the U.S. market. The court thought that because the subsidiaries were incorporated abroad and the work was done abroad, there was an insufficient connection to U.S. commerce under the provisions of the Foreign Trade Antitrust Improvement Act of 1982.

The NAM filed an amicus brief supporting an appeal of this decision to the Supreme Court. Our brief simply calls for clarification from the Court on the extent to which U.S. antitrust law allows a right of action against price fixing in this kind of situation, which for many reasons is not an uncommon way for U.S. manufacturers to structure their manufacturing operations when buying from foreign suppliers. A similar case in the Ninth Circuit, involving criminal charges for the same conspiracy, resulted in that court allowing U.S. jurisdiction because of the significant effects on U.S. commerce.

On June 15, 2015, the U.S. Supreme Court denied cert in this case.

 


Civil Procedure -- 2015



In re Deepwater Horizon   (5th Circuit)

Standards of impartiality for disqualification of claims administrator

The NAM and other business groups filed an amicus brief supporting a challenge to the impartiality of the administrator of claims arising from the Deepwater Horizon oil spill in the Gulf of Mexico. Administrators in cases like this are endowed with substantial power to make qualitative judgments about the validity of claims and quantitative judgments about the amount of damages properly to be awarded, and must avoid even the appearance of partiality. Biases or apparent biases of administrators must be disclosed in advance, or parties will avoid such alternative dispute resolution procedures and head for court, imposing greater costs on the court system and the public at large.

The case arose because it was discovered that the administrator appointed to handle the claims had served as an advocate for Louisiana on behalf of claimants against BP, and also participated in drafting pleadings against BP that led to the settlement that he presides over. Our brief called for the application of the same impartiality requirements for claims administrators as apply to judges, magistrates and judicially-appointed masters. This is particularly important where the administrator has significant discretion in exercising his authority, and he should disclose in advance any dealings that might create an impression of possible bias, erring on the side of disclosure. Without such disclosure, the parties should be able to move to disqualify the administrator.

No decision was reached on the merits, as the parties dismissed the appeal pursuant to a settlement agreement on March 6, 2015.

 


Class Actions -- 2015



Carpenter Co. v. ACE Foam, Inc.   (U.S. Supreme Court)

Class certification

The NAM and Chamber filed a brief in support this appeal to the Supreme Court. Our brief argued that the Sixth Circuit improperly relaxed the requirements for class certification in at least two respects. First, the Sixth Circuit affirmed the district court’s certification decision, even though the certified class included a non-de minimis number of individuals who were not injured by any defendant’s conduct and, therefore, did not have standing under Article III of the U.S. Constitution. Second, the Sixth Circuit approved class certification on the theory that an aggregate damages model—one that calculates average damages for the class as a whole—satisfies Rule 23’s predominance requirement.

The lower courts' decisions in this case not only violate this Court’s precedents, including its recent decision in Comcast, but they also deepen entrenched divisions in lower court authority over the requirements for class certification. The class certification requirements of Federal Rule of Civil Procedure 23 are not mere conveniences for streamlining litigation, but crucial safeguards grounded in fundamental notions of due process, and U.S. manufacturing needs reliable and transparent application of this legal principle.

Unfortunately, the Supreme Court declined to hear this appeal on 3/2/2015.


Related Documents:
NAM brief  (December 19, 2014)

 

DIRECTV, Inc. v. Imburgia   (U.S. Supreme Court)

State law preempted by the Federal Arbitration Act

On June 5th, the NAM filed a joint amicus brief with the Chamber of Commerce of the U.S. and the Retail Litigation Center in the Supreme Court in DIRECTV, Inc. v. Imburgia. The issue is whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act (FAA) requires the application of a state law preempted by the FAA.

This is a class action suit against DIRECTV under the Consumers Legal Remedies Act (CLRA) in California. The trial court and Court of Appeal refused to compel arbitration by applying state law. The agreement prohibits arbitration on a classwide basis and provides that the entire section on arbitration will be void if state law nullifies such a prohibition. The CLRA expressly prevents waiver of the right to bring a CLRA class action. The FAA requires that state law must not discriminate against arbitration or be applied in a manner that disfavors arbitration agreements. States are not allowed to single out arbitration agreements for suspect status. Additionally, the FAA mandates, and the Supreme Court has routinely held, that any ambiguity in the terms of an arbitration agreement must be resolved in favor of arbitration. Under the Court of Appeal’s reading, the arbitration agreement in this case actually favors class action litigation over arbitration.

The NAM brief argued that the California Court of Appeal’s decision impermissibly discriminates against arbitration and that the decision violates the rule of deciding ambiguities in arbitration provisions in favor of arbitration. The court found that the provision could be interpreted two different ways, yet it decided the alleged ambiguity in a way that disfavored arbitration by applying common law contract principles rather than the explicit direction of the FAA. The NAM asked the Court to reverse the California Court of Appeal’s decision.

The U.S. Supreme Court ruled on December 14, 2015 that an arbitration clause containing a class action waiver was valid even when the contract incorporated state law standards that might have voided the waiver. The decision reflects the Court’s continued adherence to enforcing arbitration clauses. It’s also a significant victory for arbitration advocates and shows the Court’s willingness to police attempts by lower courts to try to sidestep the force of its prior pro-arbitration rulings.


Related Documents:
NAM brief  (June 5, 2015)

 


Corporate Governance/Shareholder Activism -- 2015



Trinity Wall Street v. Wal-Mart Stores, Inc.   (3rd Circuit)

Shareholder activists expand "ordinary business operations" exception

On January 21, 2015 the NAM filed an amicus brief in this case asking the Court to reverse the lower court’s ruling. As way of background, SEC Rule 14a-8, the shareholder proposal rule, requires a public company to include a shareholder proposal in its proxy statement for action at the company’s annual meeting if the shareholder proponent satisfies various procedural and substantive requirements. Although the rule gives shareholders wide latitude to make proposals, their rights are not unlimited when seeking to access the company’s proxy statement. Of critical importance here, a shareholder proposal under Rule 14a-8 cannot relate to the “ordinary business” operations of the company.

In this case, Trinity’s proposal targeted products for exclusion from Wal-Mart that Trinity claims will have the “substantial potential to impair the reputation of the Company and/or would reasonably be considered by many offensive to the family and community values integral to the Company’s promotion of its brand.”

The NAM brief argued that this subject matter is inherently subjective and open-ended, particularly for retailers selling a wide variety of products to an array of consumers. It should be assumed that many products may be offensive to the views or values of one of countless constituencies in the domestic or even global marketplace. The shareholder proposal rules were not intended to allow a shareholder referendum on how a retailer selects its inventory. If the mix of products a retailer chooses to stock and sell is not subject to the ordinary business exception, that exception is rendered a nullity. The District Court erred because a proposal attempting to influence the types of products a retailer may sell clearly relates to an “ordinary business” matter.

The District Court’s analysis has troubling ramifications for public companies and manufacturers because it opens the door to the possibility that any lawful product that could draw some social objection is ripe for shareholder consideration.

On April 14, 2015 the 3rd Circuit Court of Appeals affirmed the NAM position ruling that the District Court order entered on December 8, 2014 granting Appellee’s motion for summary judgment with respect to Count I of the Verified Amended Complaint is reversed and the permanent injunction it entered is vacated.


Related Documents:
NAM amicus brief  (January 21, 2015)

 


Discovery -- 2015



Antero Resources Corp. v. Strudley   (Colorado Supreme Court)

Legality of "Lone Pine" Rulings before discovery

This case is about whether Colorado trial courts may use discretionary case management tools to limit the duration and cost of litigation by requiring plaintiffs to produce evidence essential to their claims after initial disclosures but before further discovery. Plaintiffs alleged that a hydraulically fractured natural gas well near their property contaminated their drinking water. The trial court in this case issued what is often referred to as a “Lone Pine” Order, requiring the plaintiff to identify the chemical that caused the injury; specify the disease, illness, or injury caused by the substance; and explain a causal link between exposure and the injury. Because plaintiffs could not articulate an injury caused by a particular chemical, the trial court dismissed the claim without requiring discovery. The Court of Appeals reversed the trial court, holding that the court lacked authority to issue the order under the Colorado Rules of Civil Procedure and identifying a policy that all conflicts should be resolved in favor of discovery.

The NAM’s brief provided a historical perspective on judicial case management and the growth of trial court discretion in Colorado. The case management tool at issue here serves to promptly resolve disputes by avoiding the very expensive and time consuming discovery process. The NAM argued that the “Lone Pine” ruling was entirely consistent with the history of active case management, the procedural underpinnings of Colorado law, and a host of decisions from other jurisdictions that have embraced similar goals.

On April 20, 2015, the Colorado Supreme Court ruled, over 1 dissent, that the state's rules of civil procedure do not allow a case management order that requires a plaintiff to present prima facie evidence in support of a claim before a plaintiff can demand full discovery about every issue in the case. The court found that the Colorado rules of procedure differ significantly from the federal rules, which provide a justification for Lone Pine orders to handle potentially difficult or protracted suits that may involve complex issues, multiple parties, difficult legal questions, or unusual proof problems. By contrast, the Colorado rules are generally for basic scheduling matters. It cited other parts of the rules that imnpose sanctions for non-meritorious claims, that allow for motions for summary judgment before trial, and that limit the breadth of discovery within clearly defined limits.


Related Documents:
NAM brief  (June 18, 2014)

 

In re Allied Chemical Corp.   (Texas Supreme Court)

Whether discovery should be compelled to prevent abuse of the legal system

This case involves discovery abuse in South Texas. The trial judge refused to require that the plaintiffs answer discovery demands in a mass tort case involving alleged exposure to hazardous materials. The case has been pending for over a decade, and the product defendants have been unable to get even the most basic discovery identifying the products involved, claimed exposures, and basic causation.

On February 12, 2010, the NAM joined with the American Chemistry Council, the Texas Chemical Council and the U.S. Chamber of Commerce in an amicus brief that highlighted the mass tort problem in Texas, and particularly in South Texas, where plaintiffs delay discovery and raise litigation costs in order to pressure settlements.

We argued that, "A true adversary justice system must require a claimant to shoulder the burden of proof, determine whether the claimant’s burden has been satisfied, and then subject the determination to review. Cases such as this one appear to follow different rules that require correction."

By not requiring plaintiffs to answer discovery requests, "in large part cases are seldom tried. When they are tried, judgment is seldom reached because the goal is not a judgment, but an ambush, by which “the parties are ‘deprived of any just defense . . . .’"

Our brief urged the Texas Supreme Court both to order the lower court to act and to change the rules of procedure to prevent other courts from continuing to behave this way in the future. "Society cannot tolerate a system of justice in which the value of a claim is based upon the ability to drive up risk and avoid resolution on the merits rather than on the defendant’s fault for the plaintiff’s injury." Failure to resolve this problem undermines public confidence in the courts, violates constitutional rights, and prevents a defendant from clearing his name in court. We offered the court a variety of solutions.

This case was held in abatement for several years while the parties worked out a settlement of the claims. It was dismissed in 2015.


Related Documents:
NAM brief  (February 12, 2010)

 


Environmental -- 2015



Alabama v. EPA   (D.C. Circuit)

State challenge to greenhouse gas tailoring rule

Various states sued EPA over its tailoring rule, by which the agency rolled out enforcement of greenhouse gas regulations to the largest facilities first, followed by smaller ones later. States must comply with EPA's new regulations. The NAM and 14 other business associations in our coalition filed a motion to intervene in litigation filed by representatives of 8 states challenging EPA's authority. Their lawsuit sought judicial review of EPA's plan to retroactively limit its previous approval of pollution thresholds in State Implementation Plans (SIPs). The states are likely to argue that EPA violated the Clean Air Act by its reinterpretation of existing regulations, which would result in significant additional costs to manufacturers regulated under state programs.

The NAM's intervention in this case is designed to assist the court in understanding the interaction between EPA's requirements, state implementation programs, and emissions permit requirements affecting manufacturers.

The NAM and other organizations also filed a separate petition to review the EPA's tailoring rule. On March 10, 2015, the D.C. Circuit ruled that EPA's rules are vacated in part, consistent with the Supreme Court's ruling in Utility Air Regulatory Grop v. EPA.

 

Anadarko Petroleum Corp. v. United States   (U.S. Supreme Court)

Definition of "discharge" under Clean Water Act

This case involves the allocation of responsibility under the Clean Water Act's civil penalties provision between various parties related to the Deepwater Horizon accident in the Gulf of Mexico in 2010. Two defendant companies have asked the Supreme Court to review the Fifth Circuit's interpretation of the term "discharge" in the context of interconnected vessels and facilities through which the discharged oil passed. They argue that the Supreme Court has interpreted the word as "flowing or issuing out," but that the Fifth Circuit adopted a new interpretation of discharge as a "loss" or "absence" of controlled confinement. A petition for rehearing by the full court was denied by a vote of 7 to 6.

The NAM and other groups filed an amicus brief urging the Supreme Court to review this case. We argued that the appeals court ruling was confusing, overbroad, and internally inconsistent, and that ambiguous statutory terms should be interpreted leniently to defendants. Billions of dollars of potential penalties in this case depend on a proper interpretation of the statutory term.

The NAM brief was filed in both the Anadarko case and a similar appeal by BP Exploration and Production Inc. On 6/29/15, the Court declined to hear these appeals.

 

Coalition for Responsible Regulation, Inc. v. EPA   (D.C. Circuit)

Greenhouse gas case after decision from Supreme Court

The NAM's successful challenge to EPA's authority to regulate virtually all manufacturers that emit greenhouse gases was sent back from the Supreme Court to the U.S. Court of Appeals for the D.C. Circuit to determine what to do with regulations that are still printed in the Code of Federal Regulations, but that exceed EPA's regulatory authority. All of the parties that challenged EPA's authority, including state governments, industry associations, and public interest groups, filed a motion with the court, as has EPA, recommending what to do next.

EPA's motion proposed that the court declare the "regulations under review are vacated to the extent they require a stationary source to obtain a PSD [or Title V] permit if greenhouse gases are the only pollutant [that would trigger construction or modification review." It also says the court should direct it to rescind or revise the regulations to reflect the Supreme Court's decision. The agency does not believe it should establish a de minimis threshold for greenhouse gas regulation, but instead wants to rely on the 75,000 tons per year threshold currently on the books.

Industry's motion, by contrast, argued that the Court invalidated EPA's regulations to the extent they "treat greenhouse gases as a pollutant for purposes of defining" PSD and Title V applicability. As a result, EPA must vacate those rules, namely the Tailoring Rule, the Timing/Triggering Rule (to the extent EPA relied on it), and other challenged rules it relied on. EPA's interpretation of its authority was neither compelled nor allowed by law, so in effect it must start over. It should also decide on a de minimis threshold for regulation.

Final briefs in response to each motion were filed November 21, 2014.

On April 10, 2015, the court issued an amended order that:

"(1) the regulations under review (including 40 C.F.R. §§ 51.166(b)(48)(v) and 52.21(b)(49)(v)) be vacated to the extent they require a stationary source to obtain a PSD permit if greenhouse gases are the only pollutant (i) that the source emits or has the potential to emit above the applicable major source thresholds, or (ii) for which there is a significant emissions increase from a modification; (2) the regulations under review be vacated to the extent they require a stationary source to obtain a title V permit solely because the source emits or has the potential to emit greenhouse gases above the applicable major source thresholds; and (3) the regulations under review (in particular 40 C.F.R. § 52.22 and 40 C.F.R. §§ 70.12, 71.13) be vacated to the extent they require EPA to consider further phasing-in the requirements identified in (1) and (2) above, at lower greenhouse gas emission thresholds."

The court also ordered EPA to rescind or revise the applicable rules "as expeditiously as practicable," and to "consider whether any further revisions to its regulations are appropriate in light of UARG v. EPA . . . and if so, undertake to make such revisions."

 

In re Deepwater Horizon   (Texas Supreme Court)

Insurance coverage dispute for BP's pollution-related liability

In an insurance coverage case, a federal court asked the Texas Supreme Court to tell it whether Texas law compels a finding that BP is covered for damages arising from the Deepwater Horizon accident in the Gulf of Mexico. The case involves whether language in an umbrella insurance policy alone determines the extent of BP's coverage as an additional insured.

The NAM filed an amicus brief asking the court to apply traditional contract principles: (1) that the scope of insurance coverage should be determined by the contract and not from external documents unless they are clearly intended to be incorporated into the agreement, and (2) that ambiguous terms should be construed in favor of the insured. Courts should not create a subjective "sophisticated insured" exception to insurance law that has been recognized and applied for more than 125 years. Such an exception would make legal rules change depending on the identity of the party invoking them, would introduce the difficult question of determining who is a sophisticated insured, and would disincentivize insurance companies from making their policies as clear as possible.

The court held in an 8-1 decision that BP was not entitled to this coverage, relying on terms from the drilling contract that were not explicitly incorporated into the insurance policy.

The NAM filed an amicus brief on 4/22/15 supporting BP’s motion for rehearing by the Texas Supreme Court. The NAM’s brief supports BP’s argument that the court should revisit this issue as it has introduced tremendous uncertainty into state insurance law by departing from several long-held principles on insurance law. These principles include: 1) that external terms should only be incorporated into an insurance policy by explicit reference; 2) limitations on insurance coverage must be expressed in clear and unambiguous policy language; 3) the scope of additional insured coverage is determined by the policy and not the underlying contract; and 4) certificates of insurance are informational only and do not confer or abrogate rights.

BP dropped its motion for rehearing on May 27, 2015 after reaching a confidential settlement.


Related Documents:
NAM brief  (April 22, 2015)
NAM brief  (March 13, 2014)

 

Little v. Louisville Gas & Elec. Co.   (6th Circuit)

Whether common law air pollution claims are preempted by EPA regulation of power plant emissions

Neighbors of a power plant in Louisville sued the company for emitting dust and coal ash from its power generating and sludge processing plants. The suit raised claims under the federal Clean Air Act and Resource Conservation and Recovery Act (RCRA), as well as state-law claims of nuisance, trespass and negligence. The trial judge dismissed most of the claims, but allowed the common-law tort claims to proceed. That decision was appealed.

The NAM and other business groups filed an amicus brief supporting the utility, arguing that state common law air pollution claims are preempted by the Clean Air Act. Such claims directly conflict with the structure and purpose of the Act, and the Supreme Court has already held that similar claims under federal common law are displaced and unavailable. The purpose of the Clean Air Act is to ensure some level of uniformity, certainty and predictability in the application of air emissions standards throughout the United States. Piecemeal litigation that asks a judge to decide what is reasonable directly damages the interests of uniformity and predictability, subjecting companies in full compliance with their operating permits to significant and ongoing risk that they may be sued and held liable for their emissions. Moreover, nuisance law is notoriously vague and amorphous, leaving companies unable to predict whether their operations will be subject to potentially crushing damages liability.

This is another in a series of cases in which plaintiffs are trying to expand legal remedies beyond what Congress has legislated. Regulatory agencies like EPA take into account statutory requirements and consider the views of all affected parties when they impose regulations and permit requirements, and allowing individual judges or juries around the country to come up with their own views of what is a nuisance would seriously interfere with the ability of manufacturers and utilities to provide goods and electricity to their customers.

On November 2, 2015, the Sixth Circuit affirmed the district court’s order and held that such state common law air pollution claims are not preempted by the Clean Air Act. For more information, see the companion Sixth Circuit appeal in Merrick, et al. v. Diageo Americas Supply, Inc.

 

Merrick v. Diageo Americas Supply, Inc.   (6th Circuit)

Whether public nuisance claim is preempted by EPA regulation of factory emissions

This case presents another opportunity for the courts to resolve whether public nuisance claims under state law are preempted by the Clean Air Act. There are serious conflicts between the federal courts of appeals and within state courts concerning this preemption issue.

The case arose when private property owners brought claims of nuisance, negligence and trespass based on ethanol emissions from Diageo's whiskey production facilities in Louisville, Kentucky. They allege that ethanol emitted from the facilities cause a fungus to germinate and grow on their property, and they seek damages and emissions controls that exceed those required under the company's Clean Air Act operating permits.

The issue is important because public nuisance litigation threatens one of the Clean Air Act's most important methods of pollution control -- permitting. Permits specify clear standards that guarantee certainty, predictability, and evenhandedness to the regulated community, and allowing public nuisance litigation threatens to substitute ad hoc decisions for considered regulatory policy, a result completely at odds with the goals and purposes of the Clean Air Act.

The NAM and two other business groups filed an amicus brief urging the Sixth Circuit to reject the claims, arguing that they directly conflict with and are preempted by the Clean Air Act. In addition, a provision in the Clean Air Act that allows states to adopt standards for air pollution control allows such controls only when they are established through statute or regulation, not claims under state common law. The goals and policies of the Clean Air Act were intended to establish and enforce uniform standards for air quality, developed by EPA through an extensive regulatory scheme that is fundamentally inconsistent with common law adjudication that would allow for the imposition of liability based on standards developed by a judge or jury and retroactively applied against a facility.

On November 2, 2015, the Sixth Circuit affirmed the district court’s order that such state common law air pollution claims are not preempted by the Clean Air Act. Though it acknowledged the suggestion that it is unduly burdensome for industries to be subject to both federal law and state common law, the court left that concern to Congress.


Related Documents:
NAM amicus brief  (December 3, 2014)

 

Michigan v. EPA   (U.S. Supreme Court)

Consideration of costs in Utility MATS rule

The NAM filed an amicus brief in the Supreme Court supporting a challenge to EPA’s decision not to consider costs in determining whether regulation of hazardous air pollutant (HAP) emissions from electric generating units was appropriate and necessary under Sec. 112 of the Clean Air Act. EPA’s regulation, known as the Utility MATS Rule, will cost more than $9.6 billion annually, according to EPA’s own analysis, and is one of the most expensive regulations ever for power plants. (The NAM’s estimate is $12 billion annually). These costs are passed on to manufacturers and other consumers of electricity, and could endanger the reliability of electricity.

We argued that the regulatory record compiled by EPA reflects little or no public health benefit from the reduction in HAP emissions. A federal appeals court ruled that EPA was allowed to refuse to consider the costs of the rule, despite a statutory requirement that the regulation be “appropriate.” Our brief argues that a rulemaking procedure that does not consider the rule’s substantial cost burden on the regulated community violates the express and intended meaning of this statute, particularly because energy regulation affects all sectors of society and the economy. “A determination of whether regulation is ‘appropriate’ inherently involves a balancing of costs and benefits,” we argued.

We also argued that the regulation is not necessary because other EPA regulations already impose restrictions on hazardous air pollutants, and EPA improperly tried to justify its new HAP regulation by touting the potential for reduction in emissions not regulated under the HAP rules, namely further reductions in particulate matter emissions that EPA would be unable to require directly.

On 6/29/15, by a vote of 5 to 4, the Court rejected EPA's failure to consider costs when determining whether the regulation was "appropriate and necessary." Even though EPA is entitled to considerable deference in its rulemaking powers under the Chevron case, the Court found that the agency's interpretation was not reasonable or even rational. According to the majority, "an agency may not 'entirely fai[l] to consider an important aspect of the problem' when deciding whether regulation is appropriate." The phrase is very broad, and a natural reading of it requires some attention to cost. Considering costs avoids the problem of spending too much on one problem and not having enough to spend on other -- perhaps more serious -- problems. The majority also rejected EPA's argument that it could consider costs when deciding how much to regulate power plants, rather than as a threshold issue in deciding whether to regulate them. The statute requires cost considerations at the first step. But it left it to EPA to decide how to account for cost in making its initial determination, without requiring "a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value." The Court did not address EPA's claim that the regulation provides ancillary benefits that make it cost-effective.

 

Murray Energy Corp. v. EPA   (D.C. Circuit)

Challenge to EPA's proposed existing power plant GHG regulation

The NAM and 8 other business associations filed an amicus brief supporting Murray Energy's challenge to EPA's proposed rule to substantially regulate greenhouse gas emissions from existing power plants. According to the EPA, the rule's annual compliance costs will reach at least $7.3 billion by 2030, and manufacturers will see dramatic electricity cost increases and less reliable service as a result.

The NAM amicus brief argued that Section 111(d)(1) of the Clean Air Act prohibits EPA from setting performance standards for sources that are already regulated under Section 112. EPA's interpretation would create double regulation, making power plant operation more expensive and conflicting with the purpose of Section 111(d). The statutory language is not ambiguous, and EPA's interpretation should not be given deference by the courts.

On June 9, 2015, the Court dismissed the challenge because the EPA has not taken final agency action that would allow a court to review it. The criteria under the All Writs Act for issuing an order against EPA's plans are not met, and the fact that some companies may be incurring costs in anticipation of the final rule does not justify court intervention.

 

National Association for Surface Finishing v. EPA   (D.C. Circuit)

EPA recalculation of MACT standards

This case involves the statutory obligations of the EPA to set maximum achievable control technology (MACT) standards for emissions under Clean Air Act Sec. 112(d)(6), specifically for chromium electroplating and anodizing operations. EPA is in the early stages of implementing that section, which applies when EPA reviews standards every 8 years. Because this review process applies to many other substances regulated by EPA, the decision in this case will extend far beyond chromium use.

At issue is what the statute requires of EPA when determining whether to tighten an existing standard. The NAM filed an amicus brief arguing that the statute specifically requires EPA to revise a standard, when conducting a technology review, only when "necessary (taking into account developments in practices, processes, and control technologies)." In this case, EPA's approach did not square with the plain statutory requirements, because it identified no "development" in emissions control measures that necessitates the new, more stringent standards it adopted.

We also oppose an effort by environmental groups to have EPA recalculate existing standards using procedures in Sec. 112(d)(2) and (3) for initial MACT standard-setting. Those procedures for new standards are not constrained in the same way that 8-year reviews are. As a result, EPA will lower emissions limits because companies complying with new standards try to build in a compliance margin when they buy new equipment, and that commendable over-performance raises the bar and leads EPA to lower the limits when the standard is reviewed. EPA's longstanding position is that it is not required to re-set the existing MACT standards each time it conducts a Sec. 112(d)(6) review, and that it is not required to use procedures under Sec. 112(d)(2) and (3) for periodic reviews, yet it did so in this case.

On July 21, 2015, a 3-judge panel rejected both industry and environmental group challenges to the review. It declined to require EPA to determine a new MACT floor each time it reviews a MACT rule, as environmental groups had wanted. But it also rejected industry arguments challenging the extent of technological developments that have occurred since the first rule was issued. It found that developments include improvements in performance of some technologies, which EPA found.


Related Documents:
NAM brief  (June 9, 2014)

 

National Association of Clean Water Agencies v. EPA   (D.C. Circuit)

Challenging EPA's Non-Hazardous Secondary Materials Rule

The NAM and other industry organizations filed a petition with a federal appeals court to review a final rule on non-hazardous secondary materials (NHSM) issued by the EPA on February 7, 2013, entitled “Commercial and Industrial Solid Waste Incineration Units: Reconsideration and Final Amendments; Non-Hazardous Secondary Materials That Are Solid Waste, Final Rule”. The rule was written to identify whether NHSMs are solid waste under the Resource Conservation and Recovery Act when used as fuels or ingredients in combustion units. Further details about the legal claims in this litigation will be filed with the court shortly.

This case was consolidated on June 7, 2013. For more information click here.


Related Documents:
Petition for Review  (May 7, 2013)

 

National Association of Manufacturers v. SEC   (D.C. Circuit)

Appeal of NAM's challenge to SEC rule on Conflict Minerals

This is the appeal of an adverse ruling from the district court judge in our suit challenging the SEC's conflict minerals rule. Click here for details on that ruling.

Our appeal was expedited, and focused on largely the same issues that were before the trial judge. Review was de novo, which means that the appeals court looks at the case fresh, without any presumption that the trial court's ruling is binding on them.

The NAM, joined by the Business Roundtable and the U.S. Chamber of Commerce, argued that the SEC incorrectly interpreted the statute, which requires reporting of certain minerals that "did originate" in and around the Democratic Republic of the Congo (DRC), to cover minerals that "may have originated" there. It also failed to recognize and use its power to establish a reasonable de minimis exception for small amounts of minerals, which could provide substantial relief from the burdensome requirements of the rule for thousands of manufacturers. We also raised an important First Amendment objection to the requirement that companies make misleading and stigmatizing public statements unfairly linking their products to terrible human rights abuses.

We filed our main brief on the merits on Sept. 11, and our reply Nov. 13, 2013. Oral argument was held on Jan. 7, 2014, during which counsel for the SEC faced difficult questioning about the SEC's rule and the First Amendment objections.

On April 14, the court deferred to the SEC on its interpretations of the substantive provisions included in the rule, but overturned the requirement that companies disclose that their products are not "DRC conflict free." The First Amendment prohibits the requirement that companies report to the SEC and post on company web sites the fact that certain manufactured products are not “conflict free”. This constitutes government-compelled speech. It is now up to the SEC to determine what reporting requirement to impose and what to do while it is making that decision, since the first reports under the regulation must be filed by June 2, 2014. If it tries to formulate alternative reporting requirements, it may need to revist the whole public reporting aspect of the rule through a new round of notice-and-comment rulemaking.

On April 29, the NAM, Chamber and Roundtable filed a motion with the SEC to stay the rule or at least filing deadline. The whole point of the rule and the statute was to try to effect social change by shaming companies who cannot label their products as "DRC conflict free," and since the shaming mechanism has been struck down, the remainder of the rule has questionable benefits. Moreover, there are a host of questions without easy answers that must be considered before imposing enormous costs on industry. The SEC will have to determine what type of disclosure should replace the unconstitutional requirement, whether that would require changes to other provisions of the rule, re-analyze the costs and benefits of the rule, and provide for notice-and-comment rulemaking. Finally, requiring some type of truncated report is an approach that will not serve the law's intended purpose and will worsen the massive uncertainty and confusion among those who are subject to the rule.

The same day, Keith Higgins, director of the SEC's Division of Corporation Finance, issued a statement saying that companies will still need to file their first reports by the due date and address those portion of the rule that the court upheld. He added that "No company is required to describe its products as 'DRC conflict free,' having 'not been found to be ‘DRC conflict free,’' or 'DRC conflict undeterminable.' If a company voluntarily elects to describe any of its products as 'DRC conflict free' in its Conflict Minerals Report, it would be permitted to do so provided it had obtained an independent private sector audit (IPSA) as required by the rule. Pending further action, an IPSA will not be required unless a company voluntarily elects to describe a product as 'DRC conflict free' in its Conflict Minerals Report.

We also released a statement April 30 saying in part that "Congress and the SEC need time to evaluate how to amend the statute and/or the rule in light of the court's decision. Given the significant issues involved, we believe that it is in everyone's interest to stay the rule until these issues can be fully analyzed and addressed. Accordingly, we will ask the DC Circuit to grant a full stay of the rule until the implications of the decision are clear to all parties."

On May 2, 2014, the SEC issued a partial stay of the portion of the rule that requires issuers to disclose that any of their products have "not been found to be “DRC conflict free.'" It denied our request that the entire rule be stayed. The Commission did not, however, stay the effective date (June 2) for complying with all the other requirements of the rule. Companies are struggling to determine the meaning of the SEC’s action and what to do. The D.C. Circuit’s decision in our challenge to the rule means that the case will be sent back to the trial judge to determine whether to vacate the rule in its entirety or provide some other remedy.

Because this litigation was ongoing and the SEC had not voluntarily stayed the implementation of the rule, the NAM and other business organizations went back to the D.C. Circuit on May 5 and filed an emergency motion for stay of the rule in its entirety until the trial court has addressed the unresolved questions.

We argued that the rule’s compelled confessions, which have been declared unconstitutional, constitute the entire basis for the rule, imposing astronomical costs on affected companies. It makes no sense to enforce a rule that no longer achieves its goals and that likely will be vacated, and a stay would avoid “forcing companies to implement interim procedures for filing truncated reports under unilateral staff guidance that is subject to change at any time.”

On May 14, the court denied our motion for a stay. Companies must now comply with the modified filing requirements by June 2.

On May 29, both the SEC and Amnesty International asked the D.C. Circuit to hold any further appeals until after it ruled in the American Meat Institute v. USDA case, which it did on July 29. On Aug. 15, Amnesty International supplemented its brief in support of a petition for rehearing en banc, and on Aug. 28, the Court ordered us to file a response. We filed it on Sept. 12, arguing that the standards for rehearing this case have not been met, and that the court's decision in the American Meat Institute case was limited to "purely factual and uncontroversial" disclosures, not disclosures like the ones required by the conflict minerals regulation. The disclosures in this case, according to the judges who ruled on them, require an issuer "to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups," or even if the issuer is merely unable to determine their origin.

On Nov. 18, the 3-judge panel agreed to rehear this case, and asked for further briefing on the impact of the decision in American Meat Institute v. USDA, as well as the meaning of "purely factual and uncontroversial information" and whether that determination is a question of fact for the court. The SEC filed its brief on December 8, and ours was filed December 29. Oral arguments were not held.

The 3-judge panel finally ruled on Aug. 18, 2015, that the compelled disclosures are unconstitutional. It ruled that the looser standard of review under the Zauderer case does not apply here, because that case involved only voluntary commercial advertising, not government-compelled statements about products. But even if this looser standard of review applied, the government must have a sufficient interest in mandating disclosures, and the rule must be effective in achieving its objectives. Instead, whether the law will decrease the revenue of armed groups in the DRC and diminish the humanitarian crisis there "is entirely unproven and rests on pure speculation." No hearings were held on the impact of the law prior to enactment, and later hearings were inconclusive. This is an insufficient justification to compel speech under the First Amendment.

The majority also analyzed the part of the ruling in the American Meat Institute case and found that determining whether compelled speech is about "purely factual and uncontroversial information" is a puzzling exercise, but that the SEC's requirement to label products as "conflict free" or not is hardly factual and non-ideological. Instead, it ethically taints products and stigmatizes companies in violation of the First Amendment. The SEC and Amnesty International petitioned for rehearing before the full D.C. Circuit court, but that request was denied, and the case was not appealed to the Supreme Court.


Related Documents:
NAM's supplemental brief  (December 29, 2014)
NAM Response to petition for rehearing en banc  (September 12, 2014)
NAM Emergency Motion for D.C. Cir. stay  (May 5, 2014)
NAM Motion to SEC for stay  (April 29, 2014)
NAM Reply Brief  (November 13, 2013)
NAM Opening Brief  (September 11, 2013)

 

Solvay USA Inc. v. EPA   (D.C. Circuit)

Challenging EPA's Non-Hazardous Secondary Materials rule

On June 16, 2011, the NAM filed a petition for review of the EPA’s Non-Hazardous Secondary Materials (NHSM) rule under the suite of Boiler MACT rules. The NHSM rule will classify as solid waste certain “secondary” materials that are currently used as a source of energy, such as coal ash or biomass residues from lumber. Solid waste must be burned in boilers regulated under more onerous rules than apply to fuels. The NAM is concerned with several aspects of the rule, including its effect on the use of non-hazardous materials, its presumption that all non-hazardous secondary materials are solid waste, and other provisions.

A list of legal issues in the case was filed, including challenging EPA's presumption that all non-hazardous secondary materials are solid waste, and its definition of "contaminants," "traditional fuels," and "contained gaseous material." Also at issue, among other things, is whether EPA violated the Regulatory Flexibility Act by failing to consider the economic impacts of the rule on small businesses.

In 2013, National Ass'n of Clean Water Agencies v. EPA was consolidated with the NAM suit into Solvay USA Inc. v. EPA. Our main brief on the merits, filed 4/28/2014, raised 4 key challenges to EPA's rule: (1) that EPA improperly decided that transferring alternative fuels to third parties for combustion is a discard and therefore such fuels are solid wastes, (2) that EPA improperly classified as solid waste alternative fuels such as those made from construction and demolition wood, railroad ties, and other treated woods that have heating value, are managed as valuable fuel, and are processed to create new fuel products, (3) that EPA improperly classified as solid waste alternative fuels such as paper recycling residuals, even though the record demonstrates no discard has occurred and the combustion is an integral part of an industrial process or functionally equivalent to a traditional fuel, and (4) that EPA improperly classified as solid waste sewage sludge when combusted even though the Resource Conservation and Recovery Act (RCRA) prohibits such a classification.

The practical effect of EPA's rule is that alternative fuel that could have been productively combusted will be managed as a waste and can only be combusted in a solid waste incinerator under much more expensive rules, leading to an enormous increase in landfill disposal, which has its own set of environmental harms.

Our brief as intervenors was filed Aug. 29, 2014, and emphasized that EPA could find under RCRA that discarded material could be recovered and processed into a non-waste fuel product, and that it could properly classify as non-wastes scrap tires, used oil, pulp and paper residuals, construction and demolition debris and other traditional fuels.

On June 3, 2015, the Court of Appeals denied Solvay’s petition for review as well as those of the environmental groups that challenged the rule. The court reasoned that the argument regarding sewage sludge is foreclosed by RCRA’s plain language and that EPA’s distinction between material burned by the generator and material transferred to a third party is consistent with RCRA and reasonable. It allowed EPA to place the burden on regulated entities to show that its material should not be regulated, because Congress wanted EPA "to err on the side of caution."

The court also rejected an environmental challenge to EPA's treating materials that are indistinguishable from virgin materials as non-waste fuel.


Related Documents:
Joint Reply Brief of Industry Petitioners  (September 29, 2014)
Joint Brief of Industry Intervenor-Respondents (incl. NAM)  (August 29, 2014)
NAM brief on the merits  (April 28, 2014)

 

West Virginia v. EPA   (D.C. Circuit)

Challenging EPA's new round of greenhouse gas regulations for utilities

The NAM and 9 other groups filed an amicus brief in a case brought by a coalition of 12 states seeking to hold unlawful a 2011 settlement agreement between the EPA and some environmental groups which committed the agency to propose rules to regulate greenhouse gases from power plants. EPA proposed the rules in 2014, and this challenge began in July. Although the agency has not finalized its rules, this suit challenges the underlying settlement agreement.

The EPA rules impose new compliance costs on utilities that already must bear $9.6 billion per year in costs under the 2012 rule on hazardous air pollutants. Manufacturers of energy inputs will see sales decline precipitously as power plants cut costs or shut down. Manufacturers of all kinds, as purchasers of electricity, will see dramatic cost increases and electric service will become less reliable.

In our amicus brief, we argued that EPA may not regulate power plants under Section 111(d) of the Clean Air Act because power plants are already regulated under Section 112, and the law specifically prohibits dual regulation under both sections. EPA tried to manufacture ambiguity by relying on an acknowledged congressional drafting error. EPA should not be entitled to judicial deference when the statutory language itself is clear.

A similar case, Murray Energy Corp. v. EPA, is also pending in the D.C. Circuit, involving the same questions but challenging the proposed rules directly. We filed an amicus brief in that case on December 22. Oral arguments in both cases were held on April 16, 2015.

On June 9, 2015, the D.C. Circuit rejected West Virginia’s argument concerning the underlying settlement agreement and ruled for the EPA. The court held that West Virginia lacked standing to sue because the settlement agreement only set a timeline for the EPA to decide whether or not to issue a final rule and therefore did not create an injury in fact. Additionally, a suit to challenge such a settlement agreement must be filed within 60 days of the agreement’s publication in the Federal Register rather than more than two years later, as was the case here.


Related Documents:
NAM brief  (December 10, 2014)

 


ERISA -- 2015



Tibble v. Edison International   (U.S. Supreme Court)

Time limit on suit against ERISA fiduciary investment decisions

The issue in the case focused on whether retirement plan participants can challenge investment decisions by plan fiduciaries made more than six years before the suit was filed, if the decisions could have been reconsidered during the six-year window.

The petitioners, former and current participants in an Employee Retirement Income Security Act (ERISA) 401(k) plan sponsored by Edison International, brought suit in 2007 to challenge the prudence of three investment options that had initially been selected in 1999. Both of the lower courts said that such a claim was time-barred by ERISA for being brought more than six years after the fiduciary act occurred.

The petitioners argue that the fiduciaries' decision to not remove the three plans constitutes an on-going breach of duty and is thus not time-barred. This argument undermines the intent of ERISA Section 413(1) and could subject plan fiduciaries to the never-ending threat of litigation.

The NAM, along with other business and trade groups, filed an amicus brief in the case. We argued that the purpose of imposing a time-bar on claims against fiduciaries of ERISA plans was to give them closure and reduce the burden of litigation. ERISA specifically cuts off liability for breaches of fiduciary duty six years after they occur in an effort to cut down on the volume of litigation faced by ERISA plan sponsors. ERISA is designed to encourage employers to offer employee benefit plans by easing their regulatory burden. To accept the petitioner’s argument would mean to transform the statute of repose into a rolling statute of limitations, effectively undermining congressional efforts to lift some of the threat of litigation off of fiduciaries.

On May 18, 2015, the Supreme Court issued a 9-0 opinion in the case. They held that because a fiduciary normally has a continuing duty to monitor investments and remove imprudent ones, a plaintiff may allege that a fiduciary breached a duty of prudence by failing to properly monitor investments and remove imprudent ones. Such a claim is timely as long as it is filed within six years of the alleged breach of continuing duty.


Related Documents:
NAM amicus brief  (January 23, 2015)

 


Expert Testimony -- 2015



Cooper v. Takeda   (California Supreme Court)

California Daubert application

On 10/14/15 the NAM filed an amicus letter with the California Supreme Court in Cooper v. Takeda. This amicus follows the Fifth Circuit Court appeal dismissal of Takeda v. Allen pursuant to the broader settlement of the Actos litigation. There remained another Actos case still on appeal in California raising the question of how the Daubert test is to be applied in California courts following the California Supreme Court's adoption of Daubert in Sargon Enterprises Inc. v. University of Southern California.

Takeda succeeded at the trial court in having plaintiff’s specific causation expert excluded, but the California court of appeals reversed. Takeda is now seeking review from the California Supreme Court, and NAM’s amicus letter urges that review. NAM’s amicus letter argues two points. First, that California appellate courts are divided on whether, under Sargon, the question of admissibility is distinct from that of liability. Second, California courts are divided on whether epidemiology can be used to prove specific causation.

 


False Claims Act -- 2015



Kellogg, Brown and Root Services v. United States ex rel. Carter   (U.S. Supreme Court)

Applicability of the Wartime Statute of Limitations Act to qui tam claims

This is an appeal to the Supreme Court of a 4th Circuit decision concerning the applicability of the Wartime Statute of Limitations Act (WSLA), The WSLA is a 72-year-old criminal code provision that suspends the statute of limitations for “any offense” involving fraud or attempted fraud against the government when the United States is at war. The Department of Justice has argued, and some courts have agreed, that the statute now applies to civil violations as well, including qui tam claims brought by private relators. In addition to the impact on defense contractors, this expansive theory is increasingly being applied to other industries subject to qui tam claims. This expansive reading of the statute paired with the argument that the U.S. has been at war since September 11, 2001, leads to a tremendous expansion of potential liability for never-ending claims about which evidence may be long gone. This case presented the opportunity for the Supreme Court to prevent an unwarranted judicial expansion of the WSLA far beyond the plain text of the statute and contrary to congressional intent.

In its joint amicus brief with the National Defense Industrial Association and the Coalition for Government Procurement, the NAM argued that ample legislative history demonstrates that Congress never intended the WSLA to apply outside of the criminal context. To the contrary, the lack of direct language including civil claims in the WSLA – a Title 18 Criminal Code provision with suspension periods that mirror the length of the criminal statute of limitations – is evidence that Congress did not intend it to apply in the civil context.

In a May 26, 2015, decision (9-0), the Supreme Court agreed that the WSLA applies only to criminal offenses. The Court held that the WSLA’s text, structure and history are clear that the Act does not apply to civil claims. The earliest version of the WSLA was explicitly applicable only to criminal charges, and each subsequent iteration has been consistent with that original scope. Any ambiguity regarding the Act’s use of the term “offense” must be resolved in favor of the more narrow definition.

On May 26, 2015, the Supreme Court rendered its opinion. As shown by the Wartime Suspension of Limitations Act’s text, structure, and history, the Act applies only to criminal offenses, not to civil claims like those in this case. Moreover, the False Claims Act’s “first to file” bar keeps new claims out of court only while related claims are still alive, not in perpetuity.


Related Documents:
NAM brief  (September 5, 2014)

 

U.S. ex rel. Purcell v. MWI Corp.   (D.C. Circuit)

False Claims Act to enforce contract terms or regulations

For 17 years Moving Waters Industries (MWI) fought the federal government in a False Claims Act (FCA) case. MWI is a small, family-owned manufacturer of water pumps used for irrigation and sanitation systems. The particular sale at issue in the case involved sale of pumps to Nigeria. Financing documents in the transaction required the disclosure of any commissions that were not “regular.” There was not an existing regulatory definition or guidance about what the term “regular” meant, so MWI applied what it thought was a reasonable interpretation—that a normal, longstanding, market rate commission was regular. Based on a complaint asserting that the commission was in fact “irregular,” the government pursued a civil FCA case.

The NAM filed this brief in support of MWI’s appeal of the lower court's finding of liability against MWI under the False Claims Act (FCA). The brief argued that FCA “falsity” cannot be established where the violation at issue stems from an ambiguous contract term and the defendant’s actions are consistent with a reasonable interpretation of that term. The FCA is intended to protect the government’s financial resources from fraudulent conduct. It is not meant to be a tool for resolving disputes between contractors and the government over the proper interpretation of unclear contract terms. In addition, a defendant cannot be found to have acted "knowingly" under the FCA, which can include acting in "reckless disregard" of truth or falsity, if the defendant employed a reasonable interpretation of an ambiguous term.

In an opinion that will have far-reaching implications for all industries subject to potential FCA claims, on November 24, 2015, the DC Circuit found that the FCA was not intended to impose liability for an innocent, good faith mistake about the meaning of an applicable regulation. This outcome is an important victory for due process, and highlighted the fundamental unfairness of subjecting parties to liability for violating a rule without first providing notice of what the rule requires.


Related Documents:
NAM amicus brief  (March 2, 2015)

 


Government Regulation -- 2015



Yates v. United States   (U.S. Supreme Court)

Expansion of Sarbanes-Oxley Act

The NAM together with the U.S. Chamber filed an amicus brief urging the Supreme Court to review an Eleventh Circuit decision that broadly construed the Sarbanes-Oxley Act. In this case, the petitioner, Yates, was a commercial fishing boat captain who was convicted of destroying business records in a government investigation. After suspecting that Yates was catching undersized fish, federal officers instructed Yates to retain 72 fish. When the officers boarded the boat, they discovered that several of the fish had been thrown overboard. Yates was prosecuted under the Sarbanes-Oxley Act, which imposes criminal penalties against a person who knowingly destroys records, documents or tangible objects with intent to impede or obstruct and investigation. The Eleventh Circuit upheld the conviction, holding that the Sarbanes-Oxley Act applied to all forms of tangible evidence in any government investigation.

The NAM challenged the lower court’s ruling by explaining that Congress never intended the Sarbanes-Oxley act to apply to cases like this. Congress passed the act in response to an outbreak in corporate investment scandals such as Enron and WorldCom, hoping to prevent the destruction of corporate financial records during a government investigation. This objective arose from a compelling and narrow intention to protect investors. The NAM brief argues that a basic understanding of statutory interpretation indicates that the phrase “tangible object” refers in context to corporate record keeping devices such as papers, hard drives, or discs. The statute itself and Congress’ intent both illustrate that the Sarbanes-Oxley act was never intended to apply to activities beyond corporate record keeping.

Expanding the application of the Sarbanes-Oxley Act to cases like this will greatly broaden the reach of the Act beyond the intent of Congress. Further, it would potentially criminalize innocent and routine practices such as inventory management. Therefore, the consequences of the Eleventh Circuit’s ruling are far-reaching and potentially impact manufacturers of all kinds.

The Supreme agreed to hear the appeal, and on Feb. 25, 2015, overturned the lower court ruling 5-4. In a divided decision, a majority thought that the law should not be read to so broadly by prosecutors. Instead, it should be interpreted to criminalize only tangible objects that are used to record or store information, and not all tangible objects in the world.


Related Documents:
NAM brief  (July 3, 2014)

 


International -- 2015



Shell Oil Co. v. Writt   (Texas Supreme Court)

Absolute privilege for communications to Foreign Corrupt Practices Act investigators

On October 31, 2014, the NAM and coalition associations filed an amicus brief with the Texas Supreme Court. The Foreign Corrupt Practices Act (“FCPA”) has played a very significant role in the federal regulation of multinational corporations. By punishing bribery and other illicit influence of foreign officials by U.S. companies, the statute seeks to improve the integrity of American businesses, promote market efficiency, and maintain the reputation of American democracy abroad. If a company’s employees violate the FCPA they can temper the consequences of their employees’ action only if they liberally cooperate with federal authorities, disclosing all relevant information. However, the Texas appeals court decision undermines this regime of corporate cooperation by denying absolute privilege for company’s confidential voluntary disclosure of potential FCPA violations to government investigators. The NAM brief argues t05hat if left intact, the decision may force employers to make the difficult decision not to disclose all of the details in relation to potential FCPA violations as soon as they are aware of them. In doing so, it impedes the government’s investigation of FCPA violations and negatively impacts American businesses. Accordingly, the decision of the court of appeals should be reversed.

On May 15, 2015, the Texas Supreme Court held that Shell Oil Company was entitled to an absolute privilege against a defamation lawsuit brought by a former Shell employee. The suit was based on statements made by Shell in its internal investigation and report to the U.S. Department of Justice regarding alleged violations of the Foreign Corrupt Practices Act. The Court’s opinion relied heavily on various statistics and other information provided in the amicus brief, including the Firm’s 2013 Year-End FCPA Update, which the Court cited.


Related Documents:
NAM brief  (October 31, 2014)

 


Labor Law -- 2015



Baker DC, LLC v. NLRB   (U.S. District Court for the District of Columbia)

Employers harmed by ambush rule

The NAM and coalition associations filed an amicus brief supporting three construction employees from Baker LLC which joined a federal lawsuit challenging the National Labor Relations Board’s (NLRB) Ambush Rule. Baker requested a Temporary Restraining Order (TRO) against implementation of the Rule due to suffering irreparable harm on a variety of grounds including a strong objection to the Rule’s requirement mandating employer’s turn over employees personal information over to organizing officials. However, the court found no showing of irreparable harm on the notice posting requirement, a failure to show that the disclosure requirements caused certain and irreparable harm, and a failure to demonstrate that Baker’s due process rights will be irreparably injured. The judge distinguished the prior notice posting rule and states that the NAM case does not signal a substantial likelihood of success on the merits in this case. The Baker case has been consolidated with NAM’s challenge to the Rule in D.C. District court with a hearing scheduled for May 15.


Related Documents:
NAM brief  (April 21, 2015)

 

In re Browning-Ferris   (NLRB)

What constitutes a "joint-employer"

On April 30, 2014, the Board issued an order granting review of the Acting Regional Director’s Decision and Direction of Election of the current joint-employer standard as articulated in the Board’s decisions in TLI, Inc., 271 NLRB 798 (1984), enfd. mem. 772 F.2d 894 (3d Cir. 1985), and Laerco Transportation, 269 NLRB 324 (1984). “To establish joint employer status there must be a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.” In June 2014, the NAM’s Manufacturers’ Center for Legal Action (MCLA) submitted an amicus brief outlining key concerns of manufacturers in changing the definition of joint employer.

On August 27, 2015 in a 3-2 decision, the Board loosened the standard for determining joint employment under the National Labor Relations Act. For the past 30 years, the relevant joint employer inquiry was whether or not an entity exerts a direct and immediate degree of control over another business's employees and their essential terms and conditions of employment. Under the new standard, the Board evaluates whether an entity exercises indirect control over the means or manner of the employees' work and terms of employment, or whether the entity has the potential to exercise such control. This requires a very fact-specific case-by-case inquiry.

The NLRB’s actions challenge the way manufacturers are able to work in the United States, and the NAM continues to advocate and fight for manufacturers on this issue.

Browning-Ferris has appealed the Board's decision to the D.C. Circuit Court of Appeals. The NAM has joined that fight, which can be found here.


Related Documents:
NAM brief  (June 26, 2014)

 

Case New Holland, Inc. v. EEOC   (D.D.C.)

EEOC's authority to send blast emails to company employees

On June 5, 2013, without any finding of discrimination or advance notice to Case New Holland (CNH), the EEOC delivered an email blast to the business email inboxes of 1,169 CNH employees. The blast email advised the employees, well over a hundred of whom were managers, that the EEOC was investigating CNH for age discrimination. It then directed the employees to provide to the government, through a secure Internet site, evidence of discrimination and personal contact information. The EEOC actually admitted, in later correspondence, that its blast email was trolling for class action plaintiffs to sue CNH.

CNH asked for a declaratory judgment finding that the EEOC had overreached its authority under its governing statutes and the United States Constitution. There were five counts in the complaint. The First Count asserted an Administrative Procedure Act (APA) violation because no authorizing rule or regulation permitted the blast email. The Second Count asserted that the blast email was neither “necessary [n]or appropriate,” and thus exceeded the permissible scope of the EEOC’s authority under Section 7(a) of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 626(a). The Third Count alleged that the EEOC failed to comply with its own Compliance Manual’s provisions on the conduct of investigations, again in violation of the APA. The Fourth Count asserted an unreasonable invasion of the CNH computer network and of the privacy interests of CNH employees, in violation of the Fourth Amendment to the Constitution. Lastly, the Fifth Count asserted that the EEOC trespassed on the CNH computer network and, by so doing, effected a taking without compensation in violation of the Fifth Amendment to the Constitution.

The EEOC moved to dismiss the complaint, and on Nov 14, 2013, the NAM filed an amicus brief opposing the motion. Our brief argued that the extensive CNH employee time and property used to complete the EEOC evaluations and interviews constitutes a violation of the Fifth Amendment’s takings clause.

The EEOC took the highly unusual step of filing a reply brief to the NAM amicus brief calling it "unprecedented" and asked for an extension to file their full reply. The substance of the full EEOC reply demonstrates the significance of the NAM argument. On 1/6/14, we responded (see brief below).

On 9/24/14, the judge dismissed the case for lack of jurisdiction based on standing. CNH amended its complaint and filed an appeal, and the judge reinstated the case. CNH voluntarily dismissed the case on 10/28/2015.


Related Documents:
NAM reply brief  (January 6, 2014)
NAM amicus brief  (November 14, 2013)

 

Chamber of Commerce v. NLRB   (U.S. District Court for the District of Columbia)

Ambush Election Rule

On January 5, 2015 the NAM sued the NLRB in D.C. District Court to stop the agency’s overreach on its “ambush elections” rule issued on December 12, 2014. The coalition brief argues that the Final Rule violates the statutory requirement for an “appropriate hearing” prior to the election, by giving Regional Directors authority to defer litigation of voter eligibility and inclusion issues until after the election. The brief also argues that the Rule is arbitrary and irrational. Specifically, it promotes speed over all other statutory goals, including employer free speech rights and the opportunity for a full and informed debate before the election; requires employers to give out employees’ private phone numbers and personal email addresses. The Board acknowledges that “the privacy, identity theft, and other risks may be greater than the Board has estimated” but nonetheless concludes that these “risks are worth taking.” Finally, the brief argues that the Rule will result in more election-related litigation, not less, even though the stated purpose of the Final Rule is to reduce such litigation.

On February 4, 2015, the NAM filed a motion for summary judgment.

On July 28, 2015, the Court ruled against the NAM's motion.


Related Documents:
NAM Opposition to Motion to Dismiss  (March 25, 2015)
NAM Reply to Motion for Summary Judgment  (March 25, 2015)
NAM Motion for Summary Judgment  (February 24, 2015)
NAM complaint  (January 5, 2015)

 

In re Constellation Brands   (NLRB)

Unlawful application of bargaining unit determination

The NAM filed a letter with the National Labor Relations Board affirming support for Constellation Brands. The NAM’s letter asserted that the Regional Director ignored important factors which influenced unit determinations including the departmental lines drawn by Constellation. NAM members have a vital interest in the Board’s application of Specialty Healthcare in the manufacturing setting. The standard for bargaining-unit determinations applied by the Regional Director in this case, which is an inaccurate application of the already unlawful standard established by the Board in Specialty Healthcare is problematic in all industries covered by the National Labor Relations Act (“Act” or “NLRA”), 29 U.S.C. §§ 151-169 including manufacturing. The NAM letter further asked that the Board grant Constellation’s Request for Review and invite NAM and other interested parties to brief these issues as they relate to manufacturing/production facilities.


Related Documents:
NAM letter  (February 12, 2015)

 

M&G Polymers USA, LLC v. Tackett   (U.S. Supreme Court)

Retiree health-care benefits

On July 24, 2014, the NAM filed an amicus brief urging the Supreme Court to reverse a Sixth Circuit decision ruling that retiree health-care benefits, resulting from silence in collective bargaining agreements, are presumed to be indefinite. This decision undermines Congress’ intent regarding employee retirement health benefits and disrupts judicial precedent in other circuits. NAM’s brief clarified that when Congress passed the Employee Retirement Income Security Act (ERISA), it in no way intended retiree health care benefits to be indefinite. Furthermore, other federal circuits have effectuated Congress’ intent by requiring clear and express language in order for retiree health benefits to be provided indefinitely. Accordingly, the NAM encouraged the Supreme Court to adopt a clear and express rule affirming ERISA and precluding a presumption of indefinite health-care benefits.

On January 26th, 2015, the Supreme Court rendered its opinion in this case holding that to determine whether retiree health-care benefits survive the expiration of a collective bargaining agreement, courts should apply ordinary contract principles. Those principles do not include the Sixth Circuit’s inference that parties to collective bargaining would intend retiree benefits to vest for life.


Related Documents:
NAM brief  (July 24, 2014)

 

National Association of Manufacturers v. Perez   (D.D.C.)

NAM sues OFCCP over its labor rights poster requirement

Continuing the fight against forced speech and aggressive overreach by federal agencies, the NAM and the Virginia Manufacturers Association (VMA) filed a lawsuit 12/18/13 to stop the Office of Federal Contract Compliance Programs (OFCCP) from enforcing its “posting requirement” rule. The OFCCP, an agency within the Department of Labor, enforces rules and regulations imposed on federal contractors.

The OFCCP rule adversely affects thousands of federal contractors and subcontractors by forcing them to promote unionization of their workforces or risk being debarred from federal contracts. Our lawsuit asked the court to strike down the rule on the grounds that poster is compelled speech and violates the First Amendment.

A similar rule put forth by the National Labor Relations Board (NLRB) was struck down earlier in 2013 by a federal appeals court due to a successful lawsuit from the NAM. In that case, the court ruled that similar posters amount to compelled speech and extend beyond the intent of the National Labor Relations Act. Federal contractors deserve the same protection from this aggressive overreach.

The NAM and VMA filed a joint Motion for Summary Judgment in D.C. District Court on 5/1/14. This case arises from a facial challenge brought by Plaintiffs against Defendant’s Final Rule, at 29 CFR Part 471, 75 F.R. 28368 implementing Executive Order 13496 which forces all federal contractors to post a “Notification of Employee Rights Under Federal Labor Laws”, prominently and conspicuously in places of employment. NAM and VMA argue that the Rule must be vacated as it constitutes compelled speech in violation of the First Amendment of the United States Constitution, has been promulgated in excess of Defendants’ statutory authority, is arbitrary and capricious, and is preempted by the NLRA.

On May 7, 2015, the D.C. District Court denied the NAM’s motion for summary judgment and entered judgment for the DOL. The DOL rule requiring contractor posting of NLRA rights statement was upheld by the Court and does not violate the constitutional rights of covered employers.


Related Documents:
NAM brief  (May 1, 2014)
NAM Motion  (May 1, 2014)
NAM & VMA complaint  (December 18, 2013)

 

Roundy's Inc.   (NLRB)

Right to exclude nonemployee union handbillers from company property

The NAM and 194 other national, state and local business organizations filed a brief at the NLRB as part of the Coalition for a Democratic Workplace in a case involving access by nonemployee union members to private property for purposes of handbilling. The case arose when union agents engaged in handbilling in front of 26 of the company's stores. The NLRB allowed the picketing where the company did not have a sufficient property interest, but asked for input from the public about 2 other stores where Roundy's property rights were arguably stronger.

The NAM/industry amicus brief argues that the company may allow some handbillers, such as charitable solicitors, but may exclude others from its property. The company should have the right to exclude individuals whose handbilling advocates a boycott or otherwise is detrimental to the company. A company must have some degree of control over the messages it conveys to its customers on its private property, and the courts have upheld this principle. Our brief urged the Board to stop requiring employers to allow nonemployee union agents to trespass on private property for the purpose of harming the employer's business under any circumstances. If any limitation on a company's right to exclude handbillers is allowed, it should recognize the difference between handbillers that are engaged in beneficent activities and those that are engaged in harmful activities.


Related Documents:
NAM amicus brief  (January 7, 2011)

 

Walgreen Co. v. Hinchy   (Indiana Supreme Court)

Indiana court allows for vicarious employer liability for personal employee misconduct

On February 18, 2015 the NAM filed an amicus brief with the Indiana Supreme Court in Hinchy v. Walgreen Co. An appeals court in Indiana adopted a “strict liability” respondeat superior theory, holding businesses liable for the actions of their employees, regardless of whether the employee was acting within what is traditionally considered the “scope of employment,” and regardless of whether the employee had been trained not to engage in the behavior.

The NAM brief sought clarification from the Indiana Supreme Court on when an employer can be held liable for the unlawful actions of an employee, where the employee knowingly violated company policy. Although this particular case arose in the health care context, and could have very significant implications for health care companies, the issue is of interest to all Indiana employers.

Unfortunately, the Court declined to take the case.


Related Documents:
NAM brief  (February 18, 2015)

 


Patents, Copyrights and Trademarks -- 2015



In re Lamictal Direct Purchaser Antitrust Litigation   (3rd Circuit)

Antitrust scrutiny of patent litigation settlements

On June 3, 2014 the NAM filed an amicus brief in the US Court of Appeals for the Third Circuit in a case challenging the legality of a pharmaceutical patent litigation settlement under the antitrust laws. Here, a brand and generic pharmaceutical manufacturer settled an all-too-common type of lengthy and costly patent litigation using a procompetitive licensing arrangement. Plaintiffs' (downstream purchasers) challenge to the licensing arrangement under Sections 1 and 2 of the Sherman Act was dismissed by the district court judge both initially and again on remand in light of the Supreme Court’s decision in FTC v. Actavis, Inc. Plaintiffs appealed to the Third Circuit.

Our amicus brief argued that patent settlement negotiations must include more than mere early entry, which is a zero-sum game in which a marginal gain for one party means a marginal loss for the other. However, as more variables are introduced, the opportunity to reach a settlement improves. To effectively settle litigation, something of value must be exchanged, ideally something each party values differently.

Licensing agreements are commonly used means of settling litigation. Here, the parties agreed to a license agreement allowing a generic to enter during the term of a patent holder’s exclusive rights, while also allowing the patent holder to compete with the generic by continuing to market and sell its branded drug. This settlement is procompetitive or, at worst, competitively neutral. We argued that merely alleging that a settlement agreement contains this type of licensing arrangement, without more, does not constitute a “plausible” theory of competitive harm sufficient to survive a motion to dismiss.

Plaintiffs in this case present a no-win proposition where patent holders and patent challengers would face an impossible choice between expensive, burdensome patent litigation, and expensive, burdensome antitrust litigation. This is not what the law requires, nor should it. This case is important to manufacturers across the economy that rely on settlements to avoid unnecessary litigation.

The appeals court vacated the district court’s decision, denied a petition for a full court rehearing and remanded to the district court for further proceedings because the appeals court believed that Actavis's holding applies here and the settlement should be subject to antitrust scrutiny under the rule of reason.


Related Documents:
NAM brief  (June 3, 2014)

 


Product Liability -- 2015



American Cyanamid Co. v. Gibson   (U.S. Supreme Court)

Challenging collective liability without proof of causation

172 plaintiffs in Wisconsin sued a variety of companies that at one time or another produced while lead carbonate pigments for paint. The plaintiffs cannot prove which company produced the pigments that are alleged to have injured them, but a federal appeals court allowed them to use a novel tort theory called "risk contribution," which holds a manufacturer liable if it "may have provided the product which caused the injury" and therefore "contributed to the risk of injury." The lower court's decision makes companies subject to severe, retroactive, unanticipated and disproportionate liability. For one defendant, liability may reach back to its activities between 1917 and 1924.

The NAM filed an amicus brief 2/13/15 supporting Supreme Court review of this ruling. We argued to keep in place fundamental liberty and property rights, along with the due process guarantee encompassed by the bedrock principle that proof of causation is required for tort liability. We emphasized that the collective liability theory endorsed in this case is only one example of a broader attack against the requirement of proving causation. These theories include market share liability, alternative liability, enterprise liability, commingled product liability, and risk contribution, all holding a defendant individually liable for injuries that may have been caused by other defendants who sold similar products or engaged in similar operations. Public nuisance claims have also been raised to avoid traditional product liability proof.

We urged the Court to review and overturn the Seventh Circuit's decision, which is a stark example of how far the courts can depart from settled causation requirements.

On May 18, 2015, the Court declined to review this appeal, so the Seventh Circuit's decision stands.

 

Johnson v. U.S. Steel Corp.   (California Supreme Court)

Liability of raw material supplier for end product injuries

In California, those who supply raw materials for use in a manufacturing process and integration into an end product cannot be held liable for injuries caused by the end product when (1) the raw material is not defective; (2) the raw material is sold in bulk to a sophisticated manufacturer; (3) the manufacturer employs a manufacturing process that substantially changes the raw material; and (4) the supplier does not participate substantially in the design of the end product. Liability for the decision to use potentially dangerous raw materials is placed on the maker of the end products and not on the suppliers who are selling materials that may be dangerous but can also be integrated safely into end products.

On November 23, 2015, the NAM sent an amicus letter the California Supreme Court urging it to review the decision of a lower court that departed from settled principles of liability. The lower court failed to apply the established legal framework to evaluate the alleged liability of U.S. Steel as a supplier of a raw material that was incorporated into the end product the allegedly caused plaintiffs’ injuries. The court also assumed that the “consumer” expectations test should be used to evaluate whether the raw material is defective. U.S. Steel acted solely as a bulk supplier of a raw material to a sophisticated purchaser, the raw material was not defective, and U.S. Steel was not involved in the design, manufacture, or distribution of the end product.

On December 14, 2015, the California Supreme Court left standing this ruling, which will have serious adverse consequences for manufacturing and commerce. The NAM has a strong interest in the development of tort law and the application of doctrines that place reasonable limits on strict product liability claims.


Related Documents:
NAM brief  (November 23, 2015)

 

May v. Air & Liquid Systems, Inc.   (Maryland)

Duty to warn about hazards in products made by other manufacturers

The NAM joined with 6 other organizations urging Maryland's highest court to affirm a lower court ruling that refused to hold a manufacturer liable for failing to disclose the hazards that arose from products made, sold or installed by another manufacturer. Under common law, manufacturers are only liable for hazards in their own products. We opposed the creation of a new duty to warn about hazards a manufacturer does not produce or put in its products.

Product liability law generally attaches to entities which participate in the chain of distribution of a product that causes harm because of a defect in that product but does not hold them liable for products made by others. Allowing for the reverse of this decision is unsound public policy. Such logic would require the manufacturers of staplers to be legally responsible every time a person is hurt due to a paper cut. Courts nationwide have almost uniformly held that a manufacturer has no duty to warn about hazards in a third-party’s asbestos-containing product. Consumer safety could be undermined by the potential for over-warning and through conflicting information that may be provided by manufacturers of different components and by makers of finished products.

This case specifically addresses a company’s liability due to another manufacturer creating products with asbestos. Roughly 100 companies have entered bankruptcy to address their asbestos liabilities. The bankruptcies established a privately funded personal injury compensation system of over 60 multi-billion dollar trusts. This system operates parallel to, but independent of, the civil tort system and provides substantial compensation to plaintiffs for harms caused by companies that were the largest asbestos defendants. Currently, the lack of coordination between the asbestos bankruptcy trust claim and civil tort systems can lead to “double dipping” as plaintiffs obtain tort recoveries for their injuries and then bring additional claims against asbestos trusts for the same injury.

Our amicus brief supported well-established law that a manufacturer of one product has no duty to warn about the alleged hazards of another's product. This is true even where the supplier knew its product may be integrated into another product that could cause harm.

Unfortunately, on Dec. 18, 2015, the court ruled 7-2 that "a manufacturer will have a duty to warn under negligence and strict liability when (1) its product contains asbestos components, and no safer material is available; (2) asbestos is a critical part of the pump sold by the manufacturer; (3) periodic maintenance involving handling asbestos gaskets and packing is required; and (4) the manufacturer knows or should know the risks from exposure to asbestos.” The court placed its principal justification on whether the injury was foreseeable. It also thought the burden on the manufacturer was negligible because the instruction manuals for the pumps "could easily have included in those manuals a warning that asbestos dust was dangerous, and a directive to wear protective gear. . . ." The duty on manufacturers announced in this case is intended to be "a narrow and limited duty." Presumably if asbestos were not the only product required for use with the pumps, the manufacturer would not have had to warm. It expressly declined to "extend the duty to warn to all instances when a manufacturer can foresee that a defective component may be used with its product."

 

Mobil Corporation v. Johnson   (Florida Court of Appeals)

Dose-specific evidence in asbestos case

This appeal involves the intersection of science and law with respect to what is believed to be the first case to be tried of the thousands of asbestos cases that have been pending in the Florida courts for over a decade and that involve plaintiffs with little or no present physical impairment. The case involves a claim for damages arising from latent injuries caused by exposure to chrysotile asbestos included in a joint sealant and caulking product called Dum Dum. The plaintiff claimed that exposure to Dum Dum was a substantial contributing cause of his benign (non-cancerous) pleural plaque condition. However, the plaintiff provided no evidence of his level of exposure to the product or whether his exposure was sufficient to cause the damages alleged. Nonetheless, the trial court ruled in favor of the plaintiff. This case is an appeal in Florida’s intermediate appellate court.

The NAM argued in its brief that, if courts permit liability to be imposed without requiring plaintiffs to show that they have received a sufficient dose of a defendant's product to develop the condition alleged, then there is a substantial risk that defendants in the countless pending Florida asbestos cases - as well as defendants in other latent injury cases - could be held liable for harms that are the fault of others. Dose-specific evidence is especially important in asbestos injury cases because courts have acknowledged that asbestos-containing products are not uniformly dangerous.

The parties settled the case in late 2015.


Related Documents:
NAM brief  (October 17, 2014)

 


Punitive Damages -- 2015



Grigg v. Owens-Illinois, Inc.   (Cal. Ct. App.)

Punitive damages for unforeseeable asbestos claims

Asbestos litigation has flooded American courtrooms. Most courts have ruled that corporations did not have a duty to warn about take-home or spousal exposure to asbestos that occurred in the 1950’s because science and medical experts at the time were not aware of the risks associated with asbestos. Modern understanding of the danger of asbestos exposure did not emerge until the mid-1960’s. Despite this prevailing trend in the courts, a California jury awarded the plaintiff in this case $11 million in punitive damages for take-home and spousal exposure to asbestos that occurred during the 1950’s.

On appeal, the NAM filed an amicus brief arguing that the company should not be liable for punitive damages since the harm of asbestos exposure was unforeseeable at that time. Absent the scientific and medical awareness of the risk, the company did not have a duty to warn its employees or their spouses of asbestos exposure. Courts usually do not award punitive damage unless the defendant intentionally or maliciously disregarded a known risk. As stated in the brief, holding the company liable in such a case “would be to effectively punish a defendant for failing to predict the future.”

The NAM also argued that awarding punitive damages in cases like this depletes financial resources and prevents current and future plaintiffs from getting appropriate damage awards. Furthermore, the risk of punitive damages discourages practical settlement negotiations and slows down the asbestos docket. California’s practice of awarding punitive damages in asbestos cases has caused an explosion of asbestos litigation in the state. To curtail this trend, California should follow most other states and either limit punitive damages in such cases or do away with them all together.

The case was settled in October, 2015, so no decision was issued by the court.


Related Documents:
NAM brief  (July 1, 2014)

 


Settlement Agreements and Consent Decrees -- 2015



Volvo Powertrain Corp. v. United States   (U.S. Supreme Court)

Court's power to liberally construe consent decrees

A company negotiated a consent decree with EPA over Clean Air Act requirements applicable to diesel engines, and later a subsidiary not involved in the consent decree sought and received EPA approval to import diesel engines. A few years later, EPA sued that company, claiming the engines, most of which were never imported into the United States, violated the consent decree.

A federal judge ordered $72 million in penalties, even though it imposed a penalty beyond what the Clean Air Act authorizes, and the D.C. Circuit affirmed.

The NAM filed an amicus brief arguing that courts should not be able to broaden the terms of the settlement to impose penalties beyond those in the consent decree for actions not subject to the EPA regulations at issue. Our brief and the appeals court decision are summarized here.

This case is now on appeal to the Supreme Court. The NAM, along with the American Petroleum Institute, the American Coatings Association, the Organizatio for International Investment, and the Metals Service Center Institute, filed another brief 3/9/15 urging the Court to review the decision. The brief, submitted by our counsel, Laurence H. Tribe of Harvard, argued that the case presents an important question whether an agency may reinterpret a consent decree to expand its authority beyond its statutory limits and beyond the territorial jurisdiction of the United States. Federal agencies are parties to thousands of consent decrees, and regulated parties often have little choice but to resolve a matter this way rather than to contest it on the merits. Agencies like EPA should not be allowed to operate beyond statutory limits imposed by Congress.

On June 15, 2015, the U.S. Supreme Court denied cert in this case.

 


Administrative Procedure -- 2014



NLRB v. Noel Canning   (U.S. Supreme Court)

Defining the President's recess-appointment power

This case presents the fundamental question whether the President’s recess-appointment power may be exercised during a recess that occurs within a session of the Senate, or is instead limited to recesses that occur between enumerated sessions of the Senate. A second question involves when a vacancy occurs that may be filled by a recess appointment -- must the vacancy first arise during a recess, or may it be filled if it exists at any time during a recess? Closely related to these questions is whether the President's recess-appointment power may be exercised when the Senate is convening every three days in pro forma sessions.

These issues are critical to the validity of dozens of recess appointments that have been made by recent presidents. This case involves appointees to the National Labor Relations Board.

On May 23, 2013, the Coalition for a Democratic Workplace, of which the NAM is a member, filed an amicus brief urging the Court to settle the rules for recess appointments. The Court agreed to hear the case, and on June 26, 2014, invalidated the appointments. It held that the Recess Appointment Clause only empowers the President to fill existing vacancies during a recess of sufficient length. Furthermore, the recess appointment power applies to both pre-existing vacancies that continue to exist during the recess period and vacancies that occur during a recess period. Several hundred cases decided by the improperly appointed NLRB were affected and could be revisited.


Related Documents:
CDW amicus brief in support of certiorari  (May 23, 2013)

 


Antitrust -- 2014



Dean Foods Co. v. Food Lion, LLC   (U.S. Supreme Court)

Usefulness of summary judgment in antitrust and other complex civil cases

The NAM filed an amicus brief petitioning the Supreme Court to review the Sixth Circuit Court of Appeals' decision in Dean Foods Co. v. Food Lion, LLC. The decision, if left to stand, could substantially limit the usefulness of summary judgment as a tool to dispose of meritless claims in antitrust and other complex civil cases. This would as a consequence significantly raise the likelihood and risk of unnecessary trials. The Sixth Circuit held that this putative class action challenging petitioners’ conduct under Section 1 of the Sherman Act could proceed to trial even though respondents offered no evidence that the alleged conspiracy actually caused any injury to them.

For “proof” of causation, respondents relied solely on their expert, who admitted that he could not say whether the price increase he observed was caused by conspiracy, by effects of an unchallenged merger-related shift in the structure of the market, or by other lawful, unilateral conduct. In the absence of any evidence showing the requisite causal link, the court of appeals merely presumed causation.

Summary judgment’s utility as a mechanism for the efficient resolution of disputes would be undermined seriously if unsubstantiated assertions were sufficient to compel a trial merely because they were factually or legally complex. Yet, that is what the Sixth Circuit found and that is the inevitable result of failing to stem the flow of cases that treat summary judgment as a disfavored procedure in antitrust cases.

The petition for certiorari was denied on November 14, 2014 by the Supreme Court.


Related Documents:
NAM brief  (September 3, 2014)

 


Arbitration -- 2014



Babcock & Wilcox Constr. Co.   (NLRB)

Presumption against the validity of arbitral decisions

Pursuant to the Notice and Invitation to File Briefs issued by the National Labor Relations Board on February 7, 2014, the NAM submitted an amicus brief in Babcock & Wilcox Constr. Co.. The Board asked that parties and interested amici to address whether the Board should adhere to, modify, or abandon its long-established standards for post-arbitral, pre-arbitral, and post-grievance settlement deferral for charges that raise claims under Sections 8(a)(1) and (3) of the National Labor Relations Act, but which are also susceptible to resolution through the employer’s and union’s grievance arbitration process.

On 3/25/2014 the NAM filed its brief arguing that the well-established, court-approved deferral standards that the Board has long used should remain in place without modification. Existing Board standards accommodate the clear preference under the Act for arbitral and other private resolution of disputes, while also protecting employee statutory rights. Further, current standards allow for the fair and efficient resolution of workplace disputes where existing collective bargaining relationships provide for a working arbitral mechanism, and conserve increasingly scarce public and private resources.


Related Documents:
NAM brief  (March 25, 2014)

 


Civil Procedure -- 2014



California ex rel. Wilson v. Superior Court   (California Supreme Court)

NAM opposes unreasonable standard

In a case concerning whether the California Insurance Fraud Prevention Act (IFPA) permits a finding of fault absent a showing of causation, the NAM filed an amicus letter on 8/26/2014 with the California Supreme Court in support of a Petition for Review. The plaintiffs before the trial court were former employees of the member and alleged that their employer engaged in illegal and fraudulent conduct aimed at doctors, pharmacists and insurance companies to induce the use of their products. The trial court found that the IFPA permits penalties only if the prescriptions would not have been written but for the unlawful conduct; that the prescriptions must be assessed on a case-by-case basis to have been a quid pro quo; and the claim itself must be independently fraudulent and contain an express misstatement of fact.

However, the Court of Appeals reversed the trial court in almost every aspect. It concluded that the proper test for damages under the IFPA was not the “but for” test, but instead the less rigorous “substantial factor” test. Under this test, a company could be subject to penalties when a doctor prescribes one of its products even when the prescription was perfectly medically sound. Additionally, prescriptions need not be assessed on a case-by-case basis; instead, use of statistical modeling and data to show trends can be sufficient. This ruling would make the threshold for penalties under the IFPA very low, and could criminalize a great deal of the legal activity that pharmaceutical and medical device manufacturers engage in.

In its amicus curiae letter with the California Supreme Court in support of the Petition for Review, the NAM argued that the Court of Appeals erred in its analysis of the IFPA and incorrectly applied the “substantial factor” test. Since this allows for aggregate proof of causation based on statistical evidence, it effectively places the burden on defendants to prove that their marketing practices were not the substantial cause of allegedly fraudulent insurance claims. Additionally, since manufacturers do not themselves file the insurance claims, they could be penalized for the actions of third-parties over which they have no control. This will broaden manufacturers' potential liability and increase the risk of litigation. We asked that the California Supreme Court grant the Petition for Review and seek reversal of the findings of the Court of Appeals.

Canifornia Supreme Court denied petition on the Insurance Fraud Prevention Act issue.

 


Class Actions -- 2014



Halliburton Co. v. Erica P. John Fund, Inc.   (U.S. Supreme Court)

Whether to reconsider the presumption of reliance in the fraud-on-the-market theory for class action securities litigation

Although this suit involves investor claims against a company for losses allegedly suffered from company statements about asbestos litigation, this kind of suit arises in a variety of contexts where investors feel a stock price may have been affected by statements from company management. The issue on appeal is whether the Supreme Court's 1988 holding in Basic Inv. v. Levinson should be revisited (and reversed). The decision in that case established the fraud-on-the-market theory of reliance, whereby plaintiffs such as the investors in this case need not show that they individually relied on alleged misrepresentations by the company, but that the entire investor community relied on the misstatements, even if no one plaintiff in this case actually did. It's an easy way for plaintiffs to avoid having to show they were misled in any way.

The NAM filed an amicus brief supporting Supreme Court review of a 5th Circuit decision that applied the fraud-on-the-market presumption of reliance. We asked the Court to reconsider the theory, and also to prevent a case from being prosecuted as a class action when the alleged misrepresentation did not impact the market price of the stock at issue. The presumption in the Basic case has generated confusion in the courts, led to easy class certification, excessive litigation, and unfair settlement pressures. As a result, U.S. public companies and their investors have paid high litigation and settlement costs, resulting in merely a shifting of money from one set of investors to another, and their lawyers.

On Nov. 15, 2013, the Court agreed to hear this appeal.

On January 6, 2014, the NAM and other groups filed an amicus brief on the merits of the issue, arguing that the Court should overrule or modify the presumption of reliance, since the presumption undermines the requirement that plaintiffs prove actual reliance. It is based on an erroneous premise that investors rely on the integrity of market prices, while "many (if not most) investors buy or sell a security precisely because they believe the market price is wrong -- buying when they assess the market has undervalued the stock and selling when the stock is overvalued in their estimation." Such value investing is a recognized strategy. In addition, we argued that eliminating the presumption of reliance will not undermine fraud deterrence or investor compensation in cases of actual fraud.

On June 23, 2014, the Court rejected NAM’s argument and decided to uphold the Basic presumption of reliance, stating that requiring each plaintiff to prove direct reliance “would place an unnecessarily unrealistic evidentiary burden on the . . . Plaintiff who has traded on an impersonal market.” The Court reiterated that the plaintiff need only prove that the misrepresentation applied to “stock traded in a generally efficient market” and that the plaintiff purchased the stock at market price during the relevant period. Satisfying these two elements also enables the plaintiffs to proceed in a class action suit, instead of demonstrating individual reliance. The Court did reverse the circuit court’s ruling that prevented the company from raising a defense during the class certification stage. The company may defend against the presumption of reliance by demonstrating that the misrepresentation did not impact the stock price. This decision gives a company another way to prevent the certification of class action shareholder litigation.


Related Documents:
NAM amicus brief on the merits  (January 6, 2014)
NAM amicus brief  (October 11, 2013)

 

In re High-Tech Employee Antitrust Litigation   (9th Circuit)

Class action certification standards

To certify a group of people that can sue under federal class action rules, a judge must find questions of law or fact that are common to everyone in the group. Often judges have been lax in certifying large classes, and then sorting out the details during the course of the litigation. Unfortunately, the certification order imposes tremendous unfair settlement pressure on the defendants, because the stakes of the litigation are raised dramatically by the sheer number of plaintiffs allowed.

The Supreme Court has recently clamped down on overbroad certification orders, and this case involves an appeal by several companies who claim that a class was improperly certified. The class includes 60,000 employees in 2,400 diverse jobs at seven companies who claim that companies cause wage suppression that is alleged to violate antitrust laws when they agree not to cold call employees at other companies to recruit them away. The companies asked the Ninth Circuit to examine the judge's decision, arguing that each employee's compensation is determined by highly individualized factors that are inappropriate for classwide adjudication. There not only must be common questions among class members, but also commmon answers. Moreover, any injury that might have happened to one employee may not have happened to others, with some having no injury at all.

The NAM filed an amicus brief in support of this appeal, arguing that the judge should have undertaken a more rigorous analysis before certifying the class action. She should not have based her order on the average impact and a few anecdotal experiences regarding the alleged antitrust violations, but instead should have first confirmed that there were common damages among class members and that individual damages could be calculated using a class-wide formula.

On Jan. 14, 2014, the court denied the appeal, without significant explanation.

 

Mississippi v. AU Optronics Corp.   (U.S. Supreme Court)

Removal jurisdiction under CAFA

The Attorney General of Mississippi brought a parens patriae action in state court on behalf of numerous citizens of the state against 22 out-of-state companies for alleged price-fixing in the LCD screen industry. The appeals court ruled that this suit was in effect a mass action, like a class action, that is removable under the provisions of the federal Class Action Fairness Act (CAFA), and that the case should be heard in federal court. CAFA was enacted to allow large cases involving numerous plaintiffs against out-of-state defendants to be transferred, or removed, to a federal court. Federal courts are often viewed as a more neutral judicial forum than some state courts.

The NAM joined with the Access to Courts Initiative, Inc. in an amicus brief urging the Court to recognize that the Constitution established federal courts in part to hear cases between one state and citizens of another (including companies located in other states). There should be no presumption against transferring a mass action case out of state court, and in fact, there should be a presumption in favor of removal under the constitutional structure. An unduly constrained view of federal jurisdiction has helped fuel the litigation explosion of the last fifty years, contributing to the imposition of billions of dollars of costs on American consumers and the loss of hundreds of thousands of American jobs.

The Supreme Court ruled unanimously 1/14/14 that a case like this cannot be removed to federal court because Mississippi was the only plaintiff and the case was therefore not a mass action under CAFA. CAFA allows removal of cases with 100 or more persons, but a state filing suit in a representative capacity is only one plaintiff, even through it represents hundreds of unidentified persons with an interest in the outcome. The Court refused to look behind the pleadings by the state to find out if it was gaming the system, because Congress did not intend for such an inquiry in mass action cases.


Related Documents:
NAM amicus brief  (September 10, 2013)

 


Communications -- 2014



Verizon v. FCC   (D.C. Circuit)

Appeal of FCC decision to force net neutrality on Internet providers

On July 23, 2012, the NAM filed a brief in support of Verizon’s fight against net neutrality, which constitutes rate regulation, requiring Internet Service Providers to carry the internet traffic of "edge" providers free of charge and effectively prohibiting paid prioritization of certain traffic streams. This is the second time the FCC has had to defend its attempt to impose net neutrality, with the first attempt ending in the court's finding in Comcast Corp. v. FCC that the Commission did not have legal authority to enforce such principles.

The brief in this case argued that rules for net neutrality were again not within the authority of the FCC. The Commission apparently found that the Telecommunications Act of 1996 endowed it with sweeping authority to regulate the internet, despite the fact that Congress never actually did so. Even if the FCC has the authority to regulate broadband Internet access, the provisions for regulation only allow it to take steps to make the markets more competitive. Numerous economists, including one that was formerly with the FCC, declared that net neutrality will not help make markets more competitive. In addition, the agency relied on unsupported speculation that regulation would lead to increased deployment of the internet, while the evidence before it overwhelmingly demonstrated that net neutrality regulations would inhibit deployment, interfering with business operations.

The NAM supports increased deployment of broadband internet services without unnecessary and burdensome regulations and efficient spectrum management issues. Policymakers should remove barriers to entry, remove regulations that dampen investment incentives, rely on industry practices that promote transparency and enhance consumer and business choices, and ensure technology-neutral competition for all providers.

On Jan. 14, 2014, the court sent back to the FCC its non-discrimination and no-blocking requirements on the basis that they improperly constitute common carriage regulation of broadband services. It found that the agency had the authority to regulate broadband internet service, and upheld the Commission's authority to adopt Open Internet rules. But the FCC improperly applied non-discrimination and no-blocking requirements to Internet Service Providers, which are not common carriers subject to such provisions.


Related Documents:
NAM amicus brief  (July 23, 2012)

 


Environmental -- 2014



Alec L. v. McCarthy   (D.C. Circuit)

Litigation seeking to impose 6% annual reductions in greenhouse gases under "public trust" theory

This is an appeal of a decision dismissing claims by an environmental group that would force the government to impose further greenhouse gas emissions reduction policies under a "public trust" theory. The NAM intervened in the case in the trial court and helped obtain the favorable ruling there.

For a full summary of our arguments in the district court, click here.

In our appeals court brief, joined by various trucking and construction companies and associations, we argue that the public trust doctrine is a state law doctrine and does not implicate a federal question subject to jurisdiction in the federal courts. The case also presents a political question that is not for the courts to decide, putting the courts in the position of adopting air emission standards of general applicability and monitoring compliance. No court has ever used the public trust doctrine to compel a regulatory action by the federal government, much less a sweeping new regulatory agenda of the type sought here. In addition, the parties bringing suit do not have standing, because their alleged injuries are not imminent and particularized, nor are they fairly traceable to the defendants or likely to be lessened by any court order.

The court decided not to hear oral arguments in the case, and on June 5, 2014, affirmed the district court's dismissal of the claims. It found that the plaintiffs did not present a federal question, and that the court therefore did not have jurisdiction to hear the case. There was no federal question because the claims were based on the legal theory of public trust, which is entirely a state law issue.

The NAM intervened in this case to help block this attempt to use the courts to do an end run around the legislative and regulatory processes that govern regulation of emissions from manufacturing plants. This result is an important development in reining in these kinds of aggressive legal theories and litigation tactics.

The plaintiffs appealed to the Supreme Court, which declined to hear the case on 12/8/2014.


Related Documents:
NAM Opening Brief  (December 23, 2013)

 

American Chemistry Council v. EPA   (U.S. Supreme Court)

Whether EPA greenhouse gas regulation for motor vehicles triggers limits on stationary sources of GHG emissions

On April 18, 2013, the NAM and 23 other business organizations appealed to the Supreme Court to review an adverse decision on greenhouse gas regulation from the D.C. Circuit. We asked the Court to review EPA's first-ever regulations of greenhouse gases emitted by stationary sources, such as power plants and factories. The lower court rejected lawsuits from hundreds of organizations who question EPA's authority to issue the rules under the Clean Air Act, as well as the procedures it used in doing so. Our petition was granted and consolidated into Utility Air Regulatory Group v. EPA. On June 23, 2014, the Supreme Court agreed with the NAM and ruled that EPA's regulation went too far. Click here for a more detailed summary of this case.

 

American Petroleum Institute v. EPA   (D.C. Circuit)

Challenging EPA greenhouse gas regulation (light-duty vehicles and CAFÉ standards)

The NAM and other organizations filed another petition to review an EPA action that is part of its suite of regulations of greenhouse gases from stationary sources. One of our initial suits in this series challenged the EPA's effort to regulate light-duty vehicles, because the agency used that rule as a predicate for further regulation of manufacturing facilities. We challenged this latest rule, published Oct. 15, 2012, as well. The case was consolidated with Plant Oil Powered Diesel Fuel Systems, Inc. v. EPA (No. 12-1428, D.C. Cir.), but that case was voluntarily dismissed, and our challenge was severed and held in abeyance pending a decision from the Supreme Court in UARG v. EPA. After that ruling, we stipulated a dismissal of this case.


Related Documents:
NAM Petition for Review  (December 14, 2012)

 

Babb v. Lee County Landfill SC, LLC   (D.S. Car.)

Whether common law nuisance claim is preempted by EPA regulation of air emissions

Landowners near a county landfill in South Carolina sued the landfill claiming that odors from the area caused them damage. The landfill argued that the law suit should be dismissed, because emissions from waste disposal facilities are regulated by Clean Air Act permitting requirements.

The NAM and the National Waste & Recycling Association filed an amicus brief supporting this argument. Congress adopted a comprehensive regulatory process that allows federal and state regulators to set emissions requirements for major stationary sources of pollutants, and the facility at issue in this case is so regulated. Court orders that set different emissions requirements would conflict with the Clean Air Act's system, but would also dramatically alter the cooperative federal-state framework established by Congress to address air quality issues. Different court rulings around the country would create a patchwork of standards under the common law of each state, and regulated entities would face a daunting challenge of predicting what standards their facilities must meet. Instead, we argued, the court should find that this kind of state nuisance claim is preempted by the Clean Air Act.

This is another example of a law suit that attempts to use state common law claims to impose more and different air emission requirements on manufacturers or other facility operators already subject to state and federal regulation under the Clean Air Act. The NAM filed a brief in a similar case in 2013 involving emissions from a plant in Iowa.

The case was


Related Documents:
NAM brief  (January 31, 2014)

 

Center for Biological Diversity v. EPA   (D.C. Circuit)

When greenhouse gases become subject to regulation under the Clean Air Act

The NAM and 17 other business associations moved to intervene in a lawsuit brought by the Center for Biological Diversity (CBD) against the EPA over the agency's interpretation of when greenhouse gases become "subject to regulation" (STR) under the Clean Air Act. CBD is expected to argue that greenhouse gases were already subject to regulation before EPA issued the "Johnson memo" in 2008 and a subsequent STR rule in April, 2010. If such a claim is accepted by a federal court, thousands of members of the business associations could be forced to obtain permits for new or existing facilities and to install costly control technology to try to reduce greenhouse gas emissions.

On July 18, 2014, after the Supreme Court's decision in Utility Air Regulatory Group v. EPA, this case was voluntarily dismissed.


Related Documents:
NAM motion to intervene  (June 28, 2010)

 

CTS Corp. v. Waldburger   (U.S. Supreme Court)

Whether CERCLA preempts state statutes of repose

This case involves the deadline for filing damage suits under CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act. The Supreme Court agreed to review a decision from the Fourth Circuit involving a suit for alleged contamination of the ground and water near an old North Carolina manufacturing plant site once owned by CTS Corporation. The site is subject to clean-up obligations under CERCLA, but this case involves a private suit alleging nuisance under state law. CTS argued that the nuisance claim was barred by North Carolina’s 10-year statute of repose.

CERCLA provides liberal deadlines for filing suit that supersede state statutes of limitations, but says nothing about statutes of repose.

The NAM filed an amicus brief focusing on the history of statutes of repose and the beneficial purposes they serve—particularly in the efforts of states to create, enhance, and protect economic opportunities for their citizens through job growth. We stressed that states across the country have enacted statutes of repose as part of broader efforts to strengthen their economies—an effort that in the current economic environment is all the more important. These statutes simply put an end to perpetual liability that can remain unknown for years and years, after witnesses are gone and memories fade. They provide certainty and finality in commercial transactions, promote judicial economy, and help keep insurance rates down.

On 6/9/2014, the Court ruled 7 to 2 that CERCLA does not preempt state statutes of repose. Such statutes differ from statutes of limitations in that they are designed to put an absolute time limit on a defendant's liability, while statutes of limitations are designed to require plaintiffs to file suit promptly when their claims accrue. Courts may grant exceptions when plaintiffs miss statute of limitations deadlines for various reasons, but not for statutes of repose. Because Congress knew of the differences and did not include statutes of repose in the law at issue, it did not intend to preempt them.

The decision limits long-term liability under CERCLA for pollution that occurred many years ago.


Related Documents:
NAM brief  (March 3, 2014)

 

Freeman v. Grain Processing Corp.   (Iowa Supreme Court)

Whether public nuisance claim is preempted by EPA regulation of factory emissions

Eight residents of Muscatine, Iowa, sued a local corn milling plant alleging trespass, nuisance and negligence from pollutants and odors from the plant. The trial court dismissed the claims as being preempted by the Clean Air Act (CAA), Iowa law, and the political question doctrine. That decision was appealed to the Iowa Supreme Court.

The NAM, along with 5 other manufacturing associations, filed an amicus brief supporting the trial court's decision on preemption and political question. Manufacturers are already subject to a complex system of state and federal regulations, and adding common-law tort liability on top of that will further undermine the ability to create jobs and compete. We argued that courts are not equipped to properly handle cases like this, because they require clear and manageable standards for imposing liability, and such standards involve policy judgments that can only properly be developed by legislative and regulatory bodies with the investigative resources and technical and scientific expertise necessary. In addition, the executive and legislative branches of government are authorized to set and adjust standards and rules to guide the regulated community, and they are much better able to consider the views of many more affected parties, including a variety of scientific and economic experts, to revisit their policy choices on a regular basis, and to develop a consistent policy for everyone, not a piece-meal policy that depends on the court or state in which the case occurs.

On June 13, 2014, the Iowa Supreme Court reversed the trial court decision and found that the CAA does not either expressly or impliedly preempt state emissions laws nor preclude a right of action brought under those laws. The Court also stated that several clauses in the CAA reserve for private citizens the power to bring public nuisance claims. Unless a state law or common law right of action is expressly preempted by federal statute, courts are reluctant to apply the preemption doctrine to state causes of action. The Court also found that the Iowa environmental statute did not preempt the plaintiffs’ claims because it too reserved the right to bring a public nuisance claim. Rejecting the political question argument, the court found that no constitutional controversy existed, tort claims are typically not precluded under the political question doctrine, and resolution of the controversy did not require a policy decision by another branch of government.

Claims based on nuisance theories of liability continue to be somewhat of a wild card for the regulation of plant emissions. Manufacturers continue to seek a rational regulatory system where the rules are clear and the potential liabilities are predictable and manageable.


Related Documents:
NAM amicus brief  (October 10, 2013)

 

GenOn Power Midwest, L.P. v. Bell   (U.S. Supreme Court)

Validity of state tort suits for damages from permitted emissions under Clean Air Act

This is a Clean Air Act preemption case. Some private property owners sued a power company under common law tort claiming damages for nuisance, trespass, negligence and strict liability arising from emissions and particulates from the operation of a coal-fired power plant in Allegheny County, Pennsylvania. The plant had permits from EPA for the emissions, and the lawsuit did not allege any violations of the Clean Air Act. The trial court threw the case out, finding it preempted by the Clean Air Act, but the Third Circuit Court of Appeals reversed, holding that a provision of the Act saves this kind of state lawsuit. The company sought Supreme Court review.

The NAM led a group of 11 other industry associations in filing an amicus brief supporting review. We argued that state common law remedies such as those sought here are irreconcilably inconsistent with the comprehensive system of air pollution control provided by the Clean Air Act. Permits, which are subject to public notice and comment, specify clear emission and operating standards that guarantee certainty, predictability, and evenhandedness to the regulated community. They provide an informed assessment of competing interests. By contrast, common law suits view the issues from a narrower perspective, using vague standards of liability, uneven application between states or even within states, with no guarantee of consistent results even between similar facilities.

Companies must be able to rely on permits for stable business operations, and these kinds of suits are a growing concern. Their effect is to add additional liability for activities that fully comply with federal permit obligations, raising the cost of doing business and threatening jobs and competitiveness.

The Supreme Court denied our appeal on June 2, 2014.


Related Documents:
NAM brief  (March 26, 2014)

 

Grain Processing Corp. v. Freeman   (U.S. Supreme Court)

Whether public nuisance claim is preempted by EPA regulation of factory emissions

The Iowa Supreme Court ruled that a group of Iowa residents could sue a local corn milling plant for trespass, nuisance and negligence from pollutants and odors emanating from the plant, in spite of the fact that the emissions are regulated by the EPA and the company is in full compliance with its permits. That decision was appealed to the U.S. Supreme Court. This case represents a serious emerging problem for manufacturers. The appeal in a similar case was declined by the Court earlier this year.

Our brief, joined by 6 other national associations, urged the Supreme Court to hear this appeal. We argued that this case presents an ideal opportunity to resolve whether public nuisance claims under state law are preempted by the Clean Air Act. There are serious conflicts between the federal courts of appeals and within state courts concerning this preemption issue. The issue is important because public nuisance litigation threatens one of the Clean Air Act's most important methods of pollution control -- permitting. Permits specify clear standards that guarantee certainty, predictability, and evenhandedness to the regulated community, and allowing public nuisance litigation threatens to substitute ad hoc decisions for considered regulatory policy, a result completely at odds with the goals and purposes of the Clean Air Act.

On December 1, 2014, the Court declined to review this appeal.


Related Documents:
NAM brief  (October 14, 2014)

 

Mingo Logan Coal Co. v. EPA   (U.S. Supreme Court)

EPA interference with Clean Water Act permits

The NAM and a group of 18 other national business organizations filed an amicus brief urging the Supreme Court to review a ruling that would give EPA the power to revoke a valid discharge permit issued under the Clean Water Act. The ruling, reversing a trial judge's decision that struck down EPA's attempt to interfere with valid permits, prompted widespread concern in the business community that EPA was arrogating to itself the power to upset long-settled reliance on thousands of permits issued by the U.S. Army Corps of Engineers.

The NAM hoped to convince the Supreme Court of the importance of this case. Our brief focused on the impact of the decision on investment expectations and infrastructure projects. About 60,000 discharge permits are issued every year, representing $220 billion of investment in the U.S. economy, and a 2% risk that EPA could revoke a permit decreases the benefit-cost ratio of a project by 30%. We highlighted a study by Professor David Sunding that even small changes in the possibility of such EPA action "can lead to dramatic redutions in private investment." EPA's move also threatens public sector projects for water, transportation, energy and public infrastructure.

The issue is also critical to state governments, with 27 states filing their own amicus brief supporting Supreme Court review of the case.

Here are links for our summaries of action in this case in the trial court and the appeals court.

On March 25, 2014, the Court declined to hear this appeal.


Related Documents:
NAM brief  (December 16, 2013)

 

National Association of Manufacturers v. EPA   (D.C. Circuit)

Challenging EPA's NAAQS for particulate matter

On March 15, 2013, the NAM filed a petition for the U.S. Court of Appeals to review the EPA's latest regulation of particulate matter. The regulation, published on Jan. 15, lowered the primary annual National Ambient Air Quality Standard for particulate matter from 15 to 12 micrograms per cubic meter. The NAM had urged EPA to retain the existing standard, but the agency opted to move forward with a more aggressive and damaging regulation.

NAM's President and CEO Jay Timmons said that the "new standard will crush manufacturers' plans for growth by restricting counties' ability to issue permits for new facilities, which makes them less attractive for new business. Essentially, existing facilities will have to be shuttered for new facilities to be built in these areas. This is not a conducive way to create jobs."

Our opening brief, filed 8/19/13, focused on whether EPA prejudged the need for the rule and the range of outcomes from the rulemaking process, whether it ignored a substantial body of contrary scientific evidence that does not support lowering the standard, whether its decision to require monitoring devices along roadways was unlawful because it will record maximum rather than ambient particulate matter concentrations, and whether the rule is invalid because EPA failed to provide implementation rules needed to address the legal consequences that flow from it.

The brief recounts the history of EPA's regulation of particulate matter. It notes that promulgation of the rule triggered immediate implementation obligations and started the clock on numerous others, yet many key implementation issues are unresolved. First, EPA has not approved a computer model to demonstrate compliance with the standard, which is typically how companies demonstrate compliance. Second, there are technical problems with the two methods approved by EPA for testing particulate matter emissions that have led EPA to recognize their limitations, indicating that reliable test methods are several years away. Third, EPA has not provided full guidance to the states about how to designate the boundaries of nonattainment areas, which could lead to improper designations and further burdens on manufacturers. Other issues are also highlighted.

On May 9, 2014, the Circuit Court denied NAM’s petitions. On each issue, the court deferred to EPA’s process and decisions. Although we challenged EPA’s lowering of the threshold for particulate matter, the court decided that EPA provided reasonable scientific explanations to justify making the standards more stringent. We also challenged EPA’s elimination of the “spatial averaging” test to determine particulate matter standards. Spatial averaging entails gathering data from several sites within a specified area and then averaging the results to determine the level of emissions in that area. EPA reasoned that spatial averaging would cause certain specific areas within a larger area to be out of compliance. Lastly, the court determined that EPA has the authority to protect air quality, and therefore it may place monitors in all areas, including along heavily traveled metropolitan roads, to accurately determine air quality.

In sum, this decision shows that courts continue to be reluctant to second-guess EPA regulations. Lowering the particulate matter levels will increase costs and harm competitiveness. The court’s unilateral deference to EPA’s justifications for lowering the levels underscores the importance of participation in the rulemaking process to combat future EPA regulations.


Related Documents:
NAM brief  (August 19, 2013)
NAM Statement of Issues  (April 17, 2013)

 

National Mining Ass'n v. McCarthy   (D.C. Circuit)

Whether EPA guidance document constitutes regulation that must go through notice-and-comment rulemaking

There’s a law that prevents agencies from charging ahead with regulatory changes without seeking input from the public and the regulated community. It’s called the Administrative Procedure Act (APA), and it was designed to require agencies that want to make significant changes to their regulations to publish the proposed changes and answer criticisms on the record.

In 2009, the Environmental Protection Agency announced -- through a series of memoranda and letters -- a new system of review for certain Clean Water Act permits. These permits, called Section 404 permits, are needed by anyone that wants to build or modify a facility or undertake some other construction project that might have an effect on waters subject to federal jurisdiction. EPA later issued lengthy guidance making substantive changes to the requirements for permits for surface coal mining, also without going through notice-and-comment rulemaking.

The National Mining Association sued, and a federal district judge ruled that EPA had overstepped its authority and violated the APA. That ruling has been appealed to the D.C. Circuit, and the NAM and other business organizations filed an amicus brief supporting the trial judge’s decision. The brief described numerous instances where EPA and other regulatory agencies have issued regulatory requirements -- posing as guidance – that should be adopted by notice-and-comment procedures.

On July 11, 2014, the D.C. Circuit reversed, finding that the "Enhanced Coordination Process" and Final Guidance were procedural, not legislative rules, and therefore not subject to the APA. It also ruled that a court challenge was premature because the Final Guidance was not actually final agency action subject to litigation, because it did not subject regulated parties or state enforcement agencies to any requirements or liabilities. The Guidance can be legally ignored. If it is actually used to grant or deny a permit in the future, a law suit might then be appropriate.

The upshot of this ruling is that EPA can create guidance documents that regulated parties can legally ignore, but they do so at the risk of having to litigate over EPA's use of such guidance documents after a permit is denied. Changing regulatory requirements with guidance documents casts American businesses adrift in uncharted territory in terms of regulatory risk and stymies investment and economic growth. Agencies that fail to use proper rulemaking procedures make decisions without the insight, data and information of the regulated public, including the practical implications of alternative policy choices.


Related Documents:
NAM brief  (July 22, 2013)

 

Natural Resources Defense Council v. EPA   (D.C. Circuit)

Portland Cement NESHAP litigation

Several environmental groups sued EPA over its emission standards for hazardous air pollutants from cement plants. They argued that amendments to the standards weaken and delay compliance with an earlier rule, and that the agency must not allow an affirmative defense for manufacturers when malfunctions of industrial equipment occur. The NAM is part of the SSM Coalition, which filed an amicus brief supporting the affirmative defense. The environmental groups wanted a standard that regulated sources, including the best-performing sources, will be unable to meet at times despite their proper design, operation, and maintenance. As a result, manufacturers will face civil penalties for events beyond their control.

EPA took the position that malfunctions must be accounted for in standards which require maximum achievable control technology (MACT). To be achievable, MACT standards must be capable of being met on a regular basis, including under most adverse circumstances which can reasonably be expected to recur, including periods of startup, shutdown, and malfunction. EPA may set different requirements during malfunction events than apply to normal operations of plant equipment.

Our brief argued that an affirmative defense to civil penalties that might arise from a malfunction is required by the Clean Air Act and was properly promulgated by EPA. Without the defense, companies would be subjected to citizen suits, as well as administrative penalties, for events beyond their control.

We also argued that EPA has the authority to adjust the compliance deadline when it modifies a MACT standard. Not allowing this authority would be hugely unfair to regulated sources and would ignore the reality that it can take up to three years or more to design, acquire, install and start up pollution control equipment or modified processes.

On April 18, 2014, the court unanimously ruled that EPA properly adopted the emissions-related provisions in the rule, but that it did not have the statutory authority to create an affirmative defense in civil suits against cement manufacturers where an unavoidable malfunction results in impermissible levels of emissions. It found that EPA reasonably read the statute to allow an increase in the emissions limits for particulate matter from cement-making kilns. It also found that EPA reasonably considered costs to industry with a comparative analysis of cost-effectiveness, rather than, as the environmental groups wanted, consider only whether a standard would be "too expensive for industry to achieve", that is, one that would essentially bankrupt the industry.

The court rejected environmental arguments that the compliance date for emissions of mercury, hydrochloric acid and hydrocarbons should be 2013. Because the standard for particulate matter changed in the new regulation, the court found that it would be irrational and even absurd to have different compliance dates for the different pollutants because of the technology involved. The new compliance date is September 2015.

Finally, it agreed with the environmental groups that EPA did not have the authority to establish an affirmative defense for companies whose emissions exceed the regulatory limits because of unavoidable malfunctions. Instead, private civil suits may be filed by those affected by the emissions, and it is up to the courts to decide whether to award damages. During court proceedings, EPA may seek to intervene, or file an amicus brief, stating its views about whether a company should be liable for such emissions. It is up to the courts to determine the scope of remedies available to plaintiffs, taking into consideration the company's compliance history and good faith efforts to comply, the duration of the violation, and other factors.


Related Documents:
SSM Coalition brief  (July 30, 2013)

 

Oklahoma v. EPA   (U.S. Supreme Court)

EPA power to take over state enforcement on regional haze

The NAM and other groups asked the Supreme Court to review a lower court decision that allows the EPA to take over 14 state enforcement plans under the Clean Air Act with respect to regional haze, and impose Federal Implementation Plans (FIPs). Oklahoma and North Dakota objected to this EPA action, saying that the agency overstepped its statutory authority and the result will be billions of dollars in power plant upgrades that will needlessly boost electric rates by as much as 20 percent.

Our amicus brief supports review, focusing on the fact that the Clean Air Act limits EPA's authority with respect to state implementation plans, instead giving the states primary responsibility for making air quality decisions and limiting EPA's role to the secondary function of determining whether those state plans are "based on a reasoned analysis." This is particularly important regarding state regional haze decisions, which involve aesthetic concerns such as visibility in parks. EPA wanted to impose a control technology that is too costly, and conducted a visibility analysis differently. However, Congress gave the states significant latitute by allowing them to choose the mix of sources that must install controls to attain the national standards.

This litigation reflects a growing pattern of disregard by EPA for the statutory limits on its authority, undermining the balance in the Clean Air Act between federal and state enforcement. Allowing this will only make matters worse -- empowering EPA to take unilateral action without engaging with states to help craft workable standards.

On May 27, 2014, the Court declined to hear this appeal.


Related Documents:
NAM brief  (March 5, 2014)

 

Sierra Club v. EPA   (D.C. Circuit)

Whether carbon dioxide must be considered in EPA PSD permits

In the Deseret Power decision in 2008, the EPA Environmental Appeals Board rejected the Sierra Club's contention that preconstruction permits for new power plants must include "best available control technology" (BACT) for carbon dioxide, but sent the case back to the EPA to reconsider whether to impose the requirement under its discretionary authority, and to develop an adequate record for its decision. It encouraged the EPA to consider whether the issue in this case should be resolved "in the context of an action of nationwide scope, rather than through this specific permitting proceeding."

On Sept. 14, 2010, the court ordered the case held in abeyance pending the outcome of other greenhouse gas cases. Former EPA Administrator Stephen Johnson issued an interpretative guidance memorandum on Dec. 18, 2008, that concluded that PSD permits (for the Prevention of Significant Deterioration of air quality) do not need to include BACT limits for greenhouse gases. The Sierra Club challenged that guidance, while the NAM and other business organizations supported it.

Our motion to intervene, filed 2/13/09, outlined why this case will have a substantial impact on many manufacturers, and why the EPA, which represents the general public interest, will not adequately represent the interests of the business community.

On Feb. 17, 2009, EPA Administrator Lisa Jackson granted a Sierra Club petition for reconsideration of the Johnson memo, and permitted public comment on the matter. The D.C. Circuit stayed the litigation.

On April 2, 2010, EPA completed its reconsideration of the Johnson memo and published a new "Subject to Regulation" notice that made January 2, 2011 the date on which greenhouse gas emissions were regulated. On June 9, EPA asked the court to hold the case in abeyance while other litigation over its GHG regulation was resolved. The NAM opposed this motion, saying that the issues in this case are being addressed in other greenhouse gas cases, and the environmental groups here should not be allowed to have a second chance to litigate should they lose in those other cases. We also opposed an effort to allow the Center for Biological Diversity to switch its challenge from those cases into this one, as that could create competing panels of judges reviewing the same issues. Ultimately, the case was held in abeyance and finally dismissed in 2014 after the Supreme Court ruled in Utility Air Regulatory Group v. EPA, partially upholding EPA regulation of greenhouse gases, but limited its scope under the PSD program.


Related Documents:
NAM Opposition to EPA's Procedural Motion  (June 22, 2010)
NAM Motion to Intervene  (February 13, 2009)

 

Utility Air Regulatory Group v. EPA   (U.S. Supreme Court)

Whether EPA greenhouse gas regulation for motor vehicles triggers limits on stationary sources of GHG emissions

On April 18, 2013, the NAM and 23 other business organizations appealed to the Supreme Court to review an adverse decision on greenhouse gas regulation from the D.C. Circuit. We asked the Supreme Court to review EPA's first-ever regulations of greenhouse gases emitted by stationary sources, such as power plants and factories. The lower court rejected lawsuits from hundreds of organizations who questioned EPA's authority to issue the rules under the Clean Air Act, as well as the procedures it used in doing so.

Greenhouse gas regulation is one of the most costly, complex and encompassing energy regulatory issues facing manufacturers and damaging our global competitiveness. EPA’s regulations could eventually force new permitting requirements for more than 6 million stationary sources, including 200,000 manufacturing facilities, 37,000 farms and millions of other sources, such as universities, schools and hospitals – impacting every aspect of our economy.

EPA’s regulatory decisions produced what it concedes were absurd results. We argued that this was not Congress’s intent when it enacted the Clean Air Act, and that courts must avoid agency interpretations that undermine the purpose of the law.

Moreover, EPA tried to avoid these absurd results by modifying the express statutory thresholds defining who is regulated. Only Congress can make those kinds of changes, and had the agency properly interpreted the statutory requirements from the beginning, it would not be in the position of having to alter the statutory requirements.

The effects of this regulation are immediate, concrete and massive, and will require the installation of “best available control technology”, with total costs estimated by EPA to increase to more than $50 billion per year. This case is of critical importance to manufacturers and our economy.

The Supreme Court agreed to hear our appeal, along with petitions from 5 other groups, limited to the following question: "Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases."

On June 23, 2014, the Court decided that EPA's regulation went too far. A majority concluded that, while greenhouse gases are within the class of emissions that are included within the broad reach of the Clean Air Act, specific sections of that law limit the EPA's regulatory power. Five Justices found that EPA neither was compelled nor permitted to require PSD (Prevention of Significant Deterioration) permits of companies solely because of their greenhouse gas emissions. They also ruled that EPA did not have the statutory authority to rewrite the unambiguous statutory thresholds, and even if EPA would not enforce its greenhouse gas requirements on smaller emitters, those companies would have remained subject to citizen suits to enjoin construction, modification or operation and to impose civil penalties of up to $37,500 per day of violation.

Seven Justices agreed with the NAM's argument that only companies already subject to permitting under the PSD program will be subject to any permitting requirements relating to greenhouse gases. They agreed that the PSD program was intended for the largest emitters that are already subject to PSD permitting. By limiting EPA's authority in this way, the decision provides substantial regulatory relief for the owners of millions of buildings and plants across the country.


Related Documents:
NAM Reply Brief  (February 14, 2014)
NAM Brief on the Merits  (December 9, 2013)
NAM Petition  (April 18, 2013)

 

White Stallion Energy Center, LLC v. EPA   (D.C. Circuit)

Challenging EPA Maximum Achievable Control Technology regulation

This case is about how the EPA establishes standards for maximum achievable control technology (MACT) which is used to minimize the emission of pollutants into the air. It arose in the context of a new regulation on emissions of hazardous air pollutants from electric utilities, as well as industrial-commercial-institutional steam generating units. The 2012 "Utility MACT" regulation adopts a methodology that has broad implications for industries subject to existing MACT standards that may be revised, or new standards yet to be developed.

The NAM filed an amicus brief arguing that the EPA erred in adopting a "pollutant-by-pollutant" approach. Under that approach, the EPA cherry-picks emissions data from multiple sources and sets a MACT floor based on whatever source is deemed the "best" for each individual pollutant. This often means there is a different best performer for each pollutant, and no single source of emissions will be able to achieve the regulatory requirement. The NAM believes that these measurements need to be made from producers operating under practical conditions -- not individually measuring pollutants and not from sources ideally positioned to limit their pollution, as the EPA argues. The EPA's approach is like asking a decathlon champion to be able to win not only the overall decathlon, but all of the individual events as well.

In addition, we argued that the EPA must give meaningful consideration to costs in determining whether a particular standard is achievable. The Clean Air Act requires that the level of pollution reduction that the EPA specifies be achievable, and its methodology will severely curtail or eliminate operations. Some vendors are unwilling to offer guarantees that their pollution control technology will meet the new standards, and financing of new projects is jeopardized.

On 9/12/2012, the court ordered this case to be held in abeyance pending reconsideration of the new source standards now under way at the EPA. The agency stated that it intends to complete the reconsideration by March 2013. It said it would reconsider "measurement issues related to mercury and the data set to which the variability calculation was applied when establishing the new source standards for particulate matter and hydrochloric acid." See 77 Fed. Reg. 45968 (Aug. 2, 2012).

The case was settled in 2014 by stipulated agreement.


Related Documents:
NAM brief  (August 3, 2012)

 


ERISA -- 2014



Fifth Third Bancorp v. Dudenhoeffer   (U.S. Supreme Court)

Fiduciary duties of Employee Stock Ownership Plan managers

The NAM and other coalition associations filed an amicus brief on February 3, 2014, in a case on appeal from the Sixth Circuit. We asked the Supreme Court to consider when the managers (fiduciaries) of an Employee Stock Ownership Plan (ESOP) have a legal duty to stop investing in the company’s own stock as it relates to perceived risk. Our brief explains that ESOPs are unique vehicles designed to invest primarily in company stock, and are unable to go through the same evaluation standards utilized by managers of other types of investments. Therefore, investments in employer stock should be presumed to be prudent, and should only be deemed imprudent when the company is at risk of financial collapse.

Seven circuit courts have held that fiduciaries that offer employer stock funds are entitled to a “presumption of prudence” since the typical tools available to fiduciaries to evaluate investment options are not applicable in the case of Employee Stock Ownership Plans. Nearly every circuit to address the question has ruled that this presumption— which, in substance, is a standard for adjudicating a fiduciary’s liability—can be rebutted only upon a showing of dire financial circumstances that would undermine the congressional purpose in encouraging employer stock ownership.

The Sixth Circuit diverged from the “dire circumstances” test, holding that the presumption of prudence can be overcome whenever a plaintiff proves that “a prudent fiduciary acting under similar circumstances would have made a different investment decision.” The Sixth Circuit also held that the presumption of prudence is an evidentiary, rather than a substantive, standard and therefore refused to apply it on a motion to dismiss.

The NAM believes that attempts to weaken the presumption of prudence will deter manufacturers from offering employer stock funds in the future.

The Supreme Court ruling removed the presumption of prudence for employer managers offering company stock as a retirement option. The decision leaves employers stuck “between a rock and a hard place”, the Court acknowledged, in a unanimous decision penned by Justice Stephen Breyer. If an employer offers company stock and the price dips they might be sued for violating the duty of prudence under the federal Employee Retirement Income Security Act. But if they dump the stock on behalf of their employees because they know the company’s in trouble, they might violate insider-trading laws. These questions were left to the lower courts to decide.


Related Documents:
NAM brief  (February 3, 2014)

 


Expert Testimony -- 2014



Accenture, LLP v. Wellogix, Inc.   (U.S. Supreme Court)

Admissibility of expert witness testimony based on assessing the weight of scientific evidence

The National Association of Manufacturers filed an amicus curiae brief on April 21, 2014 encouraging the United States Supreme Court to review an important decision by the Fifth Circuit admitting unreliable testimony from an expert witness without adequately assessing its admissibility based upon reliability and factual basis.

The Federal Rules of Evidence were revised in 2000 to reflect recent Supreme Court decisions imposing a gatekeeper duty on trial courts to assess the reliability and helpfulness of proffered expert testimony. However, some federal circuits have still not changed their practices. Courts are required to scrutinize the factual underpinnings of any expert’s testimony before it is allowed before the jury. Unlike ordinary witnesses, experts are permitted wide latitude to offer opinions, which have an outsized influence on juries, based upon an assumption that the expert’s opinion will have a reliable basis in the knowledge and experience of his discipline. Once admitted, faulty testimony is incurable.

In this case, a software expert testified on issues far beyond his expertise, including corporate valuations and whether a trade secret existed. Some of the testimony was based upon a review of the wrong software. The testimony was the sole basis for a $100 million jury award. The Fifth Circuit upheld the trial court's abdication of its gatekeeper role, improperly relying on cross-examination and presentation of contrary evidence to cure the effects of the defective testimony. This deviation weakens the Court’s protection against factually unfounded expert testimony and we urged the Supreme Court to review the case. Unfortunately, on 6/9/14, it declined.


Related Documents:
NAM brief  (April 21, 2014)

 

SQM North America Corporation v. City of Pomona   (U.S. Supreme Court)

Exclusion of unreliable expert testimony

The National Association of Manufacturers, along with a coalition of industry groups, submitted an amicus brief supporting U.S. Supreme Court review in the case, focusing on a court’s responsibility to act as a “gatekeeper” and properly exclude unreliable expert testimony under the standard articulated by the U.S. Supreme Court in Daubert v. Merrell Dow Pharmaceuticals. The issue represents a split among the federal Circuit courts, which subjects litigants in different jurisdictions to unequal standards of justice.

In the years since the Daubert test was enunciated in a series of cases, courts have strayed from the original interpretation to a far more permissive and open standard. Under the Supreme Court’s holding in Daubert, the trial judge is to act as the “gatekeeper” in weighing whether evidence is sufficiently reliable to be admitted into evidence. However, as is evidenced in cases such as SQM North America, judges have increasingly allowed for ever more unfounded expert testimony on the premise that “vigorous expert testimony” at trial will sort the good from the bad. We argued that the Ninth Circuit’s “methodology-only” approach is an irresponsible abdication of the judge’s responsibility and contradicts the approach taken by other Circuits. Indeed, in the original Daubert case the Court said that the federal rules require close scrutiny of the factual foundation of expert testimony.

Unfortunately, on December 15, 2014, the Court declined to review this appeal.


Related Documents:
NAM brief  (October 14, 2014)

 


Free Speech -- 2014



American Meat Institute v. USDA   (D.C. Circuit)

First Amendment limits on government-compelled disclosures

The American Meat Institute and others challenged a regulation from the U.S. Department of Agriculture (USDA) that requires country-of-origin labeling of meat, including where production of the meat (born, raised, or slaughtered) occurred. A primary issue in the case is whether the government-compelled disclosure violates the First Amendment by forcing companies to provide such detail about their products without advancing a sufficient governmental interest. The trial court rejected this claim, as did a 3-judge panel of the appeals court, and the full appellate court affirmed.

The issue in the case is "Whether, under the First Amendment, judicial review of mandatory disclosure of 'purely factual and uncontroversial' commercial information, compelled for reasons other than preventing deception, can properly proceed under Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985), or whether such compelled disclosure is subject to review under Central Hudson Gas & Electric v. PSC of New York, 447 U.S. 56 (1980)."

This case is all about the standard of court review for compelled speech about commercial products. The NAM filed an amicus brief arguing that Zauderer review, which makes it easier for the government to justify compelled speech, should be limited to situations involving consumer deception. Applying a stricter standard of review would not undermine disclosures aimed at protecting the public's health and safety, and the government can disseminate other relevant factual information itself without requiring companies to do so. Indeed, using a product's label to carry government messages could drown out a company's own messages about the product.

We also argued that even if the more deferential Zauderer-type review is accepted, the government must still show that the compelled disclosure is "purely factual and uncontroversial". Some compelled disclosures strongly imply that the product at issue is inferior or morally tainted, forcing companies to denounce themselves. It is critical that the government be held to a stricter standard of review under such conditions.

On July 29, the court ruled 9 to 2 to uphold the regulation. The majority found that First Amendment interests are much weaker for disclosure laws than for laws suppressing speech, and that the government had a substantial interest in requiring labels so that consumers can choose American products, long-standing labeling requirements can be extended to food items, and so that consumers can react in the event of a food-borne illness outbreak. It found the labeling purely factual and uncontroversial, and that the requirement did not restrict or chill commercial speech.

Two judges strongly dissented, saying the majority had decided to "bust the mainspring of commercial speech jurisprudence." These dissenters said that the First Amendment's protection from government coercion "has now been reduced to an eerie echo of a supermarket tabloid’s vacuous motto: the government may compel citizens to provide, against their will, whatever information '[i]nquiring minds want to know!'"


Related Documents:
NAM brief  (April 23, 2014)

 


Government Contracting -- 2014



BP Exploration & Prod. Inc. v. McCarthy   (S.D. Texas)

Validity of broad debarment order for EPA violation

The NAM and other associations joined together in an amicus brief in a federal district court in Texas challenging an EPA order debarring all worldwide affiliates of BP from government contracts and leases. The case arose out of the Deepwater Horizon blowout in the Gulf of Mexico, which resulted in a plea agreement with BP Exploration and Development Company. After that company reached the plea agreement, EPA suspended the company, as well as its parent company and 19 other BP affiliates, preventing all of those companies from entering into any new federal procurement contracts and other transactions with the government. It also suspended the corporate headquarters from federal contracting by designating the headquarters a “violating facility” under the Clean Water Act (CWA).

BP sued EPA, arguing that the suspension orders exceeded EPA’s statutory authority. Our amicus brief supported this view, arguing that the statute clearly provides for mandatory disqualification from federal contracts “if the contract is to be performed at any facility at which the violation which gave rise to such conviction occurred, and if such facility is owned, leased, or supervised” by the convicted person. It was improper for EPA to designate the corporate headquarters as the violating facility because there was no CWA violation at that location. All of the conduct charged by EPA and agreed to in the plea agreement occurred on the rig, not at the headquarters.

This is another is a series of cases challenging EPA’s efforts to grant itself more power by broadening the language of one of its authorizing statutes. The automatic disqualification provision of the Clean Water Act was intended to exclude a facility from eligibility for contracts until the violating condition of the facility is corrected – at that point the facility again becomes eligible for contracts. EPA’s actions in this case punish the company as a whole under a statutory provision that does not allow that.

Moreover, EPA expanded its disqualification order to include all BP “affiliates,” including those in Singapore and Oman. This action was not supported by any justification grounded in the public interest, and the punishment threatens to undermine government contracting. The punishment was intended to send a message, but it was an unlawful abuse of EPA’s discretion to do so without any public interest justification.

In March, 2014, BP and EPA reached an administrative agreement under which EPA agreed to end the suspension and debarment of BP and its worldwide affiliates from federal contracting.


Related Documents:
NAM brief  (December 2, 2013)

 


Government Regulation -- 2014



New York Statewide Coalition of Hispanic Chambers of Commerce v. New York City Dept. of Health and Mental Hygiene   (New York Court of Appeals)

Challenging New York City's portion cap on certain drinks

When New York's Board of Health lost in the appeals court in a case challenging the city's portion cap rule that bans certain sales of large sugary drinks, it appealed to the Court of Appeals, New York's highest court. The NAM participated as an amicus in the lower courts, summarized here.

The NAM filed another amicus brief in this final appeal, arguing that the Board failed to consider superior options to its top-down regulation, namely industry-led solutions and public-private partnerships. We also challenged the authority of the Board to engage in the cost-benefit analysis that this kind of regulation requires, and that the solution it came up with is not sufficiently connected to its objective. The process was also not open and transparent, and the regulation draws arbitrary lines and creates nonsensical loopholes that undercut its value.

On June 26, 2014, the high court ruled that the NY City Board of Health exceeded its regulatory authority, engaging in law-making without any legislative delegation or guidance from the City Council. It found that the Board of Health has no inherent legislative authority, but may only adopt rules necessary to carry out authority delegated to it by federal, state or local law. By deciding to reduce sugary beverage consumption by limiting container size, the Board made value judgments balancing public health, economic consequences, tax implications for small business, and personal autonomy -- choices reserved for the legislative branch.

This is yet another example of a government agency assuming power without the authority to do so. Whether at the city or local level, or at the federal level from agencies like the Environmental Protection Agency or the Department of Labor, the NAM will continue to challenge such overreach and make sure that the courts step in to keep the executive branch within its constitutional bounds.


Related Documents:
NAM brief  (April 25, 2014)

 


International -- 2014



Republic of Argentina v. NML Capital, Ltd.   (U.S. Supreme Court)

Contract enforcement with sovereign nations

On April 3, 2014, the NAM filed an amicus brief in the Supreme Court advocating the necessity of contract enforcement with sovereign nations in emerging markets. On April 21, the Supreme Court heard oral arguments over whether post-judgment discovery in aid of enforcing a judgment against a foreign state can be ordered with respect to all assets of a foreign state regardless of their location or use, as held by the Second Circuit, or is limited to assets located in the United States that are potentially subject to execution under the Foreign Sovereign Immunities Act of 1976 (FSIA). The NAM brief argues that limiting discovery against foreign states would undermine the enforcement of valid commercial contracts. Further, extending FSIA immunity to post-judgment discovery against foreign states would necessarily impede discovery against state-run companies. This would hurt all U.S. manufacturers attempting to enforce contracts with foreign sovereign nations.

The Court ruled that no provision of the FSIA immunizes a foreign-sovereign judgment debtor from post-judgment discovery or information concerning its extraterritorial assets. The FSIA only provides two types of immunity: the first is jurisdictional immunity, which Argentina waived, and the second prohibits the seizure of assets, but says nothing about discovering what they are. The Court clearly stated that there is no prohibition of post-judgment discovery. Although Argentina and the United States raised concerns that affirming the discovery order would strain foreign relations, the Court determined that such concerns should be addressed by the legislative branch and not the judicial branch.

 


Labor Law -- 2014



Banner Health Sys. v. NLRB   (D.C. Circuit)

Challenging NLRB decision undermining confidentiality of investigatory interviews

This case involves an employer who asked employees not to discuss their complaints about co-workers with others while an investigation was ongoing. The NLRB ruled that an employer violates employee union-organizing rights when it has such a blanket policy, and that employers must “first determine whether in any given investigation witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.”

The NAM and other business groups submitted an amicus brief in support of the employer, stating that the NLRB was incorrect in its decision because the Board failed to take into account the challenges employers will now face when conducting an investigation. For example, with the Board’s decision an employer may not be able to uncover the entire story because employees will not come forward if they know the investigation is not confidential. Additionally, the amicus brief pointed out the Board ignored its previous decisions on investigations and overturned decades of its own precedent on the matter. The Board’s decision places an enormous burden on employers to justify the confidentiality of their investigations prior to interviewing all the witnesses or even assessing the situation.

The D.C. Circuit sent the case back to the NLRB. In June 2015, the NLRB again ruled the employer’s confidentially policy violated the NLRA, and Banner again appealed to the D.C. Circuit. The NAM also filed an amicus brief in the second appeal.


Related Documents:
NAM brief  (January 14, 2013)

 

Cochran v. Schwan's Home Service Inc.   (California Supreme Court)

Employee reimbursement for a personal item used for work purposes

On September 29th the NAM submitted an amicus letter to the Supreme Court of California supporting Schwan’s Home Service’s Petition for Review in the case of Colin Cochran v. Schwan’s Home Service. The case asks if an employee is owed reimbursement for a personal item used for work purposes even if the employee incurred no additional costs. California Labor Code Section 2802 requires that employers reimburse employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” The trial court ruled that calculating compensation for use of personal item at no cost would be too hard to calculate. However, the Court of Appeals (CoA) held that “The answer is that reimbursement is always required.” Nothing in the language of the decision limits the analysis to cell phones, and thus employees could be owed compensation for any number of mundane personal items utilized in a work context, even if the employee suffered no loss or expenditure. We argued that this ruling is so broad as to be completely unworkable, as well as completely unreasonable. Additionally, the Private Attorney General Act allows for civil fines to be levied against an employer for any violation of the Labor Code, thus compounding innocent failures to reimburse into disproportionate and frivolous fines. Thus, the NAM argued that the Supreme Court of California should take the decision up for review.


Related Documents:
NAM brief  (September 29, 2014)

 

In re Purple Communications, Inc.   (NLRB)

Protecting employer email systems

The NAM and our association allies filed an amicus brief with the NLRB arguing that the Board should not create an exception for employer owned email from the longstanding rule that employees generally have no right to use employer-owned property, equipment, or materials for purposes of Section 7 organizing activities, as long as the employer’s restrictions on such usage are not discriminatory. There is no discrimination in keeping the use of employer email systems restricted to legitimate business purposes and there are many alternatives available for these communications.

On December 11, 2014 the NLRB issued a decision the Purple Communications, Inc case. The 3-2 decision overturns the 2007 Register Guard case, and holds that employees now may use email for union-related communications during nonworking time. The NAM filed a brief with the NLRB arguing against this possible outcome.


Related Documents:
NAM brief  (June 16, 2014)

 

Integrity Staffing Solutions, Inc. v. Busk   (U.S. Supreme Court)

Whether security screening time is compensable work

On June 4th the NAM filed an amicus brief in the Supreme Court in Integrity Staffing v. Busk. This case presents the question of whether routine post shift security screenings of employees are compensable under the FLSA. Such screenings are conducted by many employers, as in this case, to help prevent theft. The resolution of this case could also have an effect on the compensability of the entire broad range of pre and post-shift screenings, conducted by employers to ensure the security of employers’ property and the safety of employees and the public. Until the 9th Circuit’s decision, employers have been able to rely on a uniform body of case law holding that security screenings are not compensable under the Portal-to-Portal Act of 1947, 29 U.S.C. §§ 251-262, as applied by this Court and regulations adopted by the Department of Labor.

The Ninth Circuit’s decision undermines the decades-old understanding of the Portal-to-Portal Act as interpreted by the Supreme Court in Steiner and Alvarez and by the Department of Labor. In holding time spent in post-shift security screenings to be compensable, the Ninth Circuit incorrectly applied the well-established “integral and indispensable” test and instead developed a new approach based on its view that the screenings were compulsory and done for the employer’s benefit. In so ruling, the court did away with the requirement under the Portal-to-Portal Act of a close and intertwined relationship between the productive work for which an employee is hired and the activity for which the employee seeks additional compensation. The court’s rule would disrupt established workplace practices imposing an unwieldy test that has already increased litigation. The Solicitor General has also filed an amicus brief in the case supporting the legal arguments raised by Petitioner and the NAM brief.

On December 9, 2014 the U.S. Supreme Court ruled unanimously that the Fair Labor Standards Act (FLSA) does not require employers to compensate employees for the time spent in security checks before and after the work day. The ruling reversed a decision by the U.S. Court of Appeals for the Ninth Circuit and reinforces arguments asserted in the amicus brief filed by the NAM and a coalition of industry groups.


Related Documents:
NAM brief  (June 4, 2014)
NAM brief  (November 7, 2013)

 

Macy's, Inc.   (NLRB)

Challenge to micro-unions

The NLRB’s Specialty Healthcare decision favoring micro-unions has led to numerous cases involving the definition of a bargaining unit. In Macy’s Inc., the Board’s regional director decided that employees of the fragrance and cosmetic departments at Macy’s could form their own union. The regional director found that the small group of employees was an appropriate unit because they were readily identifiable as a group and shared a community of interest. Moreover, the burden to show that the small unit is inappropriate is on the employer, who would have to demonstrate that a larger unit shares an overwhelming community of interest with the smaller unit. Interestingly, the previous year, the union unsuccessfully tried to organize a wall-to-wall unit in the entire store.

The NAM filed an amicus brief urging the Board to overturn the regional director’s decision. The Board’s policy conflicts with the rights of employees who do not want to form a union by allowing them to be gerrymandered out of the bargaining unit. In effect, if the majority of employees in a facility do not favor forming a bargaining unit, they can be relegated to a minority status when a union selects a gerrymandered unit where it has majority support. The NAM argued that the burden should be shifted to the union to initially demonstrate that the a proposed smaller bargaining unit is constituted on factors other than union support and that the employees are readily identifiable as a group.

Manufacturers are starting to face a multitude of small unionized bargaining units, making management of the workplace much more difficult and harming their ability to compete. This is the fifth case since Specialty Healthcare in which the NAM has sought to change the Board’s policy and encourage the proper definition of bargaining units in manufacturing facilities.


Related Documents:
NAM amicus brief  (February 27, 2013)

 

Neiman Marcus Group, Inc.   (NLRB)

Challenging NLRB's policy promoting micro-unions

A small group of women’s shoe salespeople were handed a decision by an NLRB regional director that allowed them to hold a vote to unionize. The employer appealed, arguing that their group should include many more store employees that have common workplace interests.

The NAM and other business groups filed a brief 6/13/12 arguing that the NLRB’s recent decision in the Specialty Healthcare case improperly allows this kind of micro-union to be formed, and puts an unreasonable burden on employers to show that a large group is more appropriate. The regional director had ruled that the employees at the store may serve different functions and thus vary in skills to the point that they qualify to form multiple unions. The NAM argued that Congress intended that each case be determined on its own, rather than having the NLRB impose a blanket determination for all cases that a proposed group is valid unless the employer can show otherwise.

The brief noted that all employees have a statutorily protected “right to refrain from” unionizing activities, and micro-unions prevent those employees from exercising the right to reject a union.

Furthermore, the Board abused its power by adopting its new standard in the Specialty Healthcare case when it should have gone through formal notice-and-comment rulemaking procedures.

Finally, it is bad policy to favor micro-unions, because they prevent employees from performing varying job functions, thus inhibiting employee skill development. They also lead to “endless multiple negotiations, conflicting union demands and contract obligations, and burdensome administrative duties.” Micro-unions may foster disruptive employee and union rivalry, as well as situations where one small group of employees could shut down an entire location.


Related Documents:
NAM brief  (June 13, 2012)

 

Nestle Dreyer's Ice Cream Co. v. NLRB   (4th Circuit)

Forming micro-unions under a community of interest standard

The NAM filed an amicus brief on July 10, 2012, arguing that the ruling in Specialty Healthcare, which allows very small numbers of employees to form a union, should be overruled because it violates provisions of the National Labor Relations Act (NLRA). That decision creates policy implications that will upset and reduce American investments and competitiveness. We argued that Specialty Healthcare prevents all of the employees from fully controlling the creation of the union. This violation allows micro-unions of as little as 2 employees to circumvent employees who do not wish to unionize. Further, by its ruling in Specialty Healthcare, the NLRB does not determine bargaining units “in each case,” and gives nearly all the control of determining who will be in the union to a very small group. The labor uncertainty from this precedent endangers investment in manufacturing, as employers would be required to deal with multiple and often conflicting unions.

In 2014, the court vacated and remanded the case to the NLRB. The original decision had been made by a Board that was ruled unconstitutional by the Supreme Court in the Noel Canning case. In 2016, the 4th Circuit denied Nestle Dryer’s petition for review, stating the NLRB was correct in allowing a maintenance-only bargaining unit, holding that the maintenance workers shared a community of interest distinct enough from the production workers for them to have their own bargaining unit.


Related Documents:
NAM brief  (July 10, 2012)

 

Thyssenkrupp Waupaca, Inc. v. DeKeyser   (U.S. Supreme Court)

"Nature of the work" requires employees to don, doff and shower on-site

On 8/27/14 the NAM supported review of this case in the Supreme Court. The issue presented revolved around whether the “nature of the work” at Waupaca’s foundries required employees to don, doff and shower on-site. Plaintiffs contended that foundry dust containing silica and other chemicals made the work so hazardous that on-site clothes changing and showering was required by the nature of the work. The district court disagreed and granted summary judgment. The Seventh Circuit reversed, finding that there was a factual dispute over whether the nature of the work required on-site donning, doffing and showering.

This case is very important to manufacturers. The Seventh Circuit’s position takes the determination of health and safety out of the hands of the legislature and places it in the hands of each district court judge across the country. This is not the role the courts should play, and such a perspective creates instability and unpredictability, and increases costs on business and ultimately harms the employees.

The NAM’s brief argued that OSHA had promulgated standards for foundries which do not require on-site clothes changing and showering after work. This bright-line rule has been referenced in the donning and doffing space since roughly 1968. It provides a clear and easily administrable criterion for determining whether time spent changing clothes and showering is compensable under the Fair Labor Standards Act (FLSA). If these activities can be performed offsite, at home or elsewhere, they are not compensable. If courts are going to be allowed to order them to pay for time spent changing clothes and showering when, as here, no federal or state agency requires that this conduct be performed on-site, and no rule of the employer requires that these activities be performed on-site, the impact of such a finding could be devastating. A flood of lawsuits would be filed in the foundry and other manufacturing industries, exposing these employers to huge potential payouts from overtime and require payment for additional hours of work at time and one-half. It is further likely that two to three years of back-pay would be in issue in every case, and all employees during this time period would potentially have a claim under the FLSA or Rule 23, the financial consequences would be staggering.

On November 3, 2014, the Court declined to hear this appeal.


Related Documents:
NAM brief  (August 27, 2014)

 


Product Liability -- 2014



Anthony v. Georgia Gulf Lake Charles LLC   (Louisiana Supreme Court)

Need for proof of causation in toxic tort cases

The NAM and five other associations filed an amicus brief in the Louisiana Supreme Court to underscore the need for proof causation in toxic tort cases. In this case, we argued that the lower courts allowed a case to proceed without proof of actual exposure and specific causation on injury. The courts' misapplication of the standard of causation in toxic tort cases has significant and far-reaching ramifications for manufacturers. In addition, the lower court's deviation from standard principles of causation is a decision that should be made by the legislature, not by the courts. Loosening the legal rules applicable to specific causation will increase costs for manufacturers doing business in Louisiana.

On Nov. 28, 2014, the Louisiana Supreme Court declined to hear this appeal.


Related Documents:
NAM brief  (October 10, 2014)

 

Barabin v. AstenJohnson, Inc.   (9th Circuit)

Use of "any exposure" theory of causation in asbestos suit

This is another case that illustrates a major battleground in asbestos litigation today. The issue involves attempts by plaintiffs to hold manufacturers liable for increasingly trivial exposures to hazardous substances. In this case, a worker was exposed to amphibole insulation products sufficient to cause his mesothelioma, but he sued the manufacturer of dryer felts -- used in his workplace -- because they contain chrysotile asbestos fibers. Exposure to those fibers was minimal (if any), but the plaintiff relied on the “any exposure” theory, i.e., that any occupational exposure to asbestos, no matter how slight, is sufficient to be a substantial contributing factor to the plaintiff’s disease.

The NAM filed an amicus brief opposing the $11 million verdict. The trial court accepted expert testimony that any occupational exposure above ambient level was sufficient for causation. We opposed this theory because it is a litigation construct that is not found in any published and peer-reviewed article or textbook. It does not satisfy normal standards for expert testimony and is irreconcilable with the fundamental toxicology principle relating to dosage.

On Nov. 16, 2012, the Ninth Circuit reversed the verdict and told the trial court to have a new trial. It found that the court failed to conduct a Daubert hearing to determine the relevance and reliability of the expert testimony allowed in the first trial. It concluded that the trial judge must assess the scientific methodologies, reasoning, or principles that proposed expert witnesses will apply. It also recognized that the decision to admit or exclude expert testimony is often the difference between winning or losing a case, underscoring the importance of the role of a trial judge as a gatekeeper for such evidence.

However, on March 25, 2013 the Ninth Circuit voted to rehear the case en banc following a petition for rehearing by Barabin. Barabin’s petition argued that the remand to the trial court should be limited to liability, and therefore that the $11 million verdict should stand if the court finds AstenJohnson, Inc. liable. In addition, the petition argued that the failure to conduct a Daubert hearing was harmless error and the Ninth Circuit rule requiring a new trial where a violation of the Daubert rule cannot be said to be harmless should be reversed. Under the en banc procedure, the Ninth Circuit convened an eleven (as opposed to the normal three) judge panel to decide the case anew.

On Jan. 15, 2014, the en banc panel ruled that the trial court committed reversible error by failing to use the Daubert standards before allowing expert testimony. It also ruled that an appeals court can determine whether the expert's testimony was indispensable to the case, and if so, grant judgment for the defendant if the testimony should not have been admitted into the trial. This decision is an important affirmation of the important role of trial judges to thoroughly vet expert testimony to ensure its relevance and reliability. It also bolsters the importance of proceedings before the appeals court, which can itself reverse judgments based on faulty "expert" testimony.


Related Documents:
NAM amicus brief  (May 26, 2011)

 

Bostic v. Georgia-Pacific Corp.   (Texas Supreme Court)

Opposing "any exposure" theory of causation

How much exposure to asbestos is enough to prove that the exposure caused mesothelioma? Texas has adopted a reasonable rule requiring that there be some demonstration that the dose must be sufficient to cause disease according to epidemiology studies of similarly exposed populations. This case involved an effort to say that any exposure is a substantial contributing factor to the ultimate disease, regardless of dose.

The NAM and others filed an amicus brief 8/21/13 urging the Texas Supreme Court to reaffirm its rule that any exposure is not enough to prove causation. There is no reason to depart from this rule just because the exposure is to asbestos. This rule is not harsh, nor is it an impossible standard, but simply allows plaintiffs with consequential expsoures that are consistent with the epidemiological literature showing disease to have their day in court.

On 7/11/14, the court affirmed the lower court, ruling that merely some exposure is not sufficient to establish causation. Dose matters, including in mesothelioma cases. It found that a less demanding standard would essentially result in absolute liability against any company whose asbestos-containing product crossed paths with the plaintiff throughout his entire lifetime.

However, the court also ruled that plaintiff was not required to prove that but for [the plaintiff's] exposure to [defendant's] asbestos-containing joint compound, [he] would not have contracted mesothelioma." This means that even if the plaintiff had been exposed to asbestos elsewhere, he still might have been able to prove causation from exposure to a sufficiently high dose of the defendant's product.

The final ruling means that the initial trial court award of $6.8 million in compensatory damages and $4.8 million in punitive damages was nullified.


Related Documents:
NAM brief  (August 21, 2013)

 

Company Doe v. Public Citizen   (4th Circuit)

Confidentiality of company subject to improper complaint on CPSC website

This case involves an attempt by the Consumer Product Safety Commission (CSPC) to post a materially inaccurate report submitted to its new online database of allegedly unsafe products, saferproducts.gov. Before a criticism of a company's product is posted on the website, the CPSC must give the affected company an opportunity to respond. Here, the affected company sued to prevent publication of a materially inadequate report, and the trial court agreed, on 3 separate appeals. The CPSC’s own experts found a lack of association between the risk of harm alleged in the report and the product at issue, which its epidemiological investigation confirmed. After repeated attempts to prevent the CPSC from posing the inaccurate information, the company sued.

The trial court agreed, enjoining the Commission from posting the report, and redacting the company name from public display in the court proceedings. Three consumer groups intervened and appealed, arguing that the company name should be disclosed as public court documents, even though the challenged reports were inaccurate. Media organizations, the AARP, and the ACLU raised similar arguments.

The NAM led a group of associations in filing an amicus brief supporting the court's decisions that the report was inaccurate and should not be posted, and that the company name must continue to be confidential. Disclosure of the name would sacrifice the right the company sought to safeguard by filing suit. The NAM, joined by the American Coatings Association, Association of Home Appliance Manufacturers, Manufacturers Alliance for Productivity and Innovation, Recreational Off-Highway Vehicle Association, and Specialty Vehicle Institute of America explained how certain aspects of the database, as implemented by the CPSC, provide a high risk of submission of erroneous information and allow the potential for misuse. It is important that businesses have a means of addressing false reports before publication without being disclosed, or else their remedy would be useless. If saferproducts.gov includes materially inaccurate reports, it may lose any potential value as a reliable source of product safety information for the public.

We have long fought to prevent the CPSC from providing inaccurate information on its website. Having to disclose the name of a company falsely accused of product safety issues unfairly punishes the company and does nothing to further consumer safety.

On 4/16/14, the Fourth Circuit overturned the trial judge's ruling, holding that it violated the public's "right of access" under the First Amendment. Ordering the case unsealed in its entirety, the appeals court found that the consumer groups had standing to pursue the appeal even though the CPSC did not itself appeal, on the grounds that consumer groups have a public right of access to court proceedings and they advocate on issues relating to the CPSC. That right of access outweighs the desire of a corporation to protect its corporate image, "notwithstanding the negative publicity those documents may shower upon a company." It found no credible evidence supporting the company's fear of reputational or economic injury, particularly since the trial court vindicated the company and its product. One of the judges wrote separately that publication of false and misleading reports could be catastrophic to the company, and the result might be different if it could prove that publication would cause substantial and irreparable economic harm.


Related Documents:
NAM amicus brief  (April 29, 2013)

 

ExxonMobil Corp. v. City of New York   (U.S. Supreme Court)

Liability for MTBE in NYC water

New York City sued various companies for alleged low-level ground-water contamination from MTBE, a gasoline additive mandated by federal law and for which there was no safer, feasible alternative. The trial court awarded a judgment of more than $100 million, which was affirmed by the U.S. Court of Appeals for the Second Circuit. ExxonMobil appealed to the Supreme Court, asking the Court to decide (1) whether a claim is ripe when it is predicated on a potential future injury and a mere good faith intent to use the water in 15 to 20 years, and (2) whether the federal oxygenate mandate preempts a state-law tort award that imposes retroactive liability on a manufacturer for using the safest feasible means available at the time for complying with that mandate.

The NAM and other business groups filed an amicus brief 2/14/14 supporting Supreme Court review of this case. We argued that the lower court allowed a suit based on a speculative chain of possibilities, in violation of existing standing requirements that litigants have an injury in fact. Allowing suits in such a case would open the floodgates to similar litigation alleging damage from the use and potential use of safe drinking water at water supply systems around the country. The lower court's ruling effectively redefines the term "drinking water" to mean "pristine water," so that the presence of any foreign substance constitutes a concrete injury.

We also underscored our concern about holding a company liable under state tort law for complying with a federal mandate with the safest feasible means available. The lower court came to this conclusion despite the fact that the jury in this case rejected the City's argument that there was a safer, feasible alternative to MTBE.

The Supreme Court declined to review this appeal on April 21, 2014.


Related Documents:
NAM brief  (February 14, 2014)

 

In re New York City Asbestos Litigation   (New York Supreme Court)

Punitive damages in asbestos cases

The NAM filed an amicus brief 11/1/2013 in a trial court in New York City in a case where a nearly 20-year case management order deferring the imposition of punitive damages in asbestos cases is being reconsidered. The rule has been in effect to help preserve limited assets so that future asbestos claimants will be able to recover something for their injuries. The NAM supported continuation of the order to encourage settlements, prevent longer and more complex trials, and discourage delays for further appeals.

Punitive damages are designed to punish wrongful acts, but to charge companies with such damages today for acts committed some 40 or 50 years earlier, serves no corrective purpose. Also, many suits today are against companies that were not responsible for the asbestos in the first place.

We argued that punitive damages in asbestos cases deplete available funds for current and future victims, particularly when imposed in multiple cases. Even today, the influx of asbestos claims shows no signs of abating, and projections are that they will continue for the next 35 to 50 years. Giving some current claimants punitive damages not only forces later victims to bear the punishment, but also negatively affects the defendants’ employees, who may lose their jobs, other businesses that rely on the defendant companies for income, and shareholders such as pension funds and retirement funds.

Finally, we warned that punitive damages are wild cards that present significant obstacles to settlement negotiations, and changing the order will encourage more plaintiffs to file their suits in New York, particularly since there is no cap on punitive damages there.

Unfortunately, on 4/8/14, the judge modified the case management order to allow punitive damages claims to be made after the evidentiary phase of each trial, and if the jury determines that punitive damages are warranted, there will be a separate trial before the same jury to assess the amount to be awarded. The judge questioned how much allowing punitive damages would force businesses into bankruptcy, but emphasized the constitutional limits on them and warned the plaintiffs' bar "not to overstep this permission by attempting to seek punitive damages indiscriminately," but rather only for the "most egregious conduct," and to present "a valid reference to corrective action." It remains to be seen whether the plaintiff's bar will heed this caution.


Related Documents:
NAM amicus brief  (November 1, 2013)

 

Lincoln Electric Co. v. Travelers Cas. & Surety Co.   (Ohio Supreme Court)

Use of "all sums" approach to aggregate losses for umbrella insurance coverage

This is an insurance coverage case. It arose from thousands of claims against a company for bodily injury from exposure to welding products litigated over a 13-year period. While insurance covered some costs, a dispute arose over coverage claims when multiple insurers were involved. The manufacturer reached an agreement with its primary insurance company to cover a portion of its costs spread over a period of years, and it sued the umbrella insurance carrier to cover any costs above the threshold point for the umbrella coverage.

The NAM and other groups filed an amicus brief supporting the manufacturer's position. We argued that the "all sums" standard insurance policy language at issue here is common around the country and means that the policyholder has the exclusive right to select any policy of its choice to cover lengthy liabilities spanning multiple years and multiple insurance policies. The terms of a settlement agreement with the underlying primary insurance carrier should not affect this result.

Our brief warned the court of the drastic effects of a ruling the other way. The reasonable expectations of policyholders in many states would be violated, making it much more difficult to settle insurance claims and increasing exponentially the number of disputes that will need to be addressed by courts rather than by private parties through mutual agreement.

The case was settled without opinion.


Related Documents:
NAM brief  (November 23, 2013)

 

Sears, Roebuck and Co. v. Butler   (U.S. Supreme Court)

Predominance of common questions in product liability class certification

Lawyers for a few purchasers of front-loading washing machines have been trying for several years to get final approval to represent a large class of people who they claim should be able to sue Whirlpool and Sears for making and selling machines that may have mold and odor problems. Two federal appeals courts certified classes even though most members of the class may not have experienced such problems or any other injury. In 2013, the Supreme Court threw out those decisions and sent the cases back for reconsideration in light of another recent decision on class certification.

The lower courts again certified the classes, and Sears and Whirlpool appealed to the Supreme Court again. The NAM filed an amicus brief stating our view that those courts took too expansive a view about certification. The vast majority of class members in both cases have suffered no injury at all, and the different washing machine models have undergone several design changes that undermine the argument that there are issues common to all class members. The courts should not promote efficiency of litigation to certify large classes where common issues among class members do not predominate, as required by court rules.

Class certification in meritless circumstances where consumers have suffered no cognizable injury encourages class action abuse. Ultimately, consumers are harmed by these class certifications because businesses have little choice but to incorporate the cost of frivolous product liability litigation and litigation avoidance into the prices paid by their consumers.

On Feb. 24, 2014, the Court declined to review this appeal.


Related Documents:
NAM amicus brief  (November 6, 2013)

 

Tincher v. Omega Flex, Inc.   (Pennsylvania Supreme Court)

Modern product liability standards

On June 4, 2013 the NAM filed an amicus curiae brief urging the Pennsylvania Supreme Court to adopt the modern product liability standards followed by a majority of state courts. The court should move from strict liability to negligence-based standards in cases involving design defects and failure-to-warn claims. Pennsylvania's current approach is highly unfair to defendants and results in a confusing and contradictory body of law, which the modern approach reconciles.

In particular, Pennsylvania’s product liability law has become confused and unworkable following attempts to separate strict liability and negligence concepts. Over time, the state courts have tried to carve out particular types of cases from strict liability principles, but the result is confusing to litigants. By following the mainstream and adopting the Restatement Third, Torts: Product Liability (1998), Pennsylvania would create a more fair and predictable system. We also argued that Pennsylvania should apply these principles to all pending cases.

The issue arose in a case brought by a homeowner who claimed that corrugated stainless steel tubing used for a gas supply line was too thin, resulting in a fire and destruction of the house when lightning struck.

On 11/19/2014, the court issued a lengthy opinion announcing that a plaintiff pursuing a cause of action based on strict liability must prove that the product is in a "defective condition" by showing either that "(1) the danger is unknowable and unacceptable to the average or ordinary consumer, or that (2) a reasonable person would conclude that the probability and seriousness of harm caused by the product outweigh the burden or costs of taking precautions. The burden of production and persuasion is by a preponderance of the evidence." The court declined to adopt the Restatement (Third) of Torts with a comment that "appreciation of certain principles contained in that Restatement has certainly informed our consideration of the proper approach to strict liability in Pennsylvania . . . ."


Related Documents:
NAM brief  (June 4, 2013)

 


Punitive Damages -- 2014



Oleszkowicz v. ExxonMobil Corp.   (Louisiana)

Punitive damages

The NAM supported an appeal by ExxonMobil of a $10 million punitive damages verdict, reduced to $2.4 million, for workplace exposure to naturally occurring radioactive material at a pipeyard. We joined in an amicus brief with the Louisiana Assn. of Business and Industry, the American Tort Reform Association, and the American Chemistry Council, arguing that the trial court should have instructed the jury not to allow punitive damages for alleged harm to nonparties, and that it should have dismissed the case because it duplicated an earlier trial involving the same plaintiff, the same defendant, and the same alleged conduct. The Louisiana Supreme Court agreed to hear this appeal, and reversed the punitive damages award.

The U.S. Supreme Court has made it clear that a jury must be instructed not to award punitive damages to one plaintiff based on alleged harm to a completely different person. In this case, the plaintiff repeatedly accused the defendant before the jury of causing harm to other individuals not party to the case. Despite the accusations, the lower court failed to issue this instruction, and the Louisiana Supreme Court fixed the error.

Because this case involved punitive damages claims that were previously rejected, we argued in a second brief on the merits that "Allowing one jury to say 'no' to punitive damages, only later to have another jury say 'yes' is the very meaning of arbitrary punishment" in violation of constitutional due process rights. Courts are supposed to use the legal doctrine known as res judicata to prevent one person from being sued again and again by the same plaintiff after that plaintiff loses the first time. Additionally, Louisiana law specifically calls on courts to preclude claims already raised, in order to promote judicial efficiency, to protect defendants from multiple lawsuits, and to prevent inconsistent decisions.

We also argued that courts should be particularly cautious about allowing identical claims to be relitigated when the claims involve punitive damages, since they are intended as a quasi-criminal punishment and should be avoided. Like double jeopardy in criminal cases, defendants should not be forced to defend multiple times the imposition of punitive damages where that issue from that plaintiff has already been resolved.

The Louisiana Supreme Court ruled 12/9/14 that allowing the plaintiff to relitigate the punitive damages issue amount to two bites at the apple, and the doctrine of res judicata prohibits that. This is an important affirmation of the rule that prevents parties from relitigating issues that have aleady been decided in prior litigation.


Related Documents:
NAM brief on the merits  (May 29, 2014)
NAM brief  (February 6, 2014)

 


Settlement Agreements and Consent Decrees -- 2014



BP Exploration & Prod. Inc. v. Lake Eugenie Land & Dev., Inc.   (U.S. Supreme Court)

Validity of settlement class without Art. III jurisdiction

This is an appeal to the Supreme Court concerning the validity of claims against BP arising from a settlement agreement relating to the oil spill from the Deepwater Horizon in the Gulf of Mexico. The NAM and other business groups filed an amicus brief urging the Court to review the lower court’s ruling because it ignored fundamental principles of constitutional law by certifying a plaintiffs’ class even though a large proportion of the class lacked any valid claims under applicable state law. Our brief warned against certifying either litigation classes or settlement classes without rigorous analysis of the common claims of the class members – and plaintiffs cannot demonstrate that the class members have the same injury, let alone any injury at all caused by the defendants.

The lower court found that class members who suffered no injury at the hands of the defendant could recover from a class action settlement. Yet casting aside an injury requirement violates Rule 23 of the Federal Rules of Civil Procedure. In addition, Article III of the Constitution requires that all plaintiffs in court present a live and true “case or controversy,” and a class action where members of the class have suffered no injury caused by the defendants violates that requirement.

The result of the lower court’s ruling will be to allow improper settlements and distributions, discouraging future settlements, increasing litigation costs, and flooding the courts with complex, time-consuming and expensive cases. We urged the Court to review the decision and reverse it, but on 12/8/2014, it declined to hear the appeal.


Related Documents:
NAM brief  (September 4, 2014)

 

Lake Eugenie Land & Dev., Inc. v. BP Exploration & Prod. Inc.   (5th Circuit)

Validity of settlement agreements

A divided panel of the Fifth Circuit ruled against BP in its effort to seek relief from a Deepwater Horizon settlement agreement under which numerous claims were made even though they may not have arisen from the accident. BP has asked all the judges in that circuit to revisit the case. See our blog post here.

The NAM filed an amicus brief urging the court to recognize that settlement agreements are only possible when the parties can be sure that they will be implemented as written and consistently with governing law. The panel's ruling upends that expectation, making settlement a far riskier and much less desirable option. In this case, the panel disregarded the causation requirement enshrined in the settlement agreement and found that merely attesting to a causal link between the accident and their claimed injury was enough to give them standing. Standing requires more than just attesting to it -- courts must use a searching, evidence-based inquiry to make sure that members of a class action actually had injuries attributable to the accident.

On May 19, 2014, the Fifth Circuit, with 3 judges dissenting, declined to rehear this case en banc. The dissent argued that the case should be reheard because there was no causation between BP’s actions and certain parties’ alleged injuries, which allowed “undeserving non-victims” to recover from BP. Additionally, the dissent wanted to clarify ongoing confusion regarding standing in class action suits.


Related Documents:
NAM brief  (March 24, 2014)

 

United States v. Volvo Powertrain Corp.   (D.C. Circuit)

Court's power to liberally construe EPA consent decrees

A company negotiated a consent decree with EPA over Clean Air Act requirements applicable to diesel engines, and later a subsidiary not involved in the consent decree sought and received EPA approval to import diesel engines. A few years later, EPA sued that company, claiming the engines, most of which were never imported into the United States, violated the consent decree. A federal judge ordered $72 million in penalties.

That ruling was appealed, with the company arguing that the consent decree did not apply to this separate company, that most of the engines were never subject to EPA jurisdiction, and that ambiguous consent decrees should be strictly construed so as not to impose liability unless it is clearly encompassed by the agreement.

The NAM filed an amicus brief urging the appeals court to reverse. We argued that consent decrees like this involve companies that waive their right to contest whether a violation occurred and whether accelerated remedial action is authorized by law. Companies need the certainty that a settlement provides, and courts should not be able to broaden the terms of the settlement to impose penalties beyond those in the consent decree for actions not subject to the EPA regulations at issue. The trial court's ruling undermines the finality of consent decrees that motivates companies to substantially waive their rights under the law.

Consent decrees are a common settlement tool for businesses to achieve a clear and final resolution to enforcement actions whose outcome is uncertain for both the government and the regulated entity. They sometimes incorporate requirements that go beyond what the law requires or what the court could order without the agreement of the parties, as well as waiver of judicial review of debatable issues. Because of uncertain liability and draconian potential penalties, most regulated entities have little practical alternative but to "dance to the EPA's tune" and settle. Consequently, settlements must provide a clear and reliable understanding of what will be required, and courts must be careful to construe the agreements as written.

The trial judge decided to impose a sanction that was not explicitly excluded from the consent decree and was beyond what the law requires. On appeal, the D.C. Circuit affirmed, ruling that the consent decree applied to engines made at a plant owned by Volvo Powertrain, and that the amount of the fine was not an abuse of the court's discretion.


Related Documents:
NAM brief  (December 20, 2012)

 


Administrative Procedure -- 2013



Air Transport Ass'n v. Export-Import Bank   (D.C. Circuit)

Supporting Ex-Im Bank's loan guarantee review procedures

Providers of international airline passenger service sued the Export-Import Bank of the United States for approving financing assistance for U.S.-manufactured goods sold to Air India. They contended that the Bank must first conduct a detailed individualized economic analysis of the potential indirect effects that might result for U.S. competitors operating in downstream markets where the foreign customer may provide services using the exported goods. Thus, the case is all about how much economic scrutiny the law requires the Ex-Im Bank to do before it may approve export financing for goods manufactured in the United States for export.

The NAM filed a brief 1/2/2013 support Ex-Im's process, whereby the statute requires it to more carefully scrutinize the impact on domestic manufacturers, but does not require as thorough a review for much more indirect effects in service industries. We highlighted the importance of Ex-Im's approval process and its role in supporting nearly 300,000 American jobs at more than 3,600 U.S. companies, large and small. Streamlined review procedures for export financing at the Bank are critical to enabling it to respond effectively and nimbly to the export credit financing provided by foreign governments. This is particularly important since the Bank labors under certain structural disadvantages in offering countervailing assistance, and further roadblocks imposed in litigation by private parties will jeopardize its flexibility and the competitiveness of American manufacturers.

We also provided the court with a detailed analysis of the Bank's statutory authority to establish the streamlined system it employs. It has broad discretion to craft such procedures as may be appropriate, and has extensive experience with the kinds of guarantees at issue in this case.

On 6/18/13, the court sent the case back to the Bank to explain why it created a categorical exclusion from scrutiny for loan guarantees to help a foreign company provide air travel services. It must show why such guarantees can never cause adverse effects to U.S. industries and U.S. jobs. After the Bank provides such information, the trial court is expected to take another look at the lawsuit to determine if the Bank has met its statutory requirements.


Related Documents:
NAM brief  (January 2, 2013)

 


Alien Tort Statute -- 2013



Balintulo v. Daimler AG   (2nd Circuit)

Alien Tort Statute litigation against companies following US Government principles

In the past 30 years, the 220-year old Alien Tort Statute (ATS) has resulted in lawsuits against American manufacturers that have done business with foreign governments with controversial human rights histories. This case involves a lawsuit brought in a U.S. court by South African nationals against various manufacturers. The plaintiffs allege that 85 companies aided and abetted the apartheid regime of South Africa prior to 1994 by supplying it with manufactured goods.

Our amicus brief argued that courts should defer to the trade and foreign policy decisions of the U.S. Government and dismiss this suit. The Executive Branch long ago adopted a policy of commercial engagement with South Africa to promote foreign policy goals, and private companies need to be able to rely on that decision and others like it. Both the U.S and South African governments objected to this litigation, and companies that engage in such trade to help advance our national policy could be exposed to years of litigation and adverse publicity. In many cases, negative publicity is the intended result of the ATS litigation, and the dismissal of such suits years later cannot undo the economic and reputational damage inflicted on manufacturers. Business relationships with China, Colombia, Indonesia, Nigeria and other countries could expose companies to ATS suits in the future, we argued.

On August 21, 2013, a 3-judge panel of the Second Circuit found all the claims plainly barred by the Supreme Court's recent decision in Kiobel that federal courts may not, under the ATS, recognize common-law causes of action for conduct occurring in the territory of another sovereign. The case was sent back to the trial court to resolve any remaining issues unresolved by Kiobel.


Related Documents:
NAM brief  (August 24, 2009)

 

Kiobel v. Royal Dutch Petroleum Co.   (U.S. Supreme Court)

Corporate liability under Alien Tort Statute

On April 17, 2013, the Supreme Court issued a ruling that dramatically constrains efforts to expand the application of a 1789 statute, the Alien Tort Statute, beyond our borders. The law merely provides a forum in federal courts in the United States for allegations involving violations of the "law of nations," but often such cases involve foreign plaintiffs alleging acts occurring outside of the United States. This suit was brought by 12 Nigerian nationals claiming human rights violations by three oil companies.

The Court ruled that the presumption against extraterritoriality applies to suits under the Alien Tort Statute. That presumption means that a statute does not apply to activities occuring outside of the United States unless it says it does. The presumption helps prevent conflicts between our laws and those of other nations. The Court found it particularly important to apply in this context because ATS law is determined by the courts, not by Congress.

The NAM filed an amicus brief urging exactly what the Court concluded. Many foreign governments have protested the extraterritorial application of U.S. law by means of the ATS. We argued that properly applying the law of the place where the act occurred avoids the conflict that would otherwise result from applying U.S. law to conduct occurring in other countries, and promotes international harmony.

In addition, we countered an argument by the plaintiffs that relied on the "transitory torts" doctrine, i.e., that purports to allow lawsuits against a person regardless of where the injury occurs, as long as personal jurisdiction is satisfied. Our brief explained that transitory tort cases apply the law of the country where the challenged act occurred, rather than -- as the plaintiffs wanted -- the law of the United States, or international law as interpreted by U.S. courts. Such interpretations are complicated and lead to conflicting results, not only on the precise content of the law but also on jurisdictional issues. The Court rejected the plaintiffs' transitory torts argument.

This is a very important victory for American manufacturers, many of whom have been sued under the ATS for alleged activities that occur entirely in other countries. The NAM has filed amicus briefs in many of these cases to provide guidance on issues such as (1) whether the law of nations recognizes claims for aiding and abetting liability, (2) whether activities encouraged by U.S. foreign policy can lead to liability, and (3) whether the law of nations imposes liability on corporations as well as individuals.

When it was originally argued before the Supreme Court, this case involved whether the ATS applies to corporations, or only to individuals. The Second Circuit ruled that individual corporate executives can be sued, but not corporations. No corporation has ever been subject to any form of liability under the customary international law of human rights. The NAM filed an amicus brief supporting the view that there is no specific and universal view that corporations are subject to liability for the claims in this case, as is required in determining whether the law of nations has been breached. But we spent most of our brief supporting an alternative ground for dismissing this case -- that aiding and abetting liability under international law requires that the defendant acted with a purpose to facilitate the violations, not something less like mere knowledge of the conduct. That "purpose to facilitate" was not alleged by the plaintiffs. The purpose requirement is found in nearly every leading source for determining the content of customary international law, from the Rome Statute of the International Criminal Court, to a United Nations statute and study, to case law from the International Military Tribunal at Nuremberg, to opinions of foreign international-law experts. Moreover, courts should approach any expansion of ATS liability very cautiously to avoid intruding into matters of foreign relations and to respect the ability of foreign judicial systems to address matters like this that arise abroad.

After the first round of arguments in 2012, the Court sought briefing on the extraterritoriality issue and decided the case on that basis. Thus, in a future ATS case that does not have extraterritoriality problems, there still remain open questions about whether the law applies to corporations and whether they can be sued for aiding-and-abetting liability.


Related Documents:
NAM supplemental brief  (August 8, 2012)
NAM brief  (February 3, 2012)

 


Arbitration -- 2013



American Express Co. v. Italian Colors Rest.   (U.S. Supreme Court)

Validity of contractual waiver of class action arbitration

This case involves the validity of an arbitration provision in contracts with American Express and its credit card network. The provision precluded class action arbitration, and instead required individual proceedings to resolve disputes.

The case was appealed to the Supreme Court in 2009, with the NAM supporting the appeal, and the Court vacated the Second Circuit's ruling and sent the case back for reconsideration in light of its recent decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. See our summary of the case here.

Then, the Second Circuit refused to enforce the parties' agreements to arbitrate on an individual basis and allowed the plaintiffs' federal antitrust claims to proceed as a class action. That decision was appealed to the Supreme Court.

The NAM filed an amicus brief 8/29/2012 urging the Supreme Court to hear this latest appeal, which it did. We objected to the lower court's view that the arbitration clause may not be enforced if it would not be "economically feasible" for the plaintiffs to vindicate their federal rights in an individual arbitration. In other words, if the cost of arbitration and the potential reward did not make it feasible, a court could refuse to enforce an otherwise valid arbitration agreement. Our brief urged the Supreme Court to review this decision, because it is the product of an intense effort by the plaintiffs' bar to undermine the Court's decision in the Concepcion case underscoring the validity of arbitration. Such a result would call into question literally millions of arbitration agreements nationwide.

We also argued that the lower court misread the Concepcion case. Nothing in the Federal Arbitration Act makes a distinction based on whether a claim being arbitrated arises under state or federal law. The Supreme Court has already ruled that federal antitrust claims such as those in this case may be resolved through arbitration.

On June 20, 2013, the Court ruled 5 to 3 to overturn the Second Circuit's decision, thus validating arbitration provisions that prohibit class action arbitration. It found nothing in the Federal Arbitration Act that allows courts to invalidate waivers of class action arbitration on the ground that the cost of individual arbitrations exceed the potential recovery. Arbitration is a matter of contract, and neither the antitrust laws nor the rules of civil procedure guarantee an affordable procedural path to the vindication of every claim.

The NAM is committed to supporting arbitration as an effective way to resolve disputes without having to suffer the formalities, cost and delays of litigation in court. When plaintiffs ask the courts to allow class action arbitrations, the costs and risks multiply, often forcing manufacturers to needlessly devote excessive resources to resolving the claims. Instead, the courts should enforce voluntary agreements between manufacturers and their customers to arbitrate their differences individually.


Related Documents:
NAM brief  (August 29, 2012)

 


Benefits -- 2013



U.S. Airways, Inc. v. McCutchen   (U.S. Supreme Court)

Changing and enforcing language in an agreement between retirement plan and beneficiaries

An employer’s health plan paid the medical bills of an employee who was involved in a car accident. When the employee sued a third party for damages, the company plan sought reimbursement of the medical expenses from that judgment. The issue in this case is whether the employee is bound by the contract language in the company health care plan or whether a court can rewrite that language under equitable principles of law. The original plan terms gave absolute right of full reimbursement of those expenses to the plan. This issue -- whether a court can revise the terms of a health benefits contract –is critical to keeping employer health care costs under control. The Third Circuit’s decision in this case departs from similar cases in several other federal appeals courts.

On 4/16/13, the Court unanimously ruled that the health plan's clear contract terms govern, and the employee must pay back the conmpany's health plan. However, because the plan did not clearly specify how to handle the employee's attorney's fees, a 5-4 majority applied the "common-fund doctrine" as the best indication of the parties' intent, making the plan share the cost of the attorney needed to recover for the injuries to the employee. This is a victory for enforcing the terms of employee benefit plans according to the intentions of the parties.

 


Class Actions -- 2013



Amgen v. Connecticut Retirement Plans and Trust Funds   (U.S. Supreme Court)

Class action certification issues in fraud-on-the-market securities claims

On February 27, 2013 the Supreme Court resolved a split in authority between the federal circuits and held that proof of materiality is not required for class certification in a securities fraud class action, where materiality is a critical element to the violation. The defendant corporation sought to require the plaintiff to provide evidence of materiality at the class certification stage. The Court acknowledged that materiality ultimately must be proven to win the case, but that such proof is not required to certify the class. Materiality is established by an objective standard, which is common to the class as a whole. The plaintiff class was found to be “entirely cohesive: it would prevail or fall in unison.” At the class certification stage, the issue is whether common questions predominate, and the Court held that materiality does not bear on that inquiry. The class certification stage is meant to select the best method to resolve the dispute, not to adjudicate the merits of the case.

Because certification of class actions exerts substantial pressure on defendants to settle such cases, this decision will increase the defense costs of manufacturers, even when they have done nothing wrong.

 

Comcast Corp. v. Behrend   (U.S. Supreme Court)

Evidence and analysis for the certification of a class

In another important precedent for defending class actions, on March 27, 2013 the Supreme Court ruled that trial courts must apply a rigorous analysis to the prerequisites for class certification, particularly the commonality of the harm, even if the analysis overlaps with the merits of the case. In this case, class certification was inappropriate because damages could not be shown on a class-wide basis. This decision raises the bar for plaintiff class certification and lessens the burden on companies that are forced to defend or settle class actions that should not be certified in the first place.

In this antitrust class action, subscribers to Comcast’s cable television services alleged that Comcast’s clustering of operations eliminated competition and led to supra-competitive prices in the Philadelphia market and sought certification of a 2 million member class. Rule 23(b)(3) of the Federal Rules of Civil Procedure requires that "questions of law or fact common to class members predominate over any questions affecting only individual members." The plaintiffs put forward multiple theories of harm, but the trial court accepted only one theory. However, the plaintiffs' damages expert testified based on a model that assumed the validity of all theories and did not isolate the harms arising from only the theory accepted by the trial court. The plaintiffs argued that examination of the expert’s methodology was looking at the merits and not appropriate at the class certification stage, but the court disagreed. This case builds on recent Supreme Court cases imposing restrictions on class action plaintiffs, particularly Wal-Mart Stores Inc. v. Dukes, by explaining that the “predominance” standard in damages class actions is even more demanding than in other types of class actions, even if the analysis involves an inquiry into the merits.

 

Standard Fire Ins. Co. v. Knowles   (U.S. Supreme Court)

Procedure for removal of class action cases to federal court

The Class Action Fairness Act of 2005 (CAFA) was designed to reduce abuse by allowing federal courts to hear class action cases of national importance. In this case, the plaintiffs promised they would not seek damages in excess of the $5,000,000 amount that is required for a case to be heard by a federal court, and the federal court allowed the case to be heard in state court instead. The lower court held that the plaintiff's voluntary limit on damages was binding on all members of the class, even though that plaintiff had never been authorized to represent the class as a whole.

On March 19, 2013, the Supreme Court decided that the single plaintiff's stipulation limiting the damages sought is not binding on the class as a whole, and that the case could be moved to federal court. This is a favorable outcome to prevent class representatives from artificially limiting the amount in controversy as a way to avoid federal jurisdiction.

While the parties argued over this point, the NAM filed a unique amicus brief drawing the Court's attention to the express language of the removal provision of CAFA, which allows federal courts broader authority to remove a case than to exercise jurisdiction over a case first filed there. If a case is filed in federal court, CAFA includes the $5,000,000 requirement, but that limitation is not included in the statute authorizing a case to be transferred from state to federal court. We argued that lower courts have incorrectly assumed that the criteria for bringing a class action in federal court should be transposed onto discussions of removal jurisdiction. Those courts have not explained why they have abandoned the express language of the statute to read into it provisions that do not apply when cases are being removed from state court.

In its decision, the Court did not mention the NAM's argument, but did not foreclose it either. If a court should agree with it, the argument will make it much easier for defendant manufacturers to move class actions from state to federal court, thus accomplishing the goals of Congress when it enacted CAFA.


Related Documents:
NAM brief  (October 29, 2012)

 

Whirlpool Corp. v. Glazer   (U.S. Supreme Court)

Class action certification

This is a class action suit alleging warranty, design and failure-to-warn claims involving washing machines. Click here for a summary of the proceedings in the Sixth Circuit.

The NAM filed an amicus brief 9/28/2012 supporting review of the Sixth Circuit's ruling by the Supreme Court. The ruling affirmed certification of a class of some 200,000 Ohio consumers, notwithstanding that many had no injury and their experiences with the machines were vastly different. We argued that the decision misapplied legal requirements that there be common claims among the parties, and that common questions predominate over any questions affecting only individual members. The result of this error threatens to subject manufacturers to product liability class actions with huge numbers of consumers who have suffered no injury, exposing them to liability far out of proportion to any actual underlying defect.

On April 1, 2013 the Supreme Court remanded this case back to the Sixth Circuit in light of the Court’s ruling on March 27 in Comcast Corp. v. Behrend, where the Court held that class certification was inappropriate where damages could not be shown on a class-wide basis.


Related Documents:
NAM brief  (September 28, 2012)

 


Discovery -- 2013



DCP Midstream, LP v. Anadarko Petroleum Corp.   (Colorado Supreme Court)

Breadth of discovery

This is a contract dispute in which the defendant manufacturer sought to limit having to produce millions of pages of documents during the discovery phase of the case. The company argued that its opponent demanded documents that were not relevant to the claims and defenses in the case, and the court should step in and impose reasonable restraints on an enormous discovery request.

The NAM filed an amicus brief asking the Colorado Supreme Court to instruct the lower courts to act as gatekeepers with early, hands-on case management and limit discovery to issues pled in the case. Discovery should be proportional to the case, taking into account the nature and scope of the case, relevance, importance, expense and burdens. We also asked the court to clarify that a defendant need not both object to overbroad discovery and also move for a protective order. Excessively burdensome discovery requirements can put substantial pressure on companies to give up on defenses that they would otherwise be able to make.

On 6/24/13, the court agreed, holding that trial courts must take an active role managing discovery and should, at a minimum, consider cost-benefit and proportionality factors in the Rules of Civil Procedure to control excessive discovery. It is unusual for an appeals court to say that the trial court abused its discretion in handling the discovery phase of this case, because judges have considerable discretion in these matters. In this case, however, the judge made no attempt to tailor discovery to the reasonable needs of the case. The ruling is an important victory in Colorado to rein in excessive discovery demands.


Related Documents:
NAM brief  (January 11, 2013)

 


Environmental -- 2013



California Chamber of Commerce v. California Air Resources Board   (Superior Court of Sacramento County)

Challenging CARB cap-and-trade auction allowance revenues

In November, 2012, the California Chamber of Commerce filed a lawsuit challenging the legality of the fees charged by the California Air Resources Board (CARB) for the state’s cap-and-trade greenhouse gas program. The NAM moved to intervene in the litigation, focusing not on the legality of the cap-and-trade program itself or the merits of climate change science, but on the extraordinary revenues generated by the auction and reserve sale provisions adopted by CARB.

The effectiveness of the cap-and-trade program comes from the state’s ability to ratchet down greenhouse gas emissions from year to year. CARB may not go beyond this authority to generate a huge income stream for the state. The first quarterly auction of greenhouse gas allowances in November, 2012, raised nearly $289 million for California, substantially more than the $62 million required to implement the law. Moreover, that revenue is projected to increase to as much as $70 billion over the life of the program. In 2015, more than $2 billion is expected to be generated by the program, and most of the funds already collected have been earmarked for housing and transportation projects.

We argued that that income goes far beyond simply paying for the costs of administering the program, and thus exceeded the legal authority of CARB. Alternatively, even if the fees were authorized, they constitute a massive new tax that must have been approved by a 2/3 majority of the California legislature under the state constitution.

On Nov. 12, 2013, the judge ruled that the Air Resources Board was given the discretion to raise revenues by auctioning and selling allowances. The fact that the Board may charge an administrative fee does not prevent it from also auctioning the allowances. The judge also ruled that the revenues were not an unconstitutional tax, although he called that a close question. He analyzed the difference between taxes and government regulatory fees, and found the charges more like traditional regulatory fees. The primary purpose is for regulation, not revenue, the total fees don't exceed the costs of the regulatory activities, and the fees collected are reasonably related to the burden imposed by the greenhouse gas emissions. The court was at a loss to know what the fees will actually be used for, but the law requires that they be used to further the emissions reduction goals of AB 32. It admitted that "since nearly every aspect of life has some impact on GHG emissions, it is difficult to conceive of a regulatory activity that will not have an least some impact on GHG emissions." Thus, the decision gives extremely broad power to the state government to use the funds collected and not have them be considered a tax.

This income scheme will significantly raise energy costs in the state and further harm its competitiveness, without providing any additional environmental benefits, since it will still be affected by GHG emissions from elsewhere around the world.


Related Documents:
NAM Reply brief  (August 7, 2013)
Motion to Intervene  (February 15, 2013)
Points and Authorities in Support of Complaint  (February 15, 2013)

 

Comer v. Murphy Oil U.S.A.   (5th Circuit)

Whether effects of global warming give rise to public nuisance suits under state law

This case alleges that the emissions of greenhouse gases from various energy and manufacturing companies led to a stronger Hurricane Katrina than might have otherwise occurred, and the companies should pay the damages. It was dismissed in litigation in 2010 summarized here.

The plaintiffs filed a new suit, and the trial court dismissed it. On appeal to the Fifth Circuit, the NAM and other groups filed an amicus brief opposing any common law cause of action for harms caused by weather events allegedly caused by climate change. The courts are not the place to make policy judgments about emissions policies for individual defendants, becoming a kind of super EPA. All the most recent Supreme Court and appellate court decisions reject this kind of liability, since EPA is already regulating greenhouse gases.

On May 14, 2013 the Fifth Circuit affirmed the district court’s rejection of plaintiffs’ claims based on the doctrine of res judicata, which holds that once a valid judgment decides a case, that decision shall stand. The case followed a complicated procedural history. The trial court decision rejecting the plaintiffs’ claims was up for an en banc rehearing by the Fifth Circuit. However, without a majority of the Circuit’s judges available to hear the case, quorum was not met and the case was not reheard. Plaintiffs then sought a writ of mandamus from the Supreme Court, which was denied. Then the plaintiffs asserted that there was not a final decision on the merits, and therefore that their claim was not barred by res judicata. The Fifth Circuit disagreed and upheld the trial court’s decision to bar the claims. At no point was the trial court’s final judgment disturbed nor was there was a decision on the merits.


Related Documents:
NAM brief  (September 28, 2012)

 

Decker v. Northwest Envtl. Def. Ctr.   (U.S. Supreme Court)

Citizen suits under the Clean Water Act

An environmental group sued some logging companies alleging violations of the Clean Water Act arising from rainwater runoff in logging areas. A statute requires that suits challenging EPA actions be filed within 120 days of the action. On March 20, 2013, the Supreme Court decided that that limitation does not apply to citizen suits seeking to apply permit requirements to forest roads, since another statutory provision allows such suits. The NAM had filed an amicus brief challenging the citizen suit.

Also at issue in the case is the Ninth Circuit’s decision that storm water from logging roads is industrial storm water, in spite of an EPA determination to the contrary. The Court ruled that it was reasonable for EPA to conclude that the water runoff was directly related only to the harvesting of raw materials, rather than to "manufacturing, processing, or raw materials storage areas at an idustrial plant" as defined in the regulation. Thus, the regulation extends only to traditional industrial buildings and not foresting operations.

The decision means that citizen suits can continue to be filed well after regulations are finalized, as long as the suits challenge not the rules themselves, but seek to enforce them under a proper interpretation. The decision also means that EPA's interpretation of a regulation will continue to be given deference by the courts unless it is plainly erroneous or inconsistent with the regulation. This is particularly true where a federal regulation would be duplicative or counterproductive in light of state regulation of the practices at issue.


Related Documents:
NAM brief  (September 4, 2012)

 

Los Angeles County Flood Control Dist. v. Natural Resources Defense Council   (U.S. Supreme Court)

Definition of a "discharge" from an "outfall" under the CWA

Two environmental groups sued a municipality for discharging water that allegedly exceeded water quality standards. However, the discharge was from a concrete flood control system used simply to reroute a river. The Supreme Court decided that water coming from such a source does not constitute a “discharge” under the Clean Water Act (CWA). Limiting the breadth of obligations that might be required of municipalities trying to control floods and stormwater helps keep down costs for everyone within their jurisdictions.

 

Luminant Generation Co v. EPA   (U.S. Supreme Court)

Whether EPA may disapprove SIP without finding that it conflicts with an applicable requirement of the Clean Air Act

This case involves an effort by EPA to impose greater Clean Air Act requirements on manufacturers and fuel users. The NAM joined with other groups supporting an appeal by Luminant Generation Co. of an adverse decision from the Fifth Circuit.

The case involves the balance of power between EPA and state environmental enforcement agencies when regulating emissions from industrial process or emission control equipment during startups, shutdowns or malfunctions. During these periods, states commonly allow more lenient treatment of excess emissions from such equipment, but EPA decided to disapprove part of a Texas State Implementation Plan (SIP) that potentially excuses excess emissions during planned equipment maintenance. Companies will not be able to argue affirmative defenses to citations, making them subject to civil penalties and fines.

The dispute centers on whether Section 113 of the Clean Air Act articulates a requirement that provides a basis for EPA to disapprove the Texas plan. Our brief argued that another Section of the Act (Sec. 110) gives EPA the power to disapprove state plans that interfere with any applicable requirement of the Clean Air Act, and the lower court’s decision should be reversed on this point. We also argued that EPA’s action violates the Eighth Amendment by imposing a penalty grossly disproportionate to the offense, as well as the Fifth Amendment’s due process principles, since certain emissions during planned startups and shutdowns are unavoidable. The Texas SIP would have allowed a company to demonstrate that the offense was actually unavoidable, but the EPA action took away that defense.

On 10/7/2013, the Supreme Court declined to review this appeal.


Related Documents:
NAM brief  (July 24, 2013)

 

Mingo Logan Coal Co. v. EPA   (D.C. Circuit)

EPA interference with Clean Water Act permits

Mingo Logan Coal Co. challenged an EPA decision that it argued retroactively changed a Clean Water Act permit issued by the U.S. Army Corps of Engineers four years earlier. This change withdrew certain creeks as disposal sites for dredged material, affecting the validity of a permit that EPA had previously reviewed and assented to, and even though the permit holder was in full compliance with it.

In March, 2012, a federal judge ruled that EPA did not have the power to revoke a valid permit -- only the U.S. Army Corps of Engineers, which issued the permit, has the authority to revoke it. The NAM filed an amicus brief in support of that result in the trial court, and that history is summarized here.

EPA appealed to the D.C. Circuit, and the NAM and other business groups filed a second amicus brief raising concerns about the substantial uncertainty that would be generated were EPA to have the power it claimed. The power to revoke a valid permit by EPA will substantially raise the stakes for any project that requires a Section 404 permit. That will distort the cost-benefit ratio and discourage new investments in any such project. The uncertainty from this looming threat will lead to higher interest rates and fewer investments, affecting downstream benefits such as job creation, housing, commercial space, food, consumer products, libraries and schools.

Unfortunately, the D.C. Circuit reversed the trial court on April 23, 2013. A 3-judge panel ruled that EPA has the final say on discharge site selection under Sec. 404(c) of the Clean Water Act. It can withdraw a specification of a stream as a suitable site for discharging dredged or fill material from a mountain-top mine at any time, including after a permit is issued. The withdrawal amends the terms and conditions specified in the permit. The court sent the case back to the trial court to resolve a remaining challenge -- whether EPA's decision was arbitrary and capricious in violation of the Administrative Procedure Act.


Related Documents:
NAM brief  (September 19, 2012)

 

Mississippi v. EPA   (D.C. Circuit)

Validity of EPA's ozone regulation

The NAM is a member of the Ozone NAAQS Litigation Group, which in 2008 in the U.S. Court of Appeals for the D.C. Circuit challenged the validity of the EPA's final regulation lowering certain ozone limits under the Clean Air Act. The American Lung Association, the Natural Resources Defense Council, and others are also challenging the rule, arguing that the EPA did not follow the advice of their scientific advisers to issue a tougher standard. All the petitions were consolidated under the caption, Mississippi v. EPA.

On 3/19/09, the D.C. Circuit ordered the cases held in abeyance while the new Administration considered whether to change the standards. EPA proposed revisions in January, 2010, for public comment. The NAM filed comments in March (see link below).

On April 4, 2011, the court denied our motion to begin briefing those issues that were not the subject of reconsideration, and refused to order EPA to complete its reconsideration proceeding by the July 29, 2011 date by which EPA indicated it planned to take final action. EPA forwarded a final rule to the Office of Management and Budget in July. Five of the petitioners in this case moved 8/8/11 for a court order directing EPA to complete reconsideration immediately. The NAM coalition opposed this motion because the deadline for EPA to review the 2008 Ozone rule has not yet passed, and it need not act by any specific date. We also asked the court again to renew the briefing on this litigation.

On Sept. 2, President Obama announced that he was requesting that Administrator Jackson withdraw the draft ozone standard at this time. OIRA Administrator Cass Sunstein sent a letter to EPA explaining the reasons that he was sending the proposal back to EPA for reconsideration, including that "a new standard now is not mandatory" and new scientific work is underway and will be based on the best available science. Later that day, EPA filed a notice with the D.C. Circuit saying it "no longer expects that it will take final action to complete its reconsideration of the 2008 ozone NAAQS in the near future." It filed a revised motion to govern further proceedings on Sept. 12, seeking to resume briefing, which the court did.

The Ozone NAAQS Coalition filed its brief on April 17, 2012. Key arguments included: (1) the EPA's finding that increased protection results from a lower standard is insufficient, as a matter of law, to establish that the revision is "requisite" under the statute, (2) new health evidence in 2008 does not materially differ from earlier evidence and does not support revising the standard, (3) the risks now are no greater than they were under the earlier standard, and (4) EPA misrepresented and used selective results from the latest clinical and epidemiological studies.

Our coalition filed a separate brief in July as intervenors in support of EPA defending challenges from environmental groups that the ozone standard is not stringent enough. The NAAQS standard for ozone is now at .075 ppm, and the studies EPA considered in setting this level did not support lowering it below .070 ppm, as demanded by the challengers. A clinical and some epidemiological studies did not produce any statistically significant results for levels below .080 ppm. We also supported EPA's decision regarding exposure and risk assessments.

The NAM filed a reply brief on Aug. 13 reiterating our position that the EPA did not have sufficient evidence in the record to justify its conclusion that the public health risk from ozone was any different in 2008 than it was in 1997 when it set the last ozone standard. It failed to justify why the 1997 standard was no longer “requisite,” as required by the statute, to protect public health with an adequate margin of safety. The agency also failed to rely on air quality criteria that accurately reflect the latest scientific knowledge, and set secondary standards based on the defective primary standard.

The Court issued its decision on July 23, 2013, upholding the primary ozone standard of .075 ppm, but ordering EPA to provide further explanation for its secondary ozone standard, which applies to effects of ozone on such things as animals, vegetation, visibility, property and personal comfort and well-being. With respect to the primary ozone standard, the court applied the usual highly deferential standard of review which courts apply to challenges of regulations. It found that EPA set a standard that is "requisite" to protect the public with an adequate margin of safety, holding that "requisite" protection may change over time with different policy judgments and scientific knowledge. As long as EPA reasonably and rationally explains its actions, the courts will defer to those judgments. The court likewise rejected challenges from environmental groups, saying EPA was in a situation reminiscent of Goldilocks. It upheld the agency's decision, found that it had built in a reasonable margin of safety, and allowed the agency to depart from recommendations of the Clean Air Scientific Advisory Committee because CASAC's opinion was a mix of scientific and policy considerations which EPA could decide differently.


Related Documents:
Ozone NAAQS Litigation Group reply brief  (August 13, 2012)
Ozone NAAQS Litigation Group brief  (July 23, 2012)
Ozone NAAQS Litigation Group brief  (April 17, 2012)
NAM Opposition to Motion for Order Directing EPA to Complete Reconsideration  (August 10, 2011)
NAM Cross-Motion to Resume Briefing  (January 10, 2011)
Ozone NAAQS Litigation Group petition for review  (May 27, 2008)

 

Sierra Club v. County of Solano   (Cal. Ct. App.)

County restrictions on solid waste disposal

Solano County, California, voters passed Measure E in 1984, which obstructed regional waste management by drastically limiting the volume of solid waste that could be brought into the county for disposal or recycling. It sets a low limit on waste from other counties in California, and the county stopped enforcing it after receiving legal opinions that it violated the Commerce Clause because it discriminates against and excludes waste by place of origin.

The Sierra Club and other environmental groups sued to enforce Measure E as written. The trial judge rewrote the law to apply only to other California counties, but not to waste generated outside of the state. That ruling was appealed.

The NAM and other organizations filed an amicus brief arguing that protectionist barriers like these have been struck down for decades because they interfere with interstate commerce. Simply limiting the reach of the measure to other California counties does not eliminate this problem. Solano County and thousands of others throughout the nation cannot "stand alone as economic islands around which the free flow of commerce may be diverted. Building a virtual wall around [the county] has a profound impact on the market for solid waste as an article of interstate commerce."

We urged an appeals court in California to reject laws like this that can create a patchwork of discriminatory and protectionist solid waste bans from cities and counties across the country. Allowing bans like this could lead to similar restrictions against many other goods and services, not merely solid waste, and would allow local entities to achieve what the states are prohibited from doing. The impact would be to dramatically undermine a national market of solid waste management and disposal, and could expose billions of dollars of other economic activity to discrimination by thousands of local governments.

On 7/31/2013, the court of appeal reversed the trial court's ruling and dismissed the case as moot, because California had enacted a new law (AB 845) that prohibits restrictions on the importation of solid waste based on the place of origin of the waste.


Related Documents:
NAM brief  (September 6, 2011)

 

Sierra Club v. EPA   (N.D. Cal.)

Intervention in suit that would force EPA to act on ozone

The NAM and 12 other groups moved to intervene in this suit brought by the Sierra Club over EPA's regulation of ozone. The Sierra Club and other environmental groups filed the suit to force EPA to complete its review and revision of the national ambient air quality standards (NAAQS) for ozone. EPA lowered the standard to 75 ppb in March of 2008, and now the environmental groups are trying to force EPA to take steps to finalize an additional lowering of the standard by September, 2014. The Clean Air Act requires EPA to review NAAQS every 5 years and make revisions "as may be appropriate . . . ."

The NAM group moved to intervene to help prevent the adoption of more stringent NAAQS demanded by the environmental groups. Any lowering of the standard will result in additional costly and burdensome control requirements, new emission reduction requirements, and fees, and manufacturers need to have adequate time to develop and present information to EPA concerning the present standard and a possible revision. Forcing EPA to act hurriedly "would frustrate the development of sound scientific support on the need for NAAQS revisions." The proposed timetable would make EPA "finalize its risk assessment and policy analysis, complete its consultation with CASAC [an advisory committee], publish a proposed rule in the Federal Register, solicit comments, review those comments and respond to them as necessary, send its final rule to the Office of Management and Budget for mandatory review, and publish the final rule in the Federal Register, all in the span of one year or less." This would require EPA to truncate the public comment period, to the detriment of the public and the regulated community.

Joining the NAM in the motion to intervene were the American Forest & Paper Association (“AF&PA”), American Fuel and Petrochemical Manufacturers (“AFPM”), American Iron and Steel Institute (“AISI”), American Petroleum Institute (“API”), American Wood Council (“AWC”), Automotive Aftermarket Industry Association (“AAIA”), Brick Industry Association (“BIA”), Council of Industrial Boiler Owners (“CIBO”), Independent Petroleum Association of America (“IPAA”), National Mining Association (“NMA”), Treated Wood Council (“TWC”), and Utility Air Regulatory Group (“UARG”).

On 8/20/13, the environmental groups and EPA jointly asked the court to delay further filings for 3 months while they engage in settlement discussions.

On 10/9/13, the court denied our motion to intervene, concluding "that EPA will represent adequately any interests that Proposed Intervenors might have in setting a rulemaking schedule." The judge declined to recognize that we had a "significant protectable interest" in the litigation because the rulemaking deadlines are statutory and non-discretionary. We continue to be concerned that EPA will be forced to settle its way into a rushed timeline for this regulation.

On April 29, 2014, the court ordered EPA to propose a new standard by December 1, 2014 and to finalize it by October 1, 2015. EPA had wanted an extra 45 days, but that request was denied.


Related Documents:
NAM Reply Motion  (September 6, 2013)
NAM Motion to Intervene  (August 16, 2013)

 

SIP/FIP Advocacy Group v. EPA   (D.C. Circuit)

Challenging EPA's SIP Call for regulation of greenhouse gases

In December, 2010, EPA announced its Finding of Substantial Inadequacy and SIP Call Rule for greenhouse gas emissions. It found that the laws of 13 states do not authorize them to regulate GHG emissions as is required as of January 2, 2011, and EPA requires those states to change their laws and submit revised State Implementation Plans (SIPs) for review and approval. In the meantime, EPA will use its own Federal Implemenation Plan (FIP) to regulate GHGs. The affected states are Arkansas, Arizona, parts of California, Connecticut, Florida, Idaho, Kansas, Kentucky, Oregon, Nebraska, Nevada (Clark County), Texas, and Wyoming.

The NAM and other associations that are part of the SIP/FIP Advocacy Group have petitioned two federal appeals courts to review EPA's action. This is another step in our overall challenge to EPA's efforts to regulate greenhouse gases under the Clean Air Act. We filed comments with EPA when this action was proposed, arguing that EPA's own regulations give the states 3 years to comply with the new greenhouse gas requirements, and that the state implementation plans are not "substantially inadequate" to enforce the new requirements.

A similar case was filed in the U.S. Court of Appeals for the Fifth Circuit. It was transferred to the D.C. Circuit. On 7/6/11, the court consolidated the cases into one but denied EPA's request that it be held in abeyance pending resolution of the main challenges to their greenhouse gas regulations.

On 2/8/2012, the SIP/FIP Advocacy Group filed its main brief, arguing that the Clean Air Act requires EPA to give the states 3 years to amend their SIPs to account for greenhouse gases. EPA sought, through unlawful intimidation, to coerce states to consent to GHG regulation immediately to avoid a threatened ban on new-source construction. EPA has never acted outside of these procedures, and it should be required to follow them. Until then, we ask the court to provide that no GHG-emitting sources be subject to any PSD (Prevention of Significant Deterioration) permitting requirements.

On 5/14/2012, NAM filed a reply brief arguing that EPA’s refusal to accept State Implementation Plans is invalid. EPA thinks that states may not issue preconstruction permits addressing greenhouse gases, and that EPA must take over the state's power and issue federal implementation plans. We argued that the states continue to have permitting authority and may take the time allotted by EPA regulations to implement the new greenhouse gas requirements.

On July 26, 2013, the D.C. Circuit ruled 2 to 1 that no party had standing to challenge EPA's actions because any harm was caused by the Clean Air Act and not by EPA's actions. It found that the Act's permitting requirements are self-executing and require permits for each pollutant subject to regulation under the Act even when the applicable SIP has not been updated to include requirements for newly regulated pollutants. The petitioners did not have standing, according to the majority, because a victory for them would leave them worse off than with the rules, because there would be a construction ban in those states without a SIP for greenhouse gases. The court's ruling applies to Texas v. EPA as well.


Related Documents:
NAM reply brief  (May 14, 2012)
NAM brief  (February 8, 2012)
NAM petition for review (5th Cir.)  (February 11, 2011)
NAM petition for review (D.C. Cir.)  (February 11, 2011)

 

SIP/FIP Advocacy Group v. EPA   (5th Circuit)

Challenging EPA's SIP Call for regulation of greenhouse gases

This petition challenges EPA's decision to take over 13 state Clean Air Act implementation plans governing the enforcement of greenhouse gas regulations. For details, see a similar petition in the D.C. Circuit, here.

 

SIP/FIP Advocacy Group v. EPA   (D.C. Circuit)

Challenging EPA's disapproval of Texas SIP because of greenhouse gases

The NAM is part of the SIP/FIP Advocacy Group, which comprises various national trade associations challenging EPA's efforts to require states to implement its greenhouse gas stationary source regulatory requirements. This suit is in response to EPA's decision, published May 3, 2011, partially disapproving Texas' implementation plan for regulating pollution. EPA rejected part of the Texas plan because it did not address how it would apply to pollutants that become "subject to regulation" in the future, such as greenhouse gases. Because it rejected the Texas plan, EPA moved to implement federal regulation of greenhouse gas emissions in Texas.

The State of Texas and other parties also filed suit against EPA, and our case has been consolidated with those. For further action in this case, click here.


Related Documents:
NAM Petition for Review  (July 5, 2011)

 

Texas v. EPA   (D.C. Circuit)

Challenging EPA's partial takeover of PSD permit authority in Texas

The NAM and four other business organizations filed an amicus brief supporting the State of Texas in its lawsuit seeking an emergency stay of EPA’s decision partially revoking the State’s permitting authority under its Clean Air Act implementation plan. EPA took over the Texas permitting authority without notice-and-comment rulemaking on the premise that without intervention many stationary sources of greenhouse gas emissions in Texas would have to forgo construction and modification in 2011. But there was no construction ban in Texas, and EPA's intervention was not needed to prevent one.

EPA took the action in late December, 2010, after the Texas Clear Air Act implementation plan had been on the books for 18 years. EPA believes that its new greenhouse gas rules require large stationary sources of GHG emissions to obtain PSD (Prevention of Significant Deterioration) permits before beginning construction or undertaking modifications of their facilities. Most states automatically incorporate new EPA pollutants in their state plans, but Texas does not, and EPA believes Texas will not act promptly to do so. Our brief, however, argued that PSD permit requirements are not automatically incorporated into a state's implementation plan. Thus, a court may stay EPA's latest regulatory control tactic without interfering with the continuing process by which Texas issues construction and modification permits for stationary sources of emissions.

On Jan. 12, 2011, the Court granted our motion to file an amicus brief, but denied the motion for a stay. EPA's regulatory action continued in force during the litigation.

On June 18, 2012 the NAM, as part of the SIP/FIP Advocacy Group, filed its main brief to support Texas’ State Implementation Plan (SIP) against the EPA’s actions to deny it. Our brief argued that EPA cannot override the Texas SIP any time it finds fault or shifts its policy direction. EPA should not expand its powers by using legislation that was intended merely to correct clerical or technical errors in prior laws. In addition, the EPA should not have reviewed the SIP, as it was compliant with the Clean Air Act when it was implemented. Finally, we argued that EPA ignored the requirement to give notice and an opportunity to comment on rule changes.

These steps by EPA are causing harm to Texas and manufacturers, as they require businesses to obtain permitting from both the state and the federal government, and have effectively destabilized investments in Texas businesses affected by the standards.

On July 26, 2013, the D.C. Circuit ruled 2 to 1 that no party had standing to challenge EPA's actions because any harm was caused by the Clean Air Act and not by EPA's actions. It found that the Act's permitting requirements are self-executing and require permits for each pollutant subject to regulation under the Act even when the applicable SIP has not been updated to include requirements for newly regulated pollutants. The petitioners did not have standing, according to the majority, because a victory for them would leave them worse off than with the rules, because there would be a construction ban in those states without a SIP for greenhouse gases.

On Sept. 22, 2014, we petitioned the court to rehear this case, arguing that its decision directly conflicted with the Supreme Court's recent decision in UARG v. EPA. The Supreme Court ruled that the Clean Air Act cannot be interpreted to automatically require a source to obtain a PSD permit on the sole basis of its potential greenhouse gas emissions when those emissions became regulated pollutants. Because the requirements are not self-executing, the D.C. Circuit's decision based on that finding are insupportable. EPA could not reject state implementation plans that did not regulate major sources of greenhouse gases because its own regulations were not authorized.

The court ordered responses to the petition for rehearing, which were filed on November 4. On May 4, 2015, the court denied the petitions.


Related Documents:
SIP/FIP Advocacy Group petition for rehearing  (September 22, 2014)
SIP/FIP Advocacy Group reply brief  (September 21, 2012)
SIP/FIP Advocacy Group brief  (June 18, 2012)
NAM amicus brief  (January 6, 2011)

 

U.S. Forest Service v. Pacific Rivers Council   (U.S. Supreme Court)

Challenge to EIS for EPA's forest plan revisions

In March, 2013 the Supreme Court agreed to review a case in which an environmental group challenged the U.S. Forest Service analysis of the environmental impacts of a revision to its forest plan. The forest plan is a policy that by itself is not an agency action, but is used to inform project-specific decision making, which is agency action. The Forest Service prepared an Environmental Impact Statement (EIS) at the time of the revision as required by the National Environmental Policy Act (NEPA). The environmental group alleged that the EIS for the revised forest plan failed to consider the impact of the plan on fish and amphibians in affected aquatic habitat. The court of appeals rejected the environmental group’s allegation that the EIS analysis of effects on amphibians was inadequate, but held that the EIS ultimately did not satisfy NEPA because it contained no discussion of the effects on particular fish species. The court of appeals went on to explain that NEPA requires programmatic and project-specific EISs as soon as it is reasonably possible to do so.

This case presented ripeness and standing issues for the Court to consider. The case may not be ripe because the forest plan by itself was not an agency action. If the Court ruled on the ripeness doctrine, it could have required that the environmental group challenge only project-specific agency actions that present a controversy ripe for judicial resolution, meaning that only the actions informed by the forest plan could be challenged, not the entire forest plan. Such individual project challenges would require significant additional litigation resources from the groups. As for standing, the Court could have considered whether the environmental groups make use of the resources sufficiently to have standing to challenge the forest plan, or alternatively the project-specific actions pursuant to the plan.

The case also raised the question of whether it is possible to evaluate every potential environmental impact from the revision of the forest service plan at the time the amendments were adopted. The relevance of whether all such impacts are reasonably foreseeable at the time of the revision is lessened because any action pursuant to the plan is subject to an EIS before any individual project is allowed to go forward. However, environmental groups are likely to claim “death by a thousand cuts” to the environment if they cannot challenge programs or policies like the forest plan, on the grounds that individual actions may cumulatively have an impact outside of the scope of narrow challenges to project-specific actions.

This case was important for manufacturers and other businesses that rely on permits or licenses from government agencies to pursue their endeavors efficiently and with legal certainty.

On 6/17/13, the Court dismissed the case as moot. No decision on the merits of the appeal was issued.

 


ERISA -- 2013



Heimeshoff v. Hartford Life & Accident Ins. Co.   (U.S. Supreme Court)

When statute of limitations begins to run for benefits claims under an ERISA plan

This case is about determining when the clock runs out on an employee's deadline for suing his employer over employee benefits. The dispute involves the relationship between the contractual language in the employee's benefit plan and state law which provides the statute of limitations for filing suit. The Supreme Court agreed to hear the appeal on April 15, 2013.

In the case, an employee was prevented from filing a legal challenge to an adverse long-term disability benefits determination by the ERISA plan administrator, since the parties agreed to a contractual provision limiting the time period when such a challenge could be made. ERISA does not contain a statute of limitations and federal courts normally borrow provisions from analogous state laws. In addition, plan administrators, like the one in this case, often include contractual provisions that limit the time to file a legal action to challenge an adverse benefits determination.

Here, the employee applied for long-term disability benefits and was required to provide written proof of loss. The administrator found that the proof that the employee submitted was insufficient, the employee submitted additional documentation, an administrative appeal ensued, and finally the claim was denied about 2 years later. The contract provided that legal action could not be taken 3 years after the time written proof of loss was required to be furnished. The employee filed a claim before 3 years after the final determination, but about 5 years after the original benefits claim. Here, the 3-year period for filing a legal challenge under the contract began to run well before the time specified by state law, and the lower court rejected the suit. Essentially, the employee was still pursuing an administration appeal while the time period was running from the time the written proof was required, but this was envisioned by the agreed upon contract.

The Supreme Court unanimously enforced the plan's limits. An employee benefit plan and its participants can contractually agree to use a shorter time period for litigation, as long as that period is reasonable and there is no conflicting statute. The effect of this decision may reach beyond ERISA plans to other federal statutes, particularly where the federal statute does not provide a statute of limitations and where the parties contract for shorter periods.

 


Government Regulation -- 2013



American Trucking Associations, Inc. v. Federal Motor Carrier Safety Administration   (D.C. Circuit)

Reviewing trucking hours of service rules

On 7/31/2012, the NAM and 14 other business associations filed an amicus brief in the U.S. Court of Appeals for the D.C. Circuit in this consolidated case involving the regulation of hours of service for commercial truck drivers. The Federal Motor Carrier Safety Administration (FMCSA) issued new rules in December, 2011, and lawsuits were filed by the American Trucking Associations challenging provisions relating to rest periods and non-driving work, and by Public Citizen, challenging the 14-hour driving window and the 11-hour daily driving provision. We supported ATA's case and opposed Public Citizen's.

Our brief noted that even small changes in the Hours of Service rules have an effect on the complex and interwoven distribution systems involving scheduling, logistics, route planning, and inventory control. We supported the effort to overturn that portion of the rules that changed the 34-hour restart provisions, as the changes were not supported by adequate evidence in the rulemaking record. The agency failed to consider substantial costs on entities other than motor carriers, such as manufacturers, and failed to consider the effects of the rule changes on night drivers, congestion, and safety. In addition, a requirement that drivers go off-duty for 30-minute breaks, rather than to log the break time as "on-duty, not driving" will impose significant costs on shippers, receivers and consumers.

The NAM brief supported the agency's decision to retain an 11-hour driving time limit. Evidence in the record justified this limit, and the costs of lowering the limit would significantly outweigh any purported benefits.

The NAM filed comments with FMCSA in March, 2011, supporting the 11-hour driving limit and opposing changes that would have a negative impact on supply chains, distribution operations and productivity.

On 8/2/13, the court upheld most of the rules. It upheld the 11-hours daily driving limit, the prohibition on driving after 8 hours on duty without a 30-minute break, and the requirement that the 34-hour reset may only be used once a week and must include two periods of 1:00 a.m. to 5:00 p.m. The court did accept the ATA's challenge to the 30-minute break requirement for short haul drivers, finding that the agency failed to explain and justify its decision. The decision largely relies on the principle that courts will generally defer to the decisions of regulatory agencies as long as there is a rational connection between the facts found and choice made, and the agency explains why it made the choices it did.


Related Documents:
NAM amicus brief  (July 31, 2012)

 

New York Statewide Coalition of Hispanic Chambers of Commerce v. New York City Dept. of Health and Mental Hygiene   (New York Court of Appeals)

Challenging New York City's portion cap on certain drinks

In 2012, New York City implemented a portion cap rule that bans certain sales of large sugary drinks. Several groups sued, and a trial judge ruled that the Board of Health did not have the authority to limit or ban a legal item under the guise of "controlling chronic disease," and this kind of legislative power is reserved to the City Council. He also found the rule to be arbitrary and capricious, because of uneven enforcement and loopholes which gut its purpose.

The City appealed. The NAM and other business groups joined in an amicus brief supporting the result, calling the ban "a reckless, ill-conceived, top-down regulation that has little chance of meaningfully affecting the Board's purported health objectives." Raising concerns about the far-reaching implications and public policy consequences of New York's rule across the country, we argued that rules like this are costly to businesses and consumers, balkanizing economies and disrupting finely tuned distribution chains.

We argued that the Board failed to adhere to fundamental principles of responsible regulation, including consideration of costs and benefits, ensuring that the regulation addresses the real problem and is fairly designed and implemented, and the process is inclusive and transparent.

We offered a litany of examples of voluntary initiatives led by the private sector that more effectively and fairly improve national health and wellness. Public-private partnerships can help create the right mix of incentives and options to promote a healthy lifestyle and address national obesity trends.

On July 30, 2013, the appeals court agreed that the Board of Health acted outside the bounds of its delegated authority, in violation of the separation of powers in the state constitution. This is another example of regulatory agencies trying to regulate without legislative approval.


Related Documents:
NAM amicus brief  (April 25, 2013)

 


Labor Law -- 2013



Chamber of Commerce v. NLRB   (D.C. Circuit)

Challenging NLRB's ambush elections rule

The NLRB has appealed a decision of a federal judge who ruled that it did not have a quorum when it promulgated its “ambush election” rule in 2011. The Coalition for a Democratic Workplace, of which the NAM is a leading member, challenged the rule. Click here for a summary of the proceedings in the trial court.

The NLRB filed its main brief on Nov. 16, and the Chamber and CDW filed their brief on Dec. 31, 2012. Oral arguments were scheduled before Judges Henderson, Brown and Kavanaugh, but the arguments were postponed and the case was held in abeyance pending resolution of the Noel Canning decision on whether the recess appointments to the Board were constitutional.

In December of 2013, the NLRB voluntarily dismissed its appeal in Chamber of Commerce v. NLRB, the case in which the U.S. District Court for the District of Columbia found the Board’s expedited representation election rule invalid because the Board lacked a quorum when it issued the rule in December 2011.


Related Documents:
Chamber and CDW brief  (December 31, 2012)

 

D.R. Horton, Inc. v. NLRB   (5th Circuit)

Validity of class-action waivers in employment agreements

The Fifth Circuit Court of Appeals rejected the D.R. Horton, Inc. decision from the National Labor Relations Board (NLRB).

The Supreme Court and the federal courts of appeals have issued numerous decisions endorsing the use of arbitration agreements and class action waivers to limit abusive litigation against employers. However, in January 2012, in D.R. Horton, the NLRB ruled for the first time that the National Labor Relations Act (NLRA) bans employers from including class action waivers in their employment arbitration agreements. D.R. Horton appealed the NLRB's decision to the Fifth Circuit. In its opinion, that court rejected the NLRB's interpretation of the NLRA as giving employees a non-waivable right to pursue class actions against their employers.

The NAM filed an amicus brief June 6, 2012 noting that such agreements help reduce business costs, and that the Board does not have the authority to regulate the individual contracts dealing with rights not covered by the National Labor Relations Act (NLRA).

On December 3, 2013, the Fifth Circuit held that the NLRB's decision in D.R. Horton violated the Federal Arbitration Act (FAA). That statute generally requires courts to enforce arbitration agreements according to their terms, subject to limited exceptions. The court held that no exceptions applied in this case.

First, the court held that the FAA's "savings clause" did not cover the NLRB's decision. That "savings clause" allows courts to refuse to enforce arbitration agreements on the same grounds that apply to any other contract. Second, the court held that the NLRA did not contain any congressional command overriding the FAA. The court noted as a general rule that a claim under another federal statute may be subject to arbitration unless Congress has overridden the FAA's general mandate that arbitration agreements be enforced. Finally, the Fifth Circuit also noted that three other federal courts of appeal have rejected the argument that class action waivers in employment arbitration agreements violate the NLRA and have stated that they would not defer to the NLRB's decision in D.R. Horton.

On a separate issue, the Fifth Circuit found that D.R. Horton's arbitration agreement did not make sufficiently clear that employees retained a right to file unfair labor practice charges with the NLRB. The court noted that an arbitration agreement may not prohibit employees from filing unfair labor practice charges. It further observed that even if an agreement does not expressly ban the filing of such charges, it may nevertheless violate the NLRA if "employees would reasonably construe the language" of the agreement as doing so.

This decision affects employers in two practical ways. First, employers have the authority to utilize arbitration agreements with a class action waiver. Second, every employer with an arbitration agreement should evaluate the wording to ensure compliance with the evolving law on the enforceability of such agreements.

For reasons not entirely clear, the NLRB allowed the deadline to pass and opted to not appeal the Fifth Circuit’s decision. As the issue now stands, companies will likely prevail in federal court on the issue, but will still battle the NLRB at the agency level. It is possible that the NLRB refused to appeal the case to the high court because it feared an adverse ruling. If this controversy between agency and federal court continues, the Supreme Court will likely have to review the issue. The NAM will continue to weigh in on this issue and take whatever steps appropriate to prohibit the NLRB from stepping outside its statutory authority.


Related Documents:
NAM brief  (June 6, 2012)

 

Genesis HealthCare Corp. v. Symczyk   (U.S. Supreme Court)

Is a case moot when a defendant offers full value of a plaintiff's claim

This case involves a suit by an individual for back pay. She sued her employer on her own behalf and on behalf of other similarly situated individuals. The employer offered to settle her claim for the full amount, and asked that the case be dismissed because it no longer was a “case or controversy” subject to resolution in court. On 4/16/13, the Supreme Court decided that this kind of suit, often called a collective action under the Fair Labor Standards Act, should be dismissed. The plaintiff had no personal interest in representing other unnamed plaintiffs, and was made completely whole for her own complaint. The case is important for reigning in litigation driven more by lawyers and the parties, and this ruling will help prevent excessive litigation by plaintiffs that lack a personal interest in the outcome.

 

Huntington Ingalls Inc. v. NLRB   (4th Circuit)

Defining scope of bargaining units

This is another case in which the NLRB has applied its decision in the Specialty Healthcare case to allow employees to create a bargaining unit that is small and underinclusive. The Board’s decision was appealed to a federal appeals court, and the NAM and other filed an amicus brief arguing that the Specialty Healthcare decision was wrong and violated at least two provisions of the National Labor Relations Act. An employer should not have to bear the burden of demonstrating that a proposed bargaining unit should include additional employees who share “an overwhelming community of interest with the included employees.”

In this case, the company argued that a unit of technical employees working in one department at its shipyard should include all the technical employees at that location. We argued that the Board’s rule eliminates important considerations in determining the breadth of the bargaining unit, and will disrupt the smooth operation of the company processes at a time when American employers face unprecedented economic and competitive pressures. The rule also places too much weight on the grouping selected by the organizing employees, thus effectively violating a statutory provision that the “extent to which the employees have organized shall not be controlling.” In addition, the statute requires the bargaining unit decisions assure employees the fullest freedom in exercising their legal rights, but the Board’s rule failed to consider the rights of employees to refrain from collective activities. By allowing small bargaining units, the Board effectively denies the rights of a majority of the remaining workers to refrain from having union representation in an appropriately defined unit.

This is another example of how the Board’s new ruling fosters disruptions that smaller or multiple bargaining units can have on business operations, stable labor relations, and realistic collective bargaining. A unit determination should reflect an employer’s functional integration and the resulting “community of interests” shared by its employees. Smaller units reduce employer flexibility and employee advancement opportunities as separate units isolate employees in different seniority systems and job classifications.

On 7/17/2013, the Fourth Circuit ruled that the NLRB did not have a quorum to issue the decision in this case, because three recess appointments to the Board were unconstitutional. But it also upheld the selected bargaining unit under the standard that was in place prior to the Specialty Healthcare decision, thus avoiding any decision on the propriety of the standard adopted in that case. Although the employees in this case possessed a sufficiently distinct community of interest to qualify for their own bargaining unit, the court refused to enforce the Board's order because it was not properly constituted. Subsequently, the Board issued another decision in October 2014 that required Huntington Ingalls to bargain with the micro-bargaining units. Huntington Ingalls then filed a petition of review of the Board’s order, claiming that the Board did not have jurisdiction, but the 4th circuit enforced the Board’s order.


Related Documents:
NAM brief  (October 17, 2012)

 

Kindred Nursing Centers East, LLC v. NLRB   (6th Circuit)

Challenging burden on companies to prove "overwhelming community of interest" when contesting bargaining units

The NAM, along with the HR Policy Association and the Society of Human Resource Management, filed an amicus brief 4/23/12 urging the Sixth Circuit to overturn a new NLRB rule that makes it much easier to create exceedingly small collective bargaining units in a workplace. The rule, announced by the NLRB in the Specialty Healthcare case, allows a group of employees to select the bargaining unit they want, and as long as the unit is defined to include those workers who share a “community of interest,” that defined union can only be rejected if an employer can prove that a larger unit is appropriate because the excluded employees share an “overwhelming” community of interest. This burden of proof is extremely difficult to satisfy, and our brief argued that it violates Section 9(c)(5) of the National Labor Relations Act, which limits the Board from granting controlling authority to a union based on the extent to which the employees are organized. Instead, the Board should decide not only that the employees in a proposed unit have a community of interest, but also whether their interests “are sufficiently distinct from those of other employees to warrant the establishment of a separate unit.”

We also noted that Section 9(b) of the Act requires the Board to decide on the appropriateness of a bargaining unit, and we argued that it may not delegate this duty to petitioning employees or unions, because that would undermine its obligation to guarantee all employees – including those excluded from the union’s proposed unit – the fullest freedom in exercising their collective bargaining rights. Otherwise, unions can gerrymander the bargaining units “to their hearts’ content” and leave many employees out of the collective bargaining process.

Furthermore, the Board must act to effectuate the law’s policy of promoting efficient collective bargaining, and the micro-union policy announced in Specialty Healthcare leads to piece-meal unionization and inefficient collective bargaining. Multiple unions may have inconsistent goals, may shut down a plant, affecting other employees, and will create a state of chaos.

Finally, we argued that the NLRB must change its policy through notice-and-comment rulemaking, not by simply announcing its new rules in a decision in one of its many cases. This change is a legislative-type judgment that is generalized and designed to govern all future cases.

On August 15, 2013, the Court of Appeals approved the NLRB’s "overwhelming community of interest test" in bargaining unit determination cases. The court rejected all of the employer's challenges to the Board's decision and found that not only did the Board have considerable discretion under the Act in determining the appropriateness of voting units, but also that the Board, in this case, did not substantially change prior law in the unit determination area. The court also held that the Board's decision in Specialty Healthcare did not violate Section 9(c)(5) of the NLRA, which prohibits the approval of bargaining units on an extent-of-organizing basis.


Related Documents:
NAM brief  (April 23, 2012)

 

National Association of Manufacturers v. NLRB   (D.C. Circuit)

Challenging NLRB's requirement to post provisions of NLRA

The NAM has won a major victory for manufacturers that we have been fighting for since 2011. This win came from the U.S. Court of Appeals for the D.C. Circuit, where we appealed a federal court ruling that upheld the NLRB's regulation that required employers to post in their workplaces a notice of the right of employees to organize into unions, bargain collectively, discuss wages, benefits and working conditions, jointly complain, strike and picket, or choose not to do any of these activities. For details on the district court proceedings, click here.

On 5/22/2012, the NAM filed a brief arguing 3 main issues. First, we challenged the fundamental authority of the Board to issue a posting rule at all. Congress never authorized notice-posting requirements, and rejected an express notice-posting amendment in the National Labor Relations Act (NLRA) while accepting notice-posting requirements in other labor laws.

Second, we again raised the argument that a mandate that private parties post government notices, without a clear statutory basis or compelling governmental interest, violates the First Amendment rights of employers as well as the balance of requirements spelled out in the NLRA.

Third, if the penalties for failing to post the required notice were themselves unlawful, the judge should have thrown out the entire regulation, because the NLRB did not intend for the posting requirement to stand on its own without enforcement teeth. The posting requirement was not severable from the enforcement provisions, and the entire regulation should fall.

We later filed a reply brief arguing that the NLRB failed to establish any statutory authority for the posting requirement. The Board had no authority to impose affirmative duties on employers who are charged with violations of the NLRA. The rule also violated the statutory provision which prohibits the Board from regulating expression that “contains no threat of reprisal or force or promise of benefit,” and violated employers’ First Amendment rights by forcing employers to communicate an unwanted editorial judgment to their employees.

On May 7, 2013, the D.C. Circuit agreed and overturned the NLRB regulation. It found that the rule's requirement that employers post a Government message requires an act of speech, and Section 8(c) of the Labor Management Relations Act declares that speech "shall not constitute or be evidence of an unfair labor practice under the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit." Thus the rule itself violates Section 8(c) because it makes an employer's failure to post the Board's notice an unfair labor practice.

It also ruled that the Board could not consider noncompliance with the rule to be evidence of antiunion animus, since that is also an unfair labor practice based on protected speech. Finally, the court ruled that the Board did not have the authority to amend the statute of limitations for filing unfair labor practice charges. Unless Congress intended the statute of limitations to include exceptions, the NLRB cannot create them years after the law was enacted.

Because all three means of enforcing the Board's posting requirement were invalid, the court ruled that the posting requirement itself was invalid, because the NLRB would never have promulgated it in the first place without ways to enforce it. The Board did not want just voluntary compliance.

A concurring opinion from 2 of the 3 judges found that the Board did not have authority under Section 6 of the NLRA to issue the rule because the posting requirement was not necessary to carry out the Board's responsibilities. It may only issue regulations that are necessary to carry out its responsibilities. The law does not impose an obligation on employers to educate its employees on labor relations law. In addition, the NLRB was set up to handle complaints that are filed by others, not promulgate rules that are "so aggressively prophylactic as the posting rule."

On 7/22/13, the NLRB asked the full complement of judges on the D.C. Circuit to rehear this case. The NAM filed a brief in opposition, arguing that the Board failed to identify any conflict between the court's ruling and any other court decision that would warrant further review. We also noted that a majority of the panel that decided the case also ruled that the Board exceeded its statutory authority on other grounds which independently preclude enforcement of the poster rule. On Sept. 4, the court declined to rehear the case. The NLRB had 90 days to appeal to the Supreme Court, but it declined to do so. The D.C. Circuit's ruling is now final.


Related Documents:
NAM Opposition to Appeal  (August 20, 2013)
NAM reply brief  (July 11, 2012)
NAM opening brief  (May 22, 2012)
D.C. Circuit's Injunction  (April 17, 2012)

 

Vance v. Ball State University   (U.S. Supreme Court)

Sexual harassment liability toward supervisors and job directors

Companies are liable when their supervisors engage in sexual harassment. On June 24, 2013, the Supreme Court decided that supervisors includes only those employees who are empowered by their employer to take tangible employment actions against the victim, such as controling employment, discipline and advancement. Co-workers or other employees who are not supervisors but who may control the day-to-day activities of other employees are not supervisors such that the employer would be strictly liable for their actions. However, an employer may be still be liable for such discrimination if it is negligent.

 


Patents, Copyrights and Trademarks -- 2013



FTC v. Actavis, Inc.   (U.S. Supreme Court)

Legality of reverse-payment agreements to settle patent disputes

This case arose in the pharmaceutical industry, but has implications for patents and other intellectual property in other industries as well. The Federal Trade Commission sued companies that settled pharmaceutical patent litigation, claiming that the settlement, which involved “reverse payments” from the patent owner to the generic drug manufacturer, was anticompetitive because it required the generic manufacturer to stay out of the market for a time.

The Supreme Court ruled 5-3 on 6/17/13 that the lower court erred in dismissing the FTC's case, so the case will go back down to determine whether the reverse-payment agreement was in fact anticompetitive under the antitrust laws. The Court declined to rule that such settlement agreements are presumptively unlawful, and that they should be analyzed under the "rule of reason," allowing the parties to argue that there were legitimate business justifications for the agreements.

The NAM had filed an amicus brief arguing that the settlement of bona fide patent litigation involving a patent that was not procured by fraud should not be considered presumptively unlawful, and the Court agreed. Such patents are legal monopolies for their owners, and any settlement of related litigation that does not extend the life of the patent beyond its legitimate term should be valid, we argued. The FTC’s approach completely disregards the traditional analysis of the legality of a patent settlement, and throws uncertainty into the process of settling complex cases efficiently. Proving the ultimate validity of a patent is complex and expensive, burdening the courts and the parties, and ultimately chilling innovation and harming the competitiveness of U.S. manufacturers.


Related Documents:
NAM brief  (February 27, 2013)

 

Jaffe v. Samsung Electronics Co.   (4th Circuit)

Effect of bankruptcy on patent cross-licensing agreements

This case involves a German company that manufactured semiconductor memory devices, but that filed for bankruptcy. Over the years, it has signed numerous cross-license agreements for thousands of patents relating to DRAM technology, flash memory and semiconductor process technology. The validity of those licenses, and the expectations of many high-tech companies that have relied on them, are in jeopardy in this litigation. The foreign representative of the company sought a court order allowing it to reject the licenses for its U.S. patents and compel its licensees to negotiate new licensing agreements at more favorable rates. The court rejected this request, but that issue was appealed to the U.S. Court of Appeals for the Fourth Circuit.

The NAM and other business groups filed an amicus brief on Nov. 20, 2012 urging the appeals court to affirm this decision. On Dec. 3, 2013, it did so. It ruled that the bankruptcy judge properly balanced the interests of all parties, and that U.S. bankruptcy law allows licensees the right to retain their rights under the licenses. Our brief argued that allowing the rejection of cross-license agreements in bankruptcy could have a devastating impact on the American semiconductor industry and the American economy as a whole. Companies depend on cross-licensing to protect their massive investments in research, development and manufacturing, and eliminating that certainty would constrain investment and innovation in the United States.

Allowing unilateral rejection of patent cross-licenses makes a licensee pay twice to use the same patent. After companies sink huge investments into product development, production, marketing and distribution, it would be much more difficult and expensive to switch to alternative designs and products, and they would be in a much weaker negotiating position. Patent owners in bankruptcy would be able to use the threat of an injunction to extract an extortionate royalty, rather than the actual market value of a patent when it was implemented by the licensee. This in turn would have a negative impact on consumers, research and development, innovation and exports. Moreover, U.S. producers would have an incentive to move their manufacturing operations to another country to avoid infringement liability under U.S. law. It would also provide perverse incentives for companies with patents to transfer them to entities with marginal financing, with the possibility that bankrupcty would allow them to recover far more than they originally negotiated for their licenses.

The outcome is a substantial relief to manufacturers and others who rely on patent licensing to stay in business.


Related Documents:
NAM brief  (November 20, 2012)

 


Preemption -- 2013



American Tort Reform Ass'n v. OSHA   (D.C. Circuit)

Whether OSHA improperly narrowed preemptive effect of hazard communications standard

When OSHA proposed its latest version of the communication standard for hazardous chemicals in the workplace, it planned to give the standard full preemptive effect. Federal law prescribes the requirements for manufacturers to communicate hazards in their workplace, and the proposed regulation would allow no state law, regulation or litigation to hold manufacturers to a different standard.

That changed when OSHA issued the final rule in March of 2012. The rule preempts state laws and regulations, but does not preempt litigation. Consequently, trial lawyers will be able to file state failure-to-warn claims against companies even though the companies are in compliance with the very restrictive federal requirements.

The American Tort Reform Association filed suit, alleging that this narrowing of the preemption provision exceeded OSHA’s authority and the public was not provided an opportunity to comment on OSHA’s change of plans. The NAM filed an amicus brief support the challenge, arguing that we should have been afforded an opportunity to comment on the change in the rule’s preemption language, so that we could describe any conflicts there may be between state tort claims and the requirements of the hazard communication rule. In addition, we argued that OSHA’s decision contradicted firmly established law that state litigation is preempted by federal occupational safety regulations. Otherwise, manufacturers would be subjected to duplicative and possibly counterproductive regulation, whether through specific state laws or tort laws as applied through litigation in the courts.

Our brief included situations where manufacturers could be subjected to conflicting requirements between federal and state requirements, or requirements that might vary from state to state. For example, the federal regulation imposes a mandate to use the words “danger” or “warning” in different situations, and requires the use of specific pictograms for certain hazards. Any different requirement that a state judge or jury might feel would better warn about hazards would subject a manufacturer to tort liability for following the federal rule.

On 12/27/13, the court denied the petition, but in doing so provided language to make sure that OSHA does not try to use the new rule against preemption to improperly sway judicial rulings. The court concluded that both ATRA and OSHA “agree that OSHA has no authority to determine the preemptive effect of the OSH Act.” Rather, OSHA's statement on the preemptive effect in this instance is merely an “interpretive statement” that does not have the force of law. The result is that the standard is merely advisory since interpretive rules do not have the force and effect of law; and they are not accorded that weight in the adjudicative process.


Related Documents:
NAM brief  (March 15, 2013)

 


Product Liability -- 2013



Caronia v. Philip Morris USA, Inc.   (New York Court of Appeals)

Whether to allow a medical monitoring cause of action in NY

This case involves whether a smoker who has exhibited no signs of illness may nonetheless sue a tobacco company to pay for annual medical checkups to monitor her health.

The NAM filed an amicus brief arguing that there is no basis in New York law for this cause of action, and the courts are ill-equipped to grapple with the complex social, medical and scientific issues presented by such claims. We urged the court to reject such claims where the plaintiff has no injury. The U.S. Supreme Court and the high courts of most states have already rejected “no injury” claims for medical monitoring. We argued that if such claims are to be allowed, it is up to the legislature, not the courts, to balance the complex business, legal and medical policy decisions and clearly define the standards to be used in court. There is often no consensus even within the medical community on whether to recommend certain screening tests, how often to test (if at all), and who should be tested (if anyone). Allowing medical monitoring without injury also effectively eliminates the statute of limitations on these claims.

On December 17, 2013, by a vote of 4-2, the court declined to create an independent cause of action for medical monitoring. To do so, "absent any evidence of present physical injury or damage to property, would constitute a significant deviation from our tort jurisprudence." It found that a threat of future harm is insufficent to impose tort liability, both to distinguish actual injured parties from others and to avoid crowded courts from frivolous and unfounded claims. Allowing such claims would also divert money away from those who have actually sustained an injury from the exposure. The court also recognized that courts lack the technical expertise to administer a monitoring program, and that the legislature is better suited to make such policy decisions.The ruling also still alllows plaintiffs to recover monitoring costs once they have actually sustained an injnury.

Had the New York court allowed such medical monitoring claims, the precedent would have affected numerous other companies and industries, creating a wide scope of potentially limitless and unpredictable liability. Companies that manufacture, use, store, sell or transport substances that could have a potential health effect were all at risk. In fact, medical monitoring precedents are being used to try to expand liability for other types of claims, including “credit monitoring” for the unauthorized disclosure of financial information, a “product recall” cause of action for latent product defects, and environmental monitoring of groundwater based on a possible risk of future contamination and treatment costs.


Related Documents:
NAM brief  (October 4, 2013)

 

Dixon v. Ford Motor Co.   (Maryland Court of Appeals)

Use of "any exposure" theory of causation in asbestos suit

This is another case that illustrates a major battleground in asbestos litigation today. The issue involves attempts by plaintiffs to hold manufacturers liable for increasingly trivial exposures to hazardous substances. The plaintiff in this case relied on the “any exposure” theory, i.e., that any occupational exposure to asbestos, no matter how slight, is sufficient to be a substantial contributing factor to the plaintiff’s disease.

In this case, the spouse of a worker exposed to asbestos through automotive work and various home improvement undertakings developed mesothelioma and died. The exposed worker sued on behalf of his deceased spouse and reached settlements with three defendants, but proceeded to trial against Ford Motor Company, who provided very minimal if any contributing exposure to asbestos. Plaintiff put forth an expert witness to show causation who testified that any exposure to asbestos is sufficient to cause mesothelioma, regardless of any other factors, including core scientific principles and quantitative information about the plaintiff’s asbestos exposure. The expert also based her conclusion in this case on the “generally accepted fact” that asbestos dust left on a workers clothing can be transmitted to family members in the home environment.

The NAM filed an amicus brief on February 22, 2013. The trial court accepted expert testimony that any occupational exposure above ambient level was sufficient for causation. We opposed this theory because it is a litigation construct that is not found in any published and peer-reviewed article or textbook. Under the theory, the burden is reversed because any exposure is equated with causation. Maryland follows a “substantial contributing factor” test, and use of the any exposure theory would render the state’s causation principles meaningless. The theory does not satisfy normal standards for expert testimony and is irreconcilable with the fundamental toxicology principle relating to dosage. The NAM comments summarized recent movements by other courts towards conforming expert testimony and causation requirements in asbestos cases to standard toxicology and tort principles and submitted that the Maryland Court of Appeals should likewise reject the any exposure theory.

On 7/25/13, the court of appeals found that there was sufficient evidence of exposure to allow the expert testimony. It used an existing standard of causation that considers the "frequency, regularity, and proximity" of the exposure. It found that if there were "a case of truly minimal exposure," it may well raise concerns that could lead to exclusion of the evidence, but that the facts in this case did not justify excluding the testimony. The court did uphold the constitutionality of Maryland's cap on noneconomic damages in wrongful death cases.


Related Documents:
NAM brief  (February 22, 2013)

 

ExxonMobil Corp. v. City of New York   (2nd Circuit)

Sufficiency of allegation of damages to NYC water

New York City sued various companies for alleged low-level ground-water contamination from MTBE, a gasoline additive mandated by federal law and for which there was no safer, feasible alternative. ExxonMobil appealed a judgment of more than $100 million to the U.S. Court of Appeals for the Second Circuit.

The NAM and other business groups filed an amicus brief 4/28/2011 arguing that the city has not proven an injury and that the claim that it might have an injury in the next 25 years was not ripe for court review. The jury found that the MTBE levels would never exceed safe drinking water standards, but nevertheless awarded damages. Our brief warned that the trial judge's redefinition of drinking water would deem such water damaged with the presence of any trace amount of any foreign substance. That ruling would potentially transform every public drinking water supply into a ready-made multi-million dollar lawsuit. Virtually any manufacturing emissions might lead to liability.

We noted that the city was not suffering any present injury in its ability to provide safe drinking water, and its claim that it could suffer injury in the future was based on a series of speculative findings that were not sufficiently developed in fact to be suitable for litigation then. In addition, the city will not be harmed by waiting until its injury can actually be shown, if at all, some time in the future.

On July 26, 2013, the Second Circuit affirmed the trial court's award. It characterized the suit as seeking future damages for a past injury, and refused to find the claims preempted.


Related Documents:
NAM brief  (April 28, 2011)

 

Georgia-Pacific, LLC v. Farrar   (Maryland Court of Appeals)

Evidentiary requirements and "any exposure" theory of causation in asbestos suit

This is another case that illustrates a major battleground in asbestos litigation today. The issue involves attempts by plaintiffs to hold manufacturers liable for increasingly trivial exposures to hazardous substances. The plaintiff in this case relied on the “any exposure” theory, i.e., that any occupational exposure to asbestos, no matter how slight, is sufficient to be a substantial contributing factor to the plaintiff’s disease. That theory was developed in the context of the first wave of asbestos litigation where the dose exposure was often high, but the present case is part of a new wave where there is only a low dose exposure. This case has the potential to go beyond the issues in Dixon v. Ford Motor Co. (Md.), where the any-exposure theory itself is being challenged. The court in Farrar has the opportunity to elucidate the type of evidence that experts must present to show causation. Plaintiff’s expert relied on the presence of “dust” without analyzing the dose of asbestos and whether the dose was sufficient to cause or be a substantial factor in the plaintiff’s illness.

In this case, the Plaintiff alleged that she was exposed to asbestos from a Georgia-Pacific product in her grandfather’s clothing that she washed over the course of a few years in the 1960’s. Plaintiff’s grandfather worked primarily with insulation and was on a few occasions close to drywall work where drywall joint filler was used. The grandfather never handled the filler, sanded down the filling following the installation of the drywall, or cleaned up afterwards. The insulation contained significantly more harmful types of asbestos fibers than the drywall asbestos fibers, which are less toxic. The plaintiff developed mesothelioma and sued the manufacturer of the drywall joint filler after the insulation manufacturer went bankrupt.

The NAM filed an amicus brief on February 27, 2013. The trial court accepted expert testimony that any occupational exposure above ambient level was sufficient for causation. Moreover, the expert testimony did not go any further to base the causation on any factors beyond mere exposure to some “dust” and did not produce any scientifically competent dose assessment. The NAM comments explained developments where the highest courts in Texas and Pennsylvania have limited the any-exposure theory by imposing added elements of dose and potency, requiring that asbestos fibers must be released in an amount sufficient to cause the plaintiff’s disease. The NAM urged the Maryland court to expand the type of evidence required to sufficiently show that any asbestos exposure actually caused the plaintiff’s illness.

The Maryland Court of Appeals, the highest court in the state, ruled 7/8/2013 that the company had no duty to warn the plaintiff. It found that there was skimpy knowledge at the time of the danger to household members from asbestos dust brought into the home, and that the company was unable to give warnings directly to such plaintiffs and the warnings would not have had any practical effect. Household members had no relationship with the manufacturer, were not in contact with the product itself, and were never on the work site where the product was. The court did not have to reach the second issue regarding whether the evidence showed that asbestos was a substantial contributing cause of the plaintiff's illness.


Related Documents:
NAM brief  (February 27, 2013)

 

Sears, Roebuck and Co. v. Butler   (U.S. Supreme Court)

Predominance of common questions in product liability class certification

The NAM filed an amicus brief with the Supreme Court encouraging the Court to review the Seventh Circuit’s decision in Butler v. Sears, Roebuck and Co. That decision deepened a split of authority among the federal circuits over the proper approach to analyzing class actions when the proposed class includes customers who have suffered no injury. Although the Supreme Court has recently raised the bar for class certification in antitrust and securities cases, this case presented aunique opportunity for the Court to resolve the considerable uncertainty surrounding consumer class actions involving alleged product defects and uninjured class members.

In this case, the Seventh Circuit certified a class action where class members are linked only by their purchases since 2001 of some 27 different models of the same brand of washing machine, which allegedly is more likely than other brands to allow mold to accumulate and emit odors. According to the court, even though most members of the class may not have experienced any mold problems or any other injury, the class should be certified and whether individual class members were actually harmed can be addressed at a later stage of proceedings. Class certification requirements are not mere conveniences for streamlining litigation, but crucial safeguards grounded in fundamental notions of constitutional due process. For a class to be properly certified, common questions must predominate over individual ones, and if adjudicated on a class basis, each one of the claims will be resolved in one stroke. The Seventh Circuit’s decision replaced the Supreme Court’s predominance test with a malleable question of efficiency.

Class certification in meritless circumstances where consumers have suffered no cognizable injury encourages class action abuse. Ultimately, consumers are harmed by these class certifications because businesses have little choice but to incorporate the cost of frivolous product liability litigation and litigation avoidance into the prices paid by their consumers.

On June 3, the Supreme Court vacated the 7th Circuit's decision and remanded the case back to them for further consideration in light of its decision on certifying class actions in Comcast Corp. v. Behrend.


Related Documents:
NAM brief  (April 1, 2013)

 


Securities Regulation -- 2013



National Association of Manufacturers v. SEC   (D.C. Circuit)

Challenging law and SEC rule on Conflict Minerals

The NAM filed its main brief on January 2013, in its court challenge to the conflict minerals rule issued by the Securities and Exchange Commission (SEC) in August 2012. The final rule imposes an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress’s overall objectives. Our brief asked a federal appeals court to modify or set aside the rule, arguing that the SEC adopted one of the costliest rules in its history while rejecting alternative regulatory options that would have substantially reduced the costs. The SEC also misread the statute and imposed new burdens not required by Congress on far more companies than expected. The business community understands the seriousness of the conflict occurring in the Democratic Republic of Congo and the need to implement solutions to bring an end to the violence. However, while well intentioned, the SEC’s final rule goes too far, and business groups have suggested constructive ways to make the rule more workable.

Oral arguments, originally scheduled for May before Judges Henderson, Tatel and Griffith, were canceled. A D.C. Circuit decision on April 26, 2013 in American Petroleum Institute v. SEC held that the D.C. Circuit lacked jurisdiction over a petition for review quite similar to the one filed in this case, and that the case should first be heard by a federal district court. In light of this development, we moved to transfer the case to the U.S. District Court for the District of Columbia, and the D.C. Circuit agreed.. For details on proceedings in the district court, click here.


Related Documents:
NAM Motion to Transfer  (April 30, 2013)
NAM Reply brief  (March 22, 2013)
NAM Opening brief  (January 16, 2013)
NAM Motion to Expedite  (November 21, 2012)
NAM Statement of Issues  (November 21, 2012)
NAM Amended Petition for Review  (October 22, 2012)

 

National Association of Manufacturers v. SEC   (U.S. District Court for the District of Columbia)

Challenging law and SEC rule on Conflict Minerals

The NAM's suit challenging the conflict minerals rule issued by the Securities and Exchange Commission (SEC) in August 2012 was transferred from the D.C. Circuit to the district court on May 2, 2013. Judge Wilkins agreed to our request for expedited consideration of the case, to treat the petition for review as a complaint, and to decide the case on the briefing already submitted to the Court of Appeals.

Our main brief on the merits asked the court to modify or set aside the rule, arguing that the SEC adopted one of the costliest rules in its history while rejecting alternative regulatory options that would have substantially reduced the costs. The SEC also misread the statute and imposed new burdens not required by Congress on far more companies than expected. The business community understands the seriousness of the conflict occurring in the Democratic Republic of Congo and the need to implement solutions to bring an end to the violence. However, while well intentioned, the SEC’s final rule goes too far, and business groups have suggested constructive ways to make the rule more workable. The final rule imposes an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress’s overall objectives.

On July 23, the judge upheld all aspects of the rule, deferring to the SEC for considering the rule's burden on efficiency and competition and the costs of compliance. It deferred to the agency's conclusion rejecting a de minimis exception, imposing a "reasonable country of origin inquiry" for minerals that "may" have originated in the region of the Congo, and setting different phase-in periods for large and small companies. It found the word "manufacture" to be ambiguous and accepted the application of the rule to those who contract to manufacture.

Finally, applying an intermediate level of scrutiny to our First Amendment challenge to the requirement that conflict mineral disclosures be on public web sites, the judge cited the government's foreign relations interest as justification for again deferring to the SEC. The ruling found a "reasonable fit" between the rule and Congress's objectives in promoting peace and security in and around the Congo.

We appealed this decision. Click here for this subsequent history.

Click here for the briefs and other details on the case originally filed in the D.C. Circuit.


Related Documents:
NAM Notice of Suplemental Authority  (July 3, 2013)
NAM Response to SEC Notice of Supplemental Authority  (June 28, 2013)

 


Taxation and State Taxation -- 2013



Kimberly-Clark Corp. v. Alabama Dept. of Revenue   (U.S. Supreme Court)

State's attempt to tax full value of sale of property in unitary business

States often do what they can, and sometimes exceed their authority, to tax companies doing business in many states and around the world. The Due Process and Commerce Clauses of the Constitution are designed in part to prevent state interference with interstate commerce, and the Supreme Court has applied the "unitary-business principle" to allow multiple states to tax a portion of a multistate corporation's business.

This case arose when Alabama tried to tax the full value of the proceeds of the disposal of timberland and a pulp mill located in that state, even though the assets were part of a vertically integrated business in many states. An Alabama court approved the tax, but other states may still tax their share of the transaction, since it is part of the unitary business that is subject to tax in those states. This will mean multiple taxation of the same transaction.

The company appealed to the Supreme Court, and the NAM filed an amicus brief 11/1/2012 urging the Court to review the Alabama decision. The ruling ignores the long-standing rules governing the apportionment of unitary income, which allow a state to tax activities that occur outside the state as long as the tax is properly apportioned by the taxing state. We argued that the issue in this case is of national significance, and the Supreme Court must step in to ensure compliance with its precedents regarding apportionable income.

The Court denied the petition on Jan. 14, 2013.


Related Documents:
NAM brief  (November 1, 2012)

 

Union Carbide Corp. v. Commissioner   (U.S. Supreme Court)

Whether supply costs for process research qualify for the R&D tax credit

This case involves what costs may be included as “qualified research expenses” eligible for the R&D tax credit when companies undertake manufacturing process improvements. Normally, all costs related to research into process innovations, including plant-scale research costs such as raw materials also used in ordinary production runs, are qualified expenses. However, the judge ruled, and the Second Circuit affirmed, that supply costs are “ordinary production costs” and that the company did not prove that the costs qualified for the credit. Click here for details on our involvement in the Second Circuit in this case.

This ruling was appealed to the U.S. Supreme Court, but on March 18, 2013, it declined to hear the appeal. The NAM and others had filed an amicus brief arguing that this ruling undermines the fair and effective implementation of the research credit and undermines tax certainty. Taxpayers should be able to rely on the plain language of tax laws and regulations, and a position taken by the IRS during the course of litigation should not be accorded significant deference by the courts. We also argued that the lower courts failed to acknowledge the nature and importance of research into process innovations that is conducted on the full scale of an operational production plant.


Related Documents:
NAM brief  (January 22, 2013)

 


Benefits -- 2012



Shaver v. Siemens Corp.   (3rd Circuit)

Whether sale of manufacturing plant creates liability for job separation benefits

Siemens Corp. bought a power plant from Westinghouse Corp., hiring all of the plant's then-active employees and providing them with retirement benefits that were substantially the same as had been provided under Westinghouse's pension plan. That plan offered permanent job separation (PJS) benefits until 1998. The plant was closed in 2002, and 227 former employees sued Siemens for termination benefits.

The trial court agreed, ruling that Sections 204(g) and 208 of the ERISA prevent the company from cutting back on early retirement benefits. This decision is likely to impose substantial new burdens on sponsors of employee retirement plans when a company acquires a facility and retains the workforce.

The NAM, the American Benefits Council, and the U.S. Chamber of Commerce filed an amicus brief arguing that ERISA's "spin-off" rule should not apply in this context because ERISA encourages plan sponsors to adopt employee benefit plans voluntarily and with flexibility. In addition, ERISA's Section 204(g) anti-cutback rule should not apply because the Siemens plan never included PJS benefits and compelling a purchaser to provide a seller's contingent benefit subsidy when the former employees remain ineligible for that benefit will discourage employers from entering into business transactions. We asked the court to reverse a decision in which the trial court rewrote the terms of a business transaction and circumvented the clear and express terms of an ERISA plan.

On Feb. 29, 2012, the Third Circuit ruled unanimously that the plaintiffs were not entitled to PJS benefits under any circumstance. The plaintiffs were not able to satisfy the conditions for receiving PJS benefits under the Westinghouse plan, the omission of those benefits did not diminish the plaintiffs' benefits, and the company did not undertake any obligation to provide those benefits to legacy employees.

The complexity and extensive litigation over federal law relating to employee benefit plans continues to dog manufacturers who need flexibility to weather changing economic circumstances. The lower court's unwarranted extensions of ERISA's complex rules could have encouraged protracted litigation over similar business transactions or could have discouraged employers from entering into such transactions at a time when American companies need maximum flexibility to face the challenges of global competition and rapid change. This kind of class-action litigation creates high stakes for manufacturers, and this victory is an important one for reining in such claims.


Related Documents:
NAM brief  (June 3, 2011)

 


Class Actions -- 2012



Glazer v. Whirlpool Corp.   (6th Circuit)

Class action certification without proper factual analysis

This is a class action suit alleging warranty, design and failure-to-warn claims involving washing machines. The trial court certified a class despite evidence from the defendant showing the absence of uniformity among machine designs, consumer usage practices, company disclosures and consumer damages. Cases should not be certified as class actions unless the court conducts a rigorous analysis of disputed facts to determine if all the members of the class have common injuries and common issues. A panel of appellate judges affirmed the trial court even though most of the consumers suffered no harm, as long as one plaintiff alleges a defect that potentially could manifest itself in other purchasers' products.

The NAM filed an amicus brief in support of Whirlpool's request for rehearing by all the judges on the Sixth Circuit. We argued that the trial court improperly reviewed only the plaintiffs' theories and did not address the facts or evidence offered by Whirlpool. The appellate court conducted its own review of the facts to find evidence supporting the plaintiff and disregarding contrary evidence. This process violated the Supreme Court's requirement in Wal-Mart v. Dukes to conduct a "rigorous analysis" to determine that the requirements of Rule 23 for class certification are satisfied. Without such an analysis, the ruling should be reversed and sent back to the trial court for reconsideration.

Our brief also outlined a variety of other errors in the appellate court's opinion, including defining the class to include consumers without injuries, adopting a new "premium price" theory of injury, and calling for the recognition of sub-classes of plaintiffs even though there are no individuals who represent such sub-classes.

Class action certification is a critical step in many cases, as the decision to certify a case has a substantial effect on the magnitude of the potential liability. Such decisions should be based on solid evidence that a problem is shared by a class of plaintiffs that all have the same claims and injuries.

On June 1, 2012, the Sixth Circuit took the unusual step of denying our request, along with those of several other amicus parties, to file our brief. Whirlpool moved for reconsideration of that unusual order, because the briefs were timely, involve the nation's leading business organizations, no reasons for the denial were given, the briefs will be helpful to the court, and the court should not convey an unfavorable impression about openness. On 6/12/12, the court granted this motion to reconsider, and granted our motion to file our amicus brief. Unfortunately, on June 18, the Sixth Circuit declined en banc review in this case.


Related Documents:
NAM brief  (May 17, 2012)

 


Environmental -- 2012



Alec L. v. Jackson   (D.D.C.)

Litigation seeking to impose 6% annual reductions in greenhouse gases under "public trust" theory

An environmental group in California spearheaded litigation and administrative proceedings in all fifty states, as well as this lawsuit in federal court against the EPA and the Departments of the Interior, Defense, Agriculture, Energy and Commerce, to try to force government to impose further greenhouse gas emissions reduction policies under a "public trust" theory. The federal suit was brought by WildEarth Guardians, Kids vs. Global Warming and five individuals who sought to preempt the federal legislative and regulatory processes by getting a federal judge to compel massive societal changes that they believe are necessary to address climate change.

On Oct. 31, 2011, the NAM moved to intervene in this litigation, because the law suit, if successful, would have a dramatic effect on manufacturing processes and investments, increasing production and transportation costs, decreasing global competitiveness and driving jobs and businesses abroad. The litigation, which seeks a minimum 6% reduction in carbon dioxide emissions every year, would be devastating to the entire U.S. economy.

Along with our motion to intervene, we asked the court to dismiss the law suit for various reasons: (1) the case presents political questions that the courts are not able to resolve, (2) the plaintiffs lack standing because their injuries are too speculative and not likely to be reduced by the relief sought, (3) the public trust doctrine does not exist under federal law and the claims have been displaced by federal regulation in this area, and (4) the doctrine does not apply to the atmosphere or require a duty to regulate greenhouse gas emissions.

A hearing was held before Judge Edward Chen on November 30, 2011 to determine whether to grant the government's request that the case be transferred from a federal court in northern California to one in the District of Columbia. The NAM supported this request. On December 6, the court agreed, ordering the case transferred. A hearing was held on April 2, and the judge granted our motion to intervene. A hearing was held on May 11 to consider our motion to dismiss the case.

On May 31, Judge Wilkins granted our motion to dismiss. He ruled that public trust claims are grounded in state, not federal, law, and the allegations in this suit represent "a significant departure" from the public trust doctrine as it has been traditionally applied to water-related activities. Federal courts may exercise jurisdiction in a case if it raises a federal question, but the public trust doctrine is a matter of state law. The judge also ruled that even if the doctrine had been a federal common law claim at one time, it has been displaced by federal regulation under the Clean Air Act. Citing the American Electric Power case from the Supreme Court, he found that federal judges may not set limits on greenhouse gas emissions "in the face of a law empowering EPA to set the same limits, subject to judicial review only to ensure against action arbitrary, capricious, . . . or otherwise not in accordance with the law."

The court closed with a suggestion that the parties need not "stop talking to each other once this Order hits the docket. All of the parties seem to agree that protecting and preserving the environment is a more than laudable goal, and the Court urges everyone involved to seek (and perhaps even seize) as much common ground as courage, goodwill and wisdom might allow to be discovered."

That is certainly a laudable suggestion, as the plaintiffs have filed administrative petitions in 39 states and the District of Columbia to seek similar relief at the state level, and 31 of those have already been denied. Suits were brought in 10 other states, and were dismissed in 9 of them, many with appeals or amended complaints in the works.

However, the plaintiffs filed a motion for reconsideration of the court's ruling, and the NAM filed an opposition on 7/16/12. The motion was denied on 5/22/13.


Related Documents:
NAM Opposition to Motion for Reconsideration  (July 16, 2012)
NAM Reply brief Supporting Motion to Dismiss  (April 23, 2012)
NAM brief re Intervention  (March 26, 2012)
NAM Opposition to Plaintiffs' Motion for Preliminary Injunction  (November 2, 2011)
Declaration of NAM chief economist Dr. Chad Moutray in support of intervention  (October 31, 2011)
NAM Motion to Dismiss  (October 31, 2011)
NAM Motion to Intervene  (October 31, 2011)

 

American Chemistry Council v. EPA   (D.C. Circuit)

"Grounds arising after" challenge to EPA regulations relating to greenhouse gases

The NAM and 16 other business associations filed 4 petitions for review in the U.S. Court of Appeals for the D.C. Circuit, challenging EPA regulations from 1978, 1980 and 2002 that are a part of EPA's effort to regulate greenhouse gases from stationary sources of emissions. No one anticipated that these previously issued rules would be used to mandate greenhouse gas permit requirements, but that is the interpretation EPA has adopted. Our legal challenge was consolidated under the case captioned American Chemistry Council v. EPA.

We also filed an administrative petition for reconsideration with EPA on the same rules. Our lawsuits and the administrative petition challenged each of the four older rules to the extent that EPA considers them to allow the regulation of pollutants such as greenhouse gases that are not subject to a National Ambient Air Quality Standard (NAAQS). Our administrative petition went into great detail regarding the grounds for our request (see Related Documents below). The petitions below also contain the text of the regulations that were challenged.

Our main brief on the merits was filed May 10, 2011, focusing primarily on the timeliness of the lawsuits and on the fact that EPA’s interpretation of the Clean Air Act is unreasonable and creates absurd results.

Oral arguments were held Feb. 29, 2012.

We argued that Congress intended for EPA to require PSD permits only for facilities that can financially bear the substantial regulatory costs and which, as a group, are primarily responsible for deleterious emissions. The number of permits needed by facilities that meet these criteria was about 280 per year, a number consistent with congressional intent to limit the permit program to a manageable number. The greenhouse gas regulations, however, would require more than 81,000 PSD permits per year, according to the EPA, crushing EPA, state agencies and the economy.

EPA’s reading of the Clean Air Act is unlawful because it severs the link between the PSD permit program and the attainment of national ambient air quality standards (NAAQS). We argued that PSD permits are only required for emissions of a “criteria” pollutant, such as sulfur dioxide, nitrogen oxides or lead, and then only if the emissions occur in an area that has attained compliance with national standards.

EPA’s interpretation also is flawed because it leads to requiring an absurd number of permits. Its interpretation was announced three decades ago, and this is the first time a court has been asked to scrutinize its lawfulness. Only now do sources emitting major amounts of GHGs have to get PSD permits, and now their complaints about EPA’s interpretation are ripe for judicial review.

The purpose of the PSD permitting program is to maintain air quality in areas of the country that have attained satisfactory levels of quality, hence the name "Prevention of Significant Deterioration". EPA sets ceilings for each of a number of specific pollutants, and requires permits for new facilities that might emit more of those pollutants into areas in attainment. Our brief argued that EPA is now forcibly making the PSD permit program an all-purpose regulatory program. However, to do so, we argued that EPA must first define greenhouse gases as criteria pollutants, and specify the maximum levels at which they may be present in attainment areas. It has not done so, and it is arguably impossible to set meaningful NAAQS levels for greenhouse gases.

On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.

On August 10, 2012, the NAM coalition filed a petition for rehearing en banc, asking that all the judges on the D.C. Circuit review the 3-judge panel's ruling. We argued that the panel relied on an unreasonable interpretation of the Clean Air Act to approve "the most sweeping expansion of EPA authority in the agency's history, for the first time covering a broad swatch of mobile and stationary sources of greenhouse gases and granting itself discretion to determine and revise the scope of the statute’s coverage, previously fixed by the statute’s explicit terms, for the indefinite future." The panel's ruling conflicts with Supreme Court decisions, produces absurd results, and could lead to annual cost increases of more than $20 billion upon full implementation.

On December 20, 2012, the D.C. Circuit denied our petition. Judges Brown and Kavanaugh filed separate dissenting opinions that supported our arguments. Such dissents are rare, sending a clear signal that significant legal issues remain to be addressed.

On April 18, 2013, the NAM filed a Petition for Writ of Certiorari wth the U.S. Supreme Court and awaiting the Court's determination whether to hear the case. The NAM's involvement in thisw case is critical because no other petitioners have been found to have standing to challeng the PSD regulations and NAM members are adversely affected by EPA's overly burdensome requirements.


Related Documents:
NAM petiton for writ of certiorari  (April 18, 2013)
NAM petition for rehearing en banc  (August 10, 2012)
NAM reply brief  (August 5, 2011)
NAM opening brief  (May 10, 2011)
NAM petition re: 1980 PSD Rule  (July 6, 2010)
NAM petition re: 2002 PSD & SIP Rule  (July 6, 2010)
NAM petition re: Part 51 Rule (1978)  (July 6, 2010)
NAM petition re: Part 52 Rule (1978)  (July 6, 2010)
NAM petition to EPA to reconsider PSD rules  (July 6, 2010)

 

American Lung Ass'n v. EPA   (D.C. Circuit)

Environmental challenge to EPA's decision not to reconsider ozone regulation in 2011

The EPA has been reconsidering whether to lower the limits on ozone emissions from stationary sources since early in 2010, and engaged in a lengthy reconsideration process. Finally, President Obama called on EPA to put aside their reconsideration of the existing standard. OIRA Administrator Cass Sunstein sent a letter to EPA explaining the reasons that he was sending the proposal back to EPA for reconsideration, including that "a new standard now is not mandatory" and new scientific work is underway and will be based on the best available science. EPA then withdrew its proposed regulation and terminated reconsideration of the March 2008 standards.

The American Lung Association, Environmental Defense Fund, Natural Resources Defense Council and Appalachian Mountain Club sought court review of this decision. The Ozone NAAQS Litigation Group, of which the NAM is a member, moved to intervene in this litigation to support EPA's decision not to change the existing ozone limits at this time. Our participation is needed because EPA represents the "general public interest" and the agency may not adequately represent the interests of manufacturers in avoiding costly and burdensome emissions limitations. On Dec. 1, we filed an opposition to the ALA's motion to coordinate or consolidate this case with Mississippi v. EPA, involving the 2008 ozone standard. We argued that ALA's motion is premature, since EPA is considering filing a motion to dismiss, which, if granted, would moot other issues in the case.

On Feb. 17, 2012, the Court dismissed ALA's petition for review, saying that it "lacks jurisdiction over the agency's non-final decision to defer action on the 2008 voluntary revision of the national ambient air quality standards for ozone." This decision mooted all the other issues in the case. The court also adopted a briefing schedule for separate litigation challenging the 2008 standard.

 

Defenders of Wildlife v. Bureau of Ocean Energy Management   (11th Circuit)

Environmental challenge to oil drilling exploration plan permit in Gulf of Mexico

On October 12, 2010, the Secretary of the Interior lifted the moratorium on deepwater drilling in the Gulf of Mexico, after extensive consultations with the Bureau of Ocean Energy Management. When the Bureau approved Shell's exploration plan (EP), some environmental groups sued to halt the exploration. They sought to overturn the Bureau's "Finding of No Significant Impact," claiming that erroneous assumptions led the agency to understate the risk of an oil spill.

The court reviewed the issues whether Shell’s EP violated the environmental assessment provisions of the National Environmental Policy Act (NEPA) or the interagency consultation provisions of the Endangered Species Act (ESA). On June 22, 2012, the court denied the petition for review, refusing to overturn the Bureau's approval of Shell’s EP to conduct deepwater drilling in the Gulf of Mexico because the environmental group petitioners failed to overcome the extremely deferential “arbitrary and capricious” standard of review for the Bureau's actions.

On Nov. 23, 2011, the NAM joined with other business organizations in an amicus brief in support of the Bureau's decision. Reimposing a moratorium would do little to protect the environment and would stall America's economic recovery and compromise our energy security. The toll would be particularly high for communities in the Gulf States that have faced more than their fair share of disasters and are still recovering from losses caused by Hurricanes Katrina and Rita, the Macondo oil spill, the drilling moratorium and the current slowdown in regulatory approvals. Slow approvals also affect the overall U.S. economy, meaning fewer jobs, less oil and gas production, foregone tax revenue and royalties, and increased dependence on foreign oil.

Our argument focused on the Bureau's statutory obligation to balance economic and energy-policy interests with environmental effects. Jobs and energy security must be taken into account under the law, and exploration of the Outer Continental Shelf involves billions of dollars in investments and hundreds of thousands of jobs. This lawsuit threatened to require extensive Environmental Impact Statements (EIS) for every exploration plan. However, the court explained that it is within the Bureau's discretion to not require a separate EIS for every exploration and that it could rely on prior EISs to approve future EPs. In addition, the court held that when interagency consultation is reinitiated, the prior consultations remain valid until the new process is completed.

Ultimately, the court deferred to the Bureau's balancing of environmental concerns with the expeditious and orderly exploration of resources in the Gulf of Mexico and denied the environmental groups petition for review of the Bureau’s action.


Related Documents:
NAM brief  (November 23, 2011)

 

Defenders of Wildlife v. U.S. Dep't of the Interior   (U.S. District Court for the District of Columbia)

Challenge to portion of polar bear rule

See Center for Biological Diversity v. Salazar for a summary of this case. All the challenges to the polar bear regulations were consolidated in one case.

 

Mingo Logan Coal Co. v. EPA   (U.S. District Court for the District of Columbia)

EPA interference with existing Clean Water Act permits

Mingo Logan Coal Co. challenged an EPA decision that it argued retroactively changed a Clean Water Act permit issued by the U.S. Army Corps of Engineers four years earlier. This change withdrew certain creeks as disposal sites for dredged material, affecting the validity of a permit that EPA had previously reviewed and assented to, and even though the permit holder was in full compliance with it.

The NAM and 11 other business groups filed an amicus brief urging the trial court judge to rule that EPA does not have the authority to modify previously issued permits under Section 404 of the Clean Water Act. The section 404 permitting program authorizes roughly 60,000 permits representing about $220 billion in economic investment every year, and EPA's assertion of authority to revise existing permits creates tremendous investment uncertainty for all permit holders and potential project proponents. Inevitably, that uncertainty will translate into higher risks in borrowing, less investment, lost jobs and slower growth throughout the U.S. economy.

Our brief highlighted the dramatic change that EPA's action represents. Section 404 permits are required for the discharge of fill material into waters of the United States (including wetlands), and affects construction of utility infrastructure, housing and commercial development, renewable energy projects like wind farms or solar arrays, and transportation infrastructure projects such as highways and rail lines. While EPA has occasionally exercised its authority and often uses the threat of such action to obtain concessions during the permitting process, it has never before used Section 404(c) authority to review a previously permitted project.

We also highlighted a study by Dr. David Sunding, a professor at UC Berkeley, showing that the threat that EPA may modify existing permits distorts the cost-benefit ratio of new investment projects. Existing permits are already subject to the Army Corps of Engineers' regulations governing suspension, revocation and modification, and now EPA's interference will delay or deter investment in new projects. For example, a 2% chance that EPA would act adversely decreases a project's cost-benefit ratio by an astounding 30%. Also detailed are effects on bank financing and interest rates, bond ratings, rationed credit, land prices, and other harms throughout the economy.

On Sept. 23, the government moved to strike the Sunding report from consideration, as it was not part of the record considered by EPA. We opposed this motion, arguing that EPA was repackaging their efforts to exclude us from the case, efforts that were rejected by the court in August. We also argued that the report did not add to the administrative record, but provided context for the court to interpret Section 404(c) and to understand the broad consequences that flow from the government's theory of liability.

On March 23, 2012, Judge Amy Berman Jackson ruled that EPA does not have the authority to render a permit invalid once it has been issued by the Army Corps of Engineers. The ruling found that Section 404(c) does not expressly give EPA that power, and even if it did have some power to interpret that section, its interpretation was unreasonable. The Corps is the only permitting agency identified in the statute, and the judge said, "This is a stunning power for an agency to arrogate to itself when there is absolutely no mention of it in the statute." It has the power to block the initial issuance of permits by refusing to allow the Corps to specify certain areas as disposal sites. But even if it had the power to subsequently remove the designation of certain sites, that does not affect the validity of the existing permit, which only the Corps can issue. Mingo Logan need only comply with the terms of the original permit.

The court described as "magical thinking" EPA's position that withdrawing a specification of a disposal site revokes the permit that affects that site. "It posit[ed] a scenario involving the automatic self-destuction of a written permit issued by an entirely separate federal agency after years of study and consideration. Poof!" Thus, even if the agency were accorded some deference under administrative law procedures, the agency's interpretation was unreasonable and could not stand. The judge also cited the NAM's amicus brief to show that eliminating finality from the permitting process would have a significant economic impact on industry, in turn making EPA's assertion of power less reasonable.

EPA appealed this ruling to the D.C. Circuit and won. Click here for details.


Related Documents:
NAM brief  (June 3, 2011)

 

National Association of Manufacturers v. EPA   (D.C. Circuit)

Challenging EPA's endangerment finding

In February, 2010, the NAM and other business groups filed a petition in federal appeals court challenging the U.S. Environmental Protection Agency’s (EPA) decision to regulate greenhouse gas (GHG) emissions from stationary sources through the Clean Air Act. Joining the NAM on the petition were the American Petroleum Institute, the National Petrochemical & Refiners Association, the National Association of Home Builders, the Corn Refiners Association, the Brick Industry Association, the Western States Petroleum Association and the National Oilseed Processors Association.

On March 18, 2010, a group of 21 industry associations and chambers of commerce filed a motion to intervene in the NAM suit in support of our position. This group represents a wide cross-section of sectors around the country that will be severely affected by EPA's effort to regulate stationary sources of greenhouse gases under the Clean Air Act.

A variety of other business groups and some states also challenged the endangerment finding. Some of these groups asked the EPA directly to reconsider its finding, but the agency turned down the request in July, 2010. In the endangerment case, industry's opening brief was filed on May 20, 2011. Because the court required that all non-state petitioners and intervenors file only one brief, the views of 80 parties were consolidated, and the resulting brief includes disparate arguments from a variety of interests.

The brief explains that EPA does not say what constitutes a “safe climate,” acceptable global temperature ranges, or “safe” levels of GHGs in the atmosphere, nor will anyone be able to judge whether or when EPA has ever achieved a congressionally defined goal. EPA will not be able to say that its action will reduce global temperatures or that a temperature reduction will avoid an actual danger to public health and welfare.

The brief focused on, among other things, key EPA errors relating to (1) construing its authority to produce absurd results, (2) failing to provide a rational basis for determining whether GHG regulations will mitigate a defined public health or welfare risk, (3) lumping together six pollutants without making separate determinations about the effects of each, (4) failing to consider future mitigation and adaptation steps that impact whether health and welfare are endangered, and (5) failing to follow statutory procedures, including consultation with its own Science Advisory Board.

Congress did not intend for EPA’s endangerment finding to produce absurd results, yet that is the effect of EPA’s finding. The EPA should not have used the endangerment finding to cause PSD permitting requirements, since those requirements apply to emissions whose harm is concentrated in a particular geographic area. It should have adopted a more restricted reading of the statute, instead of a broad reading that would be narrowed by the absurd results doctrine.

We also argued that EPA has no rational basis for treating all six GHGs from motor vehicle emissions as a single air pollutant. Automobiles do not emit 2 of the six pollutants, and each of the pollutants that are emitted has radically different heat-trapping properties. In addition, EPA’s use of a “CO2 equivalent” as a proxy for regulation of each gas individually unlawfully avoids having to make endangerment findings for five of the six GHG air pollutants it seeks to regulate.

EPA also refused to consider “whether any harms from the regulated emissions will be independently averted or mitigated.” The agency also ignored emissions reductions that will occur from implementation of the Energy Independence and Security Act of 2007.

EPA's response was filed on Aug. 18, 2011. The agency argued that the administrative record was sufficient, that it reasonably classified six gases on one pollutant, and that it did not need to consider costs, administrative burdens, benefits or mitigation when making its endangerment finding. It also argued that it was not required to submit the proposed finding to the Science Advisory Board for review, and that complaints that it did not do so came too late in the process.

This litigation is one of many suits by the NAM and our coalition partners against EPA's attempt to regulate GHGs. In one, we challenged the agency’s interpretation of the so-called “Johnson Memo,” where EPA stated for the first time that it would apply controls on greenhouse gas emissions on a wide range of manufacturing and other stationary sources. See our summary in NAM v. EPA described as "Challenging EPA's STR interpretation". We subsequently filed additional suits challenging EPA's tailoring rule, tailpipe rule, and other rules being used to regulate stationary sources of greenhouse gases.

On September 26, 2011, the EPA's Inspector General issued a report in part finding that EPA did not make an independent assessment of key scientific evidence that it relied on in issuing its endangerment finding. We then asked the court to take judicial notice of the report. Public documents that are not already in the record of a case may be considered by a court, and we brought this development to the court's attention because it is directly relevant to EPA's claim in court that it exercised independent judgment when reviewing the scientific evidence.

Oral arguments were held on Feb. 28, 2012.

On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


Related Documents:
NAM Request for Judicial Notice of EPA Inspector General's Report  (September 30, 2011)
Petitioners' Opening Brief  (May 20, 2011)
NAM Joint Briefing Proposal  (January 10, 2011)
NAM Docketing Statement  (April 15, 2010)
NAM Nonbinding Statement of Issues  (April 15, 2010)
NAM Petition for Review  (February 16, 2010)

 

National Association of Manufacturers v. EPA   (D.C. Circuit)

Challenging EPA's STR interpretation

On June 1, 2010, the NAM and other business organizations filed suit against EPA's latest interpretation of the so-called “Johnson Memo,” where the Agency stated for the first time that it will apply controls on greenhouse gas emissions on a wide range of manufacturing and other stationary sources beginning on January 2, 2011. This is the second piece of litigation against the EPA, which has issued 4 rules and interpretations that all combine to set limits on stationary sources of greenhouse gas emissions. Manufacturing facilities are among many sources of such emissions, and legal challenges must be filed now even though enforcement against many of these sources will not occur immediately.

This case is related to our challenge to EPA's endangerment finding. See our summary in NAM v. EPA described as "Challenging EPA's endangerment finding".

On Sept. 15, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December, 2010 and we spent 2011 filing briefs in all the greenhouse cases on the merits. Oral argument was held in the D.C. Circuit on February 29, 2012.

On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


Related Documents:
NAM/Industry brief  (June 20, 2011)
NAM's Non-Binding Statement of Issues  (August 30, 2010)
NAM Petition to Review STR Rule  (June 1, 2010)

 

National Association of Manufacturers v. EPA   (D.C. Circuit)

Challenging EPA's tailoring rule for greenhouse gas regulation

On August 2, 2010, the NAM and 16 other business associations filed a petition for review in the D.C. Circuit challenging the EPA's final regulation that sets out its schedule for enforcing regulatory controls on greenhouse gas (GHG) emissions from stationary sources. The agency has previously announced that greenhouse gas emissions are subject to regulation beginning January 2, 2011, and the usual permit requirements of the PSD program (Prevention of Significant Deterioration) kick in. Because there are millions of facilities that fall under EPA's regulatory requirements, the agency has adopted the tailoring rule to focus its initial enforcement only on facilities with the largest amounts of GHG emissions.

This is the last of eight petitions filed by the NAM coalition of business organizations challenging EPA's efforts to regulate stationary sources of greenhouse gases.

Our lawsuit is the third in a series of suits challenging four EPA rules that together implement the greenhouse gas regulatory program. Our fundamental concern is over EPA's decision to automatically trigger PSD regulation of all stationary sources.

On Sept. 15, 2010, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December.

On June 20, 2011, the NAM and several other industry associations filed the fourth major legal brief challenging the EPA’s regulation of greenhouse gas emissions. This brief argued, in part, that the EPA’s tailoring rule essentially rewrote parts of the Clean Air Act by changing clear, congressionally established numerical thresholds for pollutants that are subject to regulation. The brief reiterated that the Clean Air Act was never meant to regulate GHGs. As a result, the rules should be vacated and remanded.

Oral arguments in the case were held on Feb. 29, 2012.

On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.

On August 10, 2012, the NAM coalition filed a petition for rehearing en banc, asking that all the judges on the D.C. Circuit review the 3-judge panel's ruling. We argued that the panel relied on an unreasonable interpretation of the Clean Air Act to approve "the most sweeping expansion of EPA authority in the agency's history, for the first time covering a broad swatch of mobile and stationary sources of greenhouse gases and granting itself discretion to determine and revise the scope of the statute’s coverage, previously fixed by the statute’s explicit terms, for the indefinite future." The panel's ruling conflicts with Supreme Court decisions, produces absurd results, and could lead to annual cost increases of more than $20 billion upon full implementation.

On December 20, 2012, the D.C. Circuit denied our petition. Judges Brown and Kavanaugh filed separate dissenting opinions that supported our arguments. Such dissents are rare, sending a clear signal that significant legal issues remain to be addressed.

On April 18, 2013, the NAM filed a Petition for Writ of Certiorari with the U.S. Supreme Court and awaiting the Court's determination whether to hear the case.


Related Documents:
NAM petition for writ of certiorari  (April 18, 2013)
NAM petition for rehearing en banc  (August 10, 2012)
NAM reply brief  (November 16, 2011)
NAM/Industry brief  (June 20, 2011)
NAM reply in support of partial stay  (November 8, 2010)
NAM statement of issues  (September 15, 2010)
NAM motion for partial stay  (September 15, 2010)

 

National Association of Manufacturers v. EPA   (5th Circuit)

Challenging EPA's denial of Texas Flexible Permit program

The NAM and 5 other business associations have asked the U.S. Court of Appeals for the Fifth Circuit to review EPA's decision published July 15 to disapprove revisions to a Texas Clean Air Act implementation plan that relates to the state’s Flexible Permits Program. The Texas plan was submitted to EPA for approval in 1994 and revised several times since then. After a recent notice-and-comment period, EPA decided that the Texas plan did not meet its requirements for a minor plan revision ("Minor NSR SIP revision") for various reasons described in its decision. Alternatively, it ruled that the plan did not meet its requirements for a substitute Major NSR SIP revision.

This petition for review is the first step in a proceeding that will eventually present the court with detailed legal issues to be resolved. The Texas flexible permits program allows operators of facilities that generate air emissions flexibility in managing their operations. While one flexible permit is allowed per plant site or account, the applicant can choose which facilities and pollutants to include. The permits allow plants to exceed pollution limits from individual emission sources as long as the facility as a whole remains below an overall emissions cap. EPA's action highlights a serious struggle between national and state environmental authorities in regulating air emissions.

Click here for further developments in this case, which has been consolidated with Texas v. EPA.


Related Documents:
NAM petition for review  (September 13, 2010)

 

National Association of Manufacturers v. EPA   (D.C. Circuit)

Challenging EPA's light-duty vehicle GHG emissions standards

On July 6, 2010, the NAM and 15 other business associations filed a petition for review in the D.C. Circuit challenging the EPA's final regulation of light-duty motor vehicles, also known as the Section 202 motor vehicle rule or the tailpipe rule. EPA has announced that this rule, which regulates greenhouse gases from certain motor vehicles, was effective on January 2, 2011. The rule thus established the first EPA regulation of greenhouse gas emissions, and the agency previously announced that once a pollutant is regulated, the usual permit requirements of the PSD program (Prevention of Significant Deterioration) kick in. As a result of this combination of interpretations, EPA has begun to regulate stationary sources of greenhouse gas emissions such as manufacturing facilities around the country.

Our lawsuit was the third in a series of suits challenging four EPA rules that together implement the greenhouse gas regulatory program. Our fundamental concern was over EPA's decision to automatically trigger PSD regulation of all stationary sources.

On Sept. 15, 2010, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December.

On June 3, 2011, the NAM and 66 other parties filed a combined brief, as required by court order, detailing all the key arguments arising from the motor vehicle rule. Section 202 of the Clean Air Act requires EPA to justify the level of emissions controls imposed by explaining why those controls represent a rational choice in light of the identified endangerment risk. However, EPA said that it had no obligation to show that its regulations would be effective or reduce harm. It failed to justify its interpretation that the light-duty motor vehicle rule triggers stationary source regulations, and failed to address the enormous burdens and costs imposed on stationary sources.

The motor vehicle regulation arises under Title II of the Clean Air Act, while the regulation of stationary sources of emissions is governed by Title I, which focused on local emissions in defined geographical areas causing elevated ground-level exposures to a pollutant. EPA failed to exercise its discretion to limit the scope of the pollutants subject to the Title I, Part C PSD program, as it has done in another context -- the visibility program under the state part of the Clean Air Act.

We also argued that EPA failed to address the “absurd consequences” that the motor vehicle rule produces for stationary sources of greenhouse gas emissions. Had it done so, EPA could have avoided those consequences by adopting a more reasonable interpretation of the Clean Air Act. Instead, it told the regulated community to address the stationary-source consequences of its regulation of greenhouse gases in the tailoring rule proceeding, but then refused to address the stationary source impacts in the tailoring rule, because that rule provided only relief and did not impose costs. This failure to consider the stationary-source impacts violates Section 202 of the Clean Air Act and is inconsistent with multiple mandates from Congress and the President.

The brief itemized several statutes and orders mandating that EPA consider economic effects: (1) Section 317 of the Clean Air Act, which requires an economic impact assessment, (2) the Regulatory Flexibility Act, which requires an analysis of effects on small businesses, (3) the Unfunded Mandates Reform Act, which requires an assessment of the impact on state and local governments, (4) the Paperwork Reduction Act, which requires OMB approval for significant information-collection obligations, (5) Executive Order 12898, which requires addressing disproportionate effects on minority and low-income populations, and (6) Executive Order 13211, which requires an assessment of a rule’s impact on energy supply, distribution and use.

The brief also argued that EPA has not demonstrated that the final rule will meaningfully and substantially reduce any endangerment to public health or welfare. It adds virtually no additional benefits to already existing fuel economy standards issued by the National Highway Transportation Safety Administration (NHTSA).

Oral arguments were held on February 28, 2012.

On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


Related Documents:
NAM/Industry brief  (June 3, 2011)
NAM statement of issues  (August 20, 2010)
NAM petition for review  (July 6, 2010)

 

Native Village of Kivalina v. ExxonMobil Corp.   (9th Circuit)

Public nuisance litigation over climate change is displaced by EPA regulation

A native village in Alaska sued various energy companies, alleging that greenhouse gas emissions cause climate change and made them relocate their village because of flooding. The trial court dismissed the case because it involves political questions that are not for courts to decide. It also said the plaintiffs did not have standing because they were unable to establish that their injuries are fairly traceable to the named defendants.

The issue was appealed to the Ninth Circuit. The NAM filed an amicus brief July 7, 2010, arguing that the case represents an unprecedented attempt by environmental lawyers to recast public nuisance as a "super tort", in an effort to bypass 4 time-honored elements of fundamental public nuisance law. Their theory is unfounded in federal or state law, and they cannot establish direct causation between the defendants' energy activities and the plaintiffs' injuries. In addition, to determine whether the elements of proving public nuisance were met, a court would have to address complex political questions and establish nationwide emissions standards.

Even the plaintiffs admitted the case was born out of their frustration with the legislative process. Allowing this kind of suit would give rise to endless claims of liability in highly speculative mass tort cases after every harsh weather event.

On September 21, 2012, the Ninth Circuit dismissed the case, finding that the plaintiffs' claims were displaced by federal law. Because EPA is regulating greenhouse gases, federal common law cannot be the basis for public nuisance claims in this area. This is another in a series of cases involving public nuisance claims arising from greenhouse gas emissions, including the Comer, American Electric Power, and Tennessee Valley Authority cases, all of which the NAM has participated by filing amicus briefs. The AEP case largely rejected this kind of wasteful litigation, but left open the possibility of nuisance claims under state law.


Related Documents:
NAM brief  (July 7, 2010)

 

Native Village of Point Hope v. Salazar   (9th Circuit)

Challenge to exploratory drilling permit in Alaska

The development of Alaska offshore oil resources is the center of legal disputes involving exploration permits issued by the Department of the Interior. Environmental groups have filed multiple lawsuits to impair the permitting process, and this one alleged violations of the National Environmental Policy Act (NEPA) and the Outer Continental Shelf Lands Act (OCSLA). At issue was a revised exploration plan prepared by Shell following an extensive environmental assessment and approved by the Department. The Government’s latest estimates show that the Beaufort Sea contains a staggering 6.3 billion barrels of undiscovered oil that is economically recoverable at roughly current market prices, and a recent economic analysis estimates that the development of these resources, including the Chukchi Sea, will create an annual average of over 54,000 new jobs over the next 45 years, generating $145 billion in employee payroll.

The NAM and other business groups filed an amicus brief Feb. 3, 2012, arguing that the OCSLA was adopted with the specific goal of encouraging the expeditious exploration and production of the Outer Continental Shelf. Thousands of exploration plans have already been approved under quick timetables, including 31 exploratory wells in the Beaufort Sea. The Department should be able to use its scientific and technical expertise to approve the exploration plans without undue court interference.

The first lawsuit was filed challenging an offshore exploration plan in the Beaufort sea, and a second was filed challenging a similar plan in the Chukchi Sea. These cases were consolidated in March, and on April 3, the NAM and other business groups filed a supplemental amicus brief raising the same concerns we had expressed before.

On May 25, the Ninth Circuit rejected the environmental challenges to the exploratory permits. It found that one part of the challenge was made moot by a subsequent filing of documentation, and that the agency was not arbitrary and capricious in issuing the company's plan with the documentation provided. Also, an agency can approve applications that have inconsistent statements, because the statements were not made by the agency and the statements reflected changing circumstances. Other evidence in the record need not be fully reconciled by the agency as long as the agency's conclusion is supported by substantial evidence on the record considered as a whole. The agency complied with the law's requirements to ensure that the exploration plan would not probably cause serious harm or damage to life, property or the environment, and its decision is entitle to deference when supported by the record.


Related Documents:
NAM Supplemental brief  (April 3, 2012)
NAM brief  (February 3, 2012)

 

PPL Montana, LLC v. Montana   (U.S. Supreme Court)

Questions involving the definition of navigable waters to determine state ownership of riverbeds

On 2/22/2012, the Supreme Court reversed a Montana decision that found that the state held title to riverbeds under various dams and reservoirs long being used for hydroelectric power, and that PPL Montana must pay $41 million in back rent and millions more in future rent. The Court ruled on the definition of navigability for purposes of determining ownership of the riverbed. Had the state owned the land, the case could have affected electric power rates for customers in many areas.

The Court ruled unanimously that states could only assert ownership in land under rivers that were navigable at the time the state gained statehood. Current river conditions are not binding in this determination. Areas of rivers that could only be reached by portaging around obstacles are generally not navigable.

 

Sackett v. EPA   (U.S. Supreme Court)

Right to preenforcement review of EPA compliance order

A couple who graded a small lot to build a house was ordered by EPA under the Clean Water Act to fill in the lot, replace vegetation and monitor the land for 3 years, or face a $32,500 penalty for each day of violation. They sought court review of the order, but were denied.

On March 21, 2012, the Supreme Court decided that they have a right to go to court to get pre-enforcement review of the order. They do not have to wait for EPA to sue them for violating the order in order to raise their claims. The unanimous Court held that the Administrative Procedure Act allows aggrieved parties to sue an agency after it takes "final agency action," and EPA's order qualified. Although the majority did not limit the claims that could be raised in such a challenge, Justice Ginsburg's concurring opinion argued that a challenge could only involve EPA's jurisdiction over the land in question. It remains to be seen whether the Court's opinion is ultimately interpreted in such a limited manner.

The NAM filed an amicus brief in 2011 supporting this result.

The case has implications beyond the Clean Water Act to similar orders under the Solid Waste Disposal Act (Resource Conservation and Recovery Act) and the Safe Drinking Water Act. EPA orders such as this one essentially coerce alleged violators into compliance, denying due process. Pre-enforcement review by the courts is a critical check on agency abuse. Otherwise, persons subject to such orders risk substantial financial penalties for violating an order even if they did not violate the Clean Water Act itself.

One of the claims the landowners hope to raise is whether their property is even subject to EPA jurisdiction in the first place. This question involves defining "waters of the United States," and, as Justice Alito mentioned in his concurring opinion, neither Congress nor EPA has provided a clear answer to this question. The NAM supports efforts to prevent EPA and the U.S. Army Corps of Engineers from expanding the federal government's regulation of private and public lands under the Clean Water Act, since such expansion would create significant regulatory barriers to economic growth in an already struggling economy. In 2011, we filed extensive comments on this proposed agency action.


Related Documents:
NAM brief  (October 3, 2011)

 

Sierra Club v. EPA   (D.C. Circuit)

Environmental group's challenge of EPA's delay of the effective dates of its boiler rule and incinerator rule

The NAM and other groups moved to intervene in a law suit brought by the Sierra Club against EPA over the agency's decision to delay the effective date of new regulations on boilers and incinerators. The rules, issued on March 21, 2011, concern major source industrial boilers and commercial and industrial solid waste incinerators. When it published the rules, EPA announced that it would initiate administrative reconsideration of them, and later delayed the effective dates during the reconsideration period. Our intervention in this case was intended to support the EPA's decision to delay implementation.

At the same time, the NAM challenged the boiler MACT and incinerator rules themselves. The rules have the potential to dramatically impact the U.S. economy and impose enormous costs on key industrial sectors, and they force companies to make compliance investment decisions well in advance of their effective dates.

This suit by the Sierra Club was voluntarily dismissed on March 29, 2012. A similar suit brought in federal district court ended when the court invalidated EPA's delay notice.


Related Documents:
NAM Motion to Intervene  (August 15, 2011)

 

Texas v. EPA   (5th Circuit)

Challenging EPA's denial of Texas Flexible Permit program

On December 3, 2010, the NAM and others filed a joint brief arguing that states have substantial discretion under federal law to adopt flexible requirements the apply to minor changes in plant operations as long as air quality is protected. We also argued that the Texas program meets all the federal Clean Air Act (CAA) standards, is in some cases years ahead of schedule, and the EPA’s action more than 15 years after the adoption of the Texas program has no legal support. EPA has also failed to defer to Texas’ interpretation of its own regulatory laws, as required by federal law. This litigation is intended to eliminate the ambiguity of EPA’s latest actions and to restore predictable air pollution control regulation in Texas.

On Aug. 13, 2012, the Fifth Circuit agreed, throwing out EPA's action. The court found that EPA's demands for language and program features in the state's implementation plan had no basis in the Clean Air Act or its implementing regulations. Instead, the Act sets goals and basic requirements, and gives the states broad authority to determine the methods and particular control strategies they will use to achieve the statutory goals. Environmental regulation is a shared responsibility of the federal and state governments, and EPA must approve state plans that meet the requirements of the Clean Air Act within 18 months of a state's submitting them for approval.

The Court rejected an EPA effort to require the state to adopt express language prohibiting major sources from evading statutory major new source review regulations. It found no requirement in the statute compelling such a statement, and even EPA's prior views accepted wide variations in state enforcement program language. Thus, EPA's attempt to require specific language in a state's implementation plan violated principles of federalism embodied in the Clean Air Act, as well as the Administrative Procedure Act.

The Court also rejected EPA's criticism of the flexible permit program's monitoring, recordkeeping and recording provisions. Texas allows its enforcement director discretion to write monitoring and recordkeeping requirements into each permit, based on the size, needs, and type of facility applying for a permit. The Court found that there was no authority in the law to allow EPA to limit the director's discretion, and EPA provided no evidence that the Texas program interferes with attaining Clean Air Act requirements. In fact, EPA approved similar director discretion in previous state plan amendments.

Finally, the Court rejected similar EPA arguments about the methodology allowed for calculating each emissions cap at a permitted facility. The agency's objections "rely on standards not found in the CAA or its implementing regulations."


Related Documents:
NAM reply brief  (March 17, 2011)
NAM brief  (December 3, 2010)

 

Wilderness Society v. U.S. Dep't of the Interior   (N.D.Cal.)

Defending expedited siting of transmission lines in the west

The NAM and other major energy and business trade associations sought to intervene on the side of the Department of Interior, defending a lawsuit brought by 15 environmental groups against the agency’s expedited siting of transmission lines under the Energy Policy Act of 2005. Led by the Wilderness Society, the environmentalists sued in U.S. District Court, Northern District of California, to stop the designation of energy corridors in the western United States, specifically the West-wide Energy Corridors (WWEC). The groups had previously challenged the Department of Energy’s designation of corridors through the administrative process.

On Dec. 17, 2009, the NAM filed a motion to intervene as an intervenor/defendant in the litigation, joined by the Edison Electric Institute, American Public Power Association, National Rural Electric Cooperative Association, American Gas Association, and U.S. Chamber of Commerce. The Environmental Protection Act includes many provisions necessary to expedite development of a modernized electricity grid to meet increased demand, and the NAM endorses policies that will expedite development of a "smart grid," which will save manufacturers money. The NAM supports the identification and designation of corridors across federal lands, and this lawsuit threatened to block or impose additional delays or regulatory constraints on the WWEC.

Our motion to intervene was granted on March 9, 2011. A settlement was reached in this case, and a joint motion to dismiss was granted on 7/11/12. It called for periodic interagency reviews, agency guidance, training and a corridor study to assess whether the corridors are efficient and environmentally sensitive.


Related Documents:
NAM Motion to Intervene  (December 17, 2009)

 


Expert Testimony -- 2012



United States Steel Corp. v. Milward   (U.S. Supreme Court)

Admissibility of expert witness testimony based on assessing the weight of scientific evidence

The U.S. Court of Appeals for the First Circuit reversed a judge's ruling that excluded an expert who had concluded, based on his judgment, that the "weight of the evidence" supported a conclusion that a particular cancer could be caused by exposure to benzene. The appeals court held that such an opinion satisfies requirements designed to exclude junk science from court.

The NAM filed an amicus brief urging the Supreme Court to review this decision. We argued that scientific expert testimony must be based upon reliable scientific methodology, subject to testing and validation, and not on a witness transforming disparate pieces of scientifically unreliable evidence into a scientifically reliable whole based on the expert witness' claimed weighing of the evidence. Judges serve an important gatekeeping role to counter an aggressive and well-financed plaintiffs' bar that has threatened every segment of the business community with massive liabilities premised on often shaky science. Our brief analyzes in some detail the link between the First Circuit's opinion and doctrinal errors from presentations made at the Coronado Conference in 2003, a symposium weighted heavily toward the interests of the plaintiffs' bar.

On Jan. 9, 2012, the Supreme Court declined to hear this appeal. As this is not a formal opinion on the merits of the case, the issue can come before the Court in another case if the Court agrees to review it.


Related Documents:
NAM brief  (October 13, 2011)

 


Forum non conveniens -- 2012



Carijano v. Occidental Petroleum Corp.   (9th Circuit)

Use of U.S. advocacy group to oppose forum non conveniens motion

A California trial judge dismissed a suit by 25 plaintiffs from Peru against Occidental Petroleum for alleged environmental damage in Peru, finding that California was not the most convenient forum to hear the case. The Ninth Circuit reversed, holding that since Amazon Watch, based in California, later joined the suit as a plaintiff, nearly conclusive weight should be given to the forum chosen by that group. That group joined in the litigation after Occidental announced its intention to file a forum non conveniens motion.

The NAM and other business organizations filed an amicus brief urging review of this decision en banc, by a larger group of judges in the Ninth Circuit. Unless reversed, the ruling will allow foreign plaintiffs to bring their suits in U.S. courts simply by enlisting a U.S. advocacy group with a humanitarian interest in the suit's subject matter to serve as a nominal plaintiff. We argued that federal law already requires that no one factor be given decisive emphasis when balancing the factors that govern where a case should be decided. The presumption in favor of a plaintiff's choice of forum applies with less force when the plaintiffs or real parties in interest are foreign. Moreover, the decision in this case is of exceptional importance since foreign plaintiffs can be expected to bring many more cases into courts in the Ninth Circuit's region.

The NAM continues to oppose efforts by foreign nationals to use U.S. courts to sue U.S. companies for activities that took place in foreign countries. U.S. courts are extremely attractive to foreign plaintiffs, offering such plaintiff-friendly features as extensive discovery, jury trials and contingency fees, but foreign jurisdictions are where the evidence and witnesses are located.

On June 1, 2011, the 3-judge panel reversed itself in part, revising its opinion to conclude that Peru is an adequate forum after all. The court continued to defer to Amazon Watch's choice of a U.S. forum, but sent the case back to the trial court to determine if that group has standing. The petition for en banc review was denied May 31, 2012.


Related Documents:
NAM brief  (January 20, 2011)

 


Free Speech -- 2012



CTIA - The Wireless Association v. San Francisco   (9th Circuit)

Government-compelled speech about speculative hazards from cell phones

The NAM filed an amicus brief in support of this challenge to a San Francisco ordinance that requires retailers of cell phones to put up posters in their stores, attach stickers to cell phone displays, and distribute “factsheets”, all designed to advise consumers about the supposed risks and steps consumers can take to avoid them. We argued that the government bears a very high burden to overcome the First Amendment right not to have to engage in speech that is compelled by the government. Strict scrutiny by the courts is the appropriate standard of review, and no merchants should have to convey a controversial message with which they disagree and which is not factual. The government may not order a private citizen to convey the government’s message, unless the message is purely factual, uncontroversial and directed at preventing consumer deception. Government-compelled speech must be justified by a compelling government interest and narrowly drawn to serve that interest, according to our brief, citing numerous Supreme Court precedents. The city has less restrictive alternatives to get its message out, such as putting up its own posters in public places.

On 9/10/12, the court said that it could not find that the fact sheet was both "purely factual and uncontroversial," since there is debate about the health effects of cell phones and there is no evidence of cancer caused by cell phones. The Supreme Court has already ruled that the government may not compel disclosures to consumers unless they are purely factual and uncontroversial, and this mandate did not meet that test.

This is another case involving attempts by various governments to restrict, or mandate, certain types of commercial speech. It has appeared in various incarnations, such as mandatory “Live Free or Die” language on license plates.


Related Documents:
NAM brief  (February 1, 2012)

 

NATSO, Inc. v. 3 Girls Enterprises, Inc.   (U.S. Supreme Court)

First Amendment privacy rights for trade associations

The Tenth Circuit upheld a broad discovery order that requires a member of a trade association to disclose information about internal policy and strategy deliberations involving the measurement of gasoline volume. On appeal is whether an association can obtain appellate review of such an order, and the appeals court decisions on this issue conflict. In addition, the court imposed a difficult evidentiary burden by saying that unsworn testimony that is the equivalent of affidavits expressly held to be sufficient in other similar cases was inadequate as a matter of law to establish that the discovery order here implicated associational rights. It appeared to require a member company to file an affidavit saying that it would be deterred from communication freely within the association if it knew that such communications might one day be publicly disclosed.

The NAM filed an amicus brief 10/20 urging the Supreme Court to review this case. We argued that an association’s members need assurance that internal communication between members and the association will not be subject to public disclosure. Individuals have a right to privacy of belief and association that lies at the very heart of the First Amendment freedoms of association and petition, rights that are undeniably enhanced by participation in associations. We sought avenues for a non-party association to appeal such a broad discovery order. We argued that the First Amendment’s protections have never been limited to simply protecting the identity of the rank-and-file members, but rather extends to internal deliberations over strategy and messaging. As many cases have already shown, there is a presumption that associations and their members are protected by a First Amendment privilege where the potential for chilling associational activities and speech is self-evident, as it is here.

On January 9, 2012, the Court declined to review the lower court's ruling.


Related Documents:
NAM brief  (October 20, 2011)

 


International -- 2012



Chevron Corp. v. Naranjo   (2nd Circuit)

Supporting injunction against enforcement of Ecuador court's judgment in other countries

This case is part of the long-running story about the efforts by Ecuadorian natives and their American lawyers and consultants to win billions of dollars for pollution from oil drilling operations in Ecuador many years ago. The issue is whether an American court may bar enforcement of an $18 billion judgment from an Ecuador court to prevent fraud. The NAM and the National Foreign Trade Council filed an amicus brief on June 30, 2011, arguing that the preliminary injunction issued by the trial judge is entirely consistent with principles of international comity and should be affirmed. The United States has the authority to halt a campaign of apparent fraud and alleged corruption orchestrated by U.S. citizens and designed to benefit foreign citizens with significant contacts in the United States. In addition, we argued that U.S. courts can conduct parallel proceedings using concurrent prescriptive jurisdiction, and can prevent the enforcement of an improper judgment in other jurisdictions that do not have prescriptive jurisdiction.

On September 19, the appeals court vacated the trial court's injunction, put those proceedings on hold, and received assurances from the plaintiffs that they would not seek to enforce the Ecuadoran judgment while it is being appealed in Ecuador.

On Jan. 26, 2012, the Second Circuit issued an opinion that the New York Uniform Foreign Country Money-Judgments Recognition Act does not allow pre-enforcement challenges of foreign judgments. Chevron has to wait until the Ecuadorian plaintiffs try to enforce their damages award in New York before it can challenge the award. Other issues in the case were therefore moot. The court's decision is based on an interpretation of state law that does not address the company's claims of fraud in the underlying litigation.

 

Chevron Corp. v. Naranjo   (U.S. Supreme Court)

Enforcement of foreign judgments

The Second Circuit ruled that the New York Uniform Foreign Country Money-Judgments Recognition Act does not allow pre-enforcement challenges of foreign judgments. If Chevron wants to prevent enforcement of an $18 billion judgment from an Ecuadorian court, it must wait until the Ecuadorian plaintiffs try to enforce their damages award in New York. The court's decision is based on an interpretation of state law that does not address the company's claims of fraud in the underlying litigation.

Chevron appealed to the U.S. Supreme Court, and the NAM filed an amicus brief supporting the appeal. A summary of the lower court's proceeding is linked below. Our amicus brief told the Supreme Court the importance of the case, since the Second Circuit's ruling could inflict significant injury on manufacturers that do business in foreign states. The brief argued that principles of international comity support Chevron's request for an injunction that helps to ensure that the international legal system is not tainted and burdened by alleged fraud occurring in part in the United States. We argued that U.S. courts have jurisdiction over the alleged fraud, and that the trial court's injunction was an appropriate exercise of the power to enforce substantive legal norms as long as there is no direct conflict with another nation that has similar authority over the conduct. Only Ecuador has such an interest, and the injunction here did not interfere with their jurisdiction.

On Oct. 9, the Court declined to review the case.


Related Documents:
NAM brief  (June 28, 2012)
Summary of 2d Cir. proceedings  (January 26, 2012)

 


Labor Law -- 2012



Brinker Rest. Corp. v. Superior Court   (California Supreme Court)

Mandated lunch and rest breaks

The NAM and 9 other associations and companies filed an amicus brief 8/18/2009 urging the California Supreme Court to uphold a lower court ruling that an employer's duty to "provide" meal periods is a duty to make meal periods available, not a duty to ensure meal periods are actually taken, and that statistical evidence concerning actual breaks is irrelevant to determining whether an employer afforded the opportunity to take a break. The statute is clear on its face that employers need to "provide" a lunch break, meaning to make it available.

Our brief warned that reversing this ruling would have negative consequences for employees: (1) employees nearing the end of a 6-hour shift would have to take a 30-minute meal period before returning to work for a few more minutes, (2) employees would be subject to discipline if they are late to clock out for a meal or early to clock in, and (3) employees would be unable to work through a meal period to end the workday 30 minutes earlier. The brief expanded upon adverse consequences in the restaurant, retail, waste management, construction, agricultural, temporary staffing and hospitality industries.

On 4/12/2012, the California Supreme Court generally upheld the lower court, ruling that (1) an employer need only provide a reasonable opportunity to take the 30-minute lunch break, not ensure that employees use it, (2) meal periods must start after no more than five hours of work, (3) rest breaks are required according to a clarified formula, and (4) a class of employees making off-the-clock claims could not be certified as a class action because there was no substantial evidence of a uniform company policy pressuring employees to work off the clock. This California law has been the basis for thousands of class action suits involving lunch breaks, rest breaks and off-the-clock work. The court's decision is a very important new ruling to help manufacturers with employees in California to understand the requirements and to establish compliant workplace policies.


Related Documents:
NAM brief  (August 18, 2009)

 

Chamber of Commerce v. NLRB   (D.D.C.)

Challenging NLRB's ambush elections rule

This lawsuit challenged the NLRB's ambush election rule, issued in December, 2011, which effectively shortened the amount of time in which union certification elections take place and could allow votes to occur in as little as 20 days. The Coalition for a Democratic Workplace, of which the NAM is a leading member, immediately filed a legal challenge to this rule in federal court in Washington, D.C.

The final rule, effective April 30, 2012, is harmful to employers. Specifically, it alters what types of pre-election hearings can be held (such as who is even eligible to vote in the election) and what types of appeals can be filed prior to an election. If certain matters can be discussed only after an election is held, these matters will often become moot, leaving the employer with no voice to be heard prior to the election. The rule also appears to shorten the time between a petition for certification being filed and the election being held. If most pre-election matters will be deferred until after the election, the election itself could take place very quickly.

The complaint sought to enjoin the NLRB from enforcing the final rule. It charged that the rule violates the statutory requirement that the NLRB must hold pre-election evidentiary hearings if there are questions concerning whether representation exists. The rule also eliminates a party's right to seek Board review of a regional director's pre-election rulings until after an election, thus depriving employees of the fullest freedom in exercising their rights as required by the law. Other claims raised fundamental concerns that the Board's action impinges on the freedom of speech by employers, that it did not provide an adequate opportunity for comments, and violated the Regulatory Flexibility Act.

On Feb. 3, 2012, the CDW filed a motion for summary judgment, arguing that employees need at least 30 days to decide how to vote in NLRB elections. Even former Senator and President John F. Kennedy emphasized the need for this time to "safeguard against rushing employees into an election where they are unfamiliar with the issues."

On April 27, the Chamber and CDW filed a motion for a temporary stay of NLRB action pending judicial review to allow the court time to decide the issues in the case before the rule goes into effect. The next day, the judge denied the motion, saying that the plaintiffs will not suffer irreparable injury because the court will issue its opinion on the merits by May 15, "which date will precede any potential election under the new rule."

True to his word, Judge Boasberg ruled on May 14, denying the NLRB's motion for summary judgment and granting the plaintiffs'. He ruled that the vote to adopt the rule did not have a quorum. The vote was 2-0, with the third member of the NRLB not voting, and the judge found that the vote of two members in an online voting situation is "simply not enough." The third member "need not necessarily have voted, but he had to at least show up." More is required than just being a member of the Board in order to establish a 3-person quorum. He must "participate" in the decision, although he need not vote to be counted in determining a quorum. In the context of electronic voting, he had to affirmatively express an intent to abstain, or acknowledge receipt of the notification about the vote, but that did not happen. It was as if he had failed to attend the vote at all.

The ruling leaves open the possibility that members of the NLRB could simply not participate in votes in order to prevent the Board from having a quorum. This could slow down the rulemaking and adjudicatory process at the agency. The court did not reach any of the other procedural and substantive challenges to the ambush election rule, and those issues may have to be litigated later, if the Board reissues the rule with a proper quorum.

On June 11, 2012, the NLRB filed a motion to alter or amend the judgment, arguing that Member Hayes was in fact present in the Board's electronic voting room. This motion was denied on July 27.


Related Documents:
Memo in Support of Motion for Summary Judgment  (February 3, 2012)

 

Christopher v. SmithKline Beecham Corp.   (U.S. Supreme Court)

Pharmaceutical salesmen qualify as "outside salesmen" and are exempt from overtime pay

The Supreme Court held July 18, 2012, that pharmaceutical “detailers” (as they are known in the industry) qualify as outside salesmen when they act to promote drugs to doctors, and are therefore exempt from requirements for overtime pay. The Department of Labor argued that the detailers were not actually salesmen (and therefore entitled to overtime pay) because they did not transfer title of the property, in this case the prescription drugs. The Court rejected this argument and found that the law at issue allowed transfers of title to be considered in qualifying salesmen, but it did not require it. The majority found unpersuasive the Department’s attempt to adopt its policy through a series of amicus briefs rather than using a more deliberate process involving public comment. Using the traditional tools for determining who is an outside salesman, the Court found considerable language in the Department’s regulations supporting its conclusion that these were outside salesmen.

 

National Association of Manufacturers v. NLRB   (U.S. District Court for the District of Columbia)

Challenging NLRB's requirement to post provisions of NLRA

The NAM filed this suit challenging a regulation issued by the National Labor Relations Board that requires employers to post in their workplaces a notice of the right of employees to organize into unions, bargain collectively, discuss wages, benefits and working conditions, jointly complain, strike and picket, or choose not to do any of these activities. The required notice also lists all the things an employer or a union may not do under the law.

The regulation requires posting in "conspicuous places" as well as where other notices to employees are customarily posted, and on electronic sites if the employer customarily communicates with its employees about personnel rules or policies by such means. In addition, if 20% or more of an employer's workforce is not proficient in English and speaks a language other than English, the employer must post the notice in the language employees speak. Special requirements apply to different segments of the workforce that speak different languages. The NLRB listed this rule as "major," estimating a total compliance cost of $386.4 million for some 6 million employers nationwide.

The NAM raised 4 issues in our complaint. First, we alleged that the National Labor Relations Act (NLRA) does not expressly grant the Board the authority to promulgate a rule requiring employers to post a notification of employee rights under the NLRA. Second, the Board's authority under the NLRA is triggered when a representation petition or an unfair labor charge is filed, not before. Third, the rule purports to establish a new unfair labor practice -- i.e., failing to post the required notice -- without the statutory authority to do so. And fourth, the new regulation authorizes the Board to allow any employee to file unfair labor practice charges long after the 6-month statute of limitations has expired. We argued that the NLRA does not authorize the Board to waive the statute of limitations except for members of the armed forces whose service interferes with their ability to file charges on time.

The NAM asked the court to declare the notice posting requirement null and void. Failure to post the notice could result in the Board finding that an employer engaged in an unfair labor practice by interfering with, restraining or coercing employees in the exercise of their rights. It could also result in waiver of the statute of limitations for employee complaints about other unfair labor practices, or could be used as evidence against an employer in any case in which unlawful motive is an issue.

On Sept. 28, the NAM and co-plaintiff Coalition for a Democratic Workplace, filed a motion for a preliminary injunction and an expedited hearing. We hoped to have the court rule before the effective date of the regulation, or enjoin NLRB implementation and enforcement of the rule indefinitely. We hoped to avoid a situation where companies needed to implement the rule by November 14, its original effective date, only to find that the rule was issued unlawfully.

On Oct. 5, the NLRB announced that it would voluntarily delay implementation of the posting requirement until January 31, 2012., and after oral arguments on December 19 in which the judge sought a further extension, the Board postponed the effective date again, until April 30, 2012.

On March 2, Judge Amy Jackson ruled that the NLRB has broad authority to issue rules, and the notice posting provision was valid. However, the Board did not have the authority to impose the penalties for noncompliance, namely making failure to post an unfair labor practice and suspending the statute of limitations for employees that want to file suit for unfair labor practices years after they occur. However, the NLRB may find the failure to post the required notices to be an unfair labor practice, or to toll the statute of limitations, in case-by-case decisions. Failure to post the notices could in some cases result in findings that an employer intended to improperly influence employees from exercising their rights, or could make it easier for the Board to allow an employee to file charges after the statute of limitations has run out.

The court rejected the NAM's First Amendment arguments, and found that the enforcement provisions were severable from the posting requirement, thus allowing the posting requirement to continue to stand even though a portion of the regulation was found to be invalid.

On March 5, the NAM and others filed a notice of appeal. All are challenging the adverse decisions on the posting requirement, and all but the NAM are challenging the validity of the recess appointment of some of the current Board members who were appointed by President Obama while the Senate was still meeting regularly in pro forma sessions.


Related Documents:
NAM Notice of Appeal  (March 5, 2012)
NAM Reply brief  (November 22, 2011)
NAM Motion for Preliminary Injunction  (September 28, 2011)
NAM Complaint  (September 8, 2011)

 

Sandifer v. United States Steel Corp.   (7th Circuit)

Whether changing clothes is a principal activity that starts the work day

The NAM, the American Meat Institute and the Society for Human Resource Management filed a joint brief in a federal appeals court arguing that courts should respect collective bargaining decisions relating to whether clothes-changing activities are excluded from the compensable workday.

The case involves whether to compensate time spent walking from a locker room to a work station. In some industries, this is a substantial issue. Here, an employer and union agreed that the activities of donning, doffing and washing (clothes-changing activities) were to be excluded from the work day. The company argued these same activities are not “principal activities” that start or end the continuous workday, and thus no additional compensation, including overtime, is required. Various union-represented employees sued to have this travel time compensated, and the trial court held open the possibility.

Our amicus brief argued that courts should defer to the collective bargaining process. Congress has repeatedly emphasized the need for courts and governmental entities to defer to the sanctity of the collective bargaining process to protect the interests of both employees and employers, by giving them the flexibility to resolve the challenges of their specific industry as they deem best. The Portal-to-Portal Act was adopted to rein in litigation that was forcing employers to pay for unbargained-for wages relating to clothes-changing activities. Moreover, until last year, the Department of Labor has long advocated that where a collective bargaining agreement excludes clothes-changing activities from the start of the workday, travel time would be non-compensable.

The trial court wrongly left open the possibility that clothes changing could be a principal activity that starts the work day, but that decision undermines the collective bargaining process and deprives employers and employees of the latitude that Congress intended. Unions negotiate other benefits, such as higher rates of pay for time actually worked, in exchange for not counting travel time as compensable. Paying for travel time rewards employees who are inefficient when using it, at the expense of those who are more efficient. The law was enacted to avoid situations where courts could override collective bargaining terms through litigation, and was designed to keep the Department of Labor from stepping in and changing expectations, potentially resulting in the award of many years of back pay. Instead, in a time of economic crisis, we should be focusing on strengthening relationships between employers and their unions, not making it more expensive for employers to maintain their present workforces.

On 5/8/12, the Seventh Circuit ruled that the workers here changed into "clothes" as defined in the Fair Labor Standards Act (FLSA), and that activity was covered by the collective bargaining agreement and not subject to compensation under the FLSA. In addition, the court found that if the union and employer agree that such activity is not compensable, then it cannot be a "principal activity" under the statute that would start the clock for the workday. According to the court, "Not all requirements imposed on employees constitute employment." The court also refused to defer to the position of the Department of Labor in this case, because the Department's position has shifted from one administration to another, and they did not offer any useful knowledge that might help the court decide the case. The opinion is filled with straightforward, common-sense, practical and economic-based reasons why clothes-changing provisions in collective bargaining agreements should be enforced as written.

Interesting note: The court denied our request to file this amicus brief, so we filed an additional motion urging reconsideration, which was also denied. The Seventh Circuit has recently taken a more restrictive attitude toward briefs from groups that are affected by litigation but that are not parties to the litigation. At the same time, it used the fact that no union filed an amicus brief to support its view that the employee claims in this case would not help unions.


Related Documents:
NAM brief  (August 29, 2011)

 


Product Liability -- 2012



Aerolease of America, Inc. v. Vreeland   (U.S. Supreme Court)

Preemption of suits against aircraft owners or lessors

This suit was brought by the estate of an individual who was killed when a small plane in which he was riding crashed. The Florida Supreme Court ruled that the suit could be filed against the lessor of the plane, despite a federal law, 49 U.S.C. Sec. 44112, that preempts state tort suits against the lessor or owner of an aircraft that is not in their actual possession or control.

The NAM joined with other business organizations to urge the U.S. Supreme Court to review this holding. Our brief challenged the Florida court's decision to absurdly narrow the broad preemption afforded by the federal statute, and we pointed out that its ruling will encourage airplane accident litigation in Florida or any other jurisdiction that follows that state's lead. In another case with similar facts, a federal appeals court reached the opposite conclusion. The Florida decision creates uncertainty in an industry that depends on lessors and secured parties who are not in possession or control of an aircraft. Preemption is required so that such parties are not subject to conflicting state-law based liability claims. The Florida decision would preempt only suits for injuries caused to people that are underneath falling aircraft, a result that would make the preemption provision extremely narrow. Such a result will lead to forum-shopping by plaintiffs, increased transactional costs of litigation throughout the industry, increased insurance costs and increased risk and uncertainty.

On Feb. 21, 2012, the Court declined to review Florida court's decision.


Related Documents:
NAM brief  (January 12, 2012)

 

Avram v. McMaster-Carr Supply Co.   (Michigan Court of Appeals)

Procedural issues in asbestos litigation

This is an appeal of the first asbestos personal injury claim in Michigan to go to verdict in more than ten years, involving alleged due process violations and gamesmanship in Michigan asbestos litigation. The trial court bundled different asbestos cases together in violation of an administrative order from the Michigan Supreme Court, and selected a non-malignant case from a trial group of 95 cases to hastily proceed to trial without an opportunity for meaningful discovery.

The defendant opted not to settle, in part, because it had strong reasons to believe that the diagnosis of plaintiff’s asbestos expert, Dr. Jeffrey Parker, was unreliable; a fact confirmed by a blind study of independent medical examiners. Also, the plaintiff did not specifically allege exposure to the defendant’s asbestos products and never maintained, until the eve of trial, that asbestos-related injuries forced him to retire early. The trial court rejected these challenges and proceeded to trial, giving the defendant only six days to prepare a case involving 95 possible cases and over 30,000 pages of information. The case resulted in a verdict for the plaintiff totaling nearly a half-million dollars.

The NAM filed an amicus brief on 12/29/10 supporting the appeal, arguing that the trial court routinely appeared to violate the spirit, if not the letter, of the Michigan Supreme Court's asbestos anti-bundling order, which was designed to restore fairness and rationality to that state's asbestos litigation. In this case, the trial court allowed bundling of cases with highly suspect and dissimilar injuries into larger trial groups, and forced the defendant to enter the trial effectively blindfolded, without vital, case-dispositive information needed for its defense. Because Dr. Parker's testimony was not excluded, such unreliable screening testimony encourages false claims, harms manufacturers who create jobs, and threatens payments to palintiffs with reliable claims.

The case was settled without a ruling from the court.


Related Documents:
NAM Amicus Brief  (February 28, 2017)
NAM amicus brief  (December 29, 2010)

 

Betz v. Pneumo Abex LLC   (Pennsylvania Supreme Court)

Use of "any exposure" theory of causation in asbestos suit.

Questionable science in the courtroom makes defending product liability suits more difficult for manufacturers. A case now on appeal to the Supreme Court of Pennsylvania involves testimony claiming that any exposure to asbestos on the job, no matter how small, is a “substantial factor” in causing mesothelioma. The NAM and other groups filed an amicus brief urging the court to reject testimony based on this “any exposure” theory, which contrasts sharply with normal causation testimony. The trial court called the theory junk science, as have many other courts, but an intermediate appellate court reversed because the judge did not constrain his ruling strictly to the arguments made by the defendants.

Our brief noted that the judge properly exercised his authority and independent judgment to identify logical and scientific errors in the "any exposure" theory. The theory shuns the bedrock principle of toxicology that "the dose makes the poison," and ignores the fact that small doses of even toxic substances may cause no harm. The "any exposure" theory could subject companies that handle any products with any degree of toxicity to expansive liability. The theory is inconsistent with asbestos science and epidemiology and runs counter to the vast majority of other court opinions.

On 5/23/2012, the Court ruled that trial judges normally should allow expert testimony, but that a hearing on the validity of the expert's testimony "is warranted when a trial judge has articulable grounds to believe that an expert witness has not applied accepted scientific methodology in a conventional fashion in reaching his or her conclusions." The judge was right to question the validity of the any-exposure opinion, particularly since it would eliminate the need for plaintiffs to pursue the more conventional route of establishing specific causation. Because the expert's opinion conflicted with itself (arguing that any exposure is a substantial cause of injury while also conceding that a disease is dose responsive), the judge did not abuse his discretion by disallowing the testimony.


Related Documents:
NAM brief  (April 25, 2011)

 

In re Mass Tort and Asbestos Programs v. .   (Court of Common Pleas of Philadelphia County)

Comments to improve asbestos litigation

The Complex Litigation Center in Philadelphia, Pa., has terminated the practice of consolidating mass tort cases without agreement of all parties, and also of using "reverse bifurcation," whereby juries determine damages before determining whether a defendant was liable for them. These procedures prejudice manufacturers, and the NAM joined with other business groups to support making the Center's changes permanent. These procedures have helped make Philadelphia a magnet jurisdiction for plaintiffs' attorneys. The NAM's comments also urged the Center not to reintroduce punitive damages claims into asbestos litigation, both to prevent further bankruptcies and to preserve resources for future asbestos claimants.

On February 15, 2012, the court adopted the protocols above, with the exception of special rules for asbestos cases. In addtiion, out-of-state attorneys appearing in cases before the Complex Litigation Center are limited to no more than two trials per year. The court's protocol also states that "All punitive damages in mass tort claims shall be deferred." Unfortunately, on May 3, 2012, it notified the mass tort bar that it was inviting comments on this last protocol, suggesting the possibility that it was reconsidering the procedure.

Consequently, the NAM and others filed comments on 6/1/12 supporting the continued deferral of all punitive damage claims for mass tort litigation. While the focus of the litigation is on asbestos and pharmacological claims, the letter applies to all mass tort claims. We noted that the need to punish defendants in asbestos cases is unnecessary to prevent repeated acts, because the large number of bankrupt companies clearly established the deterrence. Furthermore, awarding large sums to early plaintiffs would prevent other injured parties from gaining just compensation. Finally, the letter noted that regulations in the medical field were comprehensive, and to allow punitive damages would create a potential disincentive for investing in life-enhancing and life-saving products. Having met these regulations and working to advance these products and customers’ lives, these companies should not be punished with repeated sanctions.

The court issued an order 6/18/12 continuing to prohibit reverse bifurcation of mass tort cases unless agreed upon by all counsel. It also will allow punitive damages claims in pharmaceutical mass tort cases provided there is enough proof to support such a claim, and will allow expedited trials for plaintiffs facing imminent death. It also will allow out-of-state lawyers to participate in up to 4 cases every year.

 

Kurns v. Railroad Friction Products Corp.   (U.S. Supreme Court)

Preemption of state asbestos claims under the Federal Railroad Safety Act

On February 29, 2012, the Supreme Court affirmed a lower court ruling that the Locomotive Inspection Act preempts a lawsuit under state law brought by the estate of a man who died from mesothelioma. The suit alleged he was exposed to asbestos while working on locomotives in the mid-twentieth century. The defendant companies won a motion to dismiss the suit, with the court ruling that federal law preempted design defect and failure-to-warn lawsuits against companies that supplied asbestos-containing equipment to the railroads.

The Supreme Court ruled that Congress long ago intended that federal law occupy the entire field of law regulating locomotive equipment. The court rejected an attempt to replace this field preemption analysis with a different express preemption or conflict preemption analysis. The Secretary of Transportation is charged with the responsibility to regulate the design, construction and material of every part of a locomotive, and claims involving repair and maintenance fall within the purview of the Secretary’s authority and outside of the reach of tort claims under state law. The decision is critical to thousands of asbestos cases in the railroad industry and helps to insure national uniformity of federal regulation of the industry.

The NAM filed an amicus brief putting this case in the context of current asbestos litigation, and explaining how the plaintiffs were trying to expand asbestos litigation to locomotive equipment manufacturers and distributors despite nearly a century of precedent holding that such claims are preempted. The suit tried to distinguish state statute and regulations from state tort litigation for purposes of preemption, claiming that litigation is not preempted, even though it imposes legal obligations that are equivalent to state "positive" law like statutes. The Supreme Court has already recognized the correctness of preempting tort claims in the context of litigation under the same principles that apply to state statutes and regulations. It did so again in its 6-3 ruling in this case.


Related Documents:
NAM brief  (October 7, 2011)

 

Macias v. Saberhagen Holdings, Inc.   (Washington State Supreme Court)

Duty to warn about hazards of another manufacturer's products

A respirator manufacturer was sued by a party alleging that the company had a duty to warn individuals who clean or otherwise handle the equipment about asbestos hazards from products made, sold or supplied by third parties. The trial court rejected the claim, and the NAM filed an amicus brief in this appeal supporting that result. We argued that liability only applies to companies that are in the chain of distribution of a product, where they have some measure of control and responsibility. There is no claim in this case that the respirators had any design defect or manufacturing flaw.

They should not be held liable for warning about the hazards of others’ products, even if those hazards are foreseeable. The courts have not and should not extend negligence liability law without limit, and a manufacturer of protective equipment should not have to warn about the risks of the products of others from which their own products provide protection. Fox example, it is one thing to require manufacturers of rubber gloves to warn about the potential for latex allergies associated with their own products; it is quite another to require them to warn of the dangers of numerous chemicals and cleansers made by others that the gloves provide a barrier against. We cited a variety of other examples as well. Imposing such a duty to warn about other products would place a significant burden that the companies are not in the best position to bear.

In addition, there should be no liability when a non-defective product functions as it is designed to.

Our brief also explained the adverse impact that expanding liability rules would have on companies already being sued as part of the wave of asbestos litigation. More than 10,000 companies have already been named as asbestos defendants, and nontraditional asbestos defendants now account for more than half of asbestos expenditures. Moreover, targeting respirator manufacturers with these kinds of claims threatens to have a broader adverse effect on health and safety by creating strong disincentives to continue to produce the devices for sale in the United States.

On 8/12/12, the court reversed, holding that the “duty at issue is to warn of the danger of asbestos exposure inherent in the use and maintenance of the defendant manufacturers’ own products, the respirators.” (emphasis in original) By establishing this duty, the court requires that all manufacturers who produce equipment (even those not involved in the production of asbestos containing products) that might expose the user to asbestos from other users or products, to warn of hazards and take safety precautions. A strong disseting opinion warned that requiring a manufacturer to list all the possible consequences that can result from using its product would lead it to warnings against everything, reducing the effectiveness of all of them.


Related Documents:
NAM brief  (September 20, 2011)

 

O'Neil v. Crane Co.   (California Supreme Court)

Liability for asbestos products made by another company and affixed post-sale

On November 12, 2009, the NAM and seven other companies filed an amicus letter urging review of this case. An emerging liability theory is that makers of non-defective products should be held liable for harms allegedly caused by asbestos-containing products made by others and attached post-sale. We supported review to resolve a clear conflict between two California Courts of Appeal. Earlier in 2009, The First District held that various parts supplied to the Navy had no duty to warn of the dangers in asbestos-containing products supplied by other manufacturers. In a separate decision, the Second District created a broad new duty rule that requires manufacturers to warn about risks in products made by others. The court's review may help secure uniformity of decision and reverse the broad new duty rule created by the Second District's decision. The new duty rule would also worsen asbestos litigation, causing a potentially substantial burden on California's judicial system.

The court agreed to hear this appeal, and the NAM filed an additional brief on March 9, 2010. On January 12, 2012, the court unanimously decided there would be no liability for harm caused by another company's products unless the defendant's own product contributed substantially to the harm or the defendant participated substantially in creating a harmful combined use of the products. This is an important victory in California to keep normal duty-of-care principles intact. Just because harm from the use of another company's products might be foreseeable doesn't mean that it is sufficient by itself to impose strict liability on the manufacturer of a nondefective product, or one whose arguably defective product does not actually cause harm. It is excessive and unrealistic to impose the burden on manufacturers to investigate the potential risks of all other products and replacements parts that might foreseeably be used with their own product and warn about all of those risks. Such a duty would also undermine consumer safety by inundating users with excessive warnings, according to the court.


Related Documents:
NAM brief  (March 9, 2010)
NAM Amicus letter  (November 12, 2009)

 

Simpkins v. CSX Transportation, Inc.   (Illinois Supreme Court)

Premises owner's liability for secondhand exposure to asbestos away from work

The NAM joined with 11 other organizations urging the Illinois Supreme Court to affirm a trial court ruling that landowners have no duty to protect against off-site injuries that could result from secondhand exposures to asbestos and other substances emitted in the workplace. Such a duty has recently been imposed in only a few states, but only after it became clear that a danger existed. This case arose from alleged exposure by an employee on the job from 1958 to 1964.

Whether one person owes a legal duty, as opposed to a moral or ethical obligation, is a policy judgment that must balance providing a remedy with extending exposure to tort liability almost without limit.

On March 22, 2012, the court found that the allegations in the complaint were insufficient to establish that the defendant owed a duty of care to the plaintiff, and it allowed the plaintiff to amend the complaint. It held that Presumably, there are some facts that could be alleged that would lead to the conclusion that everyone owes "a duty of ordinary care to all others to guard against injuries which naturally flow as a reasonably probable and foreseeable consequence of an act . . . ." If a risk was created, a manufacturer might be liable depending on (1) the foreseeability of the injury, (2) the likelihood of the injury, (3) the magnitude of the burden of guarding against the injury, and (4) the consequences of placing that burden on the defendant. It found that a manufacturer could have a legal duty to third parties in circumstances like these, and that the plaintiff should be given a chance to allege that the defendant would have been able to foresee the plaintiff's injuries if it had known of the dangers of secondhand asbestos exposure.

Our brief, which focused on the issue of secondhand exposure liability, not product liability, argued that most states considering this issue have rejected such liability. This new duty for landowners would bring about countless new lawsuits, potentially involving asbestos and other substances and involving a wide variety of people who might come in contact with an exposed worker. Illinois has experienced asbestos litigation for decades, often serving as a magnet jurisdiction for claimants from around the country, and a new duty requirement would exacerbate the current asbestos litigation and augment other toxic tort claims.

The Illinois Supreme Court had earlier denied all motions to file amicus briefs, and decided the case without the views of interested organizations.


Related Documents:
NAM brief  (February 15, 2011)

 

Stark v. Ford Motor Co.   (North Carolina Supreme Court)

Product-alteration defense

On 8/3/10, the NAM filed an amicus brief in the North Carolina Supreme Court challenging a ruling that removed a standard product-alteration defense in a product liability case. The defense protects manufacturers against liability when their products are altered by someone else, yet the lower court in this case said the defense is not available unless the alteration was done by a party to the litigation. We argued that the “party” can be any party, not just one involved in the lawsuit. Otherwise, North Carolina plaintiffs can game the system and the state’s courts will become inefficient and unfair jurisdictions for manufacturers.

The Court granted review in the case, and the NAM and others filed an additional brief on March 4, 2011. We noted that the state legislature approved the principle that manufacturers or sellers are not liable for harms caused by product misuse. At the core of this determination is the general principle that a manufacturer of a product may be held responsible for foreseeble harms caused by a defect existing at the time of sale, but should not be held liable for harms caused by others beyond the manufacturer's control. Expanding liability beyond this principle would harm manufacturers, who would have no way to safeguard the ultimate consumer, no way to modify their own behavior to minimize the risk, and no way to determine the extent of the potential risk.

On April 13, 2012, the court reversed the lower court, ruling that the product alteration defense is available to a manufacturer regardless of whether the person making the alteration is a party to the lawsuit. The North Carolina statute does not limit the availability of the defense depending on who is suing, and there was sufficient evidence in the case that the product was altered after delivery, i.e., the seatbeat was placed in an improper position before the car accident. Only a few exceptions to the defense are available, generally involving alterations that have been approved by the manufacturer. This is a clear victory in our attempt to prevent trial lawyers from expanding liability to manufacturers in situations where the manufacturer is not responsible for the injury.


Related Documents:
NAM brief on the merits  (March 4, 2011)
NAM brief supporting appeal  (August 3, 2010)

 


Punitive Damages -- 2012



Bankhead v. ArvinMeritor, Inc.   (California Supreme Court)

Net worth and comparable penalties in punitive damage awards

The NAM and other associations on June 1, 2012, urged the California Supreme Court to review a decision involving the application of punitive damages. In this asbestos personal injury case, the lower court approved a punitive damages award of $4.5 million against a company with a net worth of negative $1.023 billion. The company argues on appeal that the damages are excessive in light of its net worth, and that the punitive damages are unconstitutional because they are far in excess of comparable civil or criminal penalties for similar conduct.

The NAM supported review of both issues, requesting that the court provide a more sophisticated approach where a company has a negative net worth, to prevent harm to preexisting creditors. Those creditors are the ones who effectively end up paying the punitive damages. Moreover, the court should step in to ensure that punitive damages are assessed at a level that is comparable to statutory penalties for similar misconduct. The lower court called consideration of this factor irrelevant, despite its approval by the U.S. Supreme Court.

On 7/11/12, the court declined to review this appeal.


Related Documents:
NAM brief  (June 11, 2012)

 


Taxation and State Taxation -- 2012



Union Carbide Corp. v. Commissioner   (2nd Circuit)

Whether supply costs for process research qualify for the R&D tax credit

A federal tax court judge has thrown a monkey wrench into determining what costs may be included as “qualified research expenses” eligible for the R&D tax credit when companies undertake manufacturing process improvements. Normally, all costs related to research into process innovations, including plant-scale research costs such as raw materials also used in ordinary production runs, are qualified expenses. However, the judge ruled that the supplies costs are “ordinary production costs” and that the company did not prove that the costs qualified for the credit.

On appeal, the NAM filed an amicus brief warning that the judge’s ruling establishes an unreasonable dichotomy between research into new products and research into new processes, to the detriment of process research. But both kinds of research advance the congressional purpose of the R&D tax credit. Process research often involves difficult issues relating to scaling up from small to large production runs, and supplies are a necessary part of this research, even if the supplies ultimately end up in salable products. We urged the court to recognize the importance of process research as a whole toward improved productivity, reduced energy consumption, reduced use of hazardous and non-hazardous materials as inputs in production, reduced emissions and enhanced safety and health. Including the costs of supplies in process research recognizes that such supplies are a critical element of plant-based process research, and denying the costs would discourage experimentation and encourage economic waste.

On 9/7/12, the court upheld the Tax Court’s decision and ruled against the company. It held that the company could not claim the research credit for all the supplies it used in the production process even though research was performed. It could only claim the credit for additional supplies that were used to perform the research. All the other supplies were used to produce a product that was sold, and the credit is only for costs that the manufacturer would not otherwise incur but for the research.


Related Documents:
NAM brief  (October 12, 2011)

 


Alien Tort Statute -- 2011



Doe v. ExxonMobil Corp.   (D.C. Circuit)

Alien tort suits under state law

This suit by Indonesian villagers against ExxonMobil alleges claims under District of Columbia and Delaware law arising from alleged human rights abuses committed by Indonesian forces in the province of Aceh. The judge dismissed the case, based on the general rule that non-resident aliens have no standing to sue in U.S. courts.

The case was appealed to the D.C. Circuit, and the NAM joined with the National Foreign Trade Council, USA*Engage and the U.S. Council for International Business in an amicus brief supporting this result. We argued that federal suits under the Alien Tort Statute (ATS), and now state suits under state law, cause irreparable economic harm, interfere with U.S. foreign relations, and impede the policies designed to promote the very democratic and human-rights goals that the plaintiffs purport to advance. Allowing this kind of litigation under a patchwork of different state laws -- for injuries perpetrated against foreign nationals by other foreign nationals in a foreign country -- threatens U.S. economic and political relations. The federal government alone is assigned the constitutional responsibility for foreign relations, and federal law displaces state laws that threaten the effective exercise of the nation's foreign policy. In addition, there is no indication that the state laws at issue here were ever intended to apply to the extraterritorial claims at issue.

Unfortunately, the court ruled 7/8/2011 that aiding-and-abetting liability “is well established under the ATS” and that “the district court erred in ruling that appellants lack prudential standing to bring their non-federal tort claims and in the choice of law determination.” Thus, the case was sent back to the district court for further proceedings.


Related Documents:
NAM brief  (November 12, 2010)

 


Benefits -- 2011



CIGNA Corp. v. Amara   (U.S. Supreme Court)

Right to damages when summary plan description differs from plan terms

When a company switched from a defined benefit pension plan to a cash balance plan, it was sued by employees alleging it failed to provide the required notice that benefit accruals would be significantly decreased under the new plan, as well as other disclosure claims. The trial court felt that the company made misleading statements about the plan in order to ease the transition to a less favorable retirement program.

On May 16, 2011, the Supreme Court decided that it is enough for the employees to show actual harm from the improper disclosure in the summary plan description, and they need not show more proof of detrimental reliance to receive monetary compensation. If they can show reliance, additional compensation may be afforded, but such a showing is not required. The Court sent the case back to the trial court to determine what remedies might be available to the plaintiffs under normal equitable principles.

The decision is important in that it affirms that companies may be sued by employees who feel the disclosures of benefit plan changes are not adequate. Plan administrators will need to be especialy careful when describing plan changes and benefits to empoyees.

 


Class Actions -- 2011



Erica P. John Fund v. Halliburton Co.   (U.S. Supreme Court)

Evidence of fraud required to certify class in securities litigation

Suits against companies for misleading or fraudulent statements (or withholding signification information) that affect the price of the company's stock require proof of causation, that is, that the statements actually had an effect on the market. This case involves whether such proof must be provided at the stage of the case when the judge is deciding whether to certify the case as a class action, or whether that proof can wait until the trial phase. Whether to certify a lawsuit as a class action is often case-dispositive, since certification puts tremendous pressure on companies to settle questionable suits to avoid potentially excessive liability.

The Fifth Circuit ruled that plaintiffs must show evidence of causation prior to certification of the class. Unless the alleged fraud actually caused the loss, a court cannot assume that all the proposed members of the class relied on the fraud when buying their stock. The Supreme Court's reversed on June 6, 2011, holding that plaintiffs need not prove loss causation in order to obtain class certification. It found that loss causation is different from reliance on a misrepresentation or omission, and requires a plaintiff to show that the misrepresentation caused a subsequent economic loss.

As a result, it will be easier for shareholders to file class action lawsuits alleging misrepresentations or omissions by company management.

 

Pella Corp. v. Saltzman   (U.S. Supreme Court)

Certification of issue classes

The NAM filed an amicus brief urging the Supreme Court to review a Seventh Circuit decision that makes it easier for trial lawyers to sue manufacturers using an unwieldy and unfair class action procedure. The lower court significantly relaxed the standards for class certification, especially in product defect and consumer fraud cases, undermining procedural and substantive rights of manufacturers and encouraging a dramatic increase in class action exposure of American businesses.

Rule 23(b)(3) of the Rules of Civil Procedure allow class actions only where common questions predominate over individual ones. The lower court here allowed a class to be certified as to a few common issues, disregarding individual liability issues relating to causation and injury. The case arose from allegations that certain windows had moisture-related problems, and that the failure to notify customers of the alleged defect violated various state consumer-fraud laws. The court allowed class certification on individual components of the class claims, but not all the elements necessary to prove liability.

Our amicus brief argued that the decision to certify a class representing plaintiffs in 50 different states, without analyzing the differences in state law or the need for individualized findings under each law, denies the defendant an opportunity to present valid individual defenses. For example, the company might be able to show that a particular plaintiff's problem with its windows was caused by improper installation or other factors -- evidence that might also be helpful to raise doubt about whether the windows were defective at all. If these defenses are not available in the first phase of the class action litigation, manufacturers could face settlement pressure that effectively denies them the opportunity ever to present their defenses. We also raised several questions about how the court's separate "issue" judgments would be used in subsequent proceedings.

On Jan. 18, 2011, the Court declined to review this appeal.


Related Documents:
NAM amicus brief  (October 14, 2010)

 

Smith v. Bayer   (U.S. Supreme Court)

Class action certification procedures

The Supreme Court decided that a class action suit that has been rejected in federal court, in part because the plaintiffs did not prove sufficient injury, can be relitigated in state court using state rules. The Court ruled that the federal Anti-Injunction Act generally prohibits federal courts from enjoining state court proceedings, and an exception for re-litigating cases is to be narrowly construed. A state court proceeding may continue if the issue previously decided by the federal court is not the same as the one before the state court, and The Court ruled that West Virginia rules on class certification are a bit different from federal rules and may be relitigated under state law. In addition, the plaintiff was not a party in the earlier case. The case involves alleged economic loss by plaintiffs who bought the cholesterol-lowering medication Baycol.

 

Wal-Mart Stores, Inc. v. Dukes   (U.S. Supreme Court)

Whether a class action for money damages can be brought under procedures that allow only declaratory or injunctive relief

This very large class action against Wal-Mart was brought on behalf of 1.5 million female employees around the country for alleged discrimination in pay and promotions. Although the district court certified the class and the Ninth Circuit narrowly agreed, the Supreme Court reversed, deciding that there must be common questions of law or fact, and the critical question here involved whether Wal-Mart engaged in a pattern or practice of discrimination. Answering that question involves scrutinizing millions of employment decisions at once, and unless there is some "glue" holding together the reasons for the discrimination, a class action is not appropriate. There was no proof of a general policy of discrimination in this case. The only corporate policy clearly established was a company policy of giving local supervisors discretion over employment matters, making it unlikely that all managers would exercise their discretion in a common way without some common direction.

In addition, the Court ruled that claims for individualized monetary relief like backpay may not be included in class actions under Rule 23(b)(2), but rather should be brought under Rule 23(b)(3).

Class certification issues are of critical importance to manufacturers caught up in mass tort or mass discrimination claims. Often individual issues relating to particular workplaces, consumers and damages predominate a case, yet some judges certify them for class action status anyway. Such certifications often force companies into expensive settlements in cases of questionable merit. The result in this case is helpful to prevent "Trial by Formula," as described in the Court's opinion.

 


Communications -- 2011



FCC v. AT&T, Inc.   (U.S. Supreme Court)

Whether personal privacy exception in FOIA applies to corporations

An exemption in the Freedom of Information Act (FOIA) applies to records or information compiled for law enforcement purposes, "but only to the extent that the production of such law enforcement records or information . . . could reasonably be expected to constitute an unwarranted invasion of personal privacy." AT&T turned over records to the FCC in connection with an investigation of some bills, and a trade association representing some of its competitors sought all the records. In this suit to prevent the FCC from releasing the records, the Third Circuit held that a corporation is included in the statute's definition of a "person" and thus has personal privacy interests protected from disclosure by Exemption 7(C) of FOIA.

The NAM filed an amicus brief 12/15/10 arguing that corporations enjoy easily recognizable privacy interests other than those involving financial or trade secrets, and the government's investigative powers should not be used to serve private ends, or to cause harm or embarrassment unrelated to proper investigative purposes. Billions of private messages should not become available for public display merely because a business entity is swept up in a government investigation, either as a target, a victim, or a source of information. A wide range of in-house communications, in the hands of a competitor or a third party, including the press or trial lawyers, could be deployed to harm the company, its shareholders and employees. It is improper and abusive for the government's broad investigative power to be used to serve private ends and cause private injury.

On March 1, 2011, the Supreme Court unanimously decided that "personal privacy" is a term that is not defined in the statute, and its ordinary meaning does not include the privacy interests of corporations. Chief Justice Roberts issued the Court's opinion, citing other sections of FOIA where personal privacy has been interpreted to include only an individual's privacy interests. As a result of the decision, companies that provide information to the government will only be able to argue that it should not be publicly disclosed because it falls within Exemption 4 of FOIA, relating to "trade secrets and commercial or financial information obtained from a person and privileged or confidential."


Related Documents:
NAM brief  (December 15, 2010)

 


Discovery -- 2011



Toyota Motor Corp. v. Superior Court   (Cal. Ct. App.)

State power to compel testimony from out-of-state corporate officials

A California court had to decide whether it could order a corporation to produce out-of-state employees for deposition in California. The trial court required a Japanese parent company, Toyota, to produce Japanese residents for depositions in California, although the issue could apply to a non-California manufacturer anywhere in the United States or elsewhere. This practice would raise the costs of litigation even further, providing additional leverage for plaintiffs. A California law prevents out-of-state residents from being required to appear for depositions, but the court's decision created exceptions.

The NAM joined with the International Association of Defense Counsel in an amicus brief on March 31, 2011. Our brief recounted the historical basis for taking depositions of witnesses outside a country where the case is being tried. Traditionally, the courts have allowed depositions in foreign counties when the witnesses are there, and have not required travel to the court’s jurisdiction. In addition, the California statute itself does not grant the court authority to compel such travel. Even if the court had discretion to compel attendance, it should only exercise it after taking into account principles of international comity that include reciprocal courtesy when applying laws outside of territorial limits.

On July 27, 2011, the California Court of Appeal overturned the lower court's order, concluding that California law protects nonresidents from having to appear either as a witness during trial or during the discovery phase of litigation. Depositions may still occur in the states or countries where the required witnesses are located.


Related Documents:
NAM brief  (March 31, 2011)

 

White & Case, LLP v. United States   (U.S. Supreme Court)

Government access to civil discovery documents for criminal investigation

A government antitrust criminal investigation into the LCD flat-screen industry prompted numerous follow-on private civil suits which proceeded at the same time. This case concerns whether the government may subpoena lawyers handling the civil suits to provide documents originating outside of the United States, rather than using the standard processes governing the collection of information from foreign parties. Normally in criminal cases, such information must be obtained through (1) letters rogatory, (2) international treaties, or (3) diplomatic channels. Obtaining such information from civil litigants puts the defendants in the untenable position of having to decide whether to decline to provide such information under the Fifth Amendment and facing negative consequences in the civil litigation, or providing the information and running the risk of self-incrimination in the criminal case.

The NAM filed an amicus brief on April 20, 2011, urging the Supreme Court to review a Ninth Circuit decision that the government has a right to discover the evidence from the civil proceeding. The Ninth Circuit ruled that a grand jury subpoena in the criminal investigation trumps a protective order that exists in the civil proceeding. The NAM brief counters that the Ninth Circuit's rule enables the Department of Justice to circumvent well-established methods for seeking foreign-based discovery, and exploits the wide-ranging system of discovery allowed in this country. We raised a concern that this ruling ignores potential international complications and consequences, and could harm American businesses that may be subject to retaliation in legal proceedings abroad. Hostility to American discovery practices has been well documented. There are other methods that the Justice Department can use to obtain foreign evidence, including 2 international agreements between the countries involved in this case.

The petition was denied on June 27, 2011.


Related Documents:
NAM brief  (April 20, 2011)

 


Environmental -- 2011



American Electric Power Co. v. Connecticut   (U.S. Supreme Court)

Public nuisance litigation against 6 electric utilities

The Supreme Court reversed a very troubling decision by the U.S. Court of Appeals for the 2nd Circuit that allowed 8 states to sue 6 major electric utility companies under a public nuisance theory. The theory is that each state is adversely affected by climate change caused in part by the utilities’ electricity-generating plants, and the courts should impose emissions limits.

The NAM and other business groups filed an amicus brief urging review of the case. We argued that only the political branches of government are equipped to resolve the complex and dynamic issues relating to climate change regulation, that the plaintiffs’ legal claims exceed the boundaries of public nuisance litigation, and that judges and juries are not empowered or competent to exercise extraordinary regulatory powers without clear boundaries and guiding principles.

Our brief argued that this case is far from the "ordinary tort suit" that the lower court thought it was. Instead, it is quite extraordinary, and the judiciary "has no experience dealing with public nuisance litigation created by a global phenomenon resulting from the release of greenhouse gases by millions, if not billions, of sources (including natural events) worldwide -- very few of which are subject to the jurisdiction of American courts or under the control of these defendants." It is inappropriate for courts to entertain standardless public nuisance litigation in an area that should be addressed by the political branches of government.

Click here for a summary of the Second Circuit's decision and the NAM brief in that court.

The Supreme Court's decision to review this case was announced on Dec. 6, 2010.

On 2/7/11, we filed a brief on the merits, arguing that courts cannot resolve political questions like this because there are no judicially discoverable and manageable standards to handle them, and courts have neither the expertise nor the authority to make those judgments. Public nuisance claims have been limited by geographical boundaries and defined circumstances, and courts should not step into legislative and executive branch issues to try to address public nuisance cases of global dimensions. A public nuisance is "the right thing in the wrong place, like a pig in the parlor instead of the barnyard." But were courts to impose judicial limits on electricity generating plants, they would be removing the geographic limitation and would be acting without a standard. In addition, public nuisance cases involve defined circumstances where the controversy can actually be resolved by an abatement order. Such an order in this case cannot be designed with any standard that would project or evaluate its efficacy. This litigation is not an "ordinary tort suit," but rather involves wholly new claims that are unbounded by any rational constraints, and courts should leave their resolution to the legislative and executive branches.

On June 20, 2011, the Court ruled that EPA action to regulate greenhouse gases displaces any federal common-law right to seek abatement of GHG emissions. There is no need for the courts to develop federal common law when Congress addresses a question of national concern, such as the regulation of air and water. It does not matter whether EPA actually exercises its authority to regulate GHGs; as long as the field of GHG regulation has been delegated to EPA, federal common law is displaced.

The NAM had urged the Court to overturn the lower court’s extreme ruling, and the Court agreed, up to a point. While it rejected the federal common-law claims, it left open the possibility that such a suit could be brought under state nuisance law. It sent the case back for the lower court to consider whether the Clean Air Act preempts state-law suits as well.


Related Documents:
NAM brief on the merits  (February 7, 2011)
NAM brief  (September 2, 2010)

 

Center for Biological Diversity v. EPA   (D.C. Circuit)

Environmental group challenge to greenhouse gas tailoring rule

As part of our continuing efforts to make sure that EPA does not exceed its authority in the regulation of greenhouse gases from stationary sources of emissions, the NAM and 15 other business organizations in our coalition has moved to intervene in a lawsuit brought by an environmental group challenging EPA's power to focus on the largest emitters first. If the environmental group is successful, EPA and various states may be required to apply much more stringent criteria to permitting programs, which could impose enormous costs from foregoing operations or installing emission-control technology. Our motion to intervene does not concede that EPA's decision to regulate greenhouse gases is legally permissible.

The Center for Biological Diversity (CBD) sought a court order holding this case in abeyance pending resolution of other challenges to the tailoring rule, but the court rejected that request on June 15, 2011. The next day, CBD voluntarily moved to dismiss this case.

The NAM and other organizations have also filed a separate petition to review the EPA's tailoring rule. For a complete listing of NAM cases against EPA, click here.


Related Documents:
NAM motion to intervene  (June 28, 2010)

 

Center for Biological Diversity v. Salazar   (U.S. District Court for the District of Columbia)

Intervention in environmentalists' Challenge to Interior's polar bear rule

The NAM and other business organizations moved to intervene in a case brought in California by three environmental organizations which challenged the Department of the Interior's rule relating to naming the polar bear a threatened species under the Endangered Species Act (ESA). Our involvement did not challenge or support that designation, but supported the Department's conclusion not to require special permits for companies that conduct greenhouse gas-emitting activities. Any activity that harms a threatened species may constitute an "incidental taking" and may require a special Fish & Wildlife Service (FWS) permit. Under the new rule, the government provided an exception for greenhouse gas emissions, since their effect on global warming cannot be traced to any particular activities in particular locations.

In a separate case, we challenged a particular provision that did not exempt the state of Alaska from the greenhouse gas exception. See American Petroleum Institute v. Salazar. After we filed that case, EPA amended the rule to eliminate the "Alaska gap" carve-out provision, but left in greenhouse gas requirements for operations within the current range of the polar bear. We continued to challenge that limited ruling (see Amended Complaint below).

On 12/3/08, our motions to transfer and consolidate this case with others filed in federal court in the District of Columbia were granted. This case was consolidated with Defenders of Wildlife v. Dep't of the Interior, which challenged the Department's Section 4(d) rule as having been promulgated without conducting an environmental impact analysis and as not providing for the conservation of the polar bear. Since these cases have been consolidated, our summary is consolidated here as well.

In 2010, we filed a memorandum and reply brief supporting the decision not to extend liability for affecting polar bears to activity occurring outside the current range of the bear. This will allow energy and industrial activity permitted under the Clean Air Act, the application of pesticides allowed under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), and other economic activities. The Endangered Species Act is not the proper mechanism for controlling carbon emissions. The U.S. Fish and Wildlife Service's decision is reasonable and supported by the statute.

On Nov. 4, 2010, the district court judge rejected the Service's view that only species that are in imminent danger of extinction are "endangered" under the law, and ordered the Service to reconsider its rule in light of the ambiguity of that term. The statute mandates consideration of 5 factors and the best available science to determine whether a species is endangered, and the agency should consider them and issue a new interpretation for court review. The existing rule will remain in effect while this new interpretation is under review.

After a hearing on April 13, 2011, the judge ordered the parties to submit briefs asking whether it needs to decide all the issues in the case if it remands the case to the FWS to comply with NEPA or ESA. The NAM's brief, filed June 3, 2011, supported the Fish & Wildlife Service's view that the rule complies with all relevant statutes, but if not, the appropriate remedy is to send the case back to the agency for further action without throwing out the current version. Otherwise, thousands of otherwise lawful activities outside the polar bear's current range would be called into question and possibly generate lawsuits, unnecessary administrative actions and delays, and potential liability. There are many actions that FWS could take that would address judicial concerns about its actions, such as providing further reasons or further NEPA analysis.

On June 30, District Judge Sullivan affirmed the legality of FWS's listing of the polar bear as a "threatened species" under the ESA.

On Oct. 17 and Nov. 18, the judge upheld the final rule under the Endangered Species Act, vacated the final rule and reinstated the Interim Final 4(d) Rule. He remanded the rule to FWS to conduct its NEPA review and to publish a final Environmental Assessment by December 6, 2012. The court ruled that the ESA does not require FWS to regulate greenhouse gases, and that the Service had a rational basis for its decision, despite the fact that it may limit the ability of environmental groups to sue greenhouse gas emitters under the ESA.


Related Documents:
NAM Supplemental Brief  (June 3, 2011)
NAM Reply Brief  (August 16, 2010)
NAM Memorandum  (March 26, 2010)
NAM Amended Complaint  (March 13, 2009)
NAM Brief in Support of Motion to Transfer Polar Bear Litigation to Federal Court in D.C  (September 29, 2008)

 

National Corn Growers Ass'n v. EPA   (U.S. Supreme Court)

Right to EPA hearing prior to revoking pesticide tolerances

When the EPA unilaterally revoked a pesticide tolerance under the Federal Food, Drug and Cosmetic Act (FFDCA), it arguably violated the right of pesticide manufacturers to an adjudicatory hearing. The action effectively banned the pesticide, and whether there is a right to a hearing in such circumstances has ramifications for pharmaceuticals, medical devices, food and beverages and certain consumer products as well.

Hearings are required whenever there are material issues of fact that are disputed between the government and the manufacturer. Despite four decades of safe product use in this case, EPA made changes in its risk assessment assumptions without providing a hearing. The D.C. Circuit deferred to EPA's decision, and the case was appealed to the Supreme Court.

The NAM and other groups filed an amicus brief 3/18/11 urging the Supreme Court to review this case. We argued that administrative agency hearings before a neutral factfinder are essential to due process, and that the lower court's ruling contravenes the FFDCA's hearing requirements. American industry relies on hearing rights, and the ruling in this case could affect not only rights under this statute, but also under statutes and regulations such as those covering packaging (Fair Packaging and Labeling Act), seabed mining (National Oceanic and Atmospheric Administration regulations), the importation or exportation of natural gas (Department of Energy regulations), tax levies on property (IRS regulations), and air carrier agreements (Department of Transportation rules).

On May 31, 2011, the Court declined to hear the appeal, leaving the lower court's decision in place.


Related Documents:
NAM brief  (March 18, 2011)

 

Natural Resources Defense Council v. EPA   (D.C. Circuit)

Validity of EPA's guidance on ozone fee waivers

On January 5, 2010, EPA published guidance to the states that allowed them to waive fees under Section 185 of the Clean Air Act relating to compliance with ozone emissions regulations. The guidance assisted states in preparing their own State Implementation Plans. It allowed states to either use the Section 185 fee program or "an equivalent alternative program" that is "consistent with the principles of section 172(e)" of the Clean Air Act.

NRDC sued EPA in March to argue that EPA's action allowing an equivalent, alternative program was arbitrary and capricious, and that allowing fee waivers if an ozone nonattainment area meets an 8-hour testing standard instead of a 1-hour standard was also improper. An 8-hour standard is more protective of the environment than a 1-hour standard.

In April, the NAM and 4 other business groups moved to intervene in this suit in support of EPA. That motion was granted. The case affects fees that were then set at $8,766 per ton of volatile organic compounds and nitrogen oxides emitted above a baseline amount from major stationary sources within areas of the country that are classified as severe or extreme nonattainment areas.

The NAM and other intervenors filed a brief on Jan. 31, 2011, arguing that EPA's interpretation is reasonable and consistent with congressional intent. It is important that states have the flexibility to design equivalent alternative programs that do not unfairly and inappropriately penalize well-controlled major stationary sources of ozone. Companies that have already dramatically reduced ozone emissions are unable to make further reductions without a harmful drop in productivity, and states should be able to develop alternative programs that focus on sources that are better able to achieve further reductions.

On July 1, the court rejected EPA's arguments that the plaintiffs lacked standing, that the Guidance did not qualify as final agency action, and the plaintiffs' claims were unripe for judicial review. It then ruled that the Guidance qualified as a legislative rule that EPA was required to issue through notice-and-comment rulemaking, and that one of its features -- the "attainment alternative" -- violated the plain language of the Clean Air Act. The court vacated the EPA's guidance and ruled that it could not offer an alternative that allows violations of the old 1-hour standard to continue. The law does not allow EPA to retreat from requirements it sets that prove to be too stringent and unnecessary to protect public health, and EPA must go back to Congress if it wants to do so.


Related Documents:
NAM brief  (January 31, 2011)
NAM motion to intervene  (April 5, 2010)

 

Portland Cement Ass'n v. EPA   (D.C. Circuit)

Challenge to EPA's regulation of emissions during Startups, Shutdowns and Malfunctions

The NAM is part of the SSM Coalition, named for EPA's new Clean Air Act regulations governing special circumstances often present during startup, shutdown or malfunction (SSM) of process equipment or pollution control equipment. On Jan. 4, 2011, the Coalition moved to file an amicus brief in litigation brought by the Portland Cement Association which challenges 2 EPA regulations governing Portland Cement plants. Our particular interest is the rule which establishes national emission standards for hazardous air pollutants (NESHAPs) under Section 112 of the Act.

EPA's new approach to establishing NESHAPs and its novel interpretations of Section 112 apply not only to the portland cement case, but it plans to adopt similar requirements for a variety of other sectors, including chemical plants, pulp and paper mills, steel pickling operations and wood furniture manufacturing.

The court granted permission to file an amicus brief, and we did so on May 23, 2011. The brief argued that EPA's MACT standard cannot be met by any existing facility and that EPA's standard does not satisfy the statutory requirement that it be achievable.

We also argued that EPA did not justify its decision to no longer recognize the special circumstances that arise during equipment malfunctions. Reasonable performance standards should recognize that sudden, unexpected failures of a manufacturing process or pollution control technology are not part of a source's normal operating mode, and should not be subject to harsh EPA penalties when they occur. EPA could have considered alternatives, such as work practice standards, that would address deviations from normally achievable emissions standards that may occur during periods of malfunction.

Finally, we argued that EPA should have recognized that differences in the source of raw materials makes compliance with a uniform national MACT standard difficult or impossible. It was arbitrary and capricious for EPA fail to make allowances for emissions based on the sources of supply.

On Dec. 9, 2011, the court remanded the NESHAP rule to EPA for reconsideration, but rejected all other issues that challenged EPA's actions.


Related Documents:
NAM brief  (May 23, 2011)
NAM Motion to File Amicus Brief  (January 4, 2011)

 

Wilderness Society v. U.S. Forest Service   (9th Circuit)

Intervention in environmental suits challenging federal NEPA compliance

For many government projects involving manufacturers, the National Environmental Policy Act requires federal agencies to evaluate the environmental impact of their actions, and these evaluations are increasingly challenged in court by environmental groups. In such litigation, courts usually allow manufacturers to intervene in the suits to help defend the agency’s actions and to help the court understand the impact of the case on their business. If environmental analyses are deficient, the projects cannot proceed.

This case involves a Ninth Circuit procedure that generally bars such intervention. The practice, informally known as the “federal defendant rule,” is based on the premise that only the federal government can be held liable for failing to perform environmental assessments, and that private parties do not have a significant protectable interest in the litigation.

The NAM and other groups filed an amicus brief 10/21/2010 arguing that the rule should be abandoned. Private parties clearly have a substantial interest in defending agency actions under NEPA, and Federal Rules of Civil Procedure 24(a) allows such a party to intervene. We cited many examples where private parties have such interests, including development projects that involve work in wetlands, the construction of natural gas pipelines or nuclear power plants, and the development of genetically engineered crops.

Our concern is not just about the application of the federal defendant rule to projects subject to NEPA, but also to the fact that it has been extended to other statutes, including the Endangered Species Act, the National Forest Management Act, and the Plant Protection Act. Intervention should be allowed to parties with significant interests in the outcome of such litigation. Often, private parties have massive investments at stake.

On 1/14/2011, the Ninth Circuit rejected the federal defendant rule and said that lower courts should not automatically reject non-federal parties from intervening in litigation at the merits stage, or liability phase, of a law suit. Instead, courts should consider whether the party has a legally protectable interest in the litigation and a connection between that interest and the claims in the case. The decision was en banc, involving 11 of the judges in the Ninth Circuit, and provides great assurance that the federal defendant rule will no longer be used in that circuit. Thirty-seven amicus groups urged this result, and only one other federal circuit court of appeals hangs on to the federal defendant rule.


Related Documents:
NAM brief  (October 21, 2010)

 


False Claims Act -- 2011



Schindler Elevator Corp. v. United States   (U.S. Supreme Court)

Validity of qui tam lawsuits derived from information received by FOIA request

Private parties may sue government contractors for billing fraud using the qui tam provisions of the False Claims Act, and recover up to 30% of the amount in controversy. However, the information they use to bring their claims must not generally be information that is disclosed in an administrative report or investigation. This case involves a private party that received his information through a Freedom of Information Act request, and the issue before the Supreme Court is whether that FOIA disclosure is an administrative report or investigation under the False Claims Act that would bar the suit. Federal courts have split on the issue.

On May 16, 2011, the Court decided 5-3 that the FOIA response is a report consistent with the public disclosure bar. It sent the case back to the lower court to determine whether the qui tam suit was based on allegations or transactions disclosed in the FOIA report.

The case is important, since allowing suits based on FOIA information would have allowed anyone to search through government contract documents to determine whether any of a variety of statutory or regulatory requirements were fully satisfied. The financial incentives to bring qui tam suits are enormous, and the False Claims Act is designed to ensure that those rewards are available only to plaintiffs with firsthand knowledge of an alleged wrongdoing. Allowing opportunistic suits in this situation would have encouraged litigation and undermined the judgment of contracting agencies in handling issues relating to compliance with government contracts.

 


Forum non conveniens -- 2011



Republic of Ecuador v. Chevron Corp.   (2nd Circuit)

Enforcement of bilateral investment treaty arbitration

In 2003, a group of Ecuadorian nationals sued Chevron and Texaco Petroleum over environmental claims from oil drilling operations of various companies in Ecuador. In 2009, the companies began an arbitration against Ecuador under the U.S.-Ecuador Bilateral Investment Treaty (BIT), citing Ecuador's failure to provide fair and equitable treatment to an investor of the United States as required by the BIT, in part because of alleged government collusion in the litigation, breach of a previous settlement agreement, and the improper use of the judicial system to generate sham criminal charges against attorneys for the companies and other acts in disregard of Ecuadorean law. Ecuador went to U.S. court to prohibit the BIT arbitration, but the trial judge allowed it to proceed. That ruling was appealed to the U.S. Court of Appeals for the Second Circuit.

The NAM and the Emergency Committee for American Trade filed an amicus brief 7/1/2010 arguing that the BIT arbitration procedure should proceed, and a U.S. court should not interfere with it. U.S. courts lack the legal authority to prevent such arbitration under an international treaty, and such interference would subvert the purpose and viability of the U.S. BIT program, which is very important to promote U.S. foreign-policy objectives. Such treaties ensure that U.S. foreign investors have basic international protections in their activities abroad, including access to a neutral and objective forum for the resolution of disputes, in order to promote investment, economic growth, development, stability and other important foreign-policy goals.

On March 17, 2011, the Second Circuit affirmed the lower court's ruling, holding that any challenges Ecuador wants to make to Chevron's right to arbitrate should be made before the arbitral panel. The court concluded that Chevron could initiate BIT arbitration without undermining the district court's earlier dismissal of the case on grounds of forum non conveniens. The BIT constitutes a standing offer to arbitrate disputes covered by the Treaty, and Chevron's written demand for arbitration constituted an agreement in writing to submit the dispute to arbitration. Once in arbitration, the dispute is subject to UNCITRAL rules that leave questions about arbitrability to the arbitral panel. Chevron's dispute with the government of Ecuador can proceed to arbitration, while the lawsuit by the Ecuadorian nationals can continue as well, without conflicting. One of Chevron's claims in arbitration is that Ecuador must honor its contractual obligation to indemnify it for environmental claims, since that obligation was transferred to Ecuador years before.

There are over 2,500 BITs around the world, including 40 involving the United States, along with seven U.S. free-trade agreements with 13 countries that contain substantially similar provisions. The parties to a bilateral investment treaty each consent to the submission of any investment dispute for settlement by binding arbitration. Such dispute resolution is quite fair, and foreign governments win those disputes more often than not. By promoting investment abroad, BITs have important benefits for the U.S. economy, U.S. companies and U.S. workers.


Related Documents:
NAM brief  (July 1, 2010)

 


Free Speech -- 2011



Sorrell v. IMS Health Inc.   (U.S. Supreme Court)

Constitutionality of Vermont's ban on pharmaceutical marketing using prescription information

Prescription information, without patient names but with prescribing doctor information, is collected by pharmacies and aggregated. The information is ultimately sold to pharmaceutical companies, who in turn use it to target their marketing efforts. While this information is widely used for other purposes, Vermont prohibits its use in marketing prescription drugs. The information publishers and the Pharmaceutical Research and Manufacturers of America (PhRMA) challenged the law as violating their commercial speech rights, because it restricts the right to convey truthful information to others based on its content.

The NAM joined with the Washington Legal Foundation in an amicus brief arguing that courts should not give deference to legislative fact-finding, predictions and judgments relating to speech restrictions that are not content-neutral, but should independently assess those legislative justifications. Where speech restrictions are motivated by legislative hostility to the content of the speech, courts should not automatically defer to the legislature’s rationale. In addition, the legislature’s findings were last-minute additions that were not developed as a result of any fact-finding studies.

We also supported the view that the privacy interests in the prescribing practices of doctors should be balanced with the First Amendment rights of others. Since courts have not given as much weight to business privacy interests, particularly in the closely regulated affairs of doctors, there must be a compelling government interest to justify restrictions on the First Amendment rights of others. We argued that the law was not intended, nor does it, protect the privacy interests of doctors, since it allows a variety of other uses of the data by insurance companies, government employees, drug companies and others.

The Supreme Court ruled 6 to 3 on June 23 that the law is a restriction on speech that is based on the content of the message or the identity of the speaker, and is therefor subject to more rigorous judicial scrutiny than restrictions that are not. The creation and dissemination of information are speech covered by the First Amendment. The majority also ruled that the law infringes commercial speech rights of pharmaceutical companies because it was not narrowly drawn to advance the state’s interest in protecting physicians’ confidentiality. The majority agreed with the NAM's view, finding that the state may not burden protected speech in order to tilt public debate in a preferred direction.


Related Documents:
NAM brief  (March 31, 2011)

 


Government Contracting -- 2011



Astra USA, Inc. v. County of Santa Clara   (U.S. Supreme Court)

Private right of action against government contractors

The Supreme Court decided that medical providers may not sue drug manufacturers to enforce a price cap imposed by the Public Health Service Act on Medicaid-covered outpatient drugs. That law requires drug manufacturers to provide discounted prices to specified healthcare providers, but did not expressly provide the providers with a right to sue to enforce the requirement. The Court decided that such a right is not implied in the statute. A different result could have affected whether third-party beneficiaries of other federal contracting statutes may also have the right to sue manufacturers.

 


Labor Law -- 2011



Chamber of Commerce v. Whiting   (U.S. Supreme Court)

Preemption of state immigration verification requirements

The NAM is a member of the Human Resource Initiative for a Legal Workforce, which filed an amicus brief on 8/27/2009 urging the Supreme Court to review an adverse decision from the Ninth Circuit in a case involving the Legal Arizona Workers Act. That state law requires businesses to use a particular employment verification program, E-Verify, that Congress decided should be voluntary, not mandatory. It also imposes penalties beyond those prescribed by federal law.

The problem is that Arizona is one of a large number of states and municipalities that have recently passed or are considering such laws, but their enforcement schemes are different, making it increasingly difficult for an employer doing business in multiple states to navigate the conflicting requirements. The laws impose a wide variety of inconsistent verification requirements, squarely conflicting with the intent of Congress to create a nationally uniform and comprehensive federal system that limits the imposition of undue burdens on businesses.

Our amicus brief enumerated the serious flaws that exist with the federal verification system. Studies have pointed out the errors in the system, including 17.8 million records that contain discrepancies related to name, date of birth or citizenship status. We also provided compelling evidence about the different penalties and enforcement schemes embodied in various laws around the country, and the burdensome and costly effect these will have on business.

On May 26, 2011, the Supreme Court, over dissents from Justices Breyer, Ginsburg & Sotomayor, affirmed the lower court's decision. It found that the Arizona law falls well within the confines of the authority Congress chose to leave to the states and is not expressly preempted. Federal law does not prohibit state licensing law restrictions, but it does prohibit civil or criminal sanctions.

A plurality of the Court found that the Arizona law is not impliedly preempted by federal law, because Congress expressly allowed the states to pursue sanctions through licensing laws, and because the state law uses federal definitions and verification information.

The Court also found that mandating the use of the federal E-Verify program is not preempted. Federal law limits what the federal government can do with E-Verify, but does not prevent states from participating in it. The Court found that the consequences to an employer that does not use the E-Verify system to verify the employment eligibility of an employee are simply that the employer forfeits an otherwise available rebuttable presumption of compliance with the state law.


Related Documents:
NAM brief  (August 27, 2009)

 

EEOC v. Schwan's Home Service   (8th Circuit)

Breadth of EEOC subpoena authority

The NAM joined with the Equal Employment Advisory Council and the U.S. Chamber of Commerce in an amicus brief urging the Eighth Circuit to overturn a trial court ruling that authorized the EEOC to enforce an administrative subpoena that is not based on a valid charge of discrimination, and that broadly seeks information through a subpoena enforcement action that is not relevant to the charging party’s claims.

A single employee complained to the EEOC about alleged sexual harassment and retaliation under Title VII of the Civil Rights Act of 1964, but the company says she did not meet the performance requirements of the general manager position she sought. The EEOC sought a variety of information and documents from the company based on amended allegations that included a charge of class-wide discrimination.

Our brief argued that the new allegations fail to provide a “clear and concise statement of the facts” constituting the alleged violation and would authorize an open-ended audit of all of the company’s employment practices, in violation of statutory language designed to prevent the exercise of unconstrained investigative authority.

We also argued that the individual did not herself claim to be aggrieved by class-wide hiring discrimination, an essential element to an EEOC investigation in this case. The EEOC’s subpoena must be limited to the charges made and supported with facts by the complaining party.

On July 13, 2011, the Eight Circuit affirmed the district court's order enforcing the EEOC's broad subpoena. It found that the charging party had complied with all the statutory requirements, and the charge did not need more than an unsubstantiated belief that discrimination had occurred. It also found that the subpoena generally related to the charge of potential systemic gender discrimination. The ruling validates broad subpoena power at the EEOC, based on unsubstantiated claims.


Related Documents:
NAM brief  (November 10, 2010)

 

Harris v. Superior Court   (California Supreme Court)

Classifying employees under California's administrative exemption

The NAM filed an amicus letter urging the California Supreme Court to review a lower court ruling that throws into question whether employers can classify many different kinds of employees as exempt from the minimum wage and overtime provisions of California law under the "administrative" exemption. Administrative personnel are exempt from the wage and hour laws, but defining who is administrative is the heart of this case.

Our letter points out that the lower court's ruling will affect many more jobs than just the insurance claims adjusters that are the plaintiffs, and that the California Supreme Court should try to help ensure that state and federal interpretations are consistent and predictable.

Also, the test used by the court of appeal ignores the fact that employees do not necessarily need to “participate in the formulation of management policies or in the operation of the business as a whole” to be doing work “directly related to management policies or general business operations” and thus be covered by the administrative exemption. Employees need only affect policy or have the responsibility to carry out policy to be doing work “directly related” to management policies or to general business operations.

On Dec. 29, 2011, the California Supreme Court reversed the lower court and sent the case back to them to apply a legal standard outlined in its decision. According to the court, "The essence of our holding is that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue."


Related Documents:
NAM Amicus Letter  (October 11, 2007)

 

In re Specialty Healthcare and Rehabilitation Center v. .   (NLRB)

Defining scope of bargaining units

This case involves how to define a bargaining unit at a company. The United Steelworkers attempted to organize and represent a group of certified nursing assistants at a nursing home, while the employer contended that the appropriate unit includes all nonprofessional service and maintenance employees. The NLRB’s regional director ruled for the union. When issues like this are appealed, the NLRB decides them on a case-by-case basis, and it asked for input on how to determine the appropriate employees to include in each bargaining unit. In nursing homes and other nonacute health care facilities, the Board considers “community of interests” factors and background information about the workplace in determining the bargaining unit, and it asked for the views of interested parties on this question, not only for nursing homes but also for all industries. It planned to issue rules governing appropriate units via this litigation, rather than by a rulemaking process.

The Coalition for a Democratic Workplace, of which the NAM is a member, filed an amicus brief March 8, 2011, focusing on the Board’s broader question of whether employees performing the “same job at a single facility is presumptively appropriate” as the bargaining unit. Our brief urged the Board not to tackle this question in the context of the nursing home case, but if it did, to continue to use the “community of interest” test that has guided employers and labor organizations for decades. If the Board were to adopt a standard that allows very small bargaining units, employers would be burdened with negotiating and administering a number of different contracts covering only a few of its employees. The Board should not attempt to establish a comprehensive approach to bargaining unit designations by adjudicating a nursing home dispute; rather, it should use the rulemaking process with public hearings.

In addition, the proliferation of units limits the rights of employees by creating barriers in the workplace, creating the risk of balkanizing the workforce and making employee advancement more difficult. A bargaining unit should include employees who have a community of interest that is sufficiently distinct from those excluded from the unit.

On August 30, 2011, the Board released a 3-1 ruling that the group of certified nursing assistants was the appropriate bargaining unit, and did not need to include all other nonprofessional service and maintenance employees of the workplace. It did so by applying a community-of-interest approach, adding that the burden is on the employer to prove that employees not included in the group seeking recognition "share an overwhelming community of interest with the included employees." This means that the factors used in determining whether members of groups share a community of interest must "overlap almost completely." The majority adopted this formulation to provide employers and employees with a clear standard to reduce litigation and produce more predictable and consistent results.

The National Labor Relations Act creates a set of presumptively appropriate bargaining units encompassing "the employer unit, craft unit, plant unit, or subdivision thereof." If the employees choose to define a bargaining unit in a way that is "appropriate," their decision will be upheld by the Board. This means that small bargaining units will be allowed as long as members in that unit share a community of interest, and the majority even stated that a unit is not "inappropriate simply because it is small."

NLRB Member Hayes dissented, arguing that the decision "fundamentally changes the standard for determining whether a petitioned-for unit is appropriate in any industry subject to the Board's jurisdiction," and warning about proliferation of bargaining units. He said that the majority's community-of-interest test effectively gives controlling weight to whatever unit a union has been able to organize. Rather, he would require a showing that a group's interests "are sufficiently distinct from those of other employees to warrant the establishment of a separate unit." Thus, the decision "encourages unions to engage in incremental organizing in the smallest units possible." He concluded by saying that the majority's opinion in this case and their proposed snap elections and limited Board review means that unions will organize in units as small as possible and it will be "virtually impossible for an employer to oppose the organizing effect either by campaign persuasion or through Board litigation."

The rule created in this case was overturned in December 2017 in a case called PCC Structurals, Inc.


Related Documents:
CDW amicus brief  (March 8, 2011)

 

Kasten v. Saint-Gobain Performance Plastics Corp.   (U.S. Supreme Court)

Whether oral complaints are covered by anti-retaliation provisions of FLSA

An employee orally complained about the placement of a time clock during a period of months in which he was receiving increasing discipline for time-clock violations. When he was terminated after the fourth offense, he sued his employer, alleging a violation of the anti-retaliation provision in the Fair Labor Standards Act. That provision makes it unlawful for an employer to terminate an employee because such employee has "filed any complaint . . . ." under the Act.

The Seventh Circuit, along with a majority of other federal appeals courts, ruled that this law covers employees who have filed written complaints, not just made oral statements. On March 22, 2011, the Supreme Court reversed, deciding that the statute also covers employees who do not put their claims in writing. It interpreted "filing" a complaint broadly to encourage "those who would find it difficult to reduce their complaints to writing, particularly the illiterate, less educated, or overworked workers who were most in need of the Act's help at the time of passage[.]"

This interpretation could open up a tremendous volume of lawsuits following termination decisions. In August, 2010, the NAM joined with the Equal Employment Advisory Council and the NFIB in an amicus brief arguing that the Fair Labor Standards Act provision is clear and narrower than similar provisions under other federal civil rights statutes which prohibit retaliation based on an individual's mere opposition to an employment practice. Extending the FLSA to verbal complaints would undermine the ability of employers to effectively manage their workforces and enforce legitimate workplace rules.

Requiring written complaints of potential violations "not only would facilitate swift resolution of the dispute, but also would discourage employees from making false or frivolous complaints that stem more from idle 'grumblings' than from legitimate workplace concerns." Written complaints are fully protected against retaliation and can be properly addressed by management.

The Court's new interpretation providing special status to employees making oral complaints makes employers face more difficult problems when addressing poor performance or disciplinary situations. It can be difficult to tell when an employee is making a statement that constitutes "filing a complaint," but the Court adopted the following test to make that decision: "To fall within the scope of the antiretaliation provision, a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection. This standard can be met, however, by oral complaints, as well as by written ones." This issue is likely to be one of those raised in future cases fleshing out this decision.


Related Documents:
NAM brief  (August 23, 2010)

 

Kraft Foods Global, Inc. v. Spoerle   (U.S. Supreme Court)

Preemption of state wage law on donning and doffing

This law suit is about compensation for time spent putting on and taking off steel-toed boots, hard hats, smocks and hair nets when working at a meat processing plant. In collective bargaining, the union agreed to exclude such "donning and doffing" time from hours worked in return for a higher wage rate. Federal law allows such a tradeoff. Wisconsin law does not.

The Seventh Circuit ruled that a collective bargaining agreement cannot override the state law, and the company must pay for the donning and doffing time at the higher compensation rate. This decision was appealed to the Supreme Court. The NAM filed an amicus brief urging review, arguing that the decision was of national significance and interfered with long-standing collective bargaining agreements and customs and practices in various industries. In addition, the provision at issue was specifically addressed by Congress, and federal law should preempt inconsistent state laws in this area. Unfortunately, on Jan. 10, 2011, the Court declined to review it.


Related Documents:
NAM brief  (December 2, 2010)

 

Lamons Gasket Co. v. .   (NLRB)

Secret ballot elections regarding union certification

Forty-one associations joined the NAM in an amicus brief submitted to the National Labor Relations Board in response to the Board's request for advice on its 2007 decision in the Dana Corp. case. There, the Board ruled 3 to 2 that employees must have 45 days after their employer recognizes a union based on card-check authorizations to file a petition to decertify the union or to support an election petition from another union. The Board underscored the preferred method of having a secret election to determine the majority status of a union. The majority found that card-check procedures are much less reliable as indicators of employee free choice on union representation than secret elections.

The current Board reversed that ruling. On August 30, it ruled 3-1 that only a small percentage of card-signing union authorizations are ultimately overturned with a secret ballot, calling those cases "buyer's remorse." It also held that requiring employers to post a notice informing employees of their right to seek a decertification election after a card-check procedure "actually placed the Board's thumb decidedly on one side of what should be a neutral scale" by requiring a notice of only two of their many rights under the law.

Our amicus brief argued that Dana should not be overruled. Individual free choice regarding whether to be represented at all by a third party is a necessary precondition to any collective negotiation. "In nearly 25 percent of the 54 Dana elections conducted by the Board, employees exercising free choice voted to reject the employer’s initial, voluntary recognition."

We also argued that without a card-check review process in the form of a secret election, "employees are left . . . with the likelihood of peer pressure and/or coercion, lack of information, no measurement of unit-wide employee sentiment at the same point in time, and no assurance that the alleged, resulting majority is an accurate reflection of free choice."

One member of the NLRB dissented from the Lamons Gasket ruling. He said that the majority's decision was "a purely ideological policy choice, lacking any real empirical support and uninformed by agency expertise." He said that the law only imposes an election bar after a valid Board election, not after a voluntary recognition of a union by an employer. He also pointed out that there is no doubt but that a Board-supervised election "provides a more reliable basis for determining employee sentiment than an informal card designation procedure where group pressures may induce an otherwise recalcitrant employee, to go along with his fellow workers." A reversal rate of 25% against the incumbent recognized union is "substantial and supports the need for retention of a notice requirement and brief open period."

The NAM is also a member of the Coalition for a Democratic Workplace, which filed a separate brief.


Related Documents:
NAM brief  (November 1, 2010)

 

Staub v. Proctor Hospital   (U.S. Supreme Court)

Cat's paw theory of liability for employment discrimination under USERRA

The Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), prohibits discrimination based on an employee’s membership in the armed services. This case involves an employee who was discharged allegedly because of his association with the military. Normally an employer is liable when an employment decision is made with an animus against the protected employee. But in this case the decisionmaker had no such animus, and the Seventh Circuit ruled that the animus of another employee could not be imputed to the employer if the employer conducts a separate investigation into the facts relevant to the decision.

On March 1, 2011, the Supreme Court decided that an employer will be held liable for the discriminatory animus of an employee who affects an employment decision, even if that employee did not make the ultimate employment decision. The case involves the "cat's paw" theory of liability, where the company's decisionmaker is overly influenced by an employee with an improper motive. The term is derived from a fable about a monkey who persuaded a cat to pull chestnuts out of the fire, burning the cat's paw and giving the monkey the chestnuts.

Here, the Court found that where a management official expresses a discriminatory animus against an employee, and that employee is ultimately fired by another company official partially on the basis of that animus, the company may be liable for discrimination. According to the Court, "[I]f a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." The Supreme Court sent the case back to the lower courts to determine whether the jury instruction given constituted an error big enough to retry the case.

The decision poses particular difficulties for employers who wish to overcome the impact of a rogue supervisor's discriminatory actions. An employer must take steps to ensure that such actions are not the proximate cause of any adverse employment action against an employee.

 

Thompson v. North American Stainless, LP   (U.S. Supreme Court)

Whether Title VII covers third-party retaliation claims

Title VII of the Civil Rights Act of 1964 protects employees from retaliation by their employers after complaining about discrimination in the workplace. This case involves not the employee who complained, but her fiance, who was terminated from his job. He claimed the termination was in retaliation for his fiancee's complaint, while the company cites performance-related problems. The company also argued that the plain language of the statute provides claims only to those who make a charge or otherwise participate in an investigation, proceeding or hearing.

A 3-judge panel of the Sixth Circuit ruled that a fiance or other person that is closely related or associated with those who are directly involved in protected activity may sue if there is a "causal connection between the protected activity and adverse employment action." The trial judge had ruled that the plaintiff had presented no evidence that he had participated in any protected activity.

The NAM filed an amicus brief in the Sixth Circuit (see summary here) and in the Supreme Court. We argued that the statute is clear on its face and protects only those who personally “opposed” a discriminatory employment practice or personally “made a charge, testified, assisted, or participated” in a Title VII proceeding.

A rule that permits third-party retaliation claims would increase even more dramatically retaliation charges, which are the fastest-growing category of charges filed under Title VII, and would put employers in the untenable position of having to speculate about possible relationships an employee may have that could give rise to potential liability each time they contemplate disciplinary or other action against that employee.

On Jan. 24, 2011, the Supreme Court unanimously reversed the lower court (Justice Kagan did not participate), ruling that the antiretaliation provision in Title VII must be construed to cover a broad range of employer conduct. It prohibits an employer from action that might dissuade a reasonable worker from making or support a discrimination charge. The test must be applied in an objective fashion, and in this case, a reasonable worker might be dissuaded from engaging in a protected activity if she knew that her fiance would be fired. The Court refused to identify a fixed class of relationships that are protected against reprisals, instead ruling that the standard for judging harm must be "objective."

In addition, the Court slightly narrowed the universe of potential plaintiffs -- it is not enough that a plaintiff have some injury caused by the company and remediable by a court. Instead, a plaintiff must be within the "zone of interests" sought to be protected by the statutory provision. Thus, a statute protecting employees covers an employee who is the fiance of another employee intended to be harmed by the employer. The fiance was not an accidental victim of the retaliation, but rather a person with the zone of interests protected by the statute, and he therefore had standing to sue. This result will be difficult to apply in many situations, and more litigation over the breadth of third-party retaliation rights can be expected.


Related Documents:
NAM amicus brief  (October 29, 2010)

 


Patents, Copyrights and Trademarks -- 2011



Cooper Tire Co. v. Neal   (Arkansas Supreme Court)

Protection of trade secrets in litigation

The NAM and the Rubber Manufacturers Association asked the Arkansas Supreme Court to allow them to file an amicus brief supporting Cooper Tire's request to review a trial court order that required the company to give technical and proprietary documents to a plaintiff's lawyer without a protective order. The documents to be disclosed contain valuable trade secrets and commercially sensitive information, and disclosure would cause irreparable harm to the company's competitive position.

We argued that the trial court should first consider the content or nature of the documents to determine if they are needed by the plaintiffs. Even if they are necessary to prove a claim in the litigation, an appropriate protective order should be entered. American companies sustain billions of dollars in losses from the theft of their proprietary information, and there are numerous reports of companies being forced out of business when competitors obtain their know-how and trade secrets.

On 4/28/11, the Supreme Court of Arkansas overturned the circuit court. It held that Cooper properly raised an objection to discovery and the lower court should have considered it. The Arkansas Supreme Court vacated the lower court’s order, and found that it "clearly failed to apply" an exception where a defendant applies for a protective order. This is a victory for companies that face litigation pertaining to trade secrets, as it requires court review prior to disclosure.


Related Documents:
NAM brief  (November 30, 2010)
NAM motion to file amicus brief  (October 19, 2010)

 

Global-Tech Appliances Inc. v. SEB S.A.   (U.S. Supreme Court)

Definition of intent in patent infringement cases

Global-Tech developed a deep fryer after studying features of a competitor's product, then sold it through customers. It was not aware that the competitor's fryer was patented. The competitor sued the customers for infringement of its patent, and sued Global-Tech for actively inducing the infringement, as specified in 35 U.S.C. Sec. 271(b). The U.S. Court of Appeals for the Federal Circuit ruled that it is legally sufficient to prove active-inducement infringement if the company showed "deliberate indifference" about patent infringement.

The Supreme Court decided that a stricter test requiring actual knowledge of the patent being infringed is necessary to prove induced infringement. Thus, deliberate indifference to a known risk that a patent exists does not satisfy the knowledge requirement. However, in this case, the Court affirmed the lower court's conclusion that there was infringement of the patent, under the doctrine of willful blindness. To be liable, the infringer must subjectively believe that a fact exists (such as the existence of a patent), and he must take deliberate actions to avoid learning of that fact. The Court's decision requiring actual knowledge, or willful blindness, will make it harder for patent holders to prove infringement. However, it is helpful for the Court to clarify these kinds of state-of-mind issues (intent), which are regularly at issue in litigation affecting manufacturers.

 

Microsoft Corp. v. i4i Ltd. Partnership   (U.S. Supreme Court)

How much evidence is required to invalidate a patent?

Most civil cases require a plaintiff to prove a claim by a preponderance of the evidence, that is, where the evidence shows the claim is more likely than not to be valid. In patent cases, the Federal Circuit has adopted a "clear and convincing evidence" requirement, a higher standard of proof making challenges to the validity of a patent somewhat more difficult. The Supreme Court agreed, finding that Congress prescribed the governing standard of proof. A patent that is "presumed valid" under the statute requires clear and convincing evidence that it is not valid in an infringement action.

The case involved a challenge by Microsoft of a patent award for $290 million in a case involving its popular Word program.

 


Product Liability -- 2011



American Optical Corp. v. Spiewak   (Florida Supreme Court)

Asbestos medical criteria law

The NAM and seven other business groups filed a joint brief on 8/12/09 urging the Florida Supreme Court to declare Florida’s Asbestos and Silica Compensation Fairness Act to be constitutional. Enacted in June 2005 to preserve funds for individuals actually impaired by asbestos, this Act requires dismissal of claims by individuals who show no such impairment. As a result, claimants who cannot presently demonstrate impairment may only bring their cases after they develop a physical impairment that satisfies the minimum requirements of the law. We argued that this Act should be upheld as constitutional.

Our brief described the asbestos litigation crisis that led Florida to change its law and the need for courts to dismiss cases where no injury has yet been found. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the effect of these claims on solvency and peripheral defendants.

On 7/8/2011, the court held that the Florida law constituted an unconstitutional violation of a vested property interest, namely, the plaintiffs' accrued cause of action that was pending on the effective date of the law. It also held that the retroactive provision was not severable from the rest of the law, and that "the Act as a whole must fail as applied to the Appellees." Two judges dissented, arguing that there was no settled law in Florida establishing a right of recovery without a showing of impairment of health. The plaintiffs will still need to show that the defendants caused injuries and prove the extent of the injuries.


Related Documents:
NAM brief  (August 12, 2009)

 

Atlantic Richfield Co. v. County of Santa Clara   (U.S. Supreme Court)

Whether states may hire private attorneys under contingent fee agreements

The California Supreme Court ruled in July, 2010, that local governments may use contingency fee lawyers to bring product liability cases as long as the ultimate authority for the litigation remained with the governments. Using a balancing of interests test, it found that neither a liberty interest (such as in a criminal case) nor the right of an existing business to continued operation is threatened by the government's litigation, as long as the contingent-fee lawyers act under a "heightened standard of neutrality."

The NAM joined with the American Chemistry Council, American Coatings Ass'n, National Petrochemical and Refiners Ass'n, Property Casualty Insurers Ass'n of America, and Pubilc Nuisance Fairness Coalition in an amicus brief in support of the appeal. We argued that the neutrality requirement for government lawyers is of national importance, involving fundamental due process rights. Government attorneys must not have personal, financial or other extraneous influences that might bias their ability to be impartial or to elevate their own interest over a just outcome in any case. The public expects public officials not to tolerate the "appearance of impropriety," particularly in public nuisance cases, which are quasi-criminal proceedings that seek to vindicate rights owed to the population generally.

We argued that contingency fee agreements distort the decision-making of both private attorneys and the government attorneys who retain and oversee them. The agreements create improper financial incentives for both parties to the contract, fostering opportunistic attitudes that distort the government's duty to exercise independent and unbiased judgment. And as a practical matter, there is no way for the public to verify that a government supervisor is in fact neutral and controlling the acts of the contingent-fee lawyer. Government's use of contingency fee lawyers has provoked public outrage, and has so far affected many industries, including tobacco, firearms, lead paint, poultry and pharmaceuticals.

Unfortunately, the Court on Jan. 10, 2011, declined to hear this appeal.


Related Documents:
NAM brief  (November 24, 2010)

 

Bruesewitz v. Wyeth   (U.S. Supreme Court)

Preemption of design defect claims under National Childhood Vaccine Injury Act

The Supreme ruled 6 to 2 on Feb. 22, 2011, that language in the National Childhood Vaccine Injury Act of 1986 preempts all design-defect claims made under state product liability laws. The Court ruled that the statute immunizes manufacturers from liability as long as the vaccine was properly prepared and was accompanied by proper directions and warnings. It established a compensation program that allows those parties that are injured by unavoidable vaccine side effects to receive compensation from a no-fault compensation fund, or reject such compensation and sue for damages in court. The Court's ruling means that the suit in court cannot be for defective design of the vaccine, but rather must entail defective manufacture or warnings.

 

Goodyear Dunlop Tires Operations, SA v. Brown   (U.S. Supreme Court)

Jurisdiction over foreign corporations

This case involved whether a foreign corporation is subject to general personal jurisdiction in a product liability case in North Carolina for an accident that occurred outside of Paris, France, merely because other entities distributed in North Carolina other products made by the defendant company. The tire that allegedly failed was manufactured by Goodyear Turkey and was never shipped into the United States.

The lower court arguably confused specific jurisdiction (where a state has jurisdiction over a company in a lawsuit involving a specific product that it distributed in the state) with general jurisdiction (where the state tries to exercise jurisdiction over a company for activities that do not arise out of that company’s activities in the state).

The Supreme Court ruled that the foreign company is not amenable to suit in North Carolina on claims unrelated to any of their activity in the state. This is an important decision for manufacturers that could be threatened by lawsuits in jurisdictions where other entities distribute their products. The Fourteenth Amendment's Due Process Clause requires that a company have minimal contacts with a state before that state can exercise personal jurisdiction over it. There must be continuous and systematic general business contacts for a company to be subject to general jurisdiction in a state. Merely putting a product into the stream of commerce could subject a company to "specific" jurisdiction in a case involving that product, but not to any case involving other activities of the company.

This is an important decision that reduces the chances of forum shopping by plaintiffs, and helps foster international trade in the United States and our international relations abroad.

This case was argued in tandem with J. McIntyre Machinery Ltd. V. Nicastro.

 

Hirsch v. CSX Transportation, Inc.   (6th Circuit)

Medical monitoring

The NAM and 8 other organizations filed an amicus brief urging the Sixth Circuit to uphold a trial court ruling that a company should not be held liable to pay for medical monitoring for individuals who lived near the site of a train derailment, and who failed to establish that they were exposed to a hazardous substance in an amount warranting a reasonable physician to order medical monitoring. We argued that a one-in-a-million risk is too speculative to justify imposing expensive medical monitoring requirements (here, costing hundreds of millions of dollars) on any defendant.

Allowing medical monitoring claims based on remote hypothetical risks would invite frivolous or speculative litigation, subject defendants to enormous costs with little or no corresponding public benefit, threaten payment to sick claimants now and in the future, and impose a huge administrative burden on the courts as a result of having to fashion and supervise medical monitoring programs for years on end.

On Sept. 8, 2011, the Sixth Circuit agreed, holding that one-in-a-million risk is too small and speculative to lead a reasonable doctor to prescribe medical monitoring. To recover, plaintiffs must have a discernable injury, and an increased risk of disease is not enough unless a reasonable physician would order medical monitoring. The court left open the door for ordering medical monitoring in a case where plaintiffs could show that they faced a one-in-a-million increased risk of getting cancer.


Related Documents:
NAM brief  (May 14, 2010)

 

J. McIntyre Machinery, Ltd. v. Nicastro   (U.S. Supreme Court)

Personal jurisdiction over foreign corporations in suits in state court

The Supreme Court decided that a state may not exercise personal (in personam) jurisdiction over a foreign manufacturer merely because it targeted the U.S. market for sale of its product and that product is bought by a consumer in the forum state. As a result, a state will not be able to exercise worldwide personal jurisdiction over any company that sells its products in the United States.

The decision was splintered, with 4 Justices deciding one way, two others agreeing with the result for different reasons, and the last three dissenting. Justice Kennedy and 3 others concluded that because the company never engaged in any activities that revealed an intent to invoke or benefit from the protection of New Jersey's laws, the state court is without power over the company. Critical is whether the company's activities manifest an intention to submit to the power of the sovereign.

Justices Breyer and Alito agreed that New Jersey does not have jurisdiction in this case because the company did not engage in a regular course of sales in the state, but they did not want to announce a broad rule about jurisdiction without more fully considering the consequences in light of modern changes in commerce and communication.

The dissenting Justices warned that foreign manufacturers can avoid American product liability laws simply by hiring independent distributors to market their products in the United States. They would find that the foreign company could be sued here for an injury involving its product.

The case involved a complaint against the manufacturer of a shear machine made in England, shipped to its unaffiliated distributor in Ohio, and delivered to the customer in New Jersey. The New Jersey Supreme Court ruled that the English company was subject to personal jurisdiction even though it did not have any of the traditional minimum contacts with New Jersey and was not involved in the sale of the product. Instead, jurisdiction was based on the company's distribution scheme targeting the entire U.S. economy.

The case revisited the Supreme Court's opinion in the 1987 Asahi case, in which a plurality of judges ruled that personal jurisdiction may be based on a test that has come to be known as "stream-of-commerce plus." Under that test, actions of the defendant must be purposefully directed toward the forum state.

Because there was no clear rule of law announced, this issue promises to be revisited by the Supreme Court in the years ahead.

 

LeMans Corp. v. Provenza   (Nevada Supreme Court)

Whether strict liability for design defects is subjective or objective

A trial court decision in Nevada threatens to substantially expand claims against manufacturers for defective product design. The court ruled that, under strict liability principles, a product is designed unreasonably if it poses a risk of injury beyond what would be expected by the product user's own subjective expectations.

The NAM and other groups filed an amicus brief in the Nevada Supreme Court arguing that the test must be objective: a design is unreasonable only if it poses a risk of injury beyond what would be expected by "the ordinary user having the ordinary knowledge available in the community." A subjective test is prone to bias and would effectively establish absolute liability. An objective test, on the other hand, would allow expert evidence of the statistical rarity of the kinds of injuries experienced in this case, evidence of compliance with applicable government regulations, and evidence from other persons in a position similar to the plaintiff in this case. In addition, every other state that applies the consumer expectations test uses an objective evidence standard.

The case arose from burns suffered by a motocross biker in an accident. He sued the clothing manufacturer because the shirt was not fire-retardant. In February, 2011, the case was settled and no decision was issued.


Related Documents:
NAM brief  (May 27, 2009)

 

PLIVA, Inc. v. Mensing   (U.S. Supreme Court)

Preemption of labeling claims against generic drug manufacturer

In Wyeth v. Levine, the Supreme Court ruled that state-law failure-to-warn claims against name-brand drug manufacturers are not preempted by federal labeling requirements under the Food, Drug, and Cosmetic Act. This case involved whether similar claims are preempted when generic drug manufacturers are sued. These manufacturers must undergo an approval process that requires them to use labels that are identical to those used by the name-brand manufacturers.

Three cases were consolidated, involving rulings from different federal appeals courts. The Eighth Circuit held that a manufacturer should propose a labeling change to the FDA or propose that a warning letter be sent to doctors. The Fifth Circuit went one step further and held that a manufacturer may also unilaterally alter its labeling after receiving federal approval. Since either of these procedures are available, according to the courts, federal law does not preempt state claims that would have been satisfied if the manufacturer had taken action.

The Supreme Court reversed. The majority found that federal drug regulations applicable to generic drug manufacturers directly conflict with, and thus preempt, state tort claims. It is impossible for a manufacturer to comply with both the federal regulations and additional state labeling requirements, and the law does not require a manufacturer to try to obtain federal labeling changes to avoid potential liability under state law. It could not independently publish different labels without violating federal law.

 

Williamson v. Mazda Motor of America, Inc.   (U.S. Supreme Court)

Preemption of lap/shoulder seat belt litigation

State laws that conflict with federal law are usually preempted under the Constitution's Supremacy Clause. By the same token, litigation raising product liability claims under state law is preempted if the suits demand action that conflicts with federal regulation. This case involves whether an automobile manufacturer may be sued in state court for installing lap-only seatbelts in certain rear seating positions when the National Highway Traffic Safety Administration (NHTSA) specifically rejected such a requirement and gave manufacturers the freedom to choose either a lap-only or a lap/shoulder seatbelt configuration. The agency was delegated the authority to establish a coordinated national safety program, by issuing standards that take into account safety as well as the availability of technology and economic costs. It chose to offer manufacturers two design options, but this lawsuit was over whether a jury may re-examine the same safety, technological feasibility and cost-effectiveness issues that NHTSA balanced under its rulemaking authority.

The NAM and other groups filed an amicus brief on Sept. 28, 2010, arguing that traditional preemption analysis is a settled and vital component of our nationwide system of health, safety and economic regulation, rooted in the Constitution's structure and the understanding of the Founders. We noted that the 1824 case of Gibbons v. Ogden recognized the validity of preemption when state requirements conflict with federal, and "denounced in the strongest possible terms the essential argument that now recurs almost two centuries later -- the proposition that "the original powers of the States" should be retained "if any possible construction will retain them[.]" We predicted that Congress will never speak distinctly and in adequate detail as to when federal law should and should not displace state law, and it is therefore necessary for the courts to interpret conflict preemption expansively.

On Feb. 23, 2011, the Supreme Court ruled 8-0 that the law suit under state law was not preempted by the federal regulation. The decision was based on conflict preemption, that is, whether allowing a state law suit conflicts with and stands as an obstacle to the accomplishment of a federal law or regulatory decision. In the Geier case in 2000, the Department of Transportation wanted car companies to try different kinds of restraints, and suits that would have required airbags were preempted because they would have interfered with that objective. In this case, the manufacturer could use either lap belts or lap-and-shoulder belts, but, according to the Supreme Court, this choice is not a “significant objective of the federal regulation” that would be interfered with by a state lawsuit that would punish lapbelt-only configurations. The agency's decision not to require lap-and-shoulder belts was based on its thought that the requirement would not be cost effective, an insufficient justification to preempt state lawsuits.

Thus, the Court's opinion requires that certain preemption decisions be made by analyzing whether federal regulators felt strongly enough to foreclose lawsuits under state law that might force manufacturers to use only one of several options allowed by federal regulations. To establish a foundation for showing preemption in future regulations, it will be important for federal regulators to state on the record their "significant objective" to preempt more restrictive requirements that might arise from state law or litigation.


Related Documents:
NAM brief  (September 28, 2010)

 


Securities Regulation -- 2011



Apollo Group, Inc. v. Policemen's Annuity and Benefit Fund   (U.S. Supreme Court)

Effect of efficient market theory on proof of reliance requirement in securities litigation

The Ninth Circuit ruled that a company can be held liable to its shareholders for a drop in the company's stock price after two analyst reports downgraded the stock. The reports included an evaluation of various factors, including recent corrective disclosures from the company published in the Wall Street Journal, the Arizona Republic and the Chicago Tribune. The court found that the jury could have found that the reports were "corrective disclosures" under the law.

The Supreme Court is being asked to review the case, and the company argues that analyst reports several days after a company makes corrective disclosures should not subject the company to additional liability when they affect the stock price. The efficient market theory in securities litigation allows plaintiffs to sue without having to prove that they relied on false or deceptive actions by the company, since courts assume that the securities markets are efficient and assimilate company statements rapidly into the price of the stock. The company argues that the same efficient market principle should prevent a plaintiff from benefiting from third-party analyst reports published well after corrective disclosures about previous false or deceptive actions have been made.

The NAM filed an amicus brief 12/17 supporting Supreme Court review. We argued that defendants should get the benefit of the efficient market theory after corrective disclosures occur. Plaintiffs get the benefit of the theory by not having to prove reliance, and there is no rational basis for applying different standards of market efficiency for false statements and true statements. According to one appeals court, "An efficient market for good news is an efficient market for bad news."

We supported Supreme Court review of this case to help eliminate the uncertainty and unpredictability of securities litigation, and the resulting heavy costs of defending fraud claims. On March 7, 2011, the Court declined to review this appeal.


Related Documents:
NAM brief  (December 17, 2010)

 

CSX Corp. v. Ward   (2nd Circuit)

Judicial remedies against hedge fund managers that fail to report beneficial stock ownership

Two hedge funds sought to take control of CSX without making the required disclosures mandated by the Williams Act. But what is the remedy for the violation? The trial court felt it was not legally empowered to enjoin the hedge funds from voting the stock they had acquired. Consequently, an election of directors was held under the cloud of this litigation.

The NAM, the Washington Legal Foundation and the Business Roundtable filed an amicus brief arguing that prohibiting the voting of shares in an ongoing proxy fight is an appropriate remedy. Shareholders should be protected from corporate raiders who schemed to evade the reporting requirements and concealed their agreement to work together in order to gain an advantage in their efforts to put their own slate of directors on the board. Other shareholders were thus unaware of this hidden effort to change the direction of the company.

Our brief underscored the power of federal courts to redress violations of the securities laws, including the power to grant relief that deters wrongdoing and protects shareholders. The hedge funds might not have been able to gain as large a portion of shares had others known their intentions, since the price of the stock could have been affected. Consequently, other shareholders' ability to influence the outcome was diminished. Appropriate relief could include barring the hedge funds from voting their shares at the annual meeting.

The brief also highlighted the increasing frequency with which hedge funds have been mounting challenges to the incumbent board and management of publicly traded companies, and the relatively short-term investment horizons of those fund managers. Courts should have the tools needed to prevent hedge funds from gaining an unfair advantage over shareholders.

On 7/18/2011, the court sent the case back to the trial court for further proceedings, including reconsideration of the appropriateness and scope of injunctive relief. An open question is whether "total-return equity swaps" should be considered an ownership interest that would trigger the Williams Act disclosure requirements. The court also ruled that whether separate entities should be considered a "group" for determining reporting obligations depends on the definition of a group, and it overturned the trial court's broad interpretation of that word. Instead, it limited the term to groups whose actions are intended to acquire stock in a target corporation.


Related Documents:
NAM brief  (July 18, 2008)

 

Matrixx Initiatives Inc. v. Siracusano   (U.S. Supreme Court)

Whether adverse drug effects that are not statistically significant are material enough for 10b-5 litigation

This suit by investors in Matrixx sued the company for failing to disclose that Zicam Cold Remedy might cause "anosmia," or loss of the sense of smell. Their suit was based on a small number of adverse event reports during the period between 1999 and 2004, and the trial court dismissed the case because the reports did not provide "reliable statistically significant information that a drug is unsafe," and that therefore the nondisclosure was not a material omission.

This ruling was reversed on appeal, and the Supreme Court agreed. It unanimously decided on March 22, 2011, that this case could go to trial. It found that the failure to disclose a few adverse events does involve "material" information, i.e., information that would be viewed by a reasonable investor as having significantly altered the total mix of information made available. The Court found that experts and the FDA rely on evidence that is not statistically significant to establish an inference of causation, and investors can also be expected to find such evidence significant. Evidence introduced at trial will be considered to determine whether it actually rises to the level of materiality required, but the allegations in the complaint are adequate to survive a motion to dismiss.

The Court also agreed that the plaintiffs' had pled sufficient evidence of "deliberate recklessness" to constitute "scienter," or a mental state embracing intent to deceive, manipulate, or defraud." It found that a statistically significant number of complaints about a product are not necessary, as long as some of the complaints "taken collectively," give rise to a "cogent and compelling" inference that the company intended to prevent significant information from affecting the stock's price.

This is an important case that will make it harder for manufacturers to defend themselves in securities litigation if they consider a statistically insignificant number of complaints not to be material information. Consequently, manufacturers will have to disclose adverse effects based on statistically insignficant information, confusing investors and consumers alike.

 


Statute of Limitations -- 2011



Vicknair v. Phelps Dodge Inds.   (North Dakota Supreme Court)

Statute of limitations for out-of-state claims

Because North Dakota has one of the nation's longest statutes of limitations, plaintiffs increasingly go there to file product liability suits that otherwise time-barred. In this case, the state's Supreme Court looked at whether the substantive law that applies is the law of North Dakota, or the state with the most significant connection to the claims.

The NAM joined with other business associations in an amicus brief arguing that North Dakota should adopt the traditional position that applies the statute of limitations of the state in which the plaintiff's claims arose, and that allowing long-stale claims under state law would inundate its courts with stale claims from other states. There is no reason for the state to tarnish its good legal reputation by endorsing "blatant forum shopping and saddling North Dakota courts, taxpayers, and jurors with the heavy burden of hosting out-of-state litigation 'tourists.'"

The Uniform Conflict of Laws-Limitations Act (UCLLA) is designed to prevent this kind of gamesmanship and abuse. In addition, this is an asbestos liability case, and the history of asbestos litigation clearly demonstrates that nonresident claims flow to jurisdictions that develop reputations for favorable procedures and a willingness to accept nonresident claims. Then North Dakota can be expected to be a dumping ground for stale cases from other states.

On Feb. 18, 2011, the court agreed, ruling that the UCLLA placed the burden of proof on the plaintiff to show that the other state did not provide a fair opportunity to sue. Allocating the burden of proof in this way is appropriate since only the plaintiffs know what limitations there might be on the facts or their claims in the other state. This is a positive development that will help to prevent inappropriate litigation in states with plaintiff-friendly statutes.


Related Documents:
NAM brief  (July 28, 2010)

 


Taxation and State Taxation -- 2011



Consolidation Coal Co. v. United States   (U.S. Supreme Court)

Whether tax on coal for export violates the Export Clause

The Government imposes a tax on the sale of exported coal, determined by the weight and value of the coal at sale, rather than at the time of its extraction. A coal company challenged the tax because the Export Clause of the Constitution prohibits federal taxation of goods in export transit. The Federal Circuit, however, ruled that the tax was imposed on extraction, not sale, because it was based on weight rather than sales price.

The NAM filed an amicus brief on March 16, 2011, supporting the company’s bid for Supreme Court review. We argued that the Federal Circuit’s decision undermines the protections of the Export Clause by adopting a more lenient policy that allows some taxation of exports. If not reviewed and reversed, the decision will encourage administrative agencies and Congress to impose excise taxes on currently exempt articles for export. Such a result threatens the national economic recovery plan and the survival of thousands of small and medium-sized businesses that together comprise 97% of all exporters and account for 31% of total export value.

Our brief warned that a tax’s label, rather than its substance, will dictate whether it is an impermissible tax on exports. Congress has whittled away at export tax exemptions in a variety of ways, and IRS regulations have narrowed them further. These actions have affected not only coal and crude oil, but also automobiles, trucks and trailers, tires, vaccines, sporting goods, and motor and aviation fuels.

The petition was denied on June 13, 2011.


Related Documents:
NAM brief  (March 16, 2011)

 

Ford Motor Credit Co. v. Michigan Department of Treasury   (U.S. Supreme Court)

Retroactivity of tax legislation

States are increasingly passing tax legislation with retroactive periods that are longer than those periods that have been allowed by prior court rulings. This case is about such a tax in Michigan.

When DaimlerChrysler won a refund in state court for an unlawful state sales tax, the legislature changed the law for all other taxpayers. When Ford tried to get a similar refund, the court refused, citing the new law.

The NAM and the Council on State Taxation filed an amicus brief on 11/12/2010 urging the U.S. Supreme Court to review that ruling. First, the new law has a retroactive period of 6 to 10 years, which is significantly longer than the 1- to 2-year periods permitted in prior cases. Second, Michigan essentially induced taxpayers to wait in line and rely on remedies to be determined in the first litigation for a tax refund, then changed the rules for all other taxpayers after that case’s resolution. This bait-and-switch tactic encourages races to the courthouse, fosters clogging of the court system, discourages tax compliance, and treats similar taxpayers differently.

We argued that retroactive legislation must have a rational legislative purpose that does not deprive taxpayers of their Due Process rights to challenge illegal taxes already imposed. In addition, the period of retroactivity must be “modest” in length, and the Supreme Court should review the case to set some constitutional limits on aggressive state court rulings that allow retroactive periods as long as 9 years.

The petition was denied on January 18, 2011.


Related Documents:
NAM brief  (November 12, 2010)

 

Lamtec Corp. v. Department of Revenue   (U.S. Supreme Court)

Economic nexus for states imposing business and occupation taxes

The NAM and the Council on State Taxation urged the Supreme Court to review a Washington Supreme Court ruling that is the latest in a long string of cases upholding the ability of a state to impose taxes based on the “economic presence” of a company. Typically, the law has required that a company must have some physical presence in the state before that state has tax jurisdiction, but this case involves an attempt to impose a business and occupation tax using an expanded standard of jurisdiction. We urged the Court to review the case because laws like these are often ambiguous, vary widely from state to state, and are highly burdensome for taxpayers doing business in multiple jurisdictions. Businesses that cannot predict their tax liabilities cannot make meaningful disclosures in required financial statements for investors.

On October 3, 2011, the Court declined to review this appeal.


Related Documents:
NAM brief  (June 16, 2011)

 

Merck and Co. v. United States   (3rd Circuit)

Tax treatment of swap-and-assign transaction

The IRS assessed a tax deficiency against a company that had entered into a swap-and-assign transaction to help repatriate funds into the United States. The company had relied on a long-standing IRS interpretation, but the IRS, and subsequently a federal court, said that the transaction should have been taxed as lump-sum income rather than income taxable over a period of years. That decision was appealed to the Third Circuit.

The NAM filed an amicus brief on 9/7/2010 urging the Third Circuit to reverse. We focused on the need to determine whether assets such as a swap receivable are "United States property" under Section 956 of the Internal Revenue Code. If they are not, a separate IRS notice (Notice 89-21) requires that the income be amortized and taxes paid over the life of the contract. We also argued that Section 956 is a provision that reflects Congress' judgment about which types of assets had sufficient nexus, or connection, to the United States to merit taxing the U.S. shareholders of the foreign corporation that owned the assets. A court should not substitute its own policy judgment about what should constitute U.S. property for the judgment of Congress. The complicated provisions of the Internal Revenue Code attempt to balance conflicting congressional goals, and it is not the role of the courts to attempt to discern an overarching policy that might help them override the language enacted by Congress.

On June 20, 2011, the Third Circuit affirmed the trial court's judgment. It found that the transaction was properly characterized as a loan and that the IRS does not have to treat similarly-situated taxpayers consistently. Although another company engaged in a similar transaction and the IRS issued a Field Service Advice declining to tax it, that advice was merely guidance for the IRS auditors, and not an assurance for the taxpayer.


Related Documents:
NAM brief  (September 7, 2010)

 


Antitrust -- 2010



Romero v. Philip Morris Inc.   (New Mexico Supreme Court)

Parallel conduct as an antitrust violation

A class of cigarette consumers sued five major cigarette manufacturers for conspiracy to fix prices because, for a period of years, the manufacturers matched each other’s price increases. This parallel behavior is normally not considered to constitute a “conspiracy,” since there is no actual agreement between competitors. However, in this case, the New Mexico Court of Appeals, overturning the dismissal of the case below, ruled that one expert’s testimony that “it is highly unlikely that independent behavior explains the price restructuring and price changes” is enough to submit the case to a jury. Its ruling was premised on the notion that “complex, multi-variable, multi-price-tier parallelism” was involved.

The NAM joined with the Association of Commerce and Industry of New Mexico, as well as the U.S. Chamber of Commerce, in an amicus brief arguing that the lower court’s ruling means that “businesses engaged in legitimate, productive, competitive economic activity in New Mexico will be threatened with crippling antitrust liability.” We urged the New Mexico Supreme Court to rule that its standards for summary judgment should be the same as federal standards, which likely would not allow this case to proceed to trial. In addition, the lower court’s ruling against parallel conduct in a “complex, multi-variable industry” makes it much easier for a plaintiff to bring antitrust claims against businesses in oligopolistic industries – and virtually impossible for businesses to predict the circumstances that will give rise to such liability or to conform their conduct to the law.

On June 25, 2010, the Supreme Court of New Mexico overruled the appeals court and affirmed the district court’s ruling. The ruling held that defendants in a class action should have the opportunity to rebut an inference of collusion by presenting evidence that no reasonable fact finder could conclude that a price-fixing conspiracy existed. With the support of the NAM’s brief, the court found that the pricing strategy was not a conspiracy, and that the plaintiff class failed to produce evidence that the defendants’ conduct was not undertaken independently.


Related Documents:
NAM brief  (January 9, 2009)

 


Arbitration -- 2010



American Express Co. v. Italian Colors Rest.   (U.S. Supreme Court)

Validity of contractual waiver of class action arbitration

Merchants participating in American Express’s credit card network agree to an arbitration provision that precludes class action arbitration; each dispute must be resolved individually. The Second Circuit ruled that such waivers are invalid because they keep disputes small and less likely to be litigated, thus conferring “de facto immunity from antitrust liability” on American Express. This ruling was appealed to the Supreme Court.

The NAM joined Verizon Communications Inc. in an amicus brief urging the Supreme Court to hear this appeal. We argued that it is a well-established rule that parties are free to waive their constitutional and statutory rights – indeed, arbitration agreements waive the right to proceed in a judicial forum. In limited circumstances waivers are inappropriate, and the lower court considered the effects of class action waivers on antitrust remedies. However, it critically omitted consideration of the negative effects that class actions have on antitrust objectives, including extorted settlements in cases where the legal standards of liability (tying arrangements) are so uncertain.

In addition, we support the important role that class action waivers play in assuring the viability of arbitration as an alternative forum for the resolution of small disputes. Allowing class action arbitration raises costs and diminishes the value of arbitration.

In May, the Supreme Court granted the petition, vacated the ruling, and sent the case back to the Second Circuit to reconsider its decision in light of a recent decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.


Related Documents:
NAM brief  (June 29, 2009)

 

Rent-A-Center, West, Inc. v. Jackson   (U.S. Supreme Court)

Whether a court must decide whether an arbitration agreement is unconscionable if the parties assigned this question to an arbitrator

An employment contract provided for arbitration of disputes, including any questions involving the "interpretation, applicability, enforceability or formation" of the agreement. The Ninth Circuit ruled that unconscionability of a contract provision relating to arbitrability is for a court to decide, not an arbitrator.

The Supreme Court 6/21/10 further clarified its general policy upholding the Federal Arbitration Act and enforcing agreements to arbitrate. It found that there are two types of challenges to the validity of an agreement to arbitrate: (1) a challenge to the arbitration clause itself and (2) a challenge to the contract as a whole. Challenges to the arbitration clause are resolved in court; challenges to the entire contract are resolved by an arbitrator, where the contract so provides.

 

Stolt-Nielsen S.A. v. AnimalFeeds International Corp.   (U.S. Supreme Court)

Whether class arbitration may be imposed on contracting parties whose agreement does not mention it.

In an antitrust dispute, the parties agreed to arbitration, but did not specify whether the arbitration could include class arbitration. When arbitration is conducted on behalf of a class, the value of the claims is affected by the size of the class, and as a practical matter, the pressure on the defendant to settle is enormous. In this case, the Supreme Court decided that an arbitrator may not impose class arbitration when the parties did not expressly allow it under their agreement. A federal court had rejected class arbitration because it is not customary in the maritime industry, but an appeals court reversed, saying the law in this area is not so clear.

In its decision on April 27, 2010, the Court ruled 5-3 that imposing class arbitration on parties that have not agreed to it is inconsistent with the Federal Arbitration Act. The central purpose of that Act is to ensure that private agreements to arbitrate are enforced according to their terms. If the parties did not agree to arbitrate class action claims, arbitrators may not infer such an agreement solely from the fact that the parties agreed to arbitrate. According to the Court, "The differences between simple bilateral and complex class action arbitration are too great for such a presumption."

 


Class Actions -- 2010



Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co.   (U.S. Supreme Court)

Whether state law can prevent class actions from being heard in federal court

New York state law imposes a 2% monthly interest penalty on overdue payments of insurance benefits. In this case, plaintiffs filed a class action lawsuit in federal court based on diversity of citizenship claiming that Allstate failed to pay this penalty on overdue payments. Under the well-known Erie Doctrine, federal courts exercising diversity jurisdiction (as in this case) apply state substantive law and federal procedural law. If the source of the federal procedure is the Federal Rules of Civil Procedure (FRCP), federal rules trump state law if they conflict with one another.

Allstate moved to dismiss, arguing that the federal class action was barred by Section 901(b) of the New York Civil Practice Law and Rules (CPLR), which prohibits a class action for recovery of a New York statutory penalty. The trial court granted Allstate’s motion.

The Second Circuit affirmed after applying the Erie Doctrine. It held that the New York rule is substantive and does not conflict with the federal rule governing class actions. Additionally, allowing this case to proceed as a class action in federal court would circumvent state policy and lead to forum shopping, both of which go against the aims of the Erie Doctrine.

On 3/31/10, the Supreme Court reversed, holding that Federal Rule 23 allows class actions like this. The splintered decision can be expected to generate additional litigation. The ruling provides an incentive to plaintiffs to bring class actions in federal court where state procedures limit such suits.

 

Weinstat v. Dentsply International, Inc.   (California Supreme Court)

Class action certification requirements for unfair competition cases in California

The NAM, the Chamber and the NFIB joined together in an amicus letter on March 18, 2010, to the California Supreme Court urging that court to review a lower court decision that allowed a group of plaintiffs to be certified as a class for litigation purposes. The case is a breach of warranty claim under California's Unfair Competition Law, involving a piece of dental equipment.

The trial court had decertified the class because there were many individualized questions of damages and reliance, but the appeals court reversed, finding that only the class representatives needed to satisfy these requirements, not the entire class. Our letter brief urged the California Supreme Court to review this decision and provide guidance on what class certification standards apply in Unfair Competition Law cases. We believe that the claims of class representatives must be typical of those of the rest of the class, that trial judges must have the flexibility to revise class certification orders when they are incorrect, and that a product user must prove reliance on a warranty provision before he or she may sue for damages.

Consumer class actions have been steadily increasing in frequency in California for years, and Proposition 64 was intended to rein in some of them. This case offered an opportunity for the California Supreme Court to recognize those limits, and to reduce unjustified burdens on companies that do business in that state. Unfortunately, the court on 4/14/10 declined to review the lower court's ruling.


Related Documents:
NAM amicus letter  (March 18, 2010)

 


Criminal Liability -- 2010



Skilling v. United States   (U.S. Supreme Court)

Defining honest services law

Jeffrey Skilling, former CEO of Enron Corporation, was prosecuted for, among other things, engaging in a scheme to deceive investors about Enron's true financial performance by manipulating its publicly reported financial results and making false and misleading statements. He was prosecuted for committing "honest services" wire fraud, by depriving Enron and its shareholders of the intangible right of his honest services.

The Supreme Court decided, in order to avoid declaring the statute unconstitutionally vague, to construe the honest services provision to apply only to bribes and kickbacks, which Skilling did not take. It reversed his conviction on that count and sent the case back to the lower court to determine if any of the other convictions for money or property wire fraud or securities fraud would be affected by this narrow interpretation of the statute.

 


Discovery -- 2010



Bahena v. Goodyear Tire & Rubber Co.   (Nevada Supreme Court)

Civil death penalty for discovery problems

On July 26, 2010, the NAM and six other business organizations filed an amicus brief urging the Nevada Supreme Court to reconsider a decision that took away defense rights in a product liability case. Case law overwhelmingly states that an order striking all defenses to liability dictates the outcome of a case, and due process protections are required. This kind of sanction has been nicknamed the "civil death penalty," since it kills all defenses. Such a sanction, awarded for alleged discovery violations, should only be used as a last resort after lesser sanctions, such as fines or adverse inferences, are tried first, and a court should look carefully at the actual underlying discovery dispute.

Unfortunately, the Nevada Supreme Court refused to rehear the case. It held that Nevada law does not entitle defendants to an evidentiary hearing before their answers are stricken as to liability, and the state does not follow the federal model that provides for progressive sanctions for discovery errors. It also ruled that since eliminating defenses does not end the case -- there are still issues of how much damages are to be awarded -- a full evidentiary hearing is not needed.

A dissenting judge argued that the discovery errors here seemed "fairly minor" -- timely serving interrogatory answers but with the verication to follow later, producing documents without labeling them to correspond to specific discovery requests, and accepting a penalty instead of going through a records authentication deposition during the week between Christmas and New Year's Day. In such a case, the trial court should have required a showing of irremediable prejudice to the plaintiff's case from the discovery errors.

If Nevada can so easily remove constitutional due process protections, manufacturers will face more difficult litigation burdens there that could make it into a magnet litigation jurisdiction.


Related Documents:
NAM brief  (July 26, 2010)

 

In re Toyota Motor Corp.   (Texas Supreme Court)

Finality of settlement agreements

Toyota settled a personal-injury lawsuit in April of 2007, and the trial court lost jurisdiction over the case by law 30 days after that. Two and a half years later, the plaintiff sought to reopen the case and get monetary sanctions for an alleged violation of a discovery order. The company appealed to the Texas Supreme Court to order that the discovery be halted, since the trial court no longer has jurisdiction over the case.

The NAM filed an amicus brief in support, arguing that the trial court's proceedings disturb the public policy in favor of finality. There is a strong societal and judicial interest in bringing cases to an end. The proceedings also undermine settlement agreements, since every settled case has the possibility that new evidence could come to light, and the parties take that into consideration when they agree to settle. In addition, there are several legal avenues the plaintiff can pursue other than reopening a case that has been settled, without burdening the courts with never-ending challenges to final judgments.

Unfortunately, on Aug. 27, the Texas Supreme Court denied Toyota's request.


Related Documents:
NAM brief  (June 30, 2010)

 


Environmental -- 2010



Alaska Eskimo Whaling Comm'n v. Salazar   (9th Circuit)

Validity of permit for exploratory oil and gas drilling in Alaska

The Department of the Interior approved an exploratory oil and gas drilling permit in the Beaufort Sea north of Alaska that was then challenged by various groups. The Department conducts a 4-stage process: (1) preparing a five-year leasing program, (2) selling leases, (3) permitting exploration in the leased regions, and (4) allowing development and production in the leased region. This challenge involved the exploration phase, and came after the Department had prepared a 1,001-page environmental impact statement in the preparation phase, a 4-volume environmental impact statement in the sales phase, and a 109-page environmental assessement of the exploration plan. Finding that the exploration would cause no significant impact on the environment, it approved the plan.

The NAM joined with other business groups in filing an amicus brief urging the federal court not to block the exploratory drilling. In light of the massive investments needed and already made in Outer Continental Shelf (OCS) development, and the shortness of time during the Alaskan summer, it was important that exploratory drilling not be disrupted by this litigation. Congress intended to promote the "swift, orderly and efficient exploration of our almost untapped domestic oil and gas resources in the Outer Continental Shelf," which is predicted to account for more than 40% of domestic oil production and 25% of natural gas production by 2012. Allowing exploratory drilling is an important step in the process of utilizing the OCS to move toward greater energy self-sufficiency, to provide economic stimulation, to improve national security, to maintain a favorable balance of payments in world trade, and to create jobs.

We also argued that an environmental impact statement is not required for an exploration plan, based upon the fact that an EIS was completed at an earlier stage.

On April 7, the NAM filed another amicus brief on the merits, making many of the same points previously made. On May 13, the court ruled that the Minerals Management Service met its obligations to take a "hard look at the consequences of its actions" and to provide a "convincing statement of reasons to explain why a project's impacts are insignificant." The court found that the agency's decision was supported by substantial evidence on the record and that it did not act arbitrarily.


Related Documents:
NAM brief  (April 7, 2010)
NAM brief  (January 6, 2010)

 

Comer v. Murphy Oil U.S.A.   (5th Circuit)

Whether global warming lawsuit is a political question

The NAM and other organizations supported an appeal of an adverse decision by the U.S. Court of Appeals for the Fifth Circuit in a global warming public nuisance case. The plaintiffs, Mississippi residents and property owners, alleged that the emissions from more than 150 energy and manufacturing companies increased global warming and contributed to the severity of damages resulting from Hurricane Katrina. Our brief in support of the appeal argued that the plaintiffs' theory of liability would dramatically expand tort law beyond anything ever recognized because of the tenuous link between the alleged conduct and the alleged harm. In addition, this case involves a complex regulatory matter requiring the balancing of economic, environmental and international interests, and is constitutionally the domain of the political branches of government, not the courts.

The trial court had dismissed the case on these grounds, but a three-judge panel of the Fifth Circuit reversed, allowing the case to proceed. The NAM and the defendants wanted all the judges of the Fifth Circuit to review this ruling. That court did agree to review the 3-judge ruling, and arguments were scheduled for May 24, 2010.

On May 10, the NAM filed an additional brief arguing to a larger group of judges that the goal of this lawsuit is less to obtain compensation than to achieve the regulation of greenhouse gas emissions through litigation. We described how plaintiffs have tried to define a "nuisance" broadly to encompass the kind of claims that have largely been rejected by other courts. In addition, these kinds of political questions should be handled as a public policy debate, not as an adversarial proceeding in court.

Subsequently, the court announced that another judge had been recused from the case, destroying the quorum. On May 28, the court dismissed the appeal, and since it had previously vacated the 3-judge panel's ruling, the trial court's decision dismissing the lawsuit stands. This very unusual procedural development means that the appellate ruling that the NAM opposed was nullified without a formal opinion from a majority of the judges. The case was appealed to the Supreme Court, which declined to review it.

The plaintiffs later filed a similar suit, but the district court dismissed it because the claims had already been dismissed in the first case. In addition, the judge found that the parties had no standing to sue, since they cannot show a sufficient connection between the defendants' emissions and the plaintiffs' property damage. The court also found the claims non-justiciable political questions that have no "judicially discoverable and manageable standards for resolving" them, and because these policy determinations are entrusted to the EPA.


Related Documents:
NAM brief  (May 7, 2010)
NAM brief  (December 4, 2009)

 

Consumer Electronics Association v. City of New York   (S.D.N.Y.)

Validity of New York's oppressive e-waste law

New York City adopted a very strict electronic waste collection law that mandates manufacturers of computers, monitors, televisions, laptops, portable digital music players and other equipment to set up door-to-door collection programs and collect a prescribed amount of discarded products every year, or pay a stiff fine. The law also imposed retroactive liability for products already sold, and requires manufacturers to pick up products made by other manufacturers. Only manufacturers are held liable; distributors, retailers, consumers, and the City of New York are not responsible for sharing in the cost of this waste collection program.

The Consumer Electronics Association and the Information Technology Industry Council sued the city, and the NAM put together a coalition of business groups to file an amicus brief in support of a motion for a preliminary injunction against the law. Our brief warned that the proliferation of state and local laws such as New York City's E-Waste law would impose a severe burden on manufacturers in violation of the Commerce Clause of the Constitution, in part because it would shift costs that should properly be borne by the city's own residents and taxpayers to out-of-state manufacturers. The law could disrupt and discourage voluntary industry efforts, and penalizes companies that have no control over consumer decisions regarding the disposal of their products.

In many ways New York's law is much different from other local and state laws, and the NAM is concerned that many products other than consumer electronic products are being targeted for similar treatment. This is a long-term issue that will be addressed in a variety of ways, and the NAM will be active in helping to develop reasonable solutions.

Late in May, New York State passed a new electronics recycling law that preempts all local regulations like New York City's. On June 28, 2010, the court approved a settlement agreement dismissing the litigation. The parties agreed to work together to develop an accessible system to collect used electronics in New York City.


Related Documents:
NAM brief  (December 11, 2009)

 

General Electric Co. v. Jackson   (D.C. Circuit)

Constitutionality of EPA's Unilateral Administrative Orders

When EPA determines that an environmental cleanup is required at a contaminated site, it has three options: (1) conduct the cleanup itself and file suit to recover the costs, (2) get a court order, or (3) issue a Unilateral Administrative Order (UAO) compelling a potentially responsible party to undertake a specified action. This case involves the constitutionality of UAOs, which are issued without any right to a hearing prior to their issuance.

The NAM filed an amicus brief supporting GE in this case, arguing that such orders constitute immediate and substantial deprivations of property without any opportunity for a pre-deprivation hearing before a neutral decision-maker. The lower court improperly found that the cost to EPA of providing a hearing to be substantial (if all UAOs are challenged), but the court did not consider the cumulative effect of UAOs on business in the balance. We also questioned the court's ruling that constitutional rights are less where the company has not shown that EPA's administrative procedure result in an unacceptable rate of error. We argued that no case requires a company to show that an agency has erred on the merits of a case in order to establish a due process violation. Furthermore, many potential defendants do not have substantial resources to reallocate from job creation, product development or other productive uses in order to vindicate their constitutional rights.

On June 29, 2010, the court affirmed the lower court's ruling, finding that manufacturers have the option of refusing to comply with a UAO, thus forcing the EPA to go to court to enforce the order. It also did not feel that the losses experienced by a company subjected to potentially improper UAOs (stock declines, loss of brand value or increasing costs of financing) were enough to constitute violations of due process.

Specifically, it ruled that a company that refuses to comply with a UAO has several safeguards under the law: a court must find (1) that the UAO was proper, (2) that the company "willfully" failed to comply "without sufficient cause," and (3) that, in the court's discretion, fines and treble damages are appropriate. The company has protections if it reasonably believes the UAO is improper.


Related Documents:
NAM revised brief  (December 30, 2009)
NAM brief  (September 22, 2009)

 

In re Shell Gulf of Mexico, Inc.   (Environmental Appeals Bd.)

Whether greenhouse gas considerations are proper in EPA permitting decisions

On March 31 and April 9, 2010, the EPA issued permits for exploratory oil and gas drilling operations in the Chukchi and Beaufort Seas north of Alaska. Various environmental groups challenged the permits before EPA's Environmental Appeals Board, arguing that carbon dioxide that will be emitted during the exploration is currently subject to regulation, despite EPA's conclusion that greenhouse gases will not be subject to regulation until January 2, 2011, when the motor vehicle rule takes effect.

The NAM, American Petroleum Institute and Independent Petroleum Association of America filed an amicus brief 6/25/2010 arguing that challenges to EPA's regulatory decisions regarding whether to regulate greenhouse gases should be directed to those notice-and-comment rulemakings, not raised in the context of permit decisions. The challengers should either petition EPA for reconsideration of its "subject to regulation" ruling, or go to court to litigate over that regulation. The Environmental Appeals Board does not have the legal authority to review EPA regulations, but may only determine a challenged permit's compliance with the Clean Air Act and applicable regulations.

In December, 2010, the Appeals Board invalidated the permits and sent them back to the EPA, which granted them in September, 2011.


Related Documents:
NAM Reply Brief  (August 2, 2010)
NAM brief  (June 25, 2010)

 

Monsanto Co. v. Geertson Seed Farms   (U.S. Supreme Court)

Standards for injunctions under NEPA

Genetically engineered crops are subject to approval by the Animal and Plant Inspection Service of the U.S. Department of Agriculture, which must prepare an Environmental Assessment to be approved for commercial use. Environmental groups brought suit under the National Environmental Policy Act (NEPA) arguing that the assessment was inadequate, and the trial court issued a permanent injunction against the use of the genetically engineered product (alfalfa) until a more extensive environmental impact statement could be prepared.

The Supreme Court decided that environmental plaintiffs are required to show irreparable harm to obtain the injunction. A permissive ruling would have made it much easier for environmental plaintiffs to stop the sale of certain products that are subject to government approval.

 

Native Village of Point Hope v. Salazar   (9th Circuit)

Validity of permit for exploratory oil and gas drilling in Alaska

Please refer to the summary of the Alaska Eskimo Whaling Comm'n v. Salazar case.


Related Documents:
NAM brief  (April 7, 2010)

 

North Carolina v. Tennessee Valley Auth.   (4th Circuit)

Public nuisance from electric utility

A federal judge imposed strict emissions controls on TVA power plants in Tennessee and Alabama based on a finding that the plants created a "public nuisance" in North Carolina under state law. The controls went far beyond state and federal emissions controls.

On August 18, 2009, the NAM and other business groups supported TVA's appeal of this ruling to the Fourth Circuit, arguing that the state claims are preempted by the comprehensive interstate air pollution control scheme of the Clean Air Act, and that virtually any source of emissions in the country could be subjected to arbitrary case-by-case claims that they contribute to a public nuisance. The EPA established several major programs that already address interstate pollution, including the Clean Air Interstate Rule, the Nitrogen Oxide Budget Trading Program, the acid rain rules, the regional haze rules and the rules requiring permits for emissions. The lawsuit also amounts to a collateral attack on the national ambient air quality standards for particulate matter and ozone.

This litigation is similar to that brought by various states against 5 major electric utilities and recently decided by the Second Circuit. See Connecticut v. American Electric Power. Such litigation is a dangerous threat because it not only interferes with the uniform regulation of emissions but it also expands the law of public nuisance in a way that could be used against many other industries.

On July 26, 2010, the Fourth Circuit overturned the district court, ruling that Congress is the policymaking branch of government responsible for setting national standards, and that public nuisance law does not encompass an activity expressly permitted and extensively regulated by both federal and state government. It also ruled that one state is not able to apply its home state law to activities occurring in another state.

The court's opinion highlights the chief problem created by this kind of litigation: "To replace duly promulgated ambient air quality standards with standards whose content must await the uncertain twists and turns of litigation will leave whole states and industries at sea and potentially expose them to a welter of conflicting court orders across the country." In addition, it ruled that, "An activity that is explicitly licensed and allowed by Tennessee law cannot be a public nuisance." This decision is an important milestone in our fight against the use of expansive and unwarranted legal theories by trial lawyers against manufacturers.


Related Documents:
NAM brief  (August 18, 2009)

 


ERISA -- 2010



Conkright v. Frommert   (U.S. Supreme Court)

Deference to decisions by benefit plan administrators

In 2009, the NAM, the Chamber of Commerce and the Business Roundtable asked the Supreme Court to overturn a Second Circuit decision that interfered with administrative decisions by those who run company pension plans. The case on appeal involved how a Xerox Corp. administrator should account for lump-sum retirement payments made to employees who retired, but who later returned to work for the company. The trial court refused to allow the administrator to take into account the time value of the previous distribution.

We argued, and on 4/21/2010 the Supreme Court agreed, that this kind of decision, which involves an interpretation of benefit plan language, should be made the way courts normally make benefit decisions -- by deferring to the judgment of the plan administrator. The Second Circuit’s ruling drew an improper distinction between a formal benefits determination and decisions that relate to the plan but that are not actual claims. The Supreme Court held that courts should normally not interfere with reasonable interpretations by plan administrators, even if those administrators have made occasional mistakes in the past.

The Court's ruling is an important principle that will help manufacturers that want to offer retirement and other benefits to employees. Our brief argued that acceptance of the lower court's unorthodox test would call into question a variety of decisions routinely made by benefit plan administrators, such as (1) how to invest plan assets, (2) setting minimum annual funding levels, (3) deciding whether to seek subrogation and reimbursement from plan participants, (4) selecting an insurance underwriter for the plan and (5) determining when valuations and contributions of employer stock must be made.

ERISA class actions lead all other forms of workplace litigation, yet one of the primary objectives of enactment of the law was to encourage employee-benefits plans. The Supreme Court's 5-3 decision in this case returns certainty and predictability, and helps to minimize litigation expenses, administrative costs, and exposure to unanticipated benefits obligations.


Related Documents:
NAM brief  (September 21, 2009)

 

Golden Gate Rest. Ass'n v. San Francisco   (U.S. Supreme Court)

City ordinance mandating employer payments for healthcare

Effective January 1, 2008, San Francisco enacted an ordinance that requires private employers with twenty or more employees to make minimum health-care expenditures on behalf of their employees, such as paying employees’ health insurance premiums and contributing to their health savings accounts. The Golden Gate Restaurant Association challenged the ordinance in federal court on the basis that the employer mandates are preempted by the Employee Retirement Income Security Act (ERISA). The federal district court granted an injunction, holding that San Francisco’s ordinance is preempted because it has an impermissible connection with employee benefit plans and its expenditure requirements make unlawful reference to employee benefit plans.

The Ninth Circuit granted a stay, allowing the city to enforce its ordinance while the issue was on appeal. The NAM filed an amicus brief arguing that the minimum health-care spending requirement conflicts with long-settled federal law that governs employee benefits, but the Ninth Circuit reversed. See our summary here.

The case was appealed to the Supreme Court, and the NAM supported the appeal on 7/7/09 with an amicus brief. We argued that (1) the ordinance required an employer to establish or maintain an employee welfare benefit plan within the meaning of ERISA and is therefore preempted, (2) the Ninth Circuit's decision directly conflicted with the Fourth Circuit's ruling in a similar Maryland health payments case and the conflict should be resolved, and (3) resolving this issue was particularly urgent in light of the impending comprehensive health care reform that was being debated in Congress.

The Court declined to hear this appeal on June 28, 2010. It is expected that there will be additional litigation over similar state and local health care mandates in the future, and that the Supreme Court will address the conflict in the circuits sooner or later.

 

Hardt v. Reliance Standard Life Ins. Co.   (U.S. Supreme Court)

Availability of attorneys' fees under ERISA

In a suit against an employer under ERISA, a plaintiff may seek an award of attorneys' fees if she is a prevailing party, and the Fourth Circuit ruled that a plaintiff must receive "at least some relief on the merits" of a claim to be a prevailing party. In this case, a woman claimed disability benefits for carpal-tunnel syndrome, but was denied. She filed a complaint, and the court, while not providing a benefits award or an enforceable judgment, found that the denial was not based on substantial evidence, and ordered the insurance company to reconsider the claim. It did, and eventually paid the benefits.

The Supreme Court decided 5/24/10 that the statute does not require a party to be a prevailing party to be entitled to attorneys' fees. This statute is different from others in that it allows a court to award fees to either party in its discretion. This discretion is guided by the Court's ruling that the party must have obtained "some degree of success on the merits." The plaintiff did so in this case and was awarded attorneys' fees. The case is significant for manufacturers, who pay for ERISA benefits, because awards of attorneys' fees increase the cost of providing benefits.

 


Free Speech -- 2010



Philip Morris USA Inc. v. United States   (U.S. Supreme Court)

Use of fraud law to chill free speech rights

The NAM and the Washington Legal Foundation filed an amicus brief on 3/22/10 urging the Supreme Court to hear an appeal of an adverse ruling against Philip Morris under the Racketeer Influenced and Corrupt Organizations Act (RICO) for speech relating to the sale of "light" cigarettes. The Government used federal fraud statutes to target the speech of industry members made during decades-long public debates over the health and safety of smoking. It did so without any showing that the speaker had fraudulent intent or that the speech was material to consumers, and the appeals court failed to independently review the trial court's finding, eliminating a key safeguard for First Amendment protections.

The NAM and WLF brief highlighted the importance of First Amendment speech protections for the particular modes of speech principally at issue in this case -- newspaper articles, op-eds, congressional testimony, press releases, and television appearances. Speech in these forums about the health and safety effects of cigarettes are matters of public concern, and all parties with a viewpoint should be equally protected by the First Amendment, even if those parties have an economic motive.

Appellate court review is an important safeguard against an unwarranted holding that the challenged speech merits no constitutional protection. The Supreme Court agreed to review this issue in 2003 in the Nike case, but never did. Unfortunately, on 6/28/10, it declined to hear this appeal as well.


Related Documents:
NAM brief  (March 22, 2010)

 

Simpson Strong-Tie Co. v. Gore   (California Supreme Court)

Suit against lawyer advertising that disparages manufacturer

A galvanized deck screw manufacturer sued a law firm that had placed a newspaper advertisement telling the public that they "may have certain legal rights and be entitled to monetary compensation, and repair or replacement of your deck" if they used the company's screws. The law firm defended, claiming that California's law against lawsuits that restrict free speech applies here. At issue is whether an exemption in the law applies.

The NAM and the California Manufacturers & Technology Association filed an amicus letter urging California Supreme Court review of a lower court ruling that rejected the lawsuit. We urged clarification of the law regarding the kinds of advertising that lawyers may publish. We warned that the permissibility of lawyer advertising in recent years has led to more ads and a greater challenge in policing them. Our letter cited a recent study showing that many on-line sites about medical information appear legitimate but are actually lawyers posing as medical experts. Many routine searches produced results that are "dominated by Web sites paid for and sponsored by either class action law firms or legal marketing sites searching for plaintiff referrals."

We also argued that the advertisements at issue contain facts about the services being provided by the law firm, and consequently fall within an express exemption that would allow the manufacturer's suit. In addition, the ad provides information that serves to begin the process of delivering the lawyer's services, also an exemption that would allow the suit.

The NAM has been a long-time champion of free commercial speech and has opposed various efforts by the government to restrict it. In this case, however, we ask that the commercial speech of one person (a law firm) be responsible and fair in the context of calling into question the qualities of the goods or services of manufacturers or other companies, particularly when the speech proposes a commercial relationship that is designed to be in conflict with other existing commercial relationships.

The California Supreme Court on 7/30/08 agreed to hear this appeal, but ultimately rejected our argument. It found that the attorney ads were about the screws, not about a competitor of the law firm as required by the statutory language. In addition, the firm's promise to investigate was deemed not a statement of fact that might allow the suit, but a statement of what it will do if the reader responds to the ad. It thus appears that the California statute protects law firms that want to increase their business by making controversial statements about a business, like a manufacturer, that is not one of their competitors.


Related Documents:
NAM Letter  (June 24, 2008)

 


Government Regulation -- 2010



Citizens United v. Federal Election Commission   (U.S. Supreme Court)

Whether BCRA properly regulates candidate-related movies that contain no express advocacy

On January 21, 2010, the Supreme Court overturned part of the Bipartisan Campaign Reform Act of 2002 (BCRA), better known as “McCain-Feingold.” The provision in question prohibits the use of general corporate funds, including those of nonprofit issue advocacy groups, to pay for an “electioneering communication” within 60 days before a general election or 30 days before a primary election. The case arose when a conservative advocacy group wanted to distribute “Hillary: The Movie,” a film critical of Senator Hillary Clinton, and run ads for it, within the restricted time periods in 2008.

A lower court had said that the movie was an “electioneering communication” with the aim of urging viewers to vote against Senator Clinton. The panel also required that ads for the film include disclosures, such as the following: “Citizens United is responsible for the content of this advertising.”

The Supreme Court ruled 5 to 4 that the law improperly prohibits the use of corporate funds for independent expenditures in political campaigns. The Supreme Court made clear that corporations may advocate the election or defeat of political candidates, overruling prior case law and portions of BCRA. Four Justices dissented. The ruling allows companies and labor unions to make independent expenditures freely in support of or in opposition to candidates, and is not limited to federal elections.

The majority rejected various arguments trying to distinguish this communication from the prohibitions of BCRA. Instead, it considered the validity of the statute on its face under the First Amendment. The law acts as the functional equivalent of a prior restraint on speech, since those who want to avoid criminal liability and defense costs must ask a government agency for permission to speak about candidates.

The Court overruled Austin, which had limited corporate independent expenditures for campaigns. The Act imposes an outright ban on speech, backed by criminal sanctions, and the government may not impose restrictions on certain disfavored speakers like corporations, which are protected by the First Amendment. First Amendment protections do not depend on the speaker’s financial ability to engage in public discussion. All speakers use money amassed from the economic marketplace to fund their speech. In addition, independent expenditures by corporations do not give rise to corruption or the appearance of corruption, and increased influence over or access to politicians does not mean those politicians are corrupt. “No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.”

Eight Justices upheld Sections 201 and 311, which impose disclaimer and disclosure requirements. Citizens United offered no evidence that its members face the type of threats, harassment or reprisals that might make the disclosure provision unconstitutional.

Justice Stevens’ dissent, joined by three others, warned that this decision would do damage to the Court and threatens to undermine the integrity of elected institutions across the Nation. He argued that there are other avenues left open for corporations to be involved in elections, such as through PACs, and that this law is just a source restriction or a time, place, and manner restriction.

 


International -- 2010



Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.   (U.S. Supreme Court)

Federal restrictions on inland transportation contracts

Goods shipped from China are regulated by the Carriage of Goods by Sea Act (COGSA) for the ocean leg of the shipment, and by the Carmack Amendment to the Interstate Commerce Act for the inland leg. In this case, one bill of lading was used for both legs, and an accident occurred on the inland leg, damaging the cargo.

The Supreme Court ruled 6/21/10 that the stricter requirements of the Carmack Amendment do not apply to the inland portion of a shipment originating overseas under a single through bill of lading. The Carmack Amendment imposes stricter venue requirements (where suit may be brought) and a more burdensome standard of liability (strict liability as opposed to negligence). In this case, the parties agreed that the entire shipment from China to its ultimate inland destination here would be governed by Japanese law and must be brought in Tokyo District Court. The Supreme Court upheld that contractual arrangement.

 


Jurisdiction -- 2010



Hertz Corp. v. Friend   (U.S. Supreme Court)

Defining a corporation's principal place of business

Federal law allows certain claims under state law to be heard in federal court if the claims involve plaintiffs and defendants that are citizens of different states. Having a case heard in federal court is often beneficial to out-of-state corporations who may not enjoy a fair hearing in certain state courts. This case involves how to define the state of citizenship of a corporation.

On February 23, 2010, the Supreme Court ruled that a corporation's principal place of business means the place where the corporation's high level officers direct, control, and coordinate the corporation's activities, i.e., its "nerve center," which will typically be found at its corporate headquarters. This conclusion may be difficult to apply in a few cases, but it will avoid overly complicated jurisdictional questions in most cases and will make for a more uniform legal system.

 


Labor Law -- 2010



Baker v. American Horticulture Supply, Inc.   (California Supreme Court)

Interpreting California's Independent Wholesale Sales Representatives Act

On Aug. 20, 2010, the NAM and the California Manufacturers and Technology Association filed an amicus letter urging the California Supreme Court to review a state appellate decision that subjects manufacturers to treble damages liability for inadvertent violations of a state statute that prescribes various formalities for contracts with sales representatives. The Independent Wholesale Sales Representative Act, Cal. Civ. Code Sec. 1738.13, requires, among other things, that contracts specify the rate and method by which commissions are computed, the precise geographical area covered, and that sales representatives sign a written receipt acknowledging that he or she has received a copy of the contract. "Willful" violations are subject to treble damages, but the statute does not specify the level of damages that are available for non-willful violations. In this case, a California appellate court ruled that this legislative oversight would be corrected by allowing suits for single damages where a party does not act willfully, but it also adopted a loose standard of willfulness that could make most suits by sales representatives subject to treble damages.

Our amicus letter urged the California Supreme Court to review this decision. The lower court's ruling threatens to "open the floodgates of litigation against manufacturers doing business in California who inadvertently run afoul of the Act . . . No matter how innocuous the violation." In addition, by lowering the threshold for recovery of treble damages, the opinion "creates a trap for unwary manufacturers who do not know about technical requirements of the Act." The result is bad for manufacturers doing business in California.

The California court declined to review this appeal.


Related Documents:
NAM amicus letter  (August 20, 2010)

 

Chamber of Commerce v. Edmondson   (10th Circuit)

Preemption of state immigration verification requirements

The NAM is a member of the Human Resource Initiative for a Legal Workforce, which filed an amicus brief on 10/23/08 in the 10th Circuit in a case involving an Oklahoma law that requires every business that has a contract or subcontract with a public employer to use the federal Status Verification System to verify the employment authorization status of all new employees. The law also makes it illegal to fire a U.S. citizen or permanent resident alien while retaining in a similar job an employee who is an illegal alien. Employers using the federal system are exempt from liability, investigation or suit under this section; those who do not are at risk of litigation.

The problem is that Oklahoma is one of a growing number of states and municipalities that have passed or are considering such laws, but their enforcement schemes are different, making it increasingly difficult for an employer doing business in multiple states to navigate the conflicting requirements. The laws impose a wide variety of inconsistent verification requirements, squarely conflicting with the intent of Congress to create a nationally uniform and comprehensive federal system for regulating the employment of alien workers.

Our amicus brief enumerated the serious flaws that exist with the federal verification system, specifically the experimental Basic Pilot Program known as E-Verify. Studies have pointed out the errors in the system, including 17.8 million records that contain discrepancies related to name, date of birth or citizenship status. The GAO reported that the government is not equipped to manage a significant expansion of E-Verify users. Employers have complained of multiple problems and delays, prompting Illinois to prohibit employers from using it. Participation in the program is burdensome and costly.

On 2/2/2010, the court ruled that the lawsuit was likely to succeed on the merits regarding Sections 7(C) and 9 and that the trial court properly issued an injunction against enforcement of the law. The court also found that Section 7(B) of the law is not impliedly preempted by federal law. Section 7(C) prohibits discharging an employee who is a U.S. citizen while still employing employees who are unauthorized aliens, and Section 9 requires verification of employment authorization.. Section 7(B) applies to state government contractors.


Related Documents:
Human Resource Initiative's Brief  (October 23, 2008)

 

EEOC v. Kronos Inc.   (3rd Circuit)

Breadth of EEOC administrative subpoenas

How broad is the EEOC's administrative subpoena authority? That agency urged the courts to allow it to seek information from companies and third party testing firms that goes far beyond the bounds of an individual complaint. The EEOC wants to search for systemic discrimination by employers or the third parties they hire to do personality tests or other tests prior to employment. However, the courts are not all so expansive.

The defendant in this case, Kronos, won before a federal judge. The EEOC appealed to the Third Circuit. The NAM and others filed an amicus brief arguing that the EEOC’s tactics in this case exceed its statutory authority. Pursuing unbridled fishing expeditions in search of a big system case diverts valuable resources from investigating actual, live charges. The statute granting the EEOC investigatory powers is limited to investigations relating to the specific charge that an individual files.

Also on appeal was a district court order protecting the confidentiality of personality test information disclosed to the lawyers during discovery. We argued that validated employment tests are important hiring tools whose integrity could be compromised by even a minor breach of confidentiality.

On Sept. 7, 2010, the Third Circuit reversed in part, allowing the EEOC authority to expand an investigation of a single complaint into a broader investigation involving hiring practices in general and other job positions. It allowed a broadening of the time period to be examined and allowed the EEOC to look at the effect of the company's use of an employment assessment in hiring nationwide. According to the Third Circuit, the EEOC's power to investigate "encompasses not only the factual allegations contained in the charge, but also any information that is relevant to the charge." The court also ruled that while the EEOC may expand its investigation to include various legal theories of disability discrimination, it may not expand its investigation to seek out racial discrimination that is wholly unrelated to the original charge. Only "reasonable" expansion of the investigation is allowed.

The court sent the confidentiality issue back to the trial court for further explanation.


Related Documents:
NAM brief  (December 14, 2009)

 

Granite Rock Co. v. International Brotherhood of Teamsters   (U.S. Supreme Court)

Union contract formation and remedies for breach

After Granite Rock reached an agreement with the union representing one of its facilities, and the workers ratified the agreement, the union sought an additional contract provision that would absolve the international union of any liability for damages arising from its activities at other Granite Rock facilities. The company refused to make the additional concession, and the union went on strike. When Granite Rock sued for breach of the no-strike clause, two issues wound up on appeal to the Supreme Court.

The first involved whether a court or an arbitrator should decide whether there was in fact a valid contract. The NAM filed an amicus brief May 1, 2009, urging the Supreme Court to hear the appeal and apply existing law that federal courts have the authority to determine the existence of a collective bargaining agreement. In its ruling on June 24, 2010, the Court agreed. Whether a collective barganing agreement has been created is an issue to be decided by a court, not an arbitrator, according to the 7-2 majority.

Also at issue in the case was whether there is any remedy under Section 301 of the Labor Management Relations Act against the international union for allegedly interfering in the contractual obligations of the local. The NAM supported review of the Ninth Circuit decision, which said the international union was immune from suit even if it compelled its affiliated union to refuse to honor its previous commitment to Granite Rock. We argued that many unionized employers will face the prospect of internationally sanctioned strikes that violate local bargaining agreements but that cannot be remedied. It is very common for international unions to retain control over the bargaining process even though they do not sign the final agreement, and the Ninth Circuit's narrow interpretation conflicted with other federal court rulings and ignored the realities of the relationship between local unions and their international controllers. On this issue, the Supreme Court ruled unanimously that the Ninth Circuit did not err in rejecting Granite Rocks' request for a remedy under Section 301, but 7 Justices left the door open to such a claim if further proceedings in this case fail to provide relief under a different statute. It is possible that the Court could recognize a claim under Section 301 if no other remedies are available.


Related Documents:
NAM brief on the merits  (September 3, 2009)
NAM brief on the petition  (May 1, 2009)

 

Lewis v. City of Chicago   (U.S. Supreme Court)

Filing deadline for EEOC charges

Before an employee may file a suit against an employer for discrimination, the employee must file a charge with the EEOC "within 300 days after the unlawful employment practice occurred." This case, brought under Title VII of the Civil Rights Act, involved whether the 300-day period begins when the employer announced the results of a discriminatory hiring test, or whether it begins again each time the employer makes a hiring decision based on the results of the test. On 5/24/10, the Court ruled unanimously that the employment practice that allegedly was discriminatory was the selection of firefighter hires on the basis of an old test. Thus, each new decision based on old test results constitutes a new employment practice that starts the 300-day time limit for filing suit.

This outcome could substantially lengthen the time during which employers are exposed to liability from tests or other employment practices that are nondiscriminatory of their face but that may have a discriminatory impact.

 

New Process Steel, L.P. v. NLRB   (U.S. Supreme Court)

NLRB quorum requirement

The National Labor Relations Board had only 2 members beginning on December 31, 2007, even though 5 were authorized and the Board allows 2 members to decide cases when a quorum of 3 exists. The Seventh Circuit upheld a decision by the 2-member board, but the D.C. Circuit, on the same day, ruled that the Board must have at least 3 sitting members. Several hundred decisions by the 2-member Board were affected. This dilemma was caused when President Bush's recess appointments were blocked by Senate Democrats.

On 5/24/10, the Supreme Court ruled 5 to 4 that the National Labor Relations Act requires that there be at least 3 members on the Board in order to exercise the delegated authority of the Board. Section 3(b) requires delegation to at least 3 members. Their membership must be maintained for this delegation to continue to be valid. Since the decision, the NLRB has been revisiting many of the decisions that were thrown into doubt.

 


OSHA -- 2010



National Association of Home Builders v. OSHA   (D.C. Circuit)

Challenge to OSHA's per-employee citation authority

On December 12, 2008, OSHA published a rule that adopted or amended 34 workplace standards and permitted OSHA to obtain multiple penalties against an employer for providing incorrect personal protective equipment (PPE), no PPE, or incorrect training to employees. The new principle adopted in the rule is that the penalty is to be assessed for each employee, rather than based on the single decision or failure by the employer to use the proper training or PPE for all employees or a group of employees. The rule applies even when the violation is minor, not willful, and causes no harm or injury to employees. A $7,000 penalty for a “serious” violation, for example, could now become a $700,000 penalty if 100 employees are potentially affected, and OSHA could expand the per-employee penalty rule to other cases, not just PPE or training cases.

The NAM, the National Association of Home Builders, and the U.S. Chamber of Commerce joined together in a lawsuit challenging this rule in the D.C. Circuit. We opposed the rule because we believed that Congress did not give OSHA the power to address penalty issues in its standards. Whether “per employee” penalties may be assessed is a question committed solely to the Occupational Safety and Health Review Commission, which may impose penalties on a “per employee” basis when they are warranted on the facts of a specific case. The suit did not challenge OSHA's requirements for training each employee or equipping each with personal protective equipment.

Our briefs argued that Congress did not delegate authority to OSHA to word a standard to change or affect a unit of violation; rather, Congress committed this authority to the OSH Review Commission and the courts.

On April 16, 2010, the D.C. Circuit upheld OSHA's rules. It found that OSHA "stands in the shoes of the legislature" and can both define what constitutes a violation and define the unit of prosecution, or how many times a company can be fined for a single decision that affects many employees.

The decision will result in substantially greater fines and settlement leverage against companies that are alleged to have violated OSHA rules. Although OSHA's Field Operations Manual tells inspectors to issue multiple citations only when the employer's behavior is willful and egregious, the decision gives great discretion to the agency to change its practice in the future.


Related Documents:
NAM Reply Brief  (September 17, 2009)
NAM Opening Brief  (July 7, 2009)
NAM Statement of Issues  (March 16, 2009)
NAM Petition for Review  (February 6, 2009)

 


Patents, Copyrights and Trademarks -- 2010



Bilski v. Kappos   (U.S. Supreme Court)

Standard for patentability of business method

This case involves the patentability of business processes. The U.S. Court of Appeals for the Federal Circuit adopted a standard that makes it harder for business processes to be patented. It decided that only methods that are "tied to a specific machine or apparatus" or transform "a particular article into a different state or thing" qualify for a patent. Previously, the standard did not require the use of a particular machine as one alternative, and the U.S. Patent and Trademark Office has been much more restrictive in approving patents. The case attracted nearly 40 amicus briefs in the Federal Circuit, and the Supreme Court's decision will have an important effect not only on business process patents, but potentially on computer software and financial instruments as well.

On 6/28/10, the Court affirmed the Federal Circuit Court. It did not, however, agree that a patent-eligible process must be tied to a machine or the transformation of an article. It found that the machine-or-transformation test is not the sole test for patent eligibility, and business methods might be used to secure a "process" patent. Nevertheless, it rejected the attempt to patent both the concept of hedging risk and the application of that concept to energy markets, since they are nonpatentable abstract ideas.

 


Product Liability -- 2010



County of Santa Clara v. Superior Court   (California Supreme Court)

Whether states may hire private attorneys under contingent fee agreements

The NAM joined with the Coalition for Public Nuisance Fairness, the American Chemistry Council, and the Property Casualty Insurers Association of America in an amicus brief challenging the power of various cities and counties in California to hire trial lawyers on a contingent-fee basis to sue private industry for public nuisance. The issue arose when the cities and counties filed suit alleging that a group of companies created a public nuisance by selling lead pigments used in house paint decades ago. The companies filed a motion to bar the state from paying its counsel using a contingent fee arrangement, and the trial court agreed. The court of appeal reversed, claiming that because the cities and counties exercised "final authority over all aspects of the Litigation," the private attorneys were "merely assisting government attorneys in the litigation of a public nuisance abatement action and [were] explicitly serving in a subordinate role, in which private counsel lack any decision-making authority or control . . . ."

This ruling was appealed to the California Supreme Court. The NAM and other groups supported the appeal with an amicus letter. We opposed allowing private attorneys with a profit motive to prosecute cases using the police power of the state. Our amicus letter argued that the ruling brings confusion to an area that had previously been clear, and it invalidates legislative and judicial requirements that government attorneys be neutral and unaffected by financial motivations. The lower court ruling converted a firm ethical rule designed to maintain a belief by the people that our system is just and impartial into a "flexible" guideline that can be abused in the name of safeguarding the "right" of public entities to select counsel of their choice. In other contexts, government officials are not allowed to participate in activities that indirectly affect their own financial interests, and the government should not be allowed to transfer even a percentage of financial interest to outside counsel working on a contingent fee basis. In addition, it will be very difficult to detect abuse by outside counsel, meaning that the public must resort to "trust," a dangerously vague ethical limitation that will shake public faith in our judicial system.

The court agreed to hear the appeal, and the NAM and the other amici argued in a brief on the merits that the private interests of contingent-fee counsel conflict with the public interest. Government attorneys owe a duty of neutrality to the public, and allowing them the potential to earn huge profits "creates a powerful incentive for private attorneys wielding the power of government to make decisions based on their own pecuniary interests, rather than the interest of justice." The combination of temptations raised by extraordinary potential rewards with extraordinary power raise obvious appearances of impropriety.

In addition, the California legislature has already addressed lead poisoning, and the legislature is likely to strike a fairer and more effective balance between competing interests because it considers all pertinent issues in their entirety, rather than in the truncated form presented by litigants in court.

On July 26, 2010, the court unanimously ruled that local governments may use contingency fee lawyers as long as the ultimate authority for the litigation remained with the governments. Using a balancing of interests test, it found that neither a liberty interest (such as in a criminal case) nor the right of an existing business to continued operation is threatened by the government's litigation, so contingent fees may be allowed, as long as the lawyers act under a "heightened standard of neutrality." It ruled that "retention of private counsel on a contingent-fee basis is permissible in such cases if neutral, conflict-free government attorneys retain the power to control and supervise the litigation." It imposed protections such as: (1) only government attorneys may settle a case, (2) defendants may contact the government attorneys directly without having to confer with contingent-fee counsel, (3) government attorneys retain a veto power over any decisions made by outside counsel, and (4) a government attorney with supervisory authority must be personally involved in overseeing the litigation.

Even though the court sent the case back for further scrutiny of the contingent-fee arrangements at issue, it will be difficult for defendants to determine whether government lawyers are in fact exercising proper control over contingent-fee lawyers. Communications between such lawyers are subject to attorney-client confidentiality protections.

The use by state and local authorities of contingent-fee private lawyers has been gaining national attention with recent high-profile cases like the lead paint litigation in Rhode Island, which ended in 2008 with a state Supreme Court ruling throwing out the entire public nuisance theory of liability in that context. Although the private lawyers claimed that this litigation would be cost-free to the state, the defendants were ultimately awarded $242,000 in costs.


Related Documents:
NAM brief  (April 27, 2009)

 

CSX Transportation, Inc. v. Gilkison   (4th Circuit)

Fraud in asbestos mass screening cases

The NAM and other business and legal reform groups filed an amicus brief supporting the efforts by CSX Transportation, Inc. to counter the litigation industry for generating fraudulent asbestos lawsuits. The brief backed the railroad’s appeal of a judge's dismissal of its fraud and conspiracy complaint filed against a law firm and a radiologist who screened test results for evidence of asbestos-related diseases. The suit alleged that the defendants conspired to fake asbestos screenings in order to win cash settlements from the company.

Our amicus brief provided a history of rampant, coordinated asbestos fraud in arguing that CSX’s suit should be allowed to proceed. We argued that the entrepreneurial model developed by plaintiff's lawyers to pursue asbestos claims provides powerful incentives for fraud, and when suits are filed in so-called "magic jurisdictions" that favor plaintiffs, companies have very little option but to settle. Individuals with legitimate claims may be harmed most, as resources are depleted by a disproportionate amount of settlement dollars going to claimants with no discernible asbestos-related physical impairment whatsoever. It is important that courts step in to police the potential for fraud in these kinds of cases.

Fortunately, on 12/30/2010, the Fourth Circuit overturned the lower court's ruling and reinstated the CSX law suit. It found that the statute of limitations on the lawsuit did not begin running until the lawsuit alleged to be fraudulent was actually found to be meritless. It also ruled that there was sufficient evidence that a jury can find that the law firm fraudulently manufactured the claims.


Related Documents:
NAM brief  (January 14, 2010)

 

Davis v. American Home Products Corp.   (Louisiana Supreme Court)

Whether to dismiss design defect case where no alternative design existed

The NAM joined with the Louisiana Association of Business and Industry in an amicus brief urging the Louisiana Supreme Court to overturn a lower court’s refusal to dismiss a 15-year-old product liability lawsuit. The suit claims that the manufacturer’s contraceptive, Norplant, was defectively designed. However, the Louisiana Products Liability Act (“LPLA”) requires that the plaintiff prove that an alternative design for the product was available at the time of sale to prevent the alleged harm. The alternative design created by the plaintiffs’ expert did not come into existence until many years after the product was sold.

The LPLA was enacted in 1988 to discourage fringe litigation, link a manufacturer’s liability to its actual fault, produce consistent and predictable results, and conserve the resources of both the courts and the litigants. Rules on summary judgment direct that a claim must be dismissed if a plaintiff is unable to produce factual support for any essential element of that claim. Without a showing that a practical alternative product design was in existence at the time, this case should have been dismissed.

The trial court expressed policy misgivings about the law and determined that the word “existed” was ambiguous, and that it could be read to include a claim if the scientific knowledge or technology for an alternative design was available at the time of sale. Our brief argued that this kind of policy decision should be made by legislatures, and in any case, the court’s conflation of “design” with the “science and technology out of which a design might flow” was not straightforward, offended the ordinary use of ordinary words, read “design” out of the law altogether, ignores the plain use of “design” in related contexts, and introduced absurdity where there was none before.

On Nov. 19, 2010, the Louisiana Supreme Court declined to review this appeal.


Related Documents:
NAM brief  (November 3, 2010)

 

Double Quick, Inc. v. Lymas   (Mississippi Supreme Court)

Duty to protect customers on business property

A man shot outside a convenience store sued the store claiming it did not provide enough security. A judge reduced the subsequent jury verdict to $1 million for noneconomic damages (pain and suffering) in accordance with a recent Mississippi law limiting such damages to a maximum of $1 million. The constitutionality of that limit is on appeal in this case.

The NAM and many other business organizations filed an amicus brief arguing in favor of the cap. We explored the evolution and the skyrocketing rise of pain and suffering awards in the 1990's, particularly in Mississippi, and cited statistics showing that such awards total more than half of all tort damages. We also showed the positive results to the state's economy when noneconomic damages were capped by the legislature. The law carries a presumption of constitutionality, and the courts should not act as a "super legislature" to second-guess the tort policy decisions of the state's elected representatives.

On Sept. 23, 2010, the court avoided the issue of the constitutionality of the statutory cap, instead ruling that the plaintiff failed to prove that any negligent omission by the store caused the injury.


Related Documents:
NAM brief  (December 9, 2009)

 

Hall v. Warren Pumps, LLC   (Cal. Ct. App.)

Duty to warn of hazards from third party products

The NAM joined with 6 other organizations urging a California appeals court to affirm a lower court ruling that refused to hold a manufacturer liable for failing to disclose the hazards that arose from products made, sold or installed by another manufacturer. Under common law, manufacturers are only liable for hazards in their own products. We opposed the creation of a new duty to warn about hazards a manufacturer does not produce or put in its products. The third-party liability concept that plaintiffs sought to impose here is so extreme that almost no plaintiff during the 30-plus years of asbestos litigation has dared even raise it until recently. Such a duty would require bread or jam manufacturers to warn of the foreseeable risk of peanut allergies in peanut butter and jelly sandwiches.

Consumer safety could also be undermined by the potential for over-warning (the "Boy Who Cried Wolf" problem) and through conflicting information that may be provided by manufacturers of different components and by makers of finished products. The duty to warn should be placed on the party in the best position to know the risk, and any economic loss should be borne by the party who caused it.

On February 16, 2010, the California court affirmed the lower court ruling and rejected a new duty to warn in these circumstances.


Related Documents:
NAM brief  (September 3, 2009)

 

M.G. v. A.I. duPont Hospital for Children   (3rd Circuit)

Medical monitoring

On March 9, 2010, the NAM and nine other business groups filed an amicus brief urging the 3rd Circuit to reject a claim that a manufacturer should pay for medical monitoring of a plaintiff that has no proven physical injury from the use of the manufacturer’s product. The U.S. Supreme Court and a majority of state supreme courts over the last decade have rejected such claims. We argued that Delaware courts have repeatedly affirmed the need for a physical injury in tort cases, and radical changes in public policy should be made by the legislature, not the courts.

This case involves an implanted medical device (stent) that did not have FDA pre-market approval. Even if special considerations were to apply in this case, the plaintiff still would not satisfy them because there has been no exposure to a proven hazardous substance.

On August 24, the Third Circuit ruled that trial court erred in extending Delaware law "beyond the bounds of the recognized medical monitoring claim in which a plaintiff alleges long-term exposure to a proven toxic substance with known tendencies to produce serious future medical injuries." In this case, the implanted stent was not a toxic or hazardous substance, and there was no risk of "contracting a serious latent disease." Because the Delaware Supreme Court has not recognized any variant of a standard medical monitoring claim, the Third Circuit declined to agree to the plaintiff's version.


Related Documents:
NAM brief  (March 9, 2010)

 

Pennsylvania v. Janssen Pharmaceutica, Inc.   (Pennsylvania Supreme Court)

Whether states may hire private attorneys under contingent fee agreements

May states hire private attorneys under contingent fee agreements? On August 28, 2009, the NAM filed an amicus brief in the Pennsylvania Supreme Court arguing that private lawyers that sue a manufacturer under a contingent fee contract with the state government have financial motivations that prevent them from acting in the interests of justice on behalf of the people of the state. It is improper to give government-hired attorneys the potential to earn huge profits while wielding the power of government.

Such arrangements are gaining increasing attention and controversy because the retained lawyers often contribute to political campaigns of the officials who hire them.

On 8/17/2010, the court ruled that defendant did not have standing under Pennsylvania law to challenge the authority of the state's legal representation. It therefore did not address the substantive issue regarding the propriety of a state using private contingent-fee lawyers in court.

 

Robinson v. Crown Cork and Seal Co.   (Texas Supreme Court)

Constitutionality of Texas tort reform

The NAM joined with seven other organizations in an amicus brief on 8/2/07 supporting Texas’ tort reform statute that limits the total asbestos liability of successor companies to the total gross asset value of the predecessor company at the time of the merger or consolidation (adjusted for inflation). Passed in 2003 by the state legislature in Texas, which has historically been a magnet for asbestos cases from around the country, this statute was meant to lessen the devastating effects of asbestos litigation on innocent successor companies which, according to a report published by RAND in 2005, shoulder the burden for over half of asbestos expenditures.

As the successor to a bottle cap manufacturer that had a side business involving asbestos insulation, Crown Cork & Seal has been named in numerous asbestos-related lawsuits and has spent nearly $600 million in asbestos-related costs, despite the fact that Crown itself never manufactured, sold, or installed any products containing asbestos.

We believe the statute is a valid exercise of the legislature’s power to protect the public welfare and should not be overridden by courts, who should defer to the reasonable public policy judgments of the legislature.

The Texas Supreme Court ruled 10/22/2010 that the statute unconstitutionally limited liability retroactively when applied to pending lawsuits. It found that there is a presumption against retroactive legislation, to protect settled expectations and prevent the abuse of legislative power. The court accepts retroactive legislation by considering 3 factors: "the nature and strength of the public interest served by the statute as evidenced by the Legislature's factual findings; the nature of the prior right impaired by the statute; and the extent of the impairment." Using these criteria on the facts of this case, the court found the statute unconstitutional.

 

William Powell Co. v. Walton   (Cal. Ct. App.)

Duty to warn about hazards of third-party products

On Jan. 18, 2010, the NAM filed an amicus brief in a California appellate court arguing that manufacturers should not have a new legal duty to warn customers about the risks that might arise from products made by other manufacturers that are used in conjunction with their products. The plaintiffs tried to make a manufacturer liable for asbestos products like insulation and gaskets that were added to the manufacturer's valves. Our brief showed how such a duty is inconsistent with California law and with most courts around the country, and how creating this new duty raises serious public policy questions that should be considered in the context of the overall asbestos litigation environment. The new rule of liability would be unsound public policy, because economic loss should be borne by the party that caused it, and because the manufacturer of the product that produced the risk is in the best position to warn about that risk. The proposed rule would fuel claims against defendants and make asbestos litigation even worse than it already is, particularly in California which is a magnet for asbestos plaintiffs.

On April 22, 2010, the California court agreed. It overturned a $5.6 million jury award, ruling that a manufacturer does not have a duty to warn about products made by other manufacturers, and there was no evidence the defendant provided the asbestos materials that caused the injury. In addition, a manufacturer of a component part has no duty to inspect the parts of other manufacturers that may be incorporated into an integrated product, since the manufacturer has no control over those other parts.


Related Documents:
NAM brief  (January 18, 2010)

 


Punitive Damages -- 2010



Shell Oil Co. v. Hebble   (U.S. Supreme Court)

Determining the ratio of punitive damages to actual damages

The NAM and the International Association of Defense Counsel filed an amicus brief 9/28/10 urging the Supreme Court to review an Oklahoma state court decision that imposed a $53 million punitive damage award on top of an award of $750,000 in a breach of contract dispute. The punitive damages portion is far greater than the Court has found acceptable in other rulings that compare the ratio of the punitive damages to the actual damages in the case, along with other factors, such as the reprehensibility of the conduct at issue. The lower court added pre-judgment interest (at a special 12% compounded rate over a period from 1973 through 1985) to the actual contract damages, thus making the final punitive damages ratio (4 to 1) smaller and easier to affirm on appeal than a ratio based on the actual contract damages award (70 to 1).

Our brief urged the Supreme Court to review how courts are adding extra amounts to actual damages to inflate compensatory damages, and consequently punitive damages derived from them. Different state courts categorize different types of damages as “compensatory,” leading to wide variations and unpredictability. This unconstitutionally skews the punitive damages ratio, depending on the state rather than the extent of the injury to the plaintiff. We urged the Court to adopt a rule that encourages settlements by giving all sides consistent case valuation parameters, thus conserving judicial resources while preserving legislative flexibility. Examples of controversial claims that are sometimes counted as compensatory damages include emotional distress with a partially punitive aspect, lost profits and attorneys’ fees. State legislatures can cause further mischief by enacting language changes, such as removing the word “penalty” from an interest statute, that lead to excessive punitive damage awards. Uncertainty in this area leads to substantial problems when manufactures and their insurers cannot reasonably estimate exposure limits. We urged the Court to provide guidance that focuses on the actual harm inflicted on a plaintiff when calculating any punitive damages that might also be awarded.

Unfortunately, the Court declined to hear the appeal on 12/13/2010.


Related Documents:
NAM brief  (October 1, 2010)

 


Statute of Limitations -- 2010



McCann v. Foster Wheeler LLC   (California Supreme Court)

Whether California applies its own law in lawsuits that have virtually no connection with the state

The plaintiff moved to California, was diagnosed with mesothelioma, and sued over asbestos exposure that allegedly occurred about 50 years before in Oklahoma. A California court held that California's statute of limitations should govern the suit, rather than Oklahoma's 10-year statute of repose for improvements to real property.

The NAM supported this appeal with an amicus brief arguing that the ruling disregards Oklahoma's interest in drawing a balance between consumers who suffer an injury, the need for all consumers to have access to affordable goods and services, the need for businesses to operate under fair and predictable liability law rules, and the state's interest in stimulating investment and economic growth. The trial court's ruling undercuts the predictability and certainty of laws that companies rely on when making business decisions, including how to price their products and how much insurance to buy. It encourages out-of-state plaintiffs to continue to flock to California courts to file asbestos and other types of hazardous material exposure cases long after most states would prohibit them.

Fortunately, on February 18, 2010, the California Supreme Court reversed. It ruled that Oklahoma law should apply, since that state's interest in having its statute of repose applied outweighed California's interest. Weighing in the balance in favor of the manufacturer was the court's view that a state law limiting liability for commercial activity conducted within the state in order to provide fair treatment and incentives for business enterprises, applies equally to both in-state and out-of-state companies that conduct business in the state. This is a favorable ruling that will help prevent forum shopping by claimants whose claims have long since been extinguished under state law.


Related Documents:
NAM brief  (September 12, 2008)

 

Merck and Co. v. Reynolds   (U.S. Supreme Court)

Statute of limitations period for securities fraud claims

In order to claim "fraud, deceipt, manipulation or contrivance" under federal securities law, a plaintiff must bring the suit "not later than the earlier of . . . 2 years after the discovery of the facts constituting the violation[] or . . . 5 years after such violation." Some courts start the 2-year statute-of-limitations clock when the plaintiff receives sufficient notice of those facts, some require that the facts show the defendant acted with sufficient intent, and others allow additional time for a plaintiff to conduct an investigation. The Third Circuit ruled in this case that Merck shareholders alleging misrepresentations could sue the company more than 2 years after FDA issued a warning letter on one of the company's drugs.

On April 27, 2010, the Supreme Court clarified how much evidence of misrepresentation is enough to start the clock on the statute of limitations. It ruled unanimously that the statute of limitations period begins to run once the plaintiff "actually discovered or a reasonably diligent plaintiff would have 'discover[ed] the facts constituting the violation' -- whichever comes first." The results of a study about Vioxx, an FDA warning letter, and various lawsuits being filed may be useful in identifying a time when a reasonably diligent plaintiff might begin investigation, but the plaintiff would still need to discover the fact that the defendant had the requisite "scienter," or "mental state embracing intent to deceive, manipulate, or defraud." Because neither the FDA warning nor subsequent litigation revealed facts indicating that the defendant acted with scienter concerning Vioxx, the statute of limitations did not begin to run, and the plaintiff's law suit was filed in a timely manner.

As a result, it will be more difficult for companies to have securities fraud cases under Section 10(b) of the Securities Exchange Act of 1934 dismissed on statute-of-limitations grounds.

 


Taxation and State Taxation -- 2010



Hemi Group v. City of New York   (U.S. Supreme Court)

Whether New York can sue online cigarette sellers under RICO for not paying city taxes

In 2003 and 2004, New York City sued several online cigarette retailers for failing to pay city taxes on cigarettes that were shipped to city residents. The city had been unsuccessful in getting the online cigarette retailers to turn over information about their customers to state officials for tax-collection purposes, and thus based its claim on an alleged violation of federal racketeering law, better known as RICO.

Defendants asserted that the city did not have standing to invoke RICO, arguing that New York City’s loss of tax revenue was not an injury that was incurred as a party to a commercial transaction.

After a district judge dismissed the city’s RICO complaint, the Second Circuit reversed, holding that lost taxes are property under the mail and wire fraud statutes and therefore meet the RICO standing requirement.

On January 25, 2010, the Supreme Court reversed, with 4 Justices holding that the connection between the alleged fraud by the defendant and the injury to the city was too remote. There must be a proximate cause between fraud and injury. Justice Ginsburg supplied the fifth vote to reverse the lower court, but found that the city could not compel the defendant, a New Mexico corporation, to collect city taxes, and could not broaden the remedies available to it under the relevant statute.

Manufacturers are very concerned about this effort by state and local jurisdictions to skirt constitutional limits on the extraterritorial reach of their laws. If New York can have asserted jurisdiction over a company that has no physical presence in the city, and then claim a RICO violation for failure to collect sales taxes, along with treble damages, this case could have revolutionized tax enforcement around the country. It is another example of efforts by states to greatly expand the traditional requirement that it may only exercise jurisdiction over persons or companies with a physical presence, or nexus, in the state.

 

Levin v. Commerce Energy, Inc.   (U.S. Supreme Court)

Federal court jurisdiction to hear challenge of state tax law

Natural gas suppliers sued Ohio, claiming its tax system benefits local gas distributors unfairly, interfering with interstate commerce and violating the Equal Protection Clause of the Constitution. The Sixth Circuit ruled that the Tax Injunction Act (TIA), a federal law designed to keep federal courts out of many of these kinds of cases, does not prevent a federal court from deciding this one, nor does the principle of "comity," which encourages federal courts to defer to state courts. Several other federal appeals court agreed with this interpretation of the TIA, but one did not.

On June 1, 2010, the Supreme Court ruled that the comity doctrine applies and this case must proceed in state court. The Court ruled that both the comity doctrine and the Tax Injunction Act operate to constrain federal courts from interfering in the states' ability to impose taxes to fund their governments' operations. Even where a state tax law discriminates, the Court said that it generally defers to state courts to fashion a remedy that provides for equal treatment. State courts are in a better position to know what their state legislative preferences are, and the state enjoys wide regulatory latitude when it comes to commercial matters. Manufacturers prefer to go to federal court when challenging a state's laws, but discriminatory tax laws will be particularly difficult to challenge in federal court after this ruling.

 

Xilinx, Inc. v. Commissioner   (9th Circuit)

Application of "arm's length transaction" principle to related-party transactions

The Ninth Circuit Court ruled that a taxpayer who is engaged in a cost-sharing agreement with a related person must share all costs related to the agreement, including stock option costs, even where unrelated parties would not do so. This decision fundamentally weakens the "arm's length standard" of section 482 of the Internal Revenue Code - which serves as a core principle of international transfer pricing agreements.

On Aug. 21, 2009, the NAM joined 15 other organizations in an amicus brief urging a larger complement of the Ninth Circuit to reconsider the 2-1 decision by three of its judges. We argued that for more than 75 years, Congress, the courts and the IRS consistently have mandated the application of the arm's length standard for transactions governed by Section 482 of the Code. This is designed to prevent the manipulation of profits between related entities. It is very important that one internationally accepted objective measure be used to evaluate related-party transactions to prevent double taxation.

The judges vacated their original ruling, and on March 22, 2010, ruled as we had suggested. They affirmed the trial court's ruling, holding that the relevant statute should be construed to give parity between taxpayers in uncontrolled transactions and those in controlled transactions. In addition, the "arm's length" standard was part of the US-Ireland tax treaty obligations that applied to the transaction in question, and our treaty negotiators thought that this standard should apply in such cases.


Related Documents:
NAM brief  (August 21, 2009)

 


ADEA -- 2009



Gross v. FBL Financial Services, Inc.   (U.S. Supreme Court)

Whether direct evidence of discrimination is needed to get mixed-motive jury instruction in ADEA case

In a lawsuit filed by an Iowa executive who alleged that his employer violated the Age Discrimination in Employment Act (ADEA) by demoting him because of his age, a jury returned a verdict in his favor. His employer appealed, claiming that the jury instructions were improper. The Eight Circuit reversed, finding error in giving a mixed-motive jury instruction.

Employment discrimination lawsuits typically involve “mixed motives,” in which evidence shows that a combination of lawful and unlawful motives led to the employment decision giving rise to the lawsuit. Who prevails in these cases often depends on whether the plaintiff or the defendant bears the burden of persuasion.

In Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003), the Supreme Court held that a plaintiff in a Title VII employment discrimination case does not have to present direct evidence of discrimination to obtain a mixed-motive jury instruction that, helpfully to the plaintiff, shifts the burden of persuasion to the defendant.

The Supreme Court decided 6/18/09 that this burden-shifting principle under Title VII does not apply to disparate-treatment cases brought under the ADEA. Employers need not bear the burden of proving that the would have taken the adverse employment action even if age were not a factor in their decision. Instead, the employee bears the burden of proving not just that age discrimination was a motivating factor, but that the adverse employment action would not have occurred but for the employer discriminating on the basis of age.

The 5-4 decision was based on the majority's reading of the specific words of the statute, which prohibits age discrimination "because of" the employee's age. By comparison, Title VII includes language that makes an employment action unlawful if race, color, religion, sex, or national origin was "a motivating factor" for the action.

 


Alien Tort Statute -- 2009



Sinaltrainal v. Coca-Cola Co.   (11th Circuit)

Alien Tort Statute jurisdiction

The Alien Tort Statute has been used increasingly in the past 20 years by foreign nationals to sue American companies in federal court alleging complicity in acts of violence by foreign governments abroad. This case was brought by Colombian nationals against Coca-Cola for alleged aiding and abetting Columbia paramilitary personnel with respect to violent acts that those personnel allegedly committed.

The NAM's brief urged the 11th Circuit not to expand the ATS beyond its narrowly limited confines. Expansion of U.S. jurisdiction would discourage investment and trade between U.S. companies and foreign countries, and would interfere with our government's management of foreign economic affairs. ATS suits increase the risks of U.S. investments abroad, place U.S. companies at a competitive disadvantage, expose them to costly and protracted smear campaigns, and subject them to expensive and potentially futile pre-trial discovery. In addition, such litigation undermines principles of comity and second-guesses the ability of foreign authorities to investigate activities taking place on their soil. It puts the U.S. government in the untenable position of being forced to choose sides in sensitive international situations.

Moreover, the ATS is narrowly defined to allow jurisdiction over violations of the "law of Nations," but claims of aiding-and-abetting liability and corporate veil piercing like those in this case have not reached the required level of international acceptance to qualify for ATS jurisdiction.

On 8/11/2009, the 11th Circuit unanimously upheld the dismissal of the case. While the court recognized aiding and abetting liability, it described its scope very narrowly. It also found that state action is an important element in ATS cases, narrowing the circumstances in which manufacturers might be held liable.


Related Documents:
NAM brief  (July 10, 2008)

 


Antitrust -- 2009



Pacific Bell Tel. Co. v. linkLine Communications, Inc.   (U.S. Supreme Court)

Revival of "price squeeze doctrine" by Ninth Circuit

On Nov. 15, the NAM and Verizon Communications Inc. filed an amicus brief urging the Supreme Court to review a Ninth Circuit decision that affirms the “price squeeze doctrine” of antitrust law. This doctrine is recognized when companies that sell at both wholesale and retail levels, and have large wholesale market shares, set their retail prices too low for their wholesale customers to stay in business. However, this doctrine is an exception to consumers-first antitrust law, which has generally held that low prices anywhere are good for consumers and that if a less efficient competitor cannot keep up, courts need not intervene to fix the problem.

In this case, linkLine Communications, an internet service provider (ISP), bought DSL transport services from SBC, combined them with ISP services and sold the package to subscribers. SBC (Pacific Bell) does the same thing for its internet access customers, but for a price with which linkLine had an increasingly difficult time competing. Thus, because it could not compete, linkLine sought a remedy in antitrust litigation.

Our brief argued that the allegation that a vertically-integrated monopolist’s wholesale and retail prices create a “price squeeze,” at least where the monopolist has no antitrust duty to deal, fails to state a claim under Section 2 of the Sherman Act.

First, we argued that the Ninth Circuit’s ruling conflicts with four other Circuit Court decisions, which expressly held that a dominant firm does not violate Section 2 by failing to sell goods to a competitor at a wholesale price that ensures that competitor makes a profit at the retail level.

Next, we asserted that the Ninth Circuit’s ruling conflicts with the Supreme Court’s precedents and is inconsistent with settled antitrust principles. For example, in Brooke Group, the Supreme Court ruled that a price discount is not predatory unless it is below cost and poses a dangerous risk of subsequent monopoly pricing. The same rule should be applied here, since a “price squeeze” typically reflects the decision of a vertically-integrated firm to voluntarily offer a good to a competitor at wholesale and to compete vigorously over price at retail, both of which are beneficial practices that should be encouraged.

Finally, we argued that the Ninth Circuit’s rule creates uncertainty where clarity is needed. Unlike the objective test adopted in Brooke Group to determine when price is used as a predatory weapon to ensure the application of the law in a predictable manner, the Ninth Circuit’s decision forces juries, antitrust counselors, and managers to decide what wholesale and retail prices leave a rival with the opportunity to secure a “reasonable” profit.

On Sept. 4, the NAM and Verizon filed another amicus brief on the merits in this case. Our brief argued that a price-squeeze theory of antitrust liability should be rejected categorically because the potential competitive gain from recognizing a price-squeeze inquiry is hard and costly to identify, particularly for courts, and worse, any price-squeeze duty would present grave risks of deterring conduct encouraged by the antitrust laws. In addition, from a policy perspective, expanding Section 2 to recognize price-squeeze claims is particularly inadvisable when a regulatory authority like the FCC already oversees the conduct. Even without regulation at the retail level, regulatory authority at the upstream-input level can readily address any true competition issues.

Additionally, we argued that regulators are better positioned than judges or juries in antitrust cases to make the inherently uncertain determinations about pricing and the effects on investment and innovation that are necessary in a price-squeeze analysis.

On February 25, 2009, the Court rejected the price-squeeze theory of antitrust liability. As a result, a company operating at both the wholesale and retail levels need not price its products or services in a way that preserves the profit margins of companies that buy from it and sell at retail in competition with it. This is true as long as the seller has no duty to sell to competitors at the wholesale level and is not engaging in predatory pricing at the retail level. Indeed, selling at a lower retail price is the essence of competition, according to Chief Justice Roberts, author of the opinion. The case was sent back to determine whether there might be a predatory pricing claim that satisfies the specific pleading requirements of the 2007 Twombly decision.


Related Documents:
NAM brief  (September 4, 2008)

 


Arbitration -- 2009



Vaden v. Discover Bank   (U.S. Supreme Court)

Whether Federal Arbitration Act lawsuit arises under federal law

This case involves whether federal courts have jurisdiction in a lawsuit seeking to enforce an arbitration agreement under state law.

Discover Bank sued a customer in Maryland state court when she failed to make payments on her credit card balance. She filed a counterclaim for herself and on behalf of a class, alleging that the bank had imposed unlawful fees, finance charges, and interest and had breached its contract under state law. In response, the bank filed a motion to compel arbitration of the cardholder’s counterclaims under the Federal Arbitration Act (FAA) in federal court in Maryland.

Although the court granted the motion, it did not address whether it had jurisdiction to hear the case. In June 2007, the Fourth Circuit held that the district court had the requisite jurisdiction, since the underlying dispute involved the Federal Deposit Insurance Act and thus presented a federal question.

On March 9, the Supreme Court ruled that a federal court may not exercise jurisdiction to mandate arbitration under the FAA where the actual controversy between the parties is based on state law. A company seeking to compel arbitration may not recharacterize a state-law controversy to try to find some federal law aspect to the case, including an argument that the claims are preempted by federal law. In this case, even though federal courts may not compel arbitration, the company may still be able to get the state court to do so under the contract.

 


Benefits -- 2009



AT&T Corp. v. Hulteen   (U.S. Supreme Court)

Whether pregnancy leave prior to enactment of Pregnancy Discrimination Act should be included in years-of-service calculations

When the Pregnancy Discrimination Act of 1978 became effective, companies began to count pregnancy time off when calculating the length of service of an employee for purposes of pension and other benefits. But some companies do not count time off that was taken prior to the enactment of the PDA. On 5/18/2009, the Supreme Court decided that such time off need not be counted when companies are now calculating retiree benefits based on length of service. The company did not intend to discriminate at the time by using the legal benefit accrual method that excluded pregnancy time off in calculating retirement benefits. Without such intent, federal law does not prohibit the differential calculation.

In addition, the PDA is presumed not to apply retroactively unless Congress clearly wanted to impose that potential unfairness to achieve countervailing benefits, which it did not in this instance. The PDA is prospective only for most purposes, as evidenced by its language and legislative history.

The Court also rejected an argument that the Ledbetter Fair Pay Act of 2009 makes each retirement check a new discriminatory act. Since the disallowance of pregnancy time in the calculation of benefits was legal prior to enactment of the PDA, pension checks today do not effectuate a discriminatory practice that gives rise to a right to sue.

 

Winnett v. Caterpillar, Inc.   (6th Circuit)

Court jurisdiction over retiree medical claims under expired union contract

On January 14, 2008, the NAM and other groups filed an amicus brief in this case, arguing that a court does not have jurisdiction to hear a case brought by employees whose claims for retiree health care benefits expired when their labor contract expired. The employees worked under a union contract that provided certain health care benefits for workers that retired during the contract term, but the employees did not retire until after that contract had expired. The company argued that active employees cannot claim future benefits under a contract that has expired, and the court lacked jurisdiction under the Labor Management Relations Act and ERISA to hear the case.

Active employees can negotiate, through their union, to forego future retirement benefits in favor of immediate compensation, so no retirement benefits under an expired contract are vested until agreed to in a new contract. The lower court allowed a suit brought 15 years after the contract expired.

The NAM brief argued that the decision imposed an irrevocable vesting requirement, which served as a disincentive to providing retiree health benefits. Given the volatile and changing pricing factors to which health care benefits are subject, manufacturers "have a critical need to know with certainty the scope of their commitments to provide and pay for health care benefits for their active employees and their former employees." The trial court's decision allowing this suit to proceed "so threatens the financial health and global competitiveness of amici members and employers who offer retiree health care benefits that even those employers who would like to arrange for the provision of such benefits may not risk doing so." The decision will lead to increased costly benefits litigation. Not only will active employees seek to have courts declare future retiree medical benefits vested for life during any contract they deem favorable prior to their actual retirement, but they will also seek to force companies to reinstitute retiree medical benefits for long-expired labor agreements that the retirees perceive to be more beneficial than their present retiree benefits.

The NAM joined with the American Benefits Council and the HR Policy Association in the amicus brief.

In 2009, the court reversed the district court's decision. It found no express language in the contract that provided for vesting of retirement benefits, and the benefit plan contained a right-to-terminate clause for employees that have not yet reitred. Benefits vest upon actual retirement, not upon the date when an employee could have retired. It ordered the district court to dismiss Plaintiffs' claims which depend exclusively on the theory that retiree medical benefits vested before retirement.

 


Class Actions -- 2009



Dow Chemical Co. v. Tanoh   (U.S. Supreme Court)

Avoiding CAFA requirements by breaking large plaintiff class into smaller groups

The NAM and 6 corporations have supported a petition asking the Supreme Court to review a Ninth Circuit decision that allows plaintiffs to break a large mass action case into seven smaller cases, each with fewer than 100 plaintiffs, to avoid the restraints imposed by the Class Action Fairness Act of 2005 (CAFA).

Under CAFA, class action and mass action litigation involving 100 or more plaintiffs and more than $5,000,000 in damages may be filed in state courts, but defendants, often manufacturers, are allowed to transfer the cases to federal courts, which are often viewed as more fair and balanced.

In this case, trial lawyers divided a single lawsuit involving 664 plaintiffs into seven different lawsuits, all making the same claim. The Ninth Circuit accepted this chicanery and rejected the defendant’s attempt to have the case heard in federal court. Our amicus brief highlights how this decision conflicts with that of another federal appeals court, and asks the Supreme Court to review the case and allow a federal court to hear it. If the Ninth Circuit’s ruling is allowed to stand, that would present a serious problem for manufacturers, since many plaintiffs would file mass actions in courts within that jurisdiction, and would further shop around for the friendliest county courthouses. Avoiding the overwhelming pressure to settle cases that wind up in such “magnet jurisdictions” was one of the primary reasons that Congress passed CAFA.

The NAM joined with Centerpoint Energy, Eli Lilly, ExxonMobil, General Electric, Occidental Petroleum and Owens-Illinois in the amicus brief.

Cert denied on October 6, 2009.


Related Documents:
NAM brief  (July 27, 2009)

 

Henry v. Dow Chemical Co.   (Michigan Supreme Court)

Rigorous standards for class certification

The NAM joined with the U.S. Chamber of Commerce and the American Chemistry Council in an amicus brief urging the Michigan Supreme Court to reverse a class certification order in a pollution case. Michigan courts should look behind conclusory allegations in the initial pleadings in a case, and rigorously analyze the claims, defenses, relevant facts and applicable substantive law when deciding whether a case should be certified as a class action.

Lax certification standards lead to unwarranted litigation and abusive legal practices. This case includes a sizeable record demonstrating that individualized issues of fact predominate, but the lower court did not consider it. Certifying a class in such circumstances can reduce individual class members’ recoveries while increasing class counsel’s fees, can fuel forum shopping in class-action friendly state courts, and will increase class action litigation to the detriment of consumers, the economy and workforce, and the legal system.

Some state courts have not adopted the rigorous standards for certification that federal courts use. Our brief underscored the need for Michigan to reject loose certification procedures, in part to prevent the judicial blackmail that comes from the tremendous pressure on a defendant to settle a suit that has been certified, regardless of the case’s merit. Improper certifications also unfairly increase the likelihood that a defendant will be found liable and the size of any damages that may result. They give plaintiffs’ lawyers the power to call the shots in the litigation, rather than the clients they represent, and generate large and sometimes abusive fees.

On November 5, 2008, the Michigan Supreme Court agreed to hear this appeal. The NAM and other groups filed an amicus brief 2/17/2009 arguing that the trial court's approach was too "laissez faire," and we repeated our concerns about excessive and unwarranted litigation and abusive legal practices from improper class action certifications.

On July 31, 2009, the court reversed the trial court's certification of the class, and remanded the case for further consideration using state, not federal, rules. It placed the burden on the plaintiff to provide information sufficient to establish all the requirements for certification, and if the pleadings do not have sufficient evidence, the court may look to additional information to determine whether certification is proper. This ruling is beneficial to the extent it puts the burden on plaintiffs to prove that their case truly deserves to be handled as a large class action.


Related Documents:
NAM brief  (February 17, 2009)
NAM brief  (June 27, 2008)

 


Criminal Liability -- 2009



United States v. Ionia Management S.A.   (2nd Circuit)

Standards for imputing criminal liability to a corporation

Ionia Management was indicted when some of its employees dumped waste oil into the ocean and failed to keep the required records under the Act to Prevent Pollution from Ships. It appealed its conviction to the Second Circuit, arguing in part that it could not be vicariously liable for the acts of employees who violated strict company policy, who acted outside the scope of their employment, and whose illegal acts provided no benefit to the company.

The NAM joined with 5 other groups in supporting this appeal. Our brief challenged a jury instruction and urged an approach that is consistent with Supreme Court precedent and the objectives of criminal liability. The jury instruction allowed the imposition of criminal liability on the corporation for the conduct of a single low-level employee even if he or she acted in direct contravention of corporate policy and a robust compliance program. The instruction stems from a longstanding but indisputably mistaken application of a Supreme Court decision from 1909, the New York Central & Hudson River Railroad case. Although that case stood only for the proposition that Congress may include respondeat superior principles in a criminal statute, it did not mandate the use of such principles in statutes where Congress has made no such choice. It is critically important, in light of the increasing criminal investigations of organizations and the corporate life-or-death consequences an indictment can bring, that the courts apply the correct principles and criteria to the imputation of criminal misconduct by corporate employees to their employer.

In various statutes with criminal penalties, the Supreme Court has limited a company's responsibility to the acts of supervisors and when the company has no reasonable policies in place to deter the offending employee's conduct. The trial court's decision in this case would make it easier to impute conduct and knowledge to a corporation in a criminal case than it would be in a civil case under the Civil Rights Act of 1964.

The threat of criminal liability gives government prosecutors tremendous power to require the waiver of attorney-client privilege and to create Draconian non-prosecution and deferred prosecution agreements. We urged the Second Circuit to adopt a standard that mirrors recent Supreme Court decisions and that adds an additional element to criminal liability that requires the prosecution to prove that a corporation lacks effective policies and procedures to deter and detect criminal actions by its employees. This would encourage self-policing while protecting corporations and shareholders from rogue employees who commit crimes despite a corporation's diligence.

Regrettably, on 1/20/09, the Second Circuit upheld the conviction. The court cited an earlier Second Circuit case, United States v. Twentieth Century Fox Film Corp., which held that a compliance program, no matter how robust, does not protect a company from liability when its employees break the law.


Related Documents:
NAM brief  (June 6, 2008)

 


Environmental -- 2009



Alaska Wilderness League v. Kempthorne   (9th Circuit)

Standards for assessing NEPA requirements for offshore drilling

Two judges in the Ninth Circuit issued an overly strict interpretation that requires companies wanting to drill for oil in the waters off the north coast of Alaska to perform studies under NEPA, the National Environmental Policy Act, that examine very detailed effects of the drilling configuration sought to be installed. Such studies cannot be performed without conducting the kind of full-scale test that would require a permit, a Catch-22.

The NAM joined with the Mountain States Legal Foundation and the Chamber of Commerce in an amicus brief urging further review of this decision by a larger group of Ninth Circuit judges. We argued that there should be a "full and fair discussion" of environmental impacts, which is enough to constitute a "hard look" to satisfy NEPA, and that the new, tougher standard adopted by 2 of the 3 judges in this case went too far.

Facilitating oil exploration and development in Alaska is needed to increase America's access to domestic sources of reliable energy. It is part of the NAM's comprehensive energy strategy to adequately address our nation’s energy needs.

In an order dated March 6, 2009, the Ninth Circuit withdrew the 3-judge opinion and planned to issue a new one. However, Shell withdrew its drilling plan in May, 2009, and submitted a new scaled-back proposal for the 2010 season. The court dismissed the case as moot.


Related Documents:
NAM brief  (February 17, 2009)

 

American Farm Bureau Federation v. EPA   (D.C. Circuit)

Particulate matter air quality regulations

The NAM is part of the Fine Particulate Matter Petitioners Group, which filed a petition for review in the D.C. Circuit of a final EPA regulation published in October, 2006, entitled "National Ambient Air Quality Standards for Particulate Matter." This case involves stringent new EPA air quality standards, which industry and agricultural groups say go too far and environmental groups and states say are not strict enough.

The regulation applies both to fine particles (generally smaller than 2.5 micrometers in diameter) and to larger particles (less than 10 micrometers). It retains an annual fine particle standard of 15 micrograms per cubic meter, and ratchets down the daily standard from 65 to 35 micrograms per cubic meter. It retains the 150 micrograms level for daily exposure to larger particles. The agriculture and mining industries are not exempt.

The new standard is expected to increase the number of nonattainment areas around the country significantly. Our challenge focused primarily on the fine particle portion of the rule.

Also included in the Fine Particulate Matter Petitioners Group are the American Coke & Coal Chemicals Institute, the American Forest & Paper Association, the American Iron & Steel Institute, the Chamber of Commerce, the Corn Refiners Association, the National Cotton Council of America, the National Oilseed Processors Association and the Portland Cement Association. Our petition was consolidated with others from the American Lung Association and other environmental groups, the National Mining Association, the National Cattlemen's Beef Association, 13 states, the Agricultural Retailers Association, the Utility Air Regulatory Group and others.

On Jan. 29, 2008, we filed a brief supporting EPA's decision to keep the fine particulate matter standard at 15 micrograms per cubic meter. It properly kept the limit at 15 because the risk attributed to that level of ambient exposure has stayed the same or decreased since EPA established that standard in 1997. EPA also properly set the secondary fine particulate matter standard at a level identical to the primary standards, providing increased visibility protection and providing the requisite level of public welfare protection.

We opposed a challenge to the standard that argued the EPA should have adopted recommendations of the Clean Air Scientific Advisory Committee (CASAC), because the Clean Air Act only allows that group to recommend revisions and the ultimate decision is in the discretion of the EPA Administrator.

On Feb. 24, 2009, the D.C. Circuit remanded the fine particulate standard to the EPA, as well as the EPA's decision to equate the primary and secondary fine particle standards, but upheld the coarse particulate standard. The court ruled that "the EPA did not adequately explain why an annual level of 15 μg/m3 is sufficient to protect the public health while providing an adequate margin of safety from short-term exposures and from morbidity affecting vulnerable subpopulations." It noted in particular three short-term studies that the EPA did not adequately explain away. During the remand, EPA's rule will remain in effect. It also found that EPA acted unlawfully when it failed to determine what level of visibility protection was needed to protect the public welfare. EPA's failure to set a target level of visibility was fatal to the standard it set.

With respect to an industry challenge to the regulation of coarse particulate matter, the court said that EPA need not wait for conclusive evidence of adverse health effects before regulating. It rejected the challenge and upheld this portion of EPA's regulation.

 

American Petroleum Institute v. Salazar   (U.S. District Court for the District of Columbia)

Whether polar bear regulation should deny Alaskan industry greenhouse gas emissions exemption that applies to other states

On May 15, 2008, the Department of the Interior issued an Interim Final Special Rule designating the polar bear as threatened under the Endangered Species Act, based on its determination that global climate change, resulting from increased concentrations of greenhouse gases in the atmosphere, threatened to injure the bears' habitat by reducing polar ice. As part of this rule, the Department provided an exemption for greenhouse gas emissions, since they are part of a worldwide phenomenon that cannot be traced to particular activities in particular locations affecting the bears.

This exemption applied to greenhouse gas emissions in all states except Alaska. On August 27, the NAM joined with the American Petroleum Institute, the U.S. Chamber of Commerce, the National Mining Association and the American Iron and Steel Institute in filing a complaint challenging the Department's omission of Alaska from the exemption. Manufacturing and other business operations in Alaska that may produce greenhouse gases should not be treated differently than those of companies in the other 49 states. This "Alaska Gap" exposed Alaskan operations to increased permitting burdens and/or the risk of enforcement by government authorities and citizen suits.

Our lawsuit challenged the Alaska Gap as arbitrary and capricious, since the best scientific data in the rulemaking record do not demonstrate enough of a connection between specific actions resulting in emissions and an effect on the polar bear.

The NAM supported the exemption for all states from permitting for greenhouse gas emissions that might affect polar bear habitat, not just every one but Alaska. The NAM was not challenging the decision to designate the polar bear as a threatened species.

On December 16, 2008, the Department of the Interior amended the rule to eliminate the "Alaska gap" carve-out provision, but implemented a more narrow carve-out. The business groups decided not to challenge the more narrow carve-out, and on April 6, 2009, stipulated that our complaint could be dismissed. In the stipulation order, the court recognized that the business groups were Defendant-Intervenors in both the Center for Biological Diversity case and the Defenders of Wildlife case, which involve other issues affecting polar bears. See the Center for Biological Diversitysummary for details on these combined cases.


Related Documents:
NAM complaint  (August 27, 2008)

 

Burlington N. and Santa Fe R.R. Co. v. United States   (U.S. Supreme Court)

Apportionment of liability under CERCLA

This case was consolidated on appeal with Shell Oil Co. v. United States. Click here for a summary of the two cases. The NAM filed two amicus briefs in these cases.


Related Documents:
NAM brief  (November 24, 2008)
NAM brief  (July 25, 2008)

 

Connecticut v. American Electric Power Co.   (2nd Circuit)

Public nuisance from electric utilities

The NAM joined with 10 other major business groups to urge the Second Circuit to reject lawsuits brought by 8 states against 6 major electric power utility companies over global warming. The states claim that the utilities, by emitting carbon dioxide from the process of burning fuel to produce electricity, contribute to global warming and create a public nuisance in their states. Our brief argued, and the lower court judge found, that this issue is a political question unsuitable for resolution in the courts. We warned that this suit, if allowed, would open the door to nuisance suits targeting any activity that uses fossil fuel for energy, such as companies using a fleet of cars or trucks, and that global warming and energy usage are international and national issues that are not amenable to solution through the case-by-case, patchwork approach of nuisance suits.

This suit basically seeks to have the judiciary decide how fossil fuel energy should be used in this country. This issue is a political question that should be decided only after the kind of full debate and public participation that the political, legislative and administrative processes of government can provide. Energy-intensive industries include aluminum, chemicals, forest products, glass, metal casting, mining, petroleum refining and steel. Even farming and road building could be subject to nuisance suits. A second brief filed in the Open Space Institute case is virtually identical. See also: Open Space Institute, Inc. v. American Electric Power Co.

On Sept. 21, 2009, two judges of the Second Circuit issued an opinion reversing the trial court and sending the case back for trial. They ruled that the claims are not political questions, that the plaintiffs have standing, and that they have stated claims under the federal common law of nuisance. The court found that a decision by a single federal court concerning a common law nuisance action brought by domestic plaintiffs against domestic companies for domestic conduct does not establish a national or international emissions policy. The court said that the relief sought in this case "applies in only the most tangential and attenuated way to the expansive domestic and foreign policy issues raised by Defendants." It said that well-settled principles of tort and public nuisance law provide guidance on how to handle the case. Until Congress steps in to preempt the field of the federal common law of nuisance, courts can decide cases involving such claims. The court found that there is no unified U.S. policy on greenhouse gas emissions, and that a court case would not interfere.

With respect to standing, the court said that at this point in the litigation the plaintiffs "need not present scientific evidence to prove that they face injury or increased risk of injury, that Defendants' emissions cause their injuries, or that the remedy they seek will redress those injuries." It is enough that the states have an interest in safeguarding the public health and their own resources. The court found that the plaintiffs sufficiently alleged that their claimed injuries (global warming) are "fairly traceable" to the defendants' emissions.

The judges also ruled that private parties are allowed to bring federal common law public nuisance suits, although the case precedent for this is limited. In addition, federal environmental law does not displace this common law nuisance action, since neither Congress nor the EPA has yet regulated greenhouse gases "in any real way."

This litigation will now continue, but the case is being appealed to the Supreme Court. Major producers of electricity must go through lengthy and expensive governmental emission permitting procedures, and even when fully approved, plants will still be subject to suits challenging their emissions. This is an untenable situation that will lead to increased costs, conflicting court judgments and more expensive energy for manufacturers and the American public.

 

Entergy Corp. v. EPA   (U.S. Supreme Court)

Use of cost-benefit analysis in cooling water intake regulation


Related Documents:
Summarized in PSEG Fossil LLC v. Riverkeeper, Inc.  (April 1, 2009)
NAM brief  (July 21, 2008)

 

National Association of Manufacturers v. EPA   (EPA)

Request for Reconsideration of Information Quality Act request regarding ozone

The NAM filed a Request for Correction under the Information Quality Act asking that EPA correct scientific errors in a package of documents related to its proposed revision of the National Ambient Air Quality Standard for ozone. See summary linked below.

EPA rejected, disagreed with, or otherwise denied every information quality error described in the NAM's request for correction. Consequently, on Oct. 14, 2008, the NAM submitted a 160-page Request for Reconsideration detailing a variety of problems with the EPA's studies and processes. Many of the epidemiological studies EPA staff found persuasive used research designs that were known at the time to be demonstrably substandard. Staff relied on complex statistical methods to coax data into revealing effects from ozone so small that humans cannot even recognize experiencing them. Finally, EPA staff insisted that certain studies provide valid and reliable evidence of respiratory health effects from ozone even though they rejected these same studies in their July 2007 draft Integrated Science Assessment for Oxides of Nitrogen.

The appeal seeks more cogent answers than EPA provided in its response to the Request for Correction. The document also identifies a number of process changes that are necessary to ensure that future NAAQS reviews fully and consistently adhere to the Agency's Information Quality Guidelines and the Information Quality Act.

On Jan. 15, 2009, EPA responded by "deferring consideration" of our request, pending resolution of the challenge to the ozone NAAQS rule in the U.S. Court of Appeals for the D.C. Circuit (see link below). NAM may resubmit this request after the conclusion of that litigation.


Related Documents:
NAM Request for Reconsideration  (October 14, 2008)

 

Open Space Institute, Inc. v. American Electric Power Co.   (2nd Circuit)

Public nuisance from electric utilities

This is a consolidated case with Connecticut v. American Electric Power Co. Click here for the full summary.

 

PSEG Fossil LLC v. Riverkeeper, Inc.   (U.S. Supreme Court)

Use of cost-benefit analysis in cooling water intake regulation

The Second Circuit ruled that EPA could not use cost-benefit analysis when implementing certain provisions of the Clean Water Act. The regulations at issue address existing power plants, but the court's ruling directly jeopardized favorable regulations governing all other users of cooling water, such as in the steel, chemical, paper and petroleum industries. Indeed, all consumers of electric power are likely to be impacted by an increase in the cost of electricity.

The NAM joined with four other organizations in an amicus brief urging the Supreme Court to hear this appeal. The issue involves Section 316(b) of the Clean Water Act, which establishes requirements for cooling water intake structures at electric power plants, in order to minimize the impact of such structures on fish. The Second Circuit ruled that EPA choose the most effective technologies for minimizing the impact of these structures that the affected companies as a whole "can reasonably bear," without any consideration of the costs and benefits of that technology, unless two different technologies "produce essentially the same benefits."

The Second Circuit's ruling conflicted with that of another federal circuit as well as EPA's own interpretation of the statute. Our brief argued that this interpretation may affect thousands of industrial, commercial and institutional facilities that use cooling water. We also argued that the EPA acted within its authority to take into account "restoration measures" that enhance the numbers and conditions of the affected fish, but the Second Circuit rejected that as an acceptable method of minimizing the adverse impact of water intake structures on aquatic life. The operative statutory language is unclear and the EPA's interpretation is entitled to judicial deference.

Third, we argued that the Second Circuit's decision was based in part on its interpretation of Section 301 of the Clean Water Act, which governs wastewater treatment requirements. This erroneous interpretation had the potential to affect many more facilities than just the electric generating plants that were the subject of this case, and even many more than plants that have cooling water intake structures.

After the Supreme Court agreed to hear this appeal, along with Entergy Corp. v. EPA (No. 07-588) and Utility Water Act Group v. Riverkeeper (No. 07-597). We filed a brief on the merits of the legal issues on appeal on July 21, 2008.

On April 1 in a 6-3 decision, the Supreme Court held that EPA permissibly relied on cost-benefit analysis in setting the national performance standards and in providing for cost-benefit variances from those standards. Even though the legislation did not expressly provide for consideration of costs, it was within the EPA’s discretionary authority to do so, and the courts will uphold a reasonable exercise of that discretion.

 

Shell Oil Co. v. United States   (U.S. Supreme Court)

Arranger liability under CERCLA for sale of useful goods

The Ninth Circuit decided that a manufacturer of a hazardous substance is jointly and severally liable under CERCLA for any spill or misuse of the product by a third party after the substance has left the custody and control of the manufacturer. However, the product in question was sold as a useful commercial product to a third party, and not as hazardous waste. The seller relinquished control at the point of delivery, and the material subsequently leaked and contaminated some soil. The Ninth Circuit’s ruling means that a seller of a useful product that may be hazardous has actually “arranged for the disposal” of the product within the meaning of CERCLA, and is thus liable for the cleanup costs.

The Supreme Court reversed, on May 4, 2009. The plain meaning of the statute requires that a company should have had an intent to arrange for the disposal of a hazardous material to be found liable as an "arranger." The NAM's amicus brief urging the Court to review the case had made this same argument, as opposed to the Ninth Circuit's much looser test that imposed liability if disposal was merely a foreseeable byproduct of the transaction.

The Shell case was consolidated with Burlington N. & Santa Fe R.R. Co. v. United States, which raised an issue relating to the apportionment of responsibility to various parties under CERCLA. The Ninth Circuit ruled that it is possible to divide liability among various parties that may have contributed to the contamination, but that there was insufficient evidence to do so here; thus, both the railroad and Shell were held to be jointly and severally liable. The Supreme Court reversed this ruling as well, saying that the trial court correctly found that liability could be apportioned, and that the railroad was liable for 9% of the cleanup costs. It ruled that apportionment is appropriate when the evidence is sufficient to provide a reasonable basis to do so.

The NAM argued that the heightened evidentiary standards established by the Ninth Circuit for demonstrating that there is a basis for apportioning harm are inconsistent with the standards set forth in the Restatement (Second) of Torts and with the approach adopted by other circuit courts, which have applied the Restatement approach in the CERCLA context. Additionally, we contended that apportionment in this case would be consistent with the policies underlying CERCLA, especially when one considers that concerns about the potentially harsh impacts of joint and several liability led Congress to delete any specific reference to joint and several liability in the statute.


Related Documents:
NAM brief  (November 24, 2008)
NAM brief  (July 25, 2008)

 

Summers v. Earth Island Institute   (U.S. Supreme Court)

Whether plaintiffs have standing to directly challenge agency regulations

In 2002, as part of President Bush’s Healthy Forest Initiative, the U.S. Forest Service issued regulations that excluded small timber-clearing projects from the requirements of public notice, comment, and administrative appeal under both the National Environmental Policy Act (NEPA) and the agency’s internal administrative appeal process. In September 2003, the Forest Service decided to allow salvage logging of 238 acres which had been destroyed in a fire the previous summer in California’s Sequoia National Forest. Under its new regulations, the Forest Service did not conduct a NEPA environmental review before making its decision and did not allow any administrative appeals of the decision.

Several environmental groups brought suit under the Administrative Procedure Act (APA), arguing that the Forest Service’s new regulations were facially invalid and that the decision to allow salvage logging was improper. Shortly after the suit was filed, the Forest Service withdrew its decision to allow the salvage logging project. In July 2004, the parties entered into a partial settlement agreement in which the Forest Service agreed not to reauthorize the sale without first preparing a NEPA environmental review for the project. On their part, the environmental groups agreed to “dismiss with prejudice” their claims related to the salvage logging project, although they continued pursuing the suit as a direct facial challenge to the Forest Service regulations.

In July 2005, a federal district court in California issued a nationwide injunction against the new Forest Service regulations, which the 9th Circuit upheld in August 2006.

On March 3, 2009, a sharply divided Supreme Court reversed, holding that the environmental groups lacked standing to challenge the Forest Service regulations. The Court reasoned that after the controversy regarding the salvage logging project had been settled, there was no longer any concrete and particularized injury to the groups. An organization like this must show an “imminent and concrete harm” to its members’ interests at the time the suit is filed.

 


ERISA -- 2009



General Mills, Inc. v. United States   (8th Circuit)

Tax treatment of ESOP distributions

This case concerns whether amounts distributed by an Employee Stock Ownership Plan (“ESOP”) to terminated participants are deductible by the corporation sponsoring the ESOP if the distributions are funded by proceeds of redemptive dividends from the corporation (i.e., payments made in exchange for shares of its stock held by the ESOP). An Eighth Circuit panel ruled that such distributions are not deductible, thereby diminishing the incentives of an employer to offer an ESOP as an employee benefit plan and creating a conflict with the Ninth Circuit’s decision in Boise Cascade v. U.S., 329 F.3d 751 (9th Cir. 2003).

On 3/26/09, the NAM joined with three other organizations in an amicus brief urging the full Eighth Circuit to review the panel decision. In our brief, we pointed out that the panel decision was premised on the Ralston Purina decision, issued after briefing was complete, and on a ground not even advanced by the federal government in either Ralston Purina or the case at hand. Under such circumstances, an appellate court should hear supplemental arguments on these issues, particularly if the court’s decision threatens to create a circuit split.

Unfortunately, on 5/6/09 the court declined to hear this appeal.

 

Hecker v. Deere & Co.   (7th Circuit)

Disclosure requirements for 401(k) plan administrators

As more companies switch from defined-benefit to defined-contribution retirement plans, such as 401(k) plans, employees are paying closer attention to administrative costs that eat into their total retirement investment. This case involves a class action suit concerning 401(k) plan fee and revenue-sharing arrangements. The plaintiffs alleged that the plan sponsor failed to provide investment choices with lower fees and to provide information that would have allowed them to make informed investment comparisons. The trial court held that the sponsor had complied with all applicable disclosure requirements, and that it fell within a safe harbor provision that protects against suits like this.

The NAM, the ERISA Industry Committee and the American Benefits Council filed an amicus brief in the Seventh Circuit on 5/9/08 explaining that the administrative costs of 401(k) plans are increasingly paid by the plan rather than the employer, and are under increasing scrutiny by the Executive and Legislative branches. We argued that suits alleging fiduciary breaches should be carefully scrutinized under stricter pleading requirements recently upheld by the Supreme Court, to prevent unnecessary, complex and costly ERISA litigation. The law firm in this case, for example, has filed 14 other class actions alleging substantially identical, barebones claims of fiduciary breach by major manufacturing companies, and have embarked on wide-ranging and expensive discovery to try to find wrongdoing.

The brief also noted that the total fees for each investment option were disclosed to plan participants, and that ERISA does not require even more detailed disclosure about amounts paid from these total fees as revenue sharing to defray the costs of plan service providers. Instead, whether such a detailed disclosure requirement should be adopted is a topic being considered by the Department of Labor and by Congress.

On Feb. 12, 2009, the court ruled that the allegations in the complaint did not state a valid claim for breach of fiduciary duty. It also ruled that the safe harbor in ERISA Section 404(c) applied because the plans allowed participants to make their own investment choices among a broad range of diverse investment options. This is a significant victory for plan administrators and companies that try to set up efficient and effective retirement benefit plans.


Related Documents:
NAM brief  (May 9, 2008)

 

Kennedy v. DuPont Plan Administrator   (U.S. Supreme Court)

Change of beneficiaries as result of divorce

A DuPont employee originally designated his wife as the alternative beneficiary for his pension benefit plan. When the couple later divorced, the wife waived her right to the employee’s pension benefits as part of the divorce settlement, but did not file a Qualified Domestic Relations Order (QDRO) with the employer.

After the employee died, DuPont paid the employee’s pension benefits to his ex-wife pursuant to her designation as beneficiary. The employee’s estate sued DuPont to collect the pension benefits, with DuPont suing the ex-wife to recover the money it had paid her.

The district court awarded the employee’s pension benefits to his estate. The Fifth Circuit reversed, holding that the wife’s rights as a beneficiary under ERISA can only be waived when a QDRO is filed. Other circuits had recognized divorce settlements without requiring a QDRO in these circumstances. The Supreme Court agreed 2/19/08 to decide whether the plan administrator may rely on a divorce settlement or only on a valid QDRO.

The NAM filed an amicus brief 7/15/08, arguing that requiring a QDRO is important for ease of plan administration, since administrators will not need to look beyond the plan documents and QDROs to pay claims, will have lower investigation costs, and will incur less litigation from beneficiaries. Congress provided a comprehensive, specific administrative regime regarding spousal rights and beneficiary designations under ERISA plans, and it did not intend for courts to fashion common law rules that require plan administrators to find and honor waivers in other ways.

On 1/26/09, the Supreme Court unanimously ruled that a plan administrator may only rely on a valid QDRO to change the beneficiary of an ERISA pension benefit plan. The Court held that "ERISA forecloses any justification for enquiries into nice expressions of intent, in favor of the virtues of adhering to an uncomplicated rule: 'simple administration, avoid[ing] double liability, and ensur[ing] that beneficiaries get what's coming quickly.'''


Related Documents:
NAM brief  (July 15, 2008)

 


International -- 2009



United States v. Eurodif, S.A.   (U.S. Supreme Court)

Whether toll processing of materials is considered sale of goods for antidumping purposes

Under U.S. international trade law, 19 U.S.C. § 1673, the Commerce Department may levy antidumping duties when “a class or kind of foreign merchandise is . . . Sold in the United States at less than its fair value.” The purpose of this statute is to protect domestic industry against unfair foreign competition.

In this case, a U.S. utility provided raw materials (unenriched uranium) to foreign uranium enrichers which, in turn, processed those materials for a fee and delivered them in their new form (low-enriched uranium) back to the U.S. utility. After an investigation, the Commerce Department determined that the foreign companies were selling low-enriched uranium, a component in nuclear power generation, at a price below fair value. However, this was material that had been supplied by the U.S. utility merely to be transformed.

The Federal Circuit rejected the Commerce Department’s view, holding that this transaction equated to the sale of a service, not the sale of goods. Thus, because the antidumping law does not cover the sale of services, no antidumping duties could be levied on these imports.

On 1/26/09, the Supreme Court reversed, unanimously holding that the Commerce Department acted within its authority in considering the business practice of having material toll manufactured overseas and repatriated to be the sale of foreign goods against which antidumping duties can be imposed. The Court ratified the Commerce Department's "eminently reasonable" approach under the principles of Chevron U.S. A. Inc. v. Natural Resource Defense Counsel, Inc., 467 U.S. 837 (1984), since its determination neither contradicted unambiguous statutory language nor represented an unreasonable resolution of ambiguous language.

We believe that imposition of antidumping duties in this case will discourage American companies from sending goods abroad for further processing or transformation, but will protect other domestic manufacturers who can perform processing functions at home.

 


Issue Advocacy -- 2009



Caperton v. A.T. Massey Coal Co.   (U.S. Supreme Court)

Whether Due Process Clause requires judicial recusal in light of campaign contributions

During his successful campaign for a spot on the West Virginia Supreme Court, Justice Benjamin received $3 million in campaign contributions from the CEO of Massey Coal Co. This represented more than 60% of the total contributions Justice Benjamin received.

A few years later, Massey Coal Co. petitioned the West Virginia Supreme Court to review a jury award of $50 million to a mining company that claimed it was forced into bankruptcy because of allegedly fraudulent conduct by Massey in securing coal-supply contracts at a steel plant. The owner of the mining company, Hugh Caperton, requested that Justice Benjamin recuse himself from the case. Justice Benjamin declined, arguing that Caperton had failed to present any evidence that Benjamin had a pecuniary interest in the matter or had exhibited an actual bias against Caperton’s company. The West Virginia Supreme Court ultimately decided to overturn the jury verdict, 3 to 2, with Justice Benjamin in the majority.

Caperton appealed the decision to the U.S. Supreme Court, arguing that Justice Benjamin’s failure to recuse himself violated Caperton’s Due Process rights, because the Massey CEO’s support for Benjamin during his campaign created an appearance of bias.

On June 8, 2009, the Court ruled 5 to 4 that the Due Process Clause requires a judge to recuse himself when an officer of a company involved in litigation before the court was the principal contributor to the judge’s campaign. It is not necessary to show that a judge has an actual bias, and the Court did not question Justice Benjamin’s subjective findings of impartiality and propriety. Rather, if a judge’s interest in a case poses “a risk of actual bias or prejudgment” using a “realistic appraisal of psychological tendencies and human weakness.” Because one party had a significant and disproportionate influence in placing the judge on the case by raising funds or directing the judge’s election campaign when the case was pending or imminent, Due Process requires that the judge recuse himself. The closeness in time between the election and the case was also a critical factor. The Court also thought that most recusal disputes would be resolved under state codes of judicial conduct, and would rarely need to be decided under constitutional Due Process safeguards.

 

National Association of Manufacturers v. Taylor   (D.C. Circuit)

Challenging "affiliated organizations" provision of Honest Leadership and Open Government Act of 2007

See link below for history of this case in the U.S. District Court for the District of Columbia.

The NAM appealed the district court's ruling to the U.S. Court of Appeals for the D.C. Circuit. We asked for and received an order from the D.C. Circuit to expedite its review of our challenge, as new and different reports are required at the end of each calendar quarter.

The NAM emphasized that review by the court of appeals is de novo, meaning the court should not give any deference to the district judge's ruling. Our argument focused on the heavy burden the government bears in trying to justify the constitutionality of a statute that infringes upon First Amendment rights. Courts give such restrictive statutes strict scrutiny, and the government's justification for imposing a limitation on speech must be compelling. In addition, the statute must be narrowly crafted and must effectively advance the interest it purports to, but the government has not met this burden. The statute is also unconstitutionally vague, both in its requirement that associations divine the intent of its members who participate, and in its requirement that associations determine what constitutes active participation sufficient to trigger reporting.

An amicus brief in support of the NAM was filed by Wisconsin Manufacturers & Commerce, the WMC Issues Mobilization Council, the Iowa Association of Business and Industry, and the National Paint & Coatings Association. These groups argued that organizations have a First Amendment right to engage in advocacy and political speech, and that Wisconsin businesses have been threatened with retaliation when their identities are disclosed. The threat of peril from the disclosure of association membership is real, and "no one should assume that politically unpopular opinions can be expressed without triggering reprisal, particularly when those expressing controversial opinions are in the public spotlight through compulsory disclosure laws." The brief suggested that disfavored speech is increasingly met "not only with an opposing viewpoint but also efforts to intimidate the organization sponsoring the disfavored speech."

Actual examples were cited, and include political blacklisting, demands for financial support from public officials, and economic retaliation. Wisconsin businesses have been threatened with boycotts after a policy campaign by the WMC Issues Mobilization Council involving the public positions and actions of individual candidates for the Wisconsin Supreme Court. Members were subjected to anonymous telephone harassment and various boycotts were threatened and implemented. Ironically, some of the groups that oppose business issue advocacy are funded by an anonymous group of contributors who, understandably, choose not to identify themselves, and who are not required to be disclosed if they engage in substantial lobbying at the federal level. Anonymous support of public debate from a variety of diverse voices has been consistently protected by the Supreme Court, in part to protect such supporters from public hostility and economic reprisal.

The NAM's reply brief offered strong arguments against the defenses raised by the government defendants.

On Sept. 8, 2009, the D.C. Circuit affirmed the lower court's decision upholding Section 207 of the statute. It ruled that there is a "vital national interest" in knowing who is putting up the money to engage in lobbying, in that Congress needs to evaluate pressures and protect itself. However, the Harriss ruling on which the court relied was a very narrow ruling with respect to disclosure of activities relating to direct lobbying of members of Congress, not an expansive ruling allowing a wide-ranging inquiry into the organizations that participate through their trade associations in background, research, preparation or coordination of lobbying by that organization’s own registered lobbyists.

The court also found that the justification for this law (to disclose contributors to "stealth coalitions") was not dispositive in the constitutional analysis, because the law applies more broadly than that. It deferred to Congress on the justification for the law ("good government requires greater transparency"), relying on the Harriss case but not providing any further rationale.

The court also approved of the law even though it is not the best fit for its purposes, and found that it is acceptable because it is less restrictive than regulating lobbying directly. It did not give much weight to the fears of companies that have been harassed and boycotted for being members of a trade association, and thought that the statute was clear enough with respect to the meaning of "actively participates." After all, only civil fines apply (up to $200,000), unless the government can prove that violations are committed "knowingly and corruptly."

The NAM is disappointed in the outcome and will continue to work to protect the confidentiality of organizations that participate in our lobbying activities.


Related Documents:
Summary of oral argument  (September 12, 2008)
Brief for Appellee  (June 18, 2008)
Brief for Legislative Defendants  (June 18, 2008)
Wisconsin Manufacturing & Commerce and others brief  (May 27, 2008)
NAM brief  (May 19, 2008)
Summary of trial court proceedings  (April 28, 2008)

 


Labor Law -- 2009



14 Penn Plaza LLC v. Pyett   (U.S. Supreme Court)

Whether arbitration clause in collective bargaining agreement is enforceable

Members of the Service Employees International Union who had worked as night security guards for 14 Penn Plaza were replaced in August 2003, when 14 Penn Plaza contracted with another firm to provide security for the building. Claiming that they were the building’s only employees over 50 years old, the union members filed an age discrimination suit against 14 Penn Plaza under the Age Discrimination in Employment Act (ADEA). 14 Penn Plaza filed a motion to compel arbitration under the union members’ collective bargaining agreement, which clearly required that discrimination claims be resolved via arbitration.

The district court denied 14 Penn Plaza’s motion to compel arbitration and the Second Circuit affirmed, holding that a “mandatory arbitration agreement purporting to waive a covered worker’s right to a federal forum with respect to statutory rights is unenforceable,” even when such an agreement had been freely negotiated by a union.

On April 1, the Supreme Court held that an arbitration clause contained in a collective bargaining agreement is enforceable. The Court reasoned that because the arbitration clause was freely negotiated and “clearly and unmistakably” required that ADEA claims be resolved by arbitration, it had no legal basis to strike down the provision. An earlier decision allowed arbitration of ADEA rights for individuals, and the Supreme Court has now applied this principle to collective bargaining agreements, as long as the waiver of the right to sue for ADEA violations is clearly expressed. The decision is important because it applies the right to arbitrate ADEA disputes broadly to employer agreements with individuals and unions alike.

 

Crawford v. Metropolitan Gov't of Nashville   (U.S. Supreme Court)

Retaliation claims under the Civil Rights Act

In 2002, local Tennessee school officials conducted an internal investigation into charges of sexual misconduct by the school district’s employee relations director, Gene Hughes. During the investigation, Vicky Crawford, a payroll supervisor, reported that she witnessed and had been the victim of sexual harassment by Hughes. The investigation did not result in any disciplinary action or EEOC charge against Hughes. Six months later, Crawford was fired for alleged embezzlement and drug use, along with two other employees who had participated in the investigation.

Crawford filed a charge of discrimination with the EEOC, alleging that she had been fired in retaliation for what she told investigators about Hughes. Crawford later brought her suit in federal court, asserting that her employer’s actions violated Title VII of the Civil Rights Act, which forbids retaliation against an employee because the employee has participated in an investigation, proceeding, or hearing “under this subchapter” (known as the “participation clause”).

The district court granted summary judgment for the employer, holding that employees are not protected under Title VII’s anti-retaliation provision when participating in an employer’s internal investigation. The Sixth Circuit affirmed, holding that “participation in an internal investigation” initiated by the employer, “in the absence of any pending EEOC charge,” is not a “protected activity” under Title VII’s participation clause. The court also reasoned that extending Title VII’s protections to internal investigations may deter employers from undertaking such investigations.

The Supreme Court will now decide whether Title VII’s anti-retaliation provision protects employees from being terminated when they allege misconduct by another employee during their employer’s internal investigation of discrimination. This is a tricky situation because allowing retaliation suits prior to formal charges at the EEOC will increase litigation, but not allowing them will encourage employees to file charges under the EEOC’s procedures.

On 1/26/09, the Supreme Court unanimously reversed, holding that Title VII's anti-retaliation provision protects employees from being terminated when they allege misconduct by another employee during their employer's internal investigation of discrimination. The Court stated that when "an employee communicates to her employer a belief that the employer has engaged in … a form of employment discrimination, that communication virtually always constitutes the employee's opposition to the activity." In his concurring opinion, Justice Alito remarked that this holding did not address "opinions" that were not communicated directly to the employer but instead were informally communicated to co-workers, thereby suggesting that such opinions would not be protected by the anti-retaliation provision.

 

Locke v. Karass   (U.S. Supreme Court)

Whether union can charge nonmembers for litigation expenses of national affiliate

The Supreme Court has held that unions can collect service fees from nonmembers to cover expenses for collective bargaining and contract administration, but cannot collect service fees from nonmembers to support political or ideological expression. In this case, the Maine State Employees Association (MSEA), the exclusive bargaining agent for certain state employees, paid a portion of the service fees collected from nonmembers to its national affiliate, the Service Employees International Union (SEIU), who in turn used part of it to pay for litigation activities undertaken by SEIU throughout the country.

The nonmembers challenged on First Amendment grounds the portion of the service fee attributable to SEIU's litigation costs. The federal district court held that collecting the service fee was not unconstitutional, because the union adequately explained the basis for the fee, provided the employees an opportunity to challenge the fee in impartial arbitration, and provided for escrow of disputed amounts.

The First Circuit held that MSEA may lawfully collect service fees from nonmembers for this "extra-unit litigation" because it is related to the union's collective bargaining duties. The Supreme Court agreed to decide whether a union serving as the exclusive bargaining agent for state employees can charge nonmembers for litigation expenses incurred by its national affiliate.

On Jan. 21, 2009, the Court allowed the union's charge for national litigation expenses as long as (1) the litigation is of a kind that would be chargeable if it were local (appropriately related to collective bargaining rather than political activities), and (2) the charge is reciprocal (other locals contribute similarly).

 

Ricci v. DeStefano   (U.S. Supreme Court)

Standards for discarding employment test results with disparate racial impact

This controversial 5 to 4 decision involves whether New Haven could properly discard promotion test results that they believed could have led to a racial discrimination suit by blacks. The majority ruled that the city could not reject the test results unless it could demonstrate a strong basis in evidence that it would have been liable under the disparate impact provisions of Title VII of the Civil Rights Act. The Court found that if it had certified the test results, black plaintiffs may have been able to show a prima facie case of disparate impact, but the city could have rebutted that case by showing that the test was job-related and consistent with business necessity and there was no alternative with a less disparate impact.

 

Thompson v. North American Stainless, LP   (6th Circuit)

Whether Title VII covers third-party retaliation claims

Title VII of the Civil Rights Act of 1964 protects employees from retaliation by their employers after complaining about discrimination in the workplace. This case involves not the employee who complained, but her fiance, who was terminated from his job. He claimed the termination was in retaliation for his fiancee's complaint, while the company cites performance-related problems. The company also argued that the plain language of the statute provides claims only to those who make a charge or otherwise participate in an investigation, proceeding or hearing.

A 3-judge panel of the Sixth Circuit ruled that a fiance or other person that is closely related or associated with those who are directly involved in protected activity may sue if there is a "causal connection between the protected activity and adverse employment action." The trial judge had ruled that the plaintiff had presented no evidence that he had participated in any protected activity.

The NAM filed an amicus brief urging the full complement of Sixth Circuit judges to uphold the trial judge, arguing that the statute is clear on its face and already protects those who "oppose discriminatory employment practices" or "participate" in equal employment proceedings. A rule that permits third-party retaliation claims would increase even more dramatically retaliation charges, which are the fastest-growing category of charges filed under Title VII, and would put employers in the untenable position of having to speculate about possible relationships an employee may have that could give rise to potential liability each time they contemplate disciplinary or other action against that employee.

This case presents a clear example of judges reading statutes in a way to achieve a policy objective rather than to enforce the text as written. A strong dissent by one judge in this case warns against legislating from the bench.

On June 5, 2009, the full Sixth Circuit ruled that "the authorized class of claimants [in third-party retaliation cases] is limited to persons who have personally engaged in protected activity by opposing a practice, making a charge, or assisting or participating in an investigation." The majority affirmed dismissal of the case against the company, finding the language in the anti-retaliation provision plain on its face. Congress did not provide a cause of action by those who do not personally oppose an unlawful employment practice, make a charge, testify, assist or participate in an investigation. The text of the statute should not be disregarded in favor of arguable public policy preferences.

The Supreme Court agreed on 6/29/2010 to hear this case on appeal.


Related Documents:
NAM Brief  (October 10, 2008)

 


OSHA -- 2009



National Association of Manufacturers v. OSHA   (3rd Circuit)

OSHA’s permissible exposure limit for hexavalent chromium

The NAM, the Georgia Industry Association, Inc., the Surface Finishing Industry Council and the Specialty Steel Industry of North America filed a petition for a federal appeals court to review OSHA’s final rule that reduces the permissible exposure limit (PEL) for workplace exposure to hexavalent chromium. The rule, effective May 30, 2006, lowered the standard from 52 micrograms per cubic meter of air down to 5.

Hexavalent chromium, or hex chrome, is widely used in a variety of industrial operations and major manufacturing supply chains (e.g., steel, aerospace/defense, automotive, industrial/medical equipment, welding, and shipbuilding.) Some operations not traditionally viewed as chromium-based processes that involve relatively small amounts of chromium (e.g., zinc finishing operations, plastics coating) would also be covered. These operations would incur large costs with few benefits. And, among industries that do use chromium extensively (e.g., chrome plating, stainless steel), the very tight standard brings under regulation large numbers of employees who are not directly involved in chromium operations (such as supervisors, maintenance and shipping personnel).

The parties reached a settlement agreement in May, 2007. It provides that OSHA will issue a letter of interpretation that provides (1) employers will be deemed in compliance with the "methods of compliance" section of the standard if they use engineering and work practice controls in confined and enclosed locations to the extent feasible and supplement those controls with respirators to comply with the permissible exposure limit, (2) the standard does not apply to housekeeping and waste disposal activities if those activities do not involve hexavalent chromium in concentrations at or above .5 micrograms per cubic meter of air as an 8-hour time-weighted average, and (3) large or bulky waste should be disposed of in sealed, impermeable bags or other closed, impermeable containers, including wrapping pallets in impermeable plastic, unless doing so would be infeasible and OSHA agrees.

Public Citizen Health Research Group continued its litigation to try to force OSHA to lower the PEL to 1, and the NAM and SSINA stayed in the case to support OSHA's less restrictive 5 microgram limit. Our brief, filed 7/17/07, argued that for a regulation to be economically feasible, it must be achieved in a typical facility without reliance on respiratory protection in more than a few, isolated operations. OSHA determined that lowering the PEL to 1 micrograms would require nearly 10% of the regulated workforce to wear respirators, and 52% for those working in welding operations. Keeping the regulation at 5 micrograms cuts these numbers by 63%, and is a reasonable decision supported by the evidence.

In addition, we argued that OSHA's decision to set a single, uniform PEL rather than setting multiple PELs for different industries or operations is rational and clearly within its discretionary authority. Also within its discretion is the decision to set an "action level" at one-half the PEL.

On Feb. 23, 2009, the Third Circuit panel, including retired Supreme Court Justice Sandra Day O'Connor, upheld the OSHA regulation, but asked that OSHA provide an explanation for why its final regulation requires employers to notify an employee whenever monitoring results indicate that the employee was exposed to hex chrome at levels in excess of 5 micrograms, while the proposed regulation would have required notification of all monitoring results.

The court ruled that OSHA reasonably concluded that a lower PEL was technologically infeasible for various plant operations, including welding, aerospace painting, and pigment, catalyst and dye production. It upheld OSHA's judgment that electroplating job shops should not have to incur compliance costs totalling 2.7% of revenues and 65% of profits, recognizing that such costs would lead to a tripling of the industry's annual price increases. The court accepted OSHA's decision to apply the standard uniformly across industries, as well as its setting of an "action level" that triggers additional monitoring and surveillance obligations at one-half of the PEL.

 


Patents, Copyrights and Trademarks -- 2009



FMS, Inc. v. Volvo Construction Eqpt., Inc.   (7th Circuit)

Change in trademark is good cause for franchise termination

The NAM, the Association of Equipment Manufacturers and the National Marine Manufacturers Association filed an amicus brief 7/3/07 urging the Seventh Circuit to overturn a lower court ruling that prevented Volvo from terminating a relationship with a dealer that had contracted to sell another company's branded construction equipment. A Maine franchise law specifies that franchisees may only be terminated for "good cause," but we argued that substitution of a trademark on a product discontinues production and distribution of the franchise goods and provides goods cause for termination of the franchise. Volvo had bought the assets of Samsung and discontinued the Samsung-trademarked items, selling instead its own products through existing exclusive dealerships. A Samsung dealer sued, arguing that it should be able to sell Volvo-trademarked goods under its Samsung franchise agreement.

Our brief underscored the importance of trademarks as the cornerstone of a franchise system, identifying the product or service to the purchasing public and guaranteeing a uniform standard of quality. A franchise is for a particular trademarked good or service, not for someone else's trademarked goods or services. Manufacturers should not be hobbled by restrictive interpretations of state statutes when transferring assets and intellectual property rights or when responding to changing market conditions. In addition, the state law must be interpreted so as not to diminish or interfere with federal trademark rights under the Lanham Act. The lower court ruling would force Volvo to license its trademark rights to a dealer that had sold its competitor's goods.

On March 4, 2009, the Seventh Circuit overturned the lower court and ruled that the franchise termination statute defines a franchise in terms of a trademark license. Consequently, discontinuation by a manufacturer of a brand line of products is a discontinuation of franchise goods under the statute, and the retailer never had a franchise for goods branded with another name. The retailer cannot claim protection from termination for a franchise it never had.

This is a significant win for manufacturers. The court’s opinion properly recognizes the importance of brand identity in franchise agreements. In light of the tremendous financial strains in today’s economy, the ruling will help avoid litigation that might otherwise make it even harder for manufacturers to compete and survive.

 

Kerr-McGee Corp. v. M.D. Mark, Inc.   (10th Circuit)

Effect of corporate merger on existing license agreement (pet. for rehearing)

M.D. Mark, Inc. licensed seismic data to Oryx Energy, which later merged with Kerr-McGee. Mark sought additional licensing fees, claiming the merger constituted a transfer of the license to a third party, and Kerr-McGee defended, arguing that a merger does not constitute a transfer under normal law and the Model Business Corporation Act. In the ensuing lawsuit, a jury awarded more than $25 million to Mark.

Kerr-McGee appealed, and the NAM supported their position on two critical points: (1) manufacturers must be able to rely on existing contractual rights and obligations when they are involved in mergers, and under standard law a license held by a merging entity automatically vests with the survivor of that merger, and (2) a jury should not reject merger law based on the opinions of witnesses.

Thirty-eight states, including Colorado, where this case arose, have adopted model statutory language that keeps contracts intact during mergers. Parties are free to write contracts to include provisions relating to mergers, but in the absence of such language, standard law should apply. In addition, judges are authorized to decide questions of law, and juries should not be allowed to rewrite the law in a way that poses grave questions for future mergers.

On June 26, 2009, the court dismissed the appeal since the parties reached a settlement.


Related Documents:
NAM brief  (May 27, 2009)

 

Larry Hobbs Farm Eqpt., Inc. v. CNH America, LLC   (Arkansas Supreme Court)

Whether withdrawal of trademarked product line is good cause for franchise termination

A farm equipment dealer brought suit under the Arkansas Franchise Practices Act (AFPA) to prevent its supplier company, CNH, from terminating a relationship with that dealer, who had contracted to sell the supplier’s branded farm equipment. The federal district court hearing the case asked the Arkansas Supreme Court to answer three questions of Arkansas law for which there is no controlling precedent but which may be determinative. Among the three questions accepted for certification, the court agreed to decide whether the market withdrawal of a trademarked product constitutes “good cause” to terminate a franchise under Arkansas law.

On Nov. 24, the NAM and other groups filed an amicus brief urging the Arkansas Supreme Court to interpret the AFPA to permit a franchisor to make a good faith, commercially reasonable and nondiscriminatory withdrawal of a trademarked product from the market.

First, we argued that this interpretation best advances the law’s dual purposes of promoting the development of franchises and protecting franchisees from exploitation after they develop a local market for a trademarked product. Additionally, we pointed out that the history of franchise laws suggests that the aim was to “level the playing field” between franchisors and franchisees, not to immunize such agreements from economic reality.

Second, we argued that allowing market withdrawal based on good faith, commercially reasonable, and nondiscriminatory business decisions better aligns Arkansas with other states, none of which do what the plaintiffs want, namely, to wholly reject a market withdrawal defense.

Third, our proposed interpretation of the AFPA avoided calling it into constitutional doubt. An earlier Arkansas law that capped royalty payments paid by franchisees was declared unconstitutional on the ground that it exceeded the Arkansas legislature’s police power, as it conferred a unilateral economic benefit on franchisees. The interpretation proposed by plaintiffs likewise confers a unilateral benefit on franchisees to obligate franchisors in perpetuity, regardless of the franchisor’s economic circumstances, unless the franchisor pays the franchisee an “exit toll.”

Regrettably, on 1/22/09, the Arkansas Supreme Court ruled that market withdrawal of a trademarked product does not constitute "good cause" to terminate a franchise under Arkansas law. The court reasoned that because market withdrawal was not specifically listed as an example of good cause for termination within the law, the legislature must not have intended to include it as one.

The current economic climate can be expected to spawn more dealer termination litigation. For example, the NAM participated in a similar case, FMS Inc. v. Volvo Construction Eqpt. (7th Cir.), decided in 2009.


Related Documents:
NAM brief  (November 21, 2008)

 


Procedure -- 2009



Philip Morris USA Inc. v. Williams   (U.S. Supreme Court)

State procedural rights when case is remanded on federal constitutional grounds

For the third time, the Supreme Court was poised to review a $79.5 million punitive damages award imposed by an Oregon jury allegedly to punish Philip Morris for fraud. The case’s previous journey to the Supreme Court resulted in an order that the Oregon Supreme Court apply a newly articulated standard that juries cannot award punitive damages to the plaintiff arising from injuries that may have been inflicted on people not party to the litigation.

The Oregon Supreme Court, however, reaffirmed the punitive damages award without determining whether it had been based on improper consideration of third-party injuries. It ruled that the company had procedurally defaulted under state law and forfeited its federal constitutional claims. State procedural rulings are normally not reviewable by the U.S. Supreme Court.

The issue initially accepted for review was whether a state court may ignore the Supreme Court’s order relating to the federal constitutional claim, and raise – for the first time in this case -- a state procedural issue to dispose of the appeal. The decision in this case will affect many more cases than punitive damages appeals – it will affect any case that is overturned on appeal with instructions to correct a constitutional problem. It is a fundamental constitutional conflict between the U.S. Supreme Court and state supreme courts over how far the states can go to avoid federal requirements. In a similar case years ago, Alabama tried to interpose procedural objections to a Supreme Court ruling prohibiting the disclosure of the membership of the NAACP in 1959, but the Court rejected that state’s ploy.

The NAM filed an amicus brief arguing that Oregon's decision based on the jury instruction ignored a variety of other trial practices that might improperly allow consideration of nonparty harm. For example, defense counsel can raise objections to the admission and use of evidence or arguments relating to nonparty harm. In addition, Oregon's denial of relief misinterpreted the Supreme Court's earlier decision and did not provide an independent and adequate ground for upholding the damages award.

Even though the Supreme Court had received briefs and heard oral arguments for this appeal, on March 31 it dismissed the writ of certiorari as having been improvidently granted. Unfortunately, as a consequence, the Oregon Supreme Court’s decision stands.


Related Documents:
NAM brief  (August 20, 2008)

 


Product Liability -- 2009



Bugosh v. I.U. North America Inc.   (Pennsylvania Supreme Court)

Foreseeability standard in duty-to-warn cases

Between 1958 and 1966, the plaintiff in this case worked with asbestos-containing products that had been ordered through an industrial supply house, Pittsburgh Gage and Supply Company. He later developed mesothelioma and sued the supply house and others for failing to warn him about the risks of asbestos. A defense expert was effectively barred from testifying about the state-of-the-art at the time, and a judgment of $1.4 million was awarded.

The NAM and other business and insurance associations filed an amicus brief arguing that the newest Restatement of Torts supplies the proper standard to apply in failure-to-warn cases: manufacturers or distributors should only be liable for failing to warn of foreseeable risks. They should not be strictly liable for failing to warn about potential injuries that are too remote or that were not known or should not have been known at the time. Warnings about risks that are unknowable or speculative are likely to produce over-warning, reducing the effectiveness of legitimate warnings.

On June 16, 2009, the court dismissed the appeal as "improvidently granted," ducking the issue. A strong dissent from the Chief Justice and another judge detailed the core negligence and strict liability principles at issue in product liability cases like this.


Related Documents:
NAM brief  (June 13, 2008)

 

California v. General Motors Corp.   (9th Circuit)

Whether automakers cause public nuisance

On Sept. 17, 2007, a federal district court in California dismissed a lawsuit filed by the State of California against the nation’s six largest automakers for their alleged role in contributing to global warming. Specifically, California sought to hold the manufacturers liable under tort law for supposedly creating a “public nuisance” through the greenhouse gas emissions from the cars they manufactured.

The NAM joined with Pacific Legal Foundation in filing an amicus brief on 04/08/08, urging the Ninth Circuit to affirm the district court’s dismissal of this case.

First, our brief argues that federal jurisdiction is inappropriate under a common law nuisance theory in a case alleging in-state acts by in-state defendants. Even if the Ninth Circuit finds that federal jurisdiction is proper, a nuisance claim cannot be sustained because the activity complained of, the manufacture and sale of automobiles, is entirely consistent with applicable federal and state laws and is even compulsory in some circumstances (for example, California Vehicle Code § 11713.3 makes it illegal for automakers to refuse or fail to deliver vehicles against orders placed by dealers).

Second, our brief urges the Ninth Circuit to affirm dismissal of the pendent state public nuisance claims, arguing that there is no legal consensus on what actually constitutes a public nuisance, that the manufacture and sale of automobiles is certainly not the sort of unreasonable behavior required to find public nuisance under California law, and that the Ninth Circuit should not expand the already dangerously vague tort of public nuisance, as doing so would violate the Due Process Clause.

Attorney General Jerry Brown moved to voluntarily dismiss this case in June, 2009, because the federal government is stepping up its activity to regulate greenhouse gases.


Related Documents:
NAM brief  (April 8, 2008)

 

Crane Co. v. Superior Court   (California Supreme Court)

Manipulating court procedures in asbestos cases

Claiming injury from exposure to asbestos, the plaintiff sued in Texas and answered questions during an abbreviated deposition (limited by Texas law). Defendants may have cases against them dismissed in Texas if no evidence connects their products to the alleged exposure, so they generally do not engage in extensive questioning that would increase the likelihood that their product would be included. However, California has a different procedure, and a company must engage in extensive questioning of the plaintiff, without time limits, to prove that their product was not involved.

When the Texas claim was dismissed, the plaintiff filed a similar suit in California, but died before the defendant could cross-examine him. As a result, the company will have to endure higher risk and substantial legal fees.

On June 29, the NAM and other groups filed an amicus letter in the California Supreme Court asking it to review the California procedures to make sure that plaintiffs’ lawyers do not unfairly game the system in this way. The case presented an opportunity to reevaluate the costs and benefits of California’s current deposition practices and summary judgment procedures, and to take steps to discourage forum shoppers that have made California one of the most popular jurisdictions for asbestos claims. Unfortunately, on July 8, the court declined to hear the appeal. Although the trial court had found that the plaintiff’s law firm was engaging in a “type of judicially sanctioned extortion,” and said that the firm had played the same “grisly game of asbestos litigation” in at least nine cases, it allowed the case to proceed.

 

CSX Transportation, Inc. v. Hensley   (U.S. Supreme Court)

Jury instructions regarding fear of getting cancer from asbestos exposure

On 3/16/09 the NAM filed an amicus brief urging the U.S. Supreme Court to overturn a ruling by the Tennessee Court of Appeals that could lead to a surge in expensive, unwarranted asbestos lawsuits against manufacturers. The Tennessee court ruled that asbestos plaintiffs no longer need to demonstrate that their fear about incurring injury or illness from asbestos exposure is “genuine and serious,” contradicting previous Supreme Court rulings. In this particular case, the state court awarded the claimant $5 million in pain and suffering based on thin evidence of any genuine fear.

Our brief urged the Court to preserve its carefully constructed guidelines related to asbestos litigation and to avoid exposing defendants to “unlimited and unpredictable liability.” The core issue in this case is the flood of specious claims of injury from asbestos exposure filed by individuals who have no physical evidence of such injury. The sheer volume of these claims has created backlogs in many courts and exhausted the resources of defendants, thus inhibiting those with actual injury from receiving timely and appropriate compensation.

On June 1, 2009, the Court ruled 7 to 2 that the jury should have been given an instruction to find liability only if the plaintiff's fear of getting cancer was genuine and serious. Juries, especially in emotional cases, should be given clear guidance on the law to provide the proper balance between plaintiffs and defendants. This is an important decision that prevents state courts from neglecting the rights of business to fair trials.


Related Documents:
NAM brief  (March 16, 2009)

 

Donovan v. Philip Morris USA Inc.   (Massachusetts Supreme Judicial Court)

Medical monitoring

On May 14, 2009, the NAM joined seven other business groups urging the Massachusetts Supreme Court to reject a proposed right by smokers to sue a cigarette company to pay for medical monitoring without showing that they have a manifest physical injury.

The plaintiffs in this case are a class of people who smoked Marlboro cigarettes, but who do not have lung cancer and who are not under investigation by a physician for suspected lung cancer. Instead, they claim “sub-cellular injuries,” meaning that no physical injury is manifest. Traditional tort law requires that a plaintiff have some injury before he or she may file suit for damages, including the cost of medical treatment or monitoring. There should be no recovery based on the mere possibility of a future injury. If such a remedy is to be provided, the legislature should make that decision, considering all the daily situations that might lead some to seek medical monitoring and the ramifications for the economy.

Medical monitoring claims create the opportunity for abuse, burden the courts, and have been rejected by many other courts, including the Supreme Court. States that have recognized medical monitoring claims have seen their courts inundated with lawsuits (West Virginia), or have promptly enacted corrective legislation (Louisiana). In addition, lump-sum medical monitoring awards create the opportunity for abuse by members of a class who do not use the funds for the intended purpose, or would tie up the courts with a burdensome and expensive problem of administration.

On October 19, 2009, the Massachusetts Supreme Court ruled that there is no need to prove physical harm manifested by objective symptoms. It was enough that the plaintiffs provided evidence of "physiological changes" caused by smoking, and that those changes substantially increased their risk of cancer. The court left for another day whether exposure to a hazardous substance known to cause cancer might also give rise to a medical monitoring claim even though no symptoms or subclinical changes have occurred. The plaintiff will have to show that there is a substantial increase in risk of harm from the alleged exposure. The court also ruled that once a plaintiff actually develops cancer, a separate suit may be filed for those damages, without violating the "single controversy" rule.


Related Documents:
NAM brief  (May 14, 2009)

 

Green v. N.B.S., Inc.   (Maryland Court of Appeals)

Whether cap on damages applies to Consumer Protection Act cases

In a case alleging negligence and violation of Maryland’s Consumer Protection Act (CPA), a jury awarded the plaintiff $2.3 million for injuries she suffered as a result of her exposure to lead-based paint. Pursuant to Maryland’s statutory limit on non-economic damages, the court reduced the award to $515,000.

The plaintiff appealed, arguing that the damages cap only applies to common law tort actions, not actions like this which arise under the CPA.

On 12/17/08, the NAM joined in an amicus brief with seven other organizations, urging the Maryland Court of Appeals (that state’s highest court) to affirm the lower court ruling that the statutory limit on non-economic damages applies to all cases involving personal injury.

On 7/22/09, the court ruled that the state's limit on noneconomic damages applies to personal injury actions brought under the CPA, whether the actions are based on statutory, constitutional or common law violations.

This case is another in a growing trend of cases in which plaintiffs are trying to convert product liability and negligence claims into consumer protection actions, so that they can avoid the higher standards of negligence and product liability law and recover statutory damages and attorneys fees not otherwise available. Courts should be extremely wary of expanding legal theories when plaintiffs confuse the elements of their claims and suggest that traditional legal duties are shifting under the law. Additionally, interpreting the statute so that the cap would only apply to common law torts, but not statutory or constitutional torts, would be contrary to the intent of the General Assembly and Governor, who were concerned about unpredictable awards and rising insurance premiums.

 

In re Global Santa Fe Corp.   (Texas Supreme Court)

Preemption of state asbestos and silica medical criteria law

The Texas Supreme Court recently ruled that a law requiring that plaintiffs alleging exposure to asbestos or silica demonstrate more than a minimal level of impairment is a substantive change in the law and is preempted by federal law with respect to cases subject to the Jones Act (admiralty). The NAM and other groups filed a brief 2/3/09 urging that court to be careful during reconsideration of the case to limit its ruling to Jones Act cases, since it might be wrongly interpreted as weighing against the constitutionality of the law when applied to other asbestos and silica claims. A variety of considerations, including Texas common law, the strong public interest expressed by the state legislature, and the presumption in favor of constitutionality should lead the court to limit the breadth of its ruling.

In February, 2009, the court declined to rehear the case and said nothing about limiting the scope of its decision to Jones Act cases. The constitutionality of the asbestos and silica reforms are the subject of further litigation at the trial level in Texas.


Related Documents:
NAM brief  (February 3, 2009)

 

Johnson v. Rockwell Automation, Inc.   (Arkansas Supreme Court)

Constitutionality of Arkansas tort reform

The NAM joined in an amicus brief on 1/9/09 supporting Arkansas’ tort reform statute that allows juries to consider the negligence or fault of nonparties (i.e., replaces joint liability with several liability) and permits evidence for the costs of necessary medical care, treatment or services that were paid by third parties on the plaintiff’s behalf (i.e., abolishes the “collateral source” rule).

On April 30, the Arkansas Supreme Court disagreed, saying the tort reform provisions violated the separation-of-powers provisions of the Arkansas Constitution, which gives the court the authority to establish rules of pleading, practice and procedure. While it recognized that changing the law that apportions liability is substantive and within the power of the legislature, this law also dictated procedures to be followed in court, a task reserved to the judicial branch. We had argued that the statute properly replaced “deep pocket” joint liability with “fair share” several liability, ensuring that blame for the harm would be placed where it belongs, not solely on those who may have been only marginally at fault.

The second portion of the statute being challenged was the one that eliminated the collateral source rule, which has traditionally operated to exclude evidence of payments received by an injured party from sources “collateral to” (other than) the wrongdoer, such as private insurance benefits. We could not put it better than the Arkansas Supreme Court, which stated in its opinion in Bell v. Estate of Bell that “the injured party who is compensated for his injury by collateral sources as well as by the wrongdoer receives a double recovery. For that reason, the collateral source rule has been criticized by commentators who point out that it is incongruous with the compensatory goal of the tort system.”

However, the Arkansas court decided that because the statutory language spoke in terms of admissible evidence, it fell within the constitutional restriction that gives the power to determine rules of pleading, practice and procedure to the courts. It thus appears that the legislature must make sure that statutory language sets substantive rules of liability without telling the courts how to implement them. Another alternative would be for the courts themselves to update their procedures to better reflect the will of the people.


Related Documents:
NAM brief  (January 9, 2009)

 

Klein v. Nat'l R.R. Passenger Corp.   (3rd Circuit)

Expansion of premises liability law

A federal judge in Pennsylvania declined to set aside a $24 million jury verdict against two railroad companies for injuries suffered by two teenagers who climbed on a boxcar parked near Lancaster, Pennsylvania in 2002. The teens, who admitted that they were trespassers, were severely burned by electrified catenary wires, which power locomotives, after they climbed on top of the boxcar to allegedly get a better view of the city.

On Oct. 15, 2008, the NAM joined the Energy Association of Pennsylvania in an amicus brief urging reversal by the Third Circuit, arguing that the district court’s decision represents an unprecedented and inappropriate expansion of Pennsylvania premises liability law, as it imposes on landowners of multiple properties a new duty to anticipate trespassers and prepare for their presence.

First, we argued that the evidence offered by plaintiffs did not meet the standard under Pennsylvania law for premises liability, which requires that landowners know of both the dangerous condition of the property and the presence of trespassers near the dangerous condition on the property where the injury occurs.

Second, we pointed out the court’s mistake in admitting evidence of prior incidents which were remote in time and location from the accident in this case. In fact, the court did not even undertake an analysis to determine whether these prior incidents were substantially similar to the incident which occurred here.

Our brief concluded with a warning that the costs associated with the increased liability exposure will ultimately be passed along to consumers in the form of higher prices for manufactured goods and higher utility rates at a time when consumers are already burdened by inflation and rapidly rising energy costs.

On Sept. 4, 2009, the court dismissed the appeal pursuant to a settlement agreement. The lower court rulings were withdrawn.


Related Documents:
NAM Reply to Brief Opposing Amicus Participation  (October 31, 2008)
NAM Brief  (October 15, 2008)

 

Marsolino v. Patel   (California Supreme Court)

Whether jury instruction on causation is fair

California law recognizes that a plaintiff must prove that if the defendant did not act in the way complained of, the plaintiff's injuries would not have occurred. In this case, the plaintiff alleged that if the doctors accused of failing to diagnose his colon cancer had conducted proper testing, he would not have died. This is known as "but for" causation. The doctors argued that even if they had properly diagnosed the cancer, the patient would have died anyway.

At issue are the instructions given to the jury. The court refused to instruct the jury about "but for" causation, but instead gave an instruction that allowed a finding of liability if the defendants' actions were a "substantial factor" in causing the injury. An amicus letter from the NAM and other business groups supported the defendants by arguing that this instruction was ambiguous and insufficient to clearly and precisely communicate the legal standard to be used. The issue is important because manufacturers are often involved in product liability litigation in which such an instruction is critical.

In early August, the California Supreme Court declined to hear this appeal.


Related Documents:
NAM amicus letter  (July 15, 2009)

 

Martin v. Cincinnati Gas & Elec. Co.   (6th Circuit)

Secondhand exposure to hazardous substances

The NAM joined with five other organizations in an amicus brief on 2/21/08 urging the Sixth Circuit to affirm a lower court ruling that landowners in Kentucky have no new duty to protect against off-site injuries that could result from secondhand exposures to asbestos and other substances emitted in the workplace. Whether one person owes a legal duty, as opposed to a moral or ethical obligation, is a policy judgment that must balance providing a remedy with potentially limitless tort liability.

In this case, the plaintiff’s father worked at Cincinnati Gas & Electric (CG&E) and, between 1951 and 1963, allegedly exposed his son to asbestos fibers which were carried home on his clothing and hair. The son died in early 2002 from malignant mesothelioma, allegedly as a result of that earlier exposure. The plaintiff seeks to hold CG&E liable for this secondhand exposure to asbestos.

Our amicus brief argued that the mere foreseeability of harm to third parties is not enough to extend the employer's duty of providing employees with a reasonably safe work environment to potential harm outside the workplace. In addition, imposing a new duty on landowners will bring about countless new lawsuits involving many substances and third parties.

On 1/27/09, the 6th Circuit found that under Kentucky law there is no legal duty to protect against secondary asbestos exposure until harm is foreseeable, and secondary exposure was not foreseeable until the first studies showing potential harm were published in 1965. This is another in a series of cases in various states deciding when such a duty exists.

 

Pokorney v. Foster Wheeler Energy Corp.   (New York Court of Appeals)

Duty to warn of hazards from third party products

The NAM joined with 4 other organizations urging a New York appeals court to reverse a lower court ruling that held a manufacturer liable for failing to disclose the hazards that arose from products made, sold or installed by another manufacturer. Under common law, manufacturers are only liable for hazards in their own products. We opposed the court’s creation of a new duty to warn about hazards a manufacturer does not produce or put in its products. Such a duty would require syringe manufacturers to warn of the drugs that might be used in the syringe, or lighter manufacturers to warn of the hazards of smoking, or bread or jelly manufacturers to warn of the foreseeable risk of peanut allergies in peanut butter and jelly sandwiches.

The duty to warn should be placed on the party in the best position to know the risk, and any economic loss should be borne by the party who caused it.

The case was settled in November, 2009, without a decision.


Related Documents:
NAM brief  (August 19, 2009)

 

Riedel v. ICI Americas Inc.   (Delaware Supreme Court)

Premises owner's liability for secondhand exposure to asbestos away from work

The NAM joined with ten other organizations in an amicus brief on August 1, 2008, urging the Delaware Supreme Court to affirm a trial court ruling that landowners in Delaware have no new duty to protect against off-site injuries that could result from secondhand exposures to asbestos and other substances emitted in the workplace. Delaware law does not impose a duty of the owner of property to protect against injuries to people whose relationship is too remote. Imposing such a duty would create potentially limitless tort liability.

In this case, the plaintiff alleged that she was exposed to asbestos that was brought home on her husband's work clothes, which she laundered. The trial court assumed that she was injured by the asbestos, but rejected the claim anyway.

Our amicus brief argued that the mere foreseeability of harm to third parties is not enough to extend the employer's duty of providing employees with a reasonably safe work environment to potential harm outside the workplace. In addition, imposing a new duty on landowners will bring about countless new lawsuits involving many substances and third parties.

On March 4, 2009, the court agreed with us, ruling that an employer is not liable for secondhand asbestos exposure. It held that the employer shared no legally significant relationship with the spouse of its employee which would give rise to a duty to act. It decided not to accept language in the latest Restatement (Third) of Torts that would redefine the concept of duty in a way that is inconsistent with Delaware precedents and which the legislature has not adopted. There is a difference between the duty of a manufacturer that does an affirmative act and one that merely "omits to act." Failing to act only produces liability when there is some special relationship between the parties that gives rise to a duty to act.


Related Documents:
NAM brief  (August 1, 2008)

 

Taylor v. A.W. Chesterton Co.   (Cal. Ct. App.)

Duty to warn of hazards from third party products

The NAM led five other organizations in an amicus brief urging the California Court of Appeal to affirm a lower court ruling that holds that a component part manufacturer cannot be liable for failing to warn about alleged hazards in external or replacement parts that are added after the product is made. We oppose efforts by the plaintiffs’ bar to seek out manufacturers whose connection to asbestos-containing products is increasingly remote, and the trial court correctly held that manufacturers of component parts should only be liable for defects or hazards in their own products, not those of others.

The case involves a man who allegedly developed mesothelioma while working in the Navy aboard the U.S.S. Hornet. Since the Navy is protected from liability by sovereign immunity, and virtually all asbestos manufacturers have been forced into bankruptcy, the plaintiff sued solvent component part manufacturers for asbestos in parts they never made, sold, installed or profited from.

Our brief supported well-established law that a manufacturer of one product has no duty to warn about the alleged hazards of another's product. This is true even where the supplier knew its product may be integrated into another product that could cause harm. A duty to warn would be unmanageable and unsound public policy, and could result in a duty by a syringe manufacturer to warn of the danger of all drugs that it may be used to inject, or a bread manufacturer to warn of peanut allergies since a peanut butter and jelly sandwich is a foreseeable use of the bread. Smokers with lung cancer could sue manufacturers of matches and lighters for failure to warn. Such a rule would worsen the asbestos litigation problem, which appears to be continuing to grow in California.

On Feb. 25, 2009, the court of appeal adopted our position and rejected a duty on component part suppliers to warn of asbestos in others' products. According to the court, "a manufacturer has no duty to warn of defects in products supplied by others and used in conjunction with the manufacturer's product unless the manufacturer's product itself causes or creates the risk of harm. . . . (and] manufacturers or suppliers of nondefective component parts bear no liability when they simply build a product to a customer's specifications but do not substantially participate in the integration of their components into the final product." The court rejected liability under both strict liability principles and negligence law.


Related Documents:
NAM brief  (January 22, 2008)

 

Taylor v. Elliott Turbomachinery Co.   (California Supreme Court)

Duty to warn of hazards from third party products

On April 15, the NAM and six other organizations filed an amicus letter urging the California Supreme Court to decline review of an appellate court ruling that holds that one component part manufacturer cannot be liable for failing to warn about alleged hazards from another manufacturer’s part that is added to the finished product. The hazardous product contained asbestos, and we oppose efforts by the plaintiffs’ bar to seek out manufacturers whose connection to asbestos-containing products is increasingly remote.

The case involves a man who allegedly developed mesothelioma while working in the Navy aboard the U.S.S. Hornet. Since the Navy is protected from liability by sovereign immunity, and virtually all asbestos manufacturers have been forced into bankruptcy, the plaintiff sued solvent component part manufacturers for asbestos in parts they never made, sold, installed or profited from.

Our brief supports well-established law that a manufacturer of one product has no duty to warn about the alleged hazards of another’s product. This is true even where the supplier knew its product may be integrated into another product that could cause harm. A duty to warn would be unmanageable and unsound public policy, and could result, for example, in a duty by a syringe manufacturer to warn of the danger of all drugs that it may be used to inject, or a bread manufacturer to warn of peanut allergies since a peanut butter and jelly sandwich is a foreseeable use of the bread. Such a rule would worsen the asbestos litigation problem, which appears to be continuing to grow in California.

On June 11, 2009, the California Supreme Court declined to review this case.


Related Documents:
NAM amicus letter  (April 15, 2009)

 

United States v. San Diego Gas and Elec. Co.   (9th Circuit)

Due process notice requirements for criminal liability for asbestos exposure

After San Diego Gas & Electric removed underground natural gas storage pipes that were covered with a multi-layer wrap, one layer of which contained asbestos felt, it was charged with violating asbestos work practice standards under the Clean Air Act. Although the jury returned convictions against defendants, the trial court granted a new trial on the ground that artificially inflated test results and the government’s closing argument to the jury were confusing, misleading, and unfairly prejudicial, resulting in a miscarriage of justice.

The Clean Air Act only regulates asbestos-containing material in demolition projects if it is “friable” (can be crumbled, pulverized or reduced to powder by hand) or has a high probability of becoming friable during removal, and contains more than 1% asbestos as determined under a test method established by the EPA. At trial, the government relied on samples and test methods of questionable validity that led to results nearly 30 times greater than the government’s own test results for a sample, urging the jury to convict defendants based solely on those inflated and non-representative test results.

On Nov. 4, 2008, the NAM joined in an amicus brief urging the Ninth Circuit to affirm the lower court’s decision, arguing that defendants were deprived of the fair notice that is required under the Due Process Clause as to how the government would interpret its regulations or how the government’s actual application of its test method would be used at trial. As our brief pointed out, “The EPA regulation at issue did not provide fair notice of how multi-layered asbestos-containing material must be averaged [i.e., whether by weight, volume or number of fibers] for the purpose of determining asbestos content.” Thus, no liability should be found when a regulated party acting in good faith is not “able to identify, with ascertainable certainty, the standards with which the agency expects parties to conform.”

On 3/17/09, the Ninth Circuit ruled that the trial court did not abuse its discretion in finding that the tested samples were not representative samples and were not tested properly. Appellate courts generally defer to trial court rulings except in egregious cases.


Related Documents:
NAM brief  (November 4, 2008)

 

Weil-McLain v. Nolan   (Illinois Supreme Court)

Jury access to evidence of causation involving third parties

On 12/29/06, the NAM joined with eight other groups urging the Illinois Supreme Court to overrule a lower court decision that hamstrung defendants in their ability to let the jury know about other parties that might have caused the plaintiff's injuries. Previous Illinois court rulings led the court to prevent the defendant from submitting evidence that some other party was the sole cause of the plaintiff's illness. Such a ruling deprived juries of information they needed produced verdicts that were inconsistent with the facts, and forces unfair settlements. It also invites more claims against ever more remote defendants, feeding the asbestos litigation crisis. In addition, scientific knowledge continues to improve, making it possible for juries to make judgments about causation more easily. But they needed to have access to the evidence to make those judgments.

The plaintiff in this case was a plumber-pipefitter who worked many years at jobs that exposed him to amphibole asbestos, which can cause mesothelioma, but only 20-25 times in 38 years to chrysotile asbestos, which studies show do not cause mesothelioma. The defendant company was not allowed to introduce evidence of the plaintiff's exposure to amphibole asbestos.

On 4/16/09, the Illinois Supreme Court reversed the judgment of the appellate court and remanded for a new trial, holding that it was error to exclude evidence of the decedent’s other workplace exposures. Until this decision, Illinois law had been unique in preventing a defendant at trial from showing that other exposures were the sole cause of the plaintiff’s harm. This result will properly allow juries to assess all the factors that may have played a role in any injuries, without unfairly singling out one defendant.

 

Wyeth v. Levine   (U.S. Supreme Court)

Whether FDA labeling requirements preempt state law product liability claim

In this case, Diana Levine received Wyeth’s antinausea drug Phenergan during treatment for a migraine headache. The hospital administered the drug using the “IV push” method, involving injection of the drug into a vein, which the FDA-approved label did not mention as a valid method of administration. After the drug made contact with her arteries and led to gangrene, doctors were forced to amputate her right arm.

In her state-law tort claim against Wyeth, Levine alleged injury as a result of Wyeth’s failure to provide adequate warning of the drug’s dangers. In awarding her $6.7 million, a Vermont jury concluded that Wyeth had failed to warn of the risks associated with the “IV push” method of administering Phenergan.

The Vermont Supreme Court ruled that the state-law failure-to-warn claim was not preempted by the FDA’s approval of the Phenergan label, reasoning that Wyeth could have provided the FDA-approved label and an additional warning against IV push administration.

The Supreme Court agreed. On March 4, 2009, the Court ruled 6 to 3 that FDA approval of a prescription drug label does not preempt state-law failure-to-warn claims. It found that Wyeth could have unilaterally provided a stronger warning while also seeking FDA approval of the new warning. The manufacturer bears primary labeling responsibility, despite the requirement that labels be approved by the FDA. The Court rejected language in the preamble of the drug labeling rule saying that state failure-to-warn actions threaten the FDA's role, calling the statement inherently suspect because it was announced without notice and comment, conflicts with congressional intent, and reverses long-standing FDA policy.

 


Punitive Damages -- 2009



AstraZeneca LP v. Alabama   (Alabama Supreme Court)

Whether finding of fraud and punitive damages award are appropriate in pharmaceutical pricing case

In January 2005, Alabama filed suit against 73 pharmaceutical manufacturers, alleging that they misrepresented the cost of their drugs to an independent pricing clearinghouse and that the State, in alleged reliance on those prices, over-reimbursed Alabama pharmacists and physicians who dispensed the drugs to Medicaid patients. Central to the case is a benchmark called Average Wholesale Price (“AWP”), which has been used for decades as a means of determining the estimated acquisition cost of drugs for Medicaid purposes.

In February 2008, a jury awarded $40 million in compensatory damages and $175 million in punitive damages against AstraZeneca for fraudulent misrepresentation and suppression of drug cost information, with the court subsequently reducing the punitive damage award to $120 million.

The NAM filed an amicus brief 12/15/2008 urging the Alabama Supreme Court to reverse this decision, based on two primary arguments.

First, we argued that the alleged price misrepresentation in AWP was actually based on longstanding industry practice, consistent with federal regulation, and well known by state regulators and thus could not be considered fraud. Numerous government publications dating back to 1975 clearly show that regulators understood AWP to mean the list price of pharmaceutical products, exclusive of discounts, rebates, or special offers, with other evidence proving that regulators knew that the AWPs reported to independent price clearinghouses were significantly higher than the actual or average acquisition costs paid by pharmacies.

Second, we argued that the $120 million punitive damages award violated the Due Process Clause of the U.S. Constitution and Article I, Section 13 of the Alabama Constitution, as it was based on conduct that was common industry practice for decades and well known to government regulators and thus did not reach the level of reprehensibility necessary to satisfy due process.

Our brief warned that this case had implications far beyond the pharmaceutical industry, as it is part of a growing trend by an alliance of state governments and plaintiffs’ lawyers to regulate entire industries through litigation, when legislators and regulators have made a policy decision to permit the practice at issue.

On October 16, the Alabama Supreme Court reversed, finding that the state government could not both know that AWPs represented actual, discounted transaction prices while at the same time claiming in its lawsuit that it was deceived about that. The state could not claim that it relied on a price representation it knew to be false. The jury verdicts were overturned by the ruling.


Related Documents:
NAM Brief  (December 15, 2008)

 

Beverly Enterprises Inc. v. Keaton   (Arkansas Court of Appeals)

Constitutionality of punitive damages cap

Under Arkansas law, punitive damages awards for unintentional acts are limited to $250,000 or three times the amount of compensatory damages, whichever is greater. Recently, an Arkansas state court declared that the punitive damages cap violated two articles of the Arkansas Constitution.

On Oct. 20, 2008, the NAM joined with other groups in an amicus brief that urged the appellate court to declare the punitive damages cap to be constitutional.

First, we argued that the cap does not violate the Arkansas Constitution’s prohibition against statutory limits on compensatory damages, since punitive damages, which are awarded to punish malicious conduct, are clearly distinct from compensatory damages, which are awarded to compensate for injury.

Second, we argued that the cap does not violate the separation of powers clause of the state Constitution. Trial courts retain the power to determine the amount of punitive damages, within guidelines established by the legislature pursuant to its traditional and constitutional authority to classify crimes and determine punishment.

Furthermore, the cap is in line with punishments typical at common law, similar to other civil penalties for wrongdoing, much like caps enacted in many other states, consistent with due process, and supported by recommendations made by influential groups such as the ABA Special Committee on Punitive Damages. Additionally, we cited cases from eighteen states whose courts have upheld various punitive damages reforms.

On Sept. 24, 2009, the Arkansas Supreme Court dismissed the appeal on procedural grounds because the lower court did not finalize its decision on all the claims and defendants. The case could be appealed again once that is done.


Related Documents:
NAM brief  (October 20, 2008)

 


RICO Act -- 2009



United States v. Philip Morris USA Inc.   (D.C. Circuit)

RICO restrictions versus First Amendment right to free speech

The NAM and the Washington Legal Foundation filed a joint brief on 8/17/07, urging the U.S. Court of Appeals for the D.C. Circuit to reverse a lower court ruling. Having failed to impose sweeping regulation on the tobacco industry through regulatory and legislative processes, the federal government took the litigation route, suing Philip Morris under RICO’s civil injunction provision, 18 U.S.C. § 1964(a). The government argued that tobacco companies ran an association-in-fact enterprise over the past half century to operate criminal racketeering schemes of fraud, consisting primarily of allegedly fraudulent statements about the nature of cigarettes.

Our brief argued that many of the allegedly offending statements, found in press releases, public statements, newspaper articles, academic literature and television appearances, addressed matters of public concern and thus fell squarely within the definition of fully protected speech under the First Amendment. We wanted to ensure that the federal government could not punish fully protected speech without proof that allegedly false statements were made with specific intent and were material to consumers.

We also argued that the statements at issue were not commercial speech, which might enjoy less protection, because they did not propose the sale of a product or any other commercial transaction.

By focusing on the speaker (a business) instead of the content of the speech (statements addressing matters of public concern), the district court wrongly viewed the speech as commercial. Such a view will have a chilling effect on public debate of important issues, as all speech made by corporations will be presumptively commercial and enjoy less First Amendment protection from liability.

On 5/22/2009, the D.C. Circuit ruled that the trial court offered comprehensive findings that were sufficient to identify fraudulent acts, that there was sufficient evidence supporting inferences that company executives intended to mislead, and that this specific intent by the executives can be imputed to the corporation to prove liability. The 3-judge panel dismissed the argument about protected speech, saying that the First Amendment does not protect fraud.

The court agreed with the trial court that there was a reasonable likelihood that the defendants would commit future RICO violations, and upheld the order calling for corrective statements. It held that generic discussions about cigarettes, without naming specific brands, still constitutes commercial speech that may be regulated, and that mandated corrective statements can be narrowly tailored to achieve a substantial governmental interest.

 


Securities Regulation -- 2009



Gilead Sciences, Inc. v. St. Clare   (U.S. Supreme Court)

Loss causation in fraud-on-the-market 10(b)(5) litigation

In its 2005 decision in Dura Pharmaceuticals v. Broudo, 544 U.S. 336 (2005), the Supreme Court held that allegation and proof of an inflated stock price at the time of the stock purchase are insufficient to plead and prove loss causation in a securities fraud action. Rather, plaintiffs must allege and show that they suffered an actual loss and that the defendant’s misrepresentations caused that loss. Although “ordinary pleading rules are not meant to impose a great burden upon a plaintiff,” a complaint must “provide a defendant with some indication of the loss and the causal connection that the plaintiff has in mind.” Despite this 2005 precedent, the Ninth Circuit adopted a much more lenient standard in Gilead Sciences, Inc. v. St. Clare, requiring only that the plaintiff state facts that make a theory of loss causation not “per se implausible.”

On 3/17/09, the NAM joined in an amicus brief urging the Supreme Court to overturn the Ninth Circuit’s ruling because it conflicts with the loss causation requirement that was clearly articulated in the Court’s 2005 decision. The Ninth Circuit’s decision is too lenient, and allows cases to proceed with factual allegations that do not raise the claim above the speculative level. Our brief also pointed out that amid the current economic crisis, where falling stock prices are commonplace, the standard for pleading loss causation takes on particular importance.

The Supreme Court declined to hear this appeal on April 20, 2009. Until this issue is revisited in another case, opportunistic shareholders will be permitted to simply state various conclusions without offering any corroborating details in securities class action lawsuits, thereby leaving publicly traded companies much more susceptible to strike suits.

 


Taxation and State Taxation -- 2009



Capital One Bank N.A. v. Commissioner of Revenue of Massachusetts   (U.S. Supreme Court)

Taxation of out-of-state corporations

On April 20, the NAM joined with the Council on State Taxation and the National Marine Manufacturers Association in support of an appeal to the Supreme Court of a Massachusetts decision that would allow extensive taxation of out-of-state businesses.

Historically, the Commerce Clause has protected interstate markets from impermissible state tax burdens through the rule that a state may not impose a tax on an out-of-state business unless it has more than a de minimis “physical presence” in the state. However, many states are aggressively seeking to expand their tax revenues by asserting the power to tax the corporate income of out-of-state businesses that have no physical presence in the taxing state.

In this case, Massachusetts has adopted an elastic substantial nexus test which would permit the state to tax the income of any business with customers in the taxing state, even if it lacks any real property, employees or other contacts there.

Our brief provided many examples of difficult and complicated tax situations that will face multi-state businesses should Massachusetts’ system be allowed. The effects will be particularly severe on small and mid-sized businesses because compliance costs are proportionately higher for them.

On June 22, 2009, the Supreme Court declined to hear this appeal. We expect this action will lead more states to adopt business activity taxes (BAT) on companies with no physical presence in those states. The NAM is active in the BAT Coalition and supports BAT legislation that would establish limits on state taxation of interstate commerce.


Related Documents:
NAM brief  (April 20, 2009)

 

Ford Motor Co. v. Delaware Director of Revenue   (U.S. Supreme Court)

Local taxation of unapportioned gross receipts

Delaware imposes a gross receipts tax on all money received from wholesale goods delivered in the state, regardless of whether the bulk of the actual sales activity attributable to such sales occur outside the state. For an automobile manufacturer like Ford, in many cases only a small portion of the activities related to the sale of a vehicle occurs in the state. The Delaware Supreme Court rejected Ford’s argument that the tax unfairly discriminates against interstate commerce.

That ruling is now being appealed to the U.S. Supreme Court, and the NAM joined with the Council on State Taxation in an amicus brief June 16 urging the Court to hear the case. Lower courts like Delaware’s are confused over apportionment rules that apply to gross receipts taxes. A gross receipts tax is akin to an income tax that must be apportioned to reflect the location of the various interstate activities by which it was earned. States and cities around the country are divided on how to properly apportion a variety of alternative tax regimes that differ greatly from traditional income taxes. In light of the overwhelming revenue shortfalls that state and local governments now face, it is more important than ever for the Supreme Court to clearly state how to administer such taxes constitutionally. Last year, the Court declined to hear a similar case in which the NAM participated, but we are hopeful that our continued efforts to bring this issue to the Court’s attention will ultimately lead to a successful result.

Cert denied on 10/6/2009.


Related Documents:
NAM brief  (June 16, 2009)

 

VFJ Ventures v. Surtees   (U.S. Supreme Court)

Challenging state add-back law for deductions for royalty payments

Alabama's add-back tax statute imposes a discriminatory and extraterritorial restriction on a taxpayer's ability to deduct ordinary business expenses, and threatens to lead other states to approve similar laws. In a joint brief filed 2/23/2009, the Council on State Taxation and the NAM supported the appeal of this case to the Supreme Court, arguing that Alabama's add-back tax statute is unconstitutional.

The provision essentially restricts the ability of a taxpayer to deduct as expenses certain intangible and interest payments made to related companies. Our brief focuses on an exception to the law that makes the Alabama tax dependent on how well other states tax the transactions, which unconstitutionally varies a state tax liability based entirely on activities and tax policy shifts outside of Alabama. The issue of extraterritorial taxation from such add-back statutes arises in about 18 other states with similar legislation, and Supreme Court review is needed.

Unfortunately, the Court declined to review this appeal on April 27, 2009.


Related Documents:
NAM brief  (February 23, 2009)

 


ADEA -- 2008



Federal Express Corp. v. Holowecki   (U.S. Supreme Court)

Whether an EEOC intake questionnaire is a "charge" of discrimination under ADEA

The Age Discrimination in Employment Act (ADEA) requires that charges be filed with the EEOC before a lawsuit may be filed. In this case, the Second Circuit ruled that filing an EEOC Intake Questionnaire, and not a different "Charge" form, satisfies the requirement.

Since the term "charge" is not defined in the statute, some courts say all that is needed is a minimal writing that "generally describes the alleged discriminatory acts," and that the individual exhibit some intent to have the EEOC initiate an investigation.

On February 27, 2008, the Supreme Court agreed, ruling that an allegation of age discrimination against an employer is considered a valid "charge" if it must be reasonably construed as a request for the agency to take remedial action to protect the employee's rights or otherwise settle a dispute between the employer and the employee. The ruling means that formalistic charging documents are not required as long as they are reasonably viewed as a request for action by the agency. The Court generally deferred to the EEOC's interpretation of its request-to-act requirements, even though the agency did not follow up on the charge in this case. The bottom line: more documents filed at the EEOC will be considered charges that enable plaintiffs to eventually file suit against their employers.

 

Kentucky Retirement Systems v. EEOC   (U.S. Supreme Court)

Whether using age as factor in retirement plan makes plan discriminatory

In this case, a deputy sheriff for Jefferson County, Kentucky, became disabled and, under his employer’s retirement plan, was denied disability retirement benefits because he was old enough to qualify for normal retirement benefits. The Equal Employment Opportunity Commission (EEOC) sued Kentucky on his behalf, arguing that Kentucky’s disability retirement plan for public employees is facially discriminatory under the Age Discrimination in Employment Act (ADEA) in two ways: 1) it disqualifies currently working employees from receiving disability retirement benefits if they have reached normal retirement-benefit age by the time they become disabled; and 2) it provides less disability benefits to older disabled employees than to younger disabled employees based only on the factor of age. Kentucky argued that because disability retirement benefits serve the purpose of providing disabled employees with a replacement for the normal retirement benefits that they are no longer able to earn, denying those benefits to employees who already qualify for normal retirement benefits does not constitute “arbitrary” age discrimination in violation of the ADEA.

The Supreme Court ruled 5 to 4 on 6/19/08 that Kentucky's plan was not facially discriminatory because no discriminatory intent was shown. The differences in treatment of older workers in this case were not "actually motivated" by age, but rather stemmed from systemwide rules involving pensions, which the ADEA treats more flexibly and leniently in respect to age. Social Security is calculated using a formula that takes age into account, and employers may adopt retirement rules based on age. The plan did not involve age-related stereotypes.

 

Sprint/United Management Co. v. Mendelsohn   (U.S. Supreme Court)

Admissibility of ADEA testimony unrelated to supervisor at issue

In a unanimous decision on 2/26/08, the Supreme Court held that there is no per se rule requiring a court either to admit or exclude testimony about discriminatory acts by company supervisors who played no role in the alleged age discrimination against the plaintiff. Rather, admissibility questions should be determined by the trial court. This case involved an employee who lost her job in a reduction in force (RIF), with the normal rule in disparate treatment cases being that acts by other company supervisors are not relevant. However, the appeals court made an exception where the lawsuit is over a company-wide RIF, and ruled that evidence of the company's treatment of other older workers in the RIF is relevant to the issue whether the company had a discriminatory animus, or attitude, toward older workers. The Supreme Court found that this second-guessing of the trial court’s discretion to exclude evidence was improper in this disparate treatment case, and sent the case back so that the trial court could clarify that it did not exclude the evidence without good reason. This decision is important because it allows a trial court to determine whether evidence of discrimination not directly related to a case may be admitted.

 


Alien Tort Statute -- 2008



American Isuzu Motors, Inc. v. Ntsebeza   (U.S. Supreme Court)

Alien Tort Statute litigation against companies following US Government principles

The NAM joined with 5 other business groups 2/11/08 urging the Supreme Court to review a Second Circuit decision that allows a lawsuit against dozens of American companies under the Alien Tort Statute (ATS). That statute allows foreign nationals to use U.S. courts to sue for violations of international law, but there is no clear statement of what international law is. It is up to the courts to try to divine the scope of ATS suits. This case arose when individuals from South Africa sued American companies that simply did business with the South African government, contending that such activity constituted "aiding and abetting."

Our brief urged the Supreme Court to step in and rule that this issue should not be decided by U.S. courts. First, the U.S. Government had a policy that encouraged American companies to engage in commerce in South Africa in accord with the Sullivan Principles that promoted racial integration and social justice. Were our courts to impose liability on companies for doing so, that action would directly conflict with the international relations policy of our government. The Executive Branch is responsible for U.S. foreign policy, and litigation under the ATS interferes with that function.

Second, the lower courts have not adopted a consistent position on whether and to what extent international law punishes activity that might be considered "aiding and abetting." Supreme Court review is essential to sort out this potentially wide-ranging inquiry into the international trade activity of domestic companies.

The lower court's ruling in this case seriously threatens the ability of the Executive Branch to carry out foreign relations policies that rely on the cooperation of the private sector. Courts that refuse even to consider the views of the Executive Branch at an early stage of ATS litigation raise the risk of liability for American companies trying to do business in countries approved by the Executive Branch for commerce and trade.

On May 12, four Justices of the Court recused themselves from the case, and since a quorum of 6 was lacking, the lower court decision was affirmed as if by an equally divided court. The case will now go back to the trial court for continued proceedings. The issue of aiding and abetting liability under the Alien Tort Statute remains unresolved.


Related Documents:
NAM brief  (February 11, 2008)

 


Arbitration -- 2008



Hall Street Associates LLC v. Mattel, Inc.   (U.S. Supreme Court)

Federal Arbitration Act limits on judicial review

The Supreme Court decided on 3/25/08 that parties may not contract for more expansive judicial review of an arbitration award than is generally provided for under the Federal Arbitration Act. That Act provides very limited grounds for federal court review of arbitration awards.

In this case, the parties agreed in advance that a court should be able to review the validity of an arbitrator’s conclusions of law. The Ninth Circuit, however, ruled that the parties do not have the power to alter the FAA’s requirements by agreement. The Supreme Court agreed, saying that the FAA addresses extreme arbitral conduct, not just any legal error, as a basis for judicial review. The case underscores the importance of an arbitrator's decision, although it suggested that certain awards might be challenged under state statutory or common law. The ruling clarifies that companies that employ arbitration may not contractually expand the scope of judicial review of the arbitrator's decision.

 

Preston v. Ferrer   (U.S. Supreme Court)

Validity of arbitration agreement

In a contract dispute where Judge Alex Ferrer, star of the “Judge Alex” television show, refused to pay his manager certain commissions, Ferrer’s manager initiated arbitration proceedings pursuant to the arbitration clause included in their management contract. Even though the Federal Arbitration Act (FAA) requires enforcement of arbitration agreements in contracts involving interstate commerce and the Supreme Court has consistently held that the FAA preempts state laws which prohibit arbitration of certain claims, the California Court of Appeal affirmed a trial court’s injunction against the arbitration proceedings, holding that the injunction was valid under California law. Specifically, under the California Talent Agencies Act, disputes of this sort must be resolved by the state labor commissioner (subject to judicial review) and thus cannot be arbitrated in the manner agreed to by contract.

On 2/20/08, the Supreme Court disagreed. It ruled that Congress clearly indicated its intention to allow parties to move conflicts quickly and easily into arbitration, and arbitrators have the power to decide whether a contract is valid. Thus, the parties need not go through state judicial or administrative proceedings, but should go directly to arbitration, to determine the validity of the contract.

 


Benefits -- 2008



Chicago Truck Drivers Union Pension Fund v. El Paso CGP Co.   (7th Circuit)

Notice requirements for withdrawal liability under MPPAA

This case involved a company’s liability when a partially owned subsidiary goes bankrupt and failed to pay a pension plan withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). Here, the pension fund filed a withdrawal liability proof of claim against the subsidiary, but did not notify the parent or otherwise make a claim against it for more than 5 years. At that point, it tried to hold the parent responsible for the liability, and the trial court agreed. The court found the company barred from offering a defense because it had not immediately sought to arbitrate the question of its own liability when it first learned that a claim had been filed against its subsidiary.

The NAM and the U.S. Chamber of Commerce filed an amicus brief in the Seventh Circuit arguing that the company should not be held liable because the proof of claim was not filed against it. The company could not have reasonably understood that a claim against a former subsidiary was seeking to impose withdrawal liability on the former parent. The law does not allow a multiemployer pension plan to “lie in wait, concealing determinations that could impose millions of dollars in withdrawal liability on innocent parties, only to spring the trap once the time has expired to challenge the plan’s self-interested determination.”

On 2/27/2007, the Seventh Circuit denied our motion to file the amicus brief. In May, 2008, it ruled that the company could not contest its liability because it had actual notice of the claim.

 

Rohm and Haas Pension Plan v. Williams   (U.S. Supreme Court)

Whether COLAs are accrued benefits that must be included in lump sum retirement payouts.

Retirees are typically given a choice of either a lump sum retirement payout or an annuity, paid over their lifetime. Annuities often have a cost-of-living adjustment that is made every year in the future, but lump sum payments do not. In this case, the plaintiff took the lump sum payout, then sued the pension plan administrator, claiming that a cost-of-living adjustment for those choosing an annuity is an "accrued benefit" and must be paid to all retirees, including those taking the lump sum. The Seventh Circuit agreed, ruling that COLAs are accrued benefits for those taking both annuities and lump sum payments, even though the plan provides otherwise.

The NAM filed an amicus brief supporting review by the Supreme Court. We warned that mandatory inclusion of a cost-of-living adjustment in lump-sum payouts would have substantial negative impacts on other defined benefit plans, and would encourage lump sum withdrawals of pension funds. The courts should enforce clear language in pension plans that limits COLAs to those who choose annuities instead of lump sum payouts. Failing to do so would cause many plans to be rewritten or eliminated. The lower court decision interferes with the autonomy of the contracting parties to define their relationship, could lead to more prevalent underfunding of pension plans, and could encourage more retirees to choose lump sum payments, which is becoming a risky trend.

On March 17, 2008, the Supreme Court refused to hear this appeal.

 


Civil Procedure -- 2008



Foster Wheeler LLC v. Superior Court   (California Supreme Court)

Seeking publication of asbestos case-management decision

Management of complex cases is critical to fairness in trial proceedings. The California Supreme Court issued a ruling ordering a lower court to dissolve an order that consolidated two asbestos-related cases because the facts and claims were so different.

The NAM and other groups filed an amicus letter with the California Supreme Court asking that it publish that decision, so that the ruling may be cited and relied upon in future cases. Our letter argued that clear case-management rules would help California courts deal with the ever-growing asbestos docket, which includes an influx of filing from out-of-state plaintiffs, many of whom have almost no connection to the state. On Jan. 3, 2008, the Court denied the request to publish.

 

Foster Wheeler LLC v. Superior Court   (Cal. Ct. App.)

Consolidation of asbestos cases

On 04/11/08, the NAM and six other groups filed an amicus brief with the California Court of Appeal, urging it to vacate a Superior Court order that consolidated asbestos cases, and to compel that court to implement a formal process for consolidating future asbestos cases.

Our brief argued that clear case-management rules will help California courts deal with the ever-growing asbestos docket, which includes an influx of filing from out-of-state plaintiffs, many of whom have almost no connection to the state. We also argued that improper case consolidation can have serious, unintended results, such as increasing the backlog of cases the court is trying to address, violating the due-process and jury-trial rights of plaintiffs and defendants, and creating serious ethical problems for plaintiffs’ lawyers. For example, plaintiffs with serious injuries may be harmed when their claims are lumped together with those who have little or no injury.

Our brief recommended that the California Court of Appeal adopt the following criteria, set forth in Malcolm v. National Gypsum Co., 995 F.2d 346 (2d Cir. 1993), and commonly used by federal courts, for determining whether the trial court may validly consolidate asbestos cases: “(1) common worksite, (2) similar occupation, (3) similar type of exposure, (4) type of disease, (5) whether plaintiffs are living or deceased, (6) status of discovery in each case, (7) whether all plaintiffs are represented by the same counsel, and (8) type of cancer alleged.” Such criteria will provide litigants and trial court judges with clear guidelines to reduce the risk of prejudice and confusion that flow from the improper consolidation of dissimilar actions.

Subsequent to this brief, the trial judge vacated his previous order that had consolidated the cases. As a result, the Court of Appeal on 5/15/08 denied the mandamus petition as moot.


Related Documents:
NAM brief  (April 11, 2008)

 


Class Actions -- 2008



Safaie v. Jacuzzi Whirlpool Bath, Inc.   (Cal. Ct. App.)

Request to publish opinion regarding reliance on advertising

On Dec. 1, the NAM filed an amicus letter requesting the California Court of Appeal to publish its opinion in this case. Publication here would provide substantial guidance for courts and litigants on critical issues for consumer class actions, particularly given the evolving nature of state law. Our amicus letter argues that the court’s discussion of materiality as to the Consumer Legal Remedies Act, Song-Beverly Act, and express warranty claims would provide substantial guidance to courts and litigants addressing such issues, and its discussion of the Unfair Competition Law issues under alternative legal theories warrant publication.

Regrettably, the court denied our request on Dec. 5.


Related Documents:
NAM Amicus Letter  (December 1, 2008)

 

Thorogood v. Sears, Roebuck and Co.   (7th Circuit)

Class action certification in no-injury consumer protection case

Class action suits alleging violations of state consumer protection laws are being filed with increasing frequency, even though many members of the purported class of plaintiffs suffer no injuries and do not rely on the challenged marketing statements in making their purchasing decisions. These no-injury, no-reliance class actions expand liability beyond traditional limits and threaten to undo the benefits of the federal Class Action Fairness Act of 2005. The NAM joined with the Association of Home Appliance Manufacturers in an amicus brief urging the Seventh Circuit to overturn a district court order that certified a class of plaintiffs from 29 states alleging that Kenmore dryers were not completely stainless steel as advertised. Our brief argued that courts should not undermine state consumer protection laws by lumping together claims under different state laws and glossing over the substantive differences between the applicable statutes.

"By reading reliance and causation requirements out of the relevant state statutes so as to create the appearance of commonality and facilitate class certification, the trial court effectively appropriated the authority to modify state laws, altered the legal landscape on which manufacturers had depended in developing and marketing their products, and fundamentally altered the substantive rights of all parties involved,” the NAM brief contended.

Improper certifications bestow new litigation power on individuals who have not suffered injury to person or property and converts legitimate product development activities into potential grounds for economic theories of damages from states that do not recognize them. This in turn would make Seventh Circuit courts magnets that will unfairly expose manufacturers to extortion by consumer class action litigation.

On 10/28/2008, the Seventh Circuit reversed, and instructed the district court to decertify the class. Its decision provides a comprehensive summary of class actions and the incentives they create for plaintiffs' and defense lawyers to "forge a community of interest" that can be detrimental to members of the class. The court found that this case did not meet the essential requirement that common issues of law or facts predominate over individual ones. Each member of the class will have a different opinion of what the advertising meant and what their damages, if any, might be.


Related Documents:
NAM brief  (April 28, 2008)

 


Criminal Liability -- 2008



W.R. Grace & Co. v. United States   (U.S. Supreme Court)

Power of prosecutor to expand definition of asbestos

How far can prosecutors go when charging corporate officials with the release of hazardous air pollutants? This case involves a criminal prosecution that used a definition of asbestos that is far broader than the long-standing definition in EPA's regulations, subjecting the defendants to potential jail time without due process. The NAM, American Chemistry Council and National Association of Criminal Defense Lawyers filed an amicus brief asking the Supreme Court to hear this appeal from a Ninth Circuit decision that had overturned the trial court's decision to exclude evidence about forms of asbestos that do not fall within EPA's definition.

The Ninth Circuit ruling threatens to treat defendants there more harshly than those elsewhere, using broad interpretations of hazardous materials, and refusing to recognize the rule of lenity, which requires that criminal statutes be clear and provide fair warning. It also undermines the requirement of mens rea, or guilty mind, when assessing blame, which will cause businesses to over-invest in regulatory compliance.

Companies and individuals who transgress an environmental statute -- even unknowingly -- may be guilty of a felony punishable by years of imprisonment. The increasing trend toward criminal prosecutions, coupled with loose interpretations of mens rea, create immense pressure on defendants to accept plea bargains. We argue that due process requires that defendants have fair warning of the conduct that can give rise to criminal liability, particularly in light of the thousands of criminal statutes and regulations that continue to proliferate. While a defendant's professional background may have some bearing on whether he should have known that a particular substance was a pollutant subject to regulation, it is irrelevant to a statute's or regulation's definition of what a pollutant is. Defendants without clear notice of what the law covers should be given the benefit of the doubt under the rule of lenity.

Regulatory crimes are wrongful not because of their intrinsic nature -- like murder, arson, or rape -- but rather because the law says they are. Acts are wrongful only by virtue of legislative or agency determinations. As a result, individuals are less likely to realize when their actions cross the line from permissible to criminal, particularly when laws are incredibly technical and complex. And now the requirement that a violation be "knowing" is eroding -- no longer must the defendant know he is breaking the law; it is enough that he had purposefully done the act, even if he had a permit. Moreover, even things like hot water, rock and sand are pollutants for which criminal liability may be imposed. We urged the Supreme Court to review this case and clarify the standards under which manufacturers may be prosecuted.

On June 23, 2008, the Court declined to review this case.


Related Documents:
NAM brief  (May 15, 2008)

 


Environmental -- 2008



In re Deseret Power Electric Cooperative   (EPA Environmental Appeals Board)

EPA preconstruction permits for facilities with CO2 emissions

On March 21, the NAM joined with six other organizations in an amicus brief supporting EPA’s 2007 approval of a preconstruction permit for a new power plant in Utah. The Sierra Club appealed the approval, arguing that the EPA must limit carbon dioxide (CO2) emissions in the permit.

Our brief argued that the EPA’s permitting process should not be turned into a regulatory tool to control CO2 emissions. The EPA had already determined that CO2 was not a regulated pollutant and thus did not need to be addressed within a preconstruction permit.

On June 16, the EAB issued an order requesting further briefing on whether carbon dioxide monitoring requirements are enforceable under the Clean Air Act, and on the effect of the Supreme Court's decision in Massachusetts v. EPA.

On September 12, the NAM and five other organizations filed a supplemental brief. First, we argued that CO2 is not currently regulated under the Clean Air Act, as there is only monitoring of, not restrictions on emissions of, CO2. Second, we argued that that the issues the EAB seems to be focusing on go beyond its authority, and that any expansion of the preconstruction permit program to greenhouse gases is a determination that should be made by the EPA Administrator, via rulemaking, or by Congress.

On Nov. 13, 2008, the Environmental Appeals Board rejected the Sierra Club's contention that permits must include "best available control technology" for carbon dioxide, but sent the case back to the EPA to reconsider whether to impose the requirement under its discretionary authority, and to develop an adequate record for its decision. It encouraged the EPA to consider whether the issue in this case should be resolved "in the context of an action of nationwide scope, rather than through this specific permitting proceeding."

Former EPA Administrator Stephen Johnson issued an interpretative guidance memorandum on Dec. 18 that concluded that PSD permits do not need to include BACT limits for greenhouse gases. The Sierra Club is challenging that guidance. If they succeed, the number and type of facilities (e.g., any which emit certain levels of CO2) requiring EPA permits would explode, resulting in an impassable regulatory gridlock that would overwhelm permitting authorities and bring new permits to a halt. Under such a scenario, even large department stores, schools, and medium-size office buildings would require Clean Air Act preconstruction permits in order to be built or expanded.


Related Documents:
NAM supplemental brief  (September 12, 2008)
NAM brief  (March 21, 2008)

 

Massachusetts v. EPA   (D.C. Circuit)

Whether to compel EPA to determine that carbon dioxide endangers public health or welfare

The NAM is a member of the CO2 Litigation Group, which was an intervenor helping to defend EPA in this case. Massachusetts sought a court mandate to force EPA to determine that carbon dioxide is an air pollutant that contributes to air pollution "which may reasonably be anticipated to endanger public health or welfare."

We filed a brief 5/15/08 arguing that no such finding is required by the statute unless EPA decides to establish emission standards for new motor vehicles, nor is there any deadline for making such a determination. No clear statutory rights are being harmed by any delay by EPA, and EPA has announced an intention to begin a rulemaking later this spring anyway.

We argued that EPA must be able to consider this proposed rulemaking in the larger context of other regulatory obligations with respect to fuels used in motor vehicles and nonroad engines, as well as new or modified major stationary sources of emissions, comprising perhaps thousands of new facilities not currently subject to stringent Clean Air Act permit requirements.

Climate change from carbon dioxide must be addressed in a comprehensive way with input from the public through the legislative and regulatory processes, not through a judicial directive that truncates public debate.

On June 26, the court denied Massachusetts' petition without opinion, except for a statement by Judge Tatel concurring in part and dissenting in part. He would hold on to the case until EPA gives greater indication that it is moving forward with the regulation. The EPA announced in March that it would issue an Advance Notice of Proposed Rulemaking sometime in the future.


Related Documents:
CO2 Litigation Group brief  (May 15, 2008)

 

Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1   (U.S. Supreme Court)

FERC regulatory power

During an energy crisis in the Western U.S. in late 2000 and early 2001, several utility companies who had decided they could no longer afford to buy electricity from their normal suppliers and had an immediate need to secure power for their customers negotiated long-term contracts to buy electricity from alternate suppliers. After the energy crisis passed and energy prices dropped, the utility companies asked FERC to allow them to modify their contracts to enable them to pay lower prices for wholesale energy and subsequently lower their customer rates. In refusing their request, FERC explained that the Supreme Court’s Mobile-Sierra doctrine establishes a presumption that contracts negotiated by sophisticated parties like public utilities are “just and reasonable” in accord with the Federal Power Act and thus cannot be revised. The Court carved out an exception for cases where the contracts are against the “public interest” (for example, when not permitting modification would jeopardize the supply of power to retail users).

The Ninth Circuit reversed FERC’s decision, holding that the Mobile-Sierra doctrine only applies in “limited circumstances” and that, by failing to consider the market conditions in which the contracts at issue were formed, FERC had failed to determine whether such “limited circumstances” were present here. The Ninth Circuit also held that even if the Mobile-Sierra doctrine applied, its public interest exception would permit contract modification because the high electricity rates excessively burdened consumers.

The Supreme Court ruled 6/26/08 that FERC was required to follow the Mobile-Sierra presumption of reasonableness, and the validity of a contract is not affected by an environment of electric power market "dysfunction." The Court rejected the Ninth Circuit's "zone of reasonableness" test, and underscored the need to honor contracts unless they seriously harm the public interest. There must be "unequivocal public necessity" to set aside a contract rate. However, the Court affirmed the Ninth Circuit's ruling on other grounds: FERC's defective analysis of the market effects needs to consider longer-term burdens, and FERC needs to more carefully consider whether there was unlawful market manipulation that disrupted fair, arms-length contract negotiations.

 

National Association of Manufacturers v. EPA   (EPA)

Information Quality Act request

The National Association of Manufacturers submitted a formal request 10/9/07 to the U.S. Environmental Protection Agency asking that it correct scientific errors in a package of documents related to its proposed revision of the National Ambient Air Quality Standard for ozone. By law, these errors must be corrected to ensure and maximize the quality of scientific information disseminated by EPA and used for making regulatory decisions. Once these errors are corrected, the NAM is confident that EPA will have a much stronger scientific foundation for the final decision the agency will make on the ozone standard in March 2008.

The NAM’s petition identified several important information quality errors, such as:

• EPA’s risk assessment isn’t transparent.

EPA did not fully disclose analyses it recently performed and inserted at the last minute into the administrative record for the proposed revised standard. The Agency is obligated by law to ”show its work.”

• EPA’s risk estimates are purposefully exaggerated.

EPA misreported or exaggerated the results of the studies it relied on, and ignored studies that had found no health effects from ozone levels below the current standard. EPA knowingly used assumptions and models that give inflated estimates of health risks. These practices are prohibited under federal information quality standards that EPA has adopted.

• EPA’s risk assessment did not follow technical recommendations made by the National Academy of Sciences.

Since the Clean Air Act was last amended in 1990, the Academy has issued a series of reports providing technical advice concerning how to estimate and portray the risks posed by air pollution. Among other things, the Academy has pressed EPA to be more candid about the uncertainties in its estimates and predictions. EPA has ignored most of these recommendations.

The practical effect of these errors is that the public is not accurately informed about what the science says about ozone air pollution, nor is it aware just how uncertain EPA’s risk estimates really are. Through our petition, the NAM expects that EPA will correct these errors as the law requires, and provide the public scientific information that is accurate, reliable, and unbiased, and presented in an accurate, clear, complete, and unbiased manner.

In March, 2008, the EPA indirectly responded to our criticisms as part of its general response to significant public comments. We were dissapointed that the EPA did not adhere to the substantive elements in its Information Quality Guidelines, especially in not acknowledging the validity of any of our complaints related to the covered information contained in its proposal and supporting documents.

Consequently, we filed a Request for Reconsideration of the EPA's denial of our Information Quality Act petition. See link below for further developments.


Related Documents:
Summary of NAM's Request for Reconsideration  (October 14, 2008)
NAM's Petition for Correction of Record  (October 9, 2007)

 

Teck Cominco Metals, Ltd. v. Pakootas   (U.S. Supreme Court)

CERCLA

After the Environmental Protection Agency issued a Unilateral Administrative Order to a Canadian company to conduct a study on contamination of the Columbia River in this country from its smelter in Canada, an Indian tribe sued to enforce the order. The company argued that the EPA does not have jurisdiction under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the U.S. federal district court ruled otherwise. The company appealed, and the Ninth Circuit affirmed, ruling 7/3/06 that the EPA’s order only applied to a “facility,” as it’s defined in CERCLA, within the territorial boundaries of the United States. Even though the smelter was located in Canada, the definition of a facility under CERCLA is an area where a hazardous substance has been deposited or otherwise comes to be located. This is a very broad definition of facility that subjects foreign companies to liability for pollution in the United States.

The court also ruled that the slag located in the United States was leaching hazardous substances, thus satisfying the legal requirement for liability that there be a “release” from the facility into the environment. EPA’s jurisdiction did not extend to the smelter across the border, but does cover the underwater facility and hazardous releases in the United States.

The NAM joined with the National Mining Association in 2 briefs supporting Teck Cominco’s appeal and petition for rehearing in 2005 and 2006. We argued that CERCLA applies only within this country unless Congress clearly expresses an intent to apply it extraterritorially, which it did not. These kinds of disputes are quintessentially an international concern, not for unilateral action by one country's EPA. Private litigation upsets the resolution of such disputes through diplomatic means, or through the long-standing model of an arbitration group that was specifically established for the smelter in the 1930s. Allowing such litigation in U.S. courts opens them up to worldwide claims, particularly as environmental science improves, and could subject U.S. firms to retaliatory litigation abroad, imposing multiple and conflicting standards on environmental behavior.

The case was appealed to the Supreme Court. On May 2, 2007, the NAM and the National Mining Association filed an amicus brief urging the Court to take the case. We argued that the lower court's decision invites retaliation against American businesses and fosters uncertainty and discord for many industries with respect to the definition of "arranger liability." We argued that arranger liability under CERCLA applies when a company owns hazardous material and arranges with a third party for its disposal or treatment, not when the company does it itself.

On Jan. 7, 2008, the Supreme Court declined to review this appeal. The United States Government had earlier filed a brief opposing the appeal.

 


ERISA -- 2008



Golden Gate Rest. Ass'n v. San Francisco   (9th Circuit)

City ordinance mandating employer payments for healthcare

Effective January 1, 2008, San Francisco enacted an ordinance that requires private employers with twenty or more employees to make minimum health-care expenditures on behalf of their employees, such as paying employees’ health insurance premiums and contributing to their health savings accounts. The Golden Gate Restaurant Association challenged the ordinance in federal court on the basis that the employer mandates are preempted by the Employee Retirement Income Security Act (ERISA). The federal district court granted an injunction, holding that San Francisco’s ordinance is preempted because it has an impermissible connection with employee benefit plans and its expenditure requirements make unlawful reference to employee benefit plans.

On Jan. 9, the Ninth Circuit granted a stay to the district court’s injunction during the appeals process, reasoning that the city has a “strong likelihood of success on the merits,” that the “balance of hardships tips sharply in favor of the City,” and that the “public interest is served by granting a stay.” As a result, San Francisco could enforce its ordinance while the issue was on appeal to the Ninth Circuit for a final decision.

The NAM joined with the Society for Human Resource Management and the International Franchise Association in filing an amicus brief on Mar. 28, arguing that the minimum health-care spending requirement conflicts with long-settled federal law that governs employee benefits. ERISA was designed in part “to protect employers from conflicting and inconsistent state and local regulation” of pension and welfare benefit plans, and upholding the ordinance would encourage an expensive and unworkable array of state and local laws governing employer-provided benefits.

On Sept. 30, the Ninth Circuit reversed the lower court and ruled that the San Francisco ordinance was not preempted by ERISA. It found that the ordinance does not require employers to establish their own ERISA plans or to make any changes to any existing ERISA plans. They may choose to alter their plans, or may make payments directly to the city to cover the difference between what they provide employees through their existing ERISA plans and the minimum they must provide under the ordinance. In addition, the ordinance is not concerned with the nature of the health care benefits in a company's ERISA plan, just the amount spent for whatever benefits it wants. The court ruled that the ordinance does not create an ERISA plan, since it is merely a funding mechanism without allowing companies the kind of discretion that ERISA was designed to control. An employer electing to use the "City-payment" option does not establish an ERISA plan and does not control eligibility or benefits levels. The payment requirement does not have a "connection" with or a "reference to" an ERISA plan.

The case was appealed to the Supreme Court, and the NAM supported the appeal on 7/7/09 with an amicus brief, here. Unfortunately, on 6/26/2010, the Court declined to hear this appeal. Because there are conflicting decisions by federal appeals courts, we expect this issue to be litigated again, and ultimately will be reviewed by the Supreme Court.


Related Documents:
NAM brief  (March 28, 2008)

 

LaRue v. DeWolff, Boberg & Assocs., Inc.   (U.S. Supreme Court)

Whether 401(k) participant can sue administrator for losses that only affect that participant

James LaRue, an employee with retirement benefits under his company's 401(k) plan, sued the plan administrator alleging the administrator failed to carry out LaRue's investment instructions, resulting in a loss of $150,000 to his account. The lower courts ruled that LaRue's suit was invalid because the Employee Retirement Income Security Act (ERISA) only allows suits on behalf of the plan and not for individual recoveries.

The Supreme Court ruled 2/20/08 that ERISA does allow individuals to sue plan administrators even though the only damage alleged is to the individual's own account. The statute provides a remedy for individuals to sue administrators of defined benefit plans (pensions) for fiduciary breaches that affect the ability of the plan to pay out defined benefits, and now this ruling holds that the statute provides a remedy for individuals to sue for breaches that affect the payment of their individual benefits in defined contribution plans. The Court did not address the issue whether ERISA allows suits for money damages under a provision that limits remedies to "equitable relief."

This decision means that 401(k) plan administrators must exercise reasonable care as fiduciaries when carrying out their obligations on behalf of plan beneficiaries. They will still be protected against suits arising from investment decisions made by beneficiaries, but they have to carry out those investment directions according to the provisions in the plan.

 

Metropolitan Life Ins. Co. v. Glenn   (U.S. Supreme Court)

Judicial review of plan benefit decisions made by company administrators

After taking medical leave from her job, Wanda Glenn submitted a disability claim under her ERISA plan. Although MetLife approved her claim, it urged her to seek Social Security benefits, which she did. After reviewing information from Glenn’s physician indicating her improved condition and ability to do sedentary work, MetLife concluded that she was no longer eligible for disability benefits and denied her claim for long-term disability benefits.

Glenn challenged the decision in federal court, with the district court upholding MetLife’s denial of long-term disability benefits.

The Sixth Circuit reversed, holding that MetLife's dual role in both administering and funding the plan created an “apparent conflict of interest.” Based on this conflict of interest, the court concluded that MetLife’s decision “was not the product of a principled and deliberative reasoning process” and ordered MetLife to reinstate Glenn’s benefits. The Circuit Courts were split on this issue, with some Circuits not requiring courts to consider an administrator’s dual role when reviewing benefit determinations.

The Supreme Court ruled on 6/19/08 that it is proper for a court to consider a conflict of interest as a factor in reviewing the validity of a plan administrator's decisions regarding benefits. The circumstances of each case should be reviewed, and the fact that a company acts both to fund and administer a benefit plan may cause the administrator to act contrary to the interests of the beneficiaries of the plan. Normal fiduciary trust principles apply.

This case is very important to all businesses offering employee benefit plans subject to ERISA, as jointly funded and administered plans are common. The ruling means that the costs of funding and administering ERISA-regulated benefit plans are likely to increase.

 


False Claims Act -- 2008



Allison Engine Co. v. United States ex rel. Sanders   (U.S. Supreme Court)

False Claims Act liability for subcontractors who never submit their bills to the government

Former employees of a government subcontractor sued the company (and others) under the False Claims Act, which allows private parties to bring actions to enforce the Act. They claimed that the companies defrauded the federal government by submitting false claims for payment to the prime contractor.

The False Claims Act specifies that liability arises when any person presents or causes to be presented a false or fraudulent claim "to an officer or employee of the United States Government." The Sixth Circuit ruled that actual presentment to an officer or employee is not actually required as long as the bill is ultimately paid from money from the federal government.

The Supreme Court resolved a split in the Circuits and reversed. It ruled unanimously that merely using funds from a government contract to pay a fraudulent claim is insufficient to win a False Claims Act suit. Rather, a plaintiff must prove that the defendant intended that the false statement be material to the Government's decision to pay or approve the false claim. This ruling will make it harder to bring qui tam suits where it is not clear that the Government relied on a false claim to pay a bill.

 


Forum non conveniens -- 2008



In re General Electric Co.   (Texas Supreme Court)

Forum non conveniens

On 04/10/07, the NAM joined with other business organizations to file an amicus brief urging the Texas Supreme Court to send an asbestos exposure case to Maine, where all of the case-specific witnesses and evidence were located, instead of Texas, where none of the events occurred. Plaintiff had filed suit against numerous product manufacturers and distributors in Texas, which has historically been a magnet for asbestos cases from around the county. The alleged asbestos exposure here, however, occurred over 2,000 miles away in Maine.

Defendants reasonably sought dismissal of the lawsuit in Texas based on forum non conveniens (“inconvenient forum”). Despite recognizing that the case really did not belong in Texas, the Texas district court denied the defendants’ motion. The court feared that a proceeding in Maine would wind up in a federal multi-district forum, which it felt was inadequate for asbestos claimants. The NAM argued, however, that the court’s fear of the plaintiff’s claim falling into a “black hole” was unfounded, as federal courts have resolved almost 70% (nearly 75,000 out of 110,000) of multi-district asbestos cases. We argued that allowing cases to proceed in a forum that has almost no connection to the parties and absolutely no connection to any evidence is an injustice and violates the doctrine of forum non conveniens. One negative consequence is forum shopping, which puts an added strain on a particular state’s courts and juries.

In a landmark decision on 12/5/08, the Texas Supreme Court ruled that Texas’ forum non conveniens statute not only limited the trial court’s discretion to hear this case but in fact required the trial court not to hear it. Factors to be considered are the availability and adequacy of an alternate forum, as well as the fairness and efficiency of hearing the case in the available jurisdictions. This ruling will greatly limit the ability of plaintiffs to forum shop and to bring non-Texas claims in Texas.

 

Kedy v. A.W. Chesterton Co.   (Rhode Island Supreme Court)

Forum non conveniens

Thirty-nine Canadians filed suit in Rhode Island against American companies licensed to do business there. The suits alleged exposure to asbestos in Canada, and the plaintiffs had no connection in any way to Rhode Island. The issue in this appeal was whether Rhode Island would recognize the standard doctrine of forum non conveniens, that is, that the forum is simply not well suited to hear the case because neither the parties, witnesses nor other elements necessary to the trial are in Rhode Island.

The NAM joined with 5 other organizations asking the court to recognize the doctrine. It is a common law doctrine designed to provide fundamental fairness and sensible and effective judicial administration, and is particularly important to prevent nonresidents from forum shopping for jurisdictions with favorable law, procedures or juries. This is particularly true for foreign disputes, since American courts, unlike most foreign jurisdictions, permit the use of jury trials and contingency fees, do not impose a loser-pays rule, and allow more extensive discovery.

On May 9, 2008, the Rhode Island Supreme Court agreed that the case should be dismissed under the forum non conveniens doctrine, which it ruled was part of the state's "jurisprudential landscape." In a footnote, the court thanked the NAM and other amicus parties for their "helpful" briefs.

The court adopted a two-pronged test that takes into consideration the adequacy of an alternative forum if the case is dismissed in Rhode Island, and a balancing of private and public interests affected by the litigation. The opinion allows a case to be dismissed even if the alternative forum provides fewer remedies or other advantages for the plaintiff, and the court gave less weight to a plaintiff's choice of forum when it is motivated by forum-shopping objectives. A court may also consider the extent to which its own judicial system will be burdened by the inappropriate forum shopping.

 


Government Regulation -- 2008



Rowe v. New Hampshire Motor Transport Association   (U.S. Supreme Court)

State regulation of interstate commerce

To avoid sales to minors, a Maine state law required retailers to insure that tobacco products were delivered by a carrier that would verify the age and identity of the buyer. Another law prohibited a carrier from delivering tobacco products if they were purchased from an unlicensed retailer.

UPS stopped deliveries, and several associations convinced the First Circuit to hold that the state laws were preempted by the Federal Aviation Administration Authorization Act of 1994, which prohibits a state from enforcing a law "related to a price, route, or service of any motor carrier," with respect to the transportation of property.

On 2/20/08, the Supreme Court agreed. It ruled that Maine's law was preempted because it directly affected motor carrier services and had a significant adverse impact on the objectives of the federal law. The state law would regulate a significant aspect of a motor carrier's business, creating the kind of state-mandated regulations that the federal law was intended to preempt. The fact that the state law is designed to protect health and safety is unavailing, because there is no such federal exception and there are alternatives that do not interfere with carriers that the state can adopt to try to achieve its safety and health purposes.

 


Issue Advocacy -- 2008



National Association of Manufacturers v. Taylor   (D.D.C.)

Challenging "affiliated organizations" provision of Honest Leadership and Open Government Act of 2007

On February 6, 2008, the NAM filed suit to declare unconstitutional a provision of the Lobbying Disclosure Act that requires the disclosure of members of the association that actively participate in lobbying activities. The provision, Section 207 of the Honest Leadership and Open Government Act of 2007 (HLOGA), requires registered lobbying organizations like the NAM to disclose the names of any corporate members that contribute more than $5,000 to the lobbying of the organization and that “actively participate[] in the planning, supervision, or control of such lobbying activities.” The provision was nominally targeted at “stealth coalitions,” whatever they are, but missed that mark and hit legitimate, long-standing and well-known organizations like the NAM that have corporate members. Coalitions with individual members are exempted from the provision.

The suit was filed against the U.S. Attorney for the District of Columbia, who is primarily responsible for enforcement, as well as the Secretary of the Senate and the Clerk of the House of Representatives, who have the responsibility to refer deficient filings to the U.S. Attorney for prosecution. Criminal and civil penalties are available.

The NAM believes the disclosure provision is constitutionally deficient because it is not properly tailored to further a compelling state interest. It is both over-inclusive, in that it requires reporting by organizations that are by their nature not “stealth coalitions,” and under-inclusive, in that it exempts coalitions that do not hire their own lobbyists or that are funded by individual rather than corporate contributions. It is also extremely vague, and requires the expenditure of considerable resources to try to determine what it means and how to monitor the myriad member company activities that might be considered “active participation” in lobbying activities. Lobbying organizations may comply simply by listing all their members, including ones that do not meet the $5,000 and active-participation tests, resulting in information to the public that is not responsive to the purported need to scrutinize “stealth coalitions.”

The first lobbying report affected by the new law was due on April 21, 2008. The NAM sought an injunction against enforcement of Section 207, but on April 11, Judge Kollar-Kotelly ruled against us, purportedly applying a strict scrutiny analysis. She found that the government has an "important" and "vital national interest" in knowing who is paying for lobbying and how much, and to avoid "the appearance of corruption." She used the fact that the law has not changed much since 1995 as evidence that it is constitutional, as well as the fact that it took Congress so long to come up with the latest changes, because this "thoughtful and careful effort . . . Deserves respect" (citing her own opinion in a previous case). Other NAM arguments were discussed and rejected.

The NAM appealed this ruling to the U.S. Court of Appeals for the D.C. Circuit. During the week of April 14, the NAM sought a temporary stay of enforcement of Section 207 pending this appeal, but that request was denied, first by Judge Kollar-Kotelly and then by a D.C. Circuit motions panel and Chief Justice Roberts. We then asked for and received an order from the D.C. Circuit to expedite its review of our challenge, as new and different reports are required at the end of each calendar quarter.

On April 30, the NAM filed an amended lobbying disclosure report disclosing the names of organizations that we think may be reportable under Section 207.

See link below for subsequent history of this case in the D.C. Circuit.


Related Documents:
NAM Emergency Motion for Injunction and Stay Pending Appeal  (April 17, 2008)
NAM's Motion for Stay & Injunction  (April 14, 2008)
NAM Reply Brief  (March 18, 2008)
Senate & House Opposition Brief  (February 29, 2008)
NAM motion and memo for preliminary injunction  (February 6, 2008)

 


Jurisdiction -- 2008



Sprint Communications Co. v. APCC Services, Inc.   (U.S. Supreme Court)

Whether assignment of claims confers standing on assignee

Cases in federal court may only be brought by persons who have suffered an actual injury. But may an injured person sell his or her constitutional standing to another person, so that that person many file suit based on a contractual right?

In this case, the D.C. Circuit ruled that intermediaries under contract with payphone service providers may bring suit on their behalf against a telecommunications carrier that owed compensation to the payphone service providers. The Supreme Court agreed, 5 to 4. At issue was whether the assignment of the claim to the intermediaries, who themselves have no personal stake in the case other than their right to litigate it on behalf of others, is sufficient to confer standing. The defendants argued that the intermediaries had no real stake in the case because their contract provides that any proceeds would go straight to the payphone companies.

The Court ruled that assignees of legal claims have for centuries been able to sue on behalf of those who assigned their legal rights to them. Because the injury will be redressed by paying the assignee of the legal claim, it doesn't matter what the assignee does with the award. He may give it back to the original claim holder and receive a fee for his service without undermining his standing in the litigation. This decision will make it easier to aggregate small claims for purposes of litigation.

 


Labor Law -- 2008



Arizona Contractors Ass'n. v. Napolitano   (U.S. District Court for Arizona)

Exclusive federal jurisdiction over immigration

The NAM is part of a coalition of business entities that filed a joint brief on 9/14/07, urging a federal district court to declare that an Arizona immigration law is preempted by federal law.

Passed in July, Arizona’s House Bill 2779 requires employers to use a voluntary federal government-administered electronic verification system, commonly known as the “Basic Pilot,” to verify work eligibility of all employees. Our brief argued that federal immigration law preempted the new Arizona law, because the state law conflicted with federal law and with congressional intent. Deference to Congress, which has plenary authority in this field, is essential to ensuring a consistent national immigration policy and avoiding local policies that frustrate Congress’ objectives. Additionally, state immigration laws impose inconsistent requirements on and create substantial confusion for employers who conduct business in multiple jurisdictions, with conflicting state laws occasionally making it impossible for employers to comply with all of the laws simultaneously.

In addition to Arizona, Arkansas, Colorado, Georgia, Illinois, Iowa, Louisiana, Massachusetts, Nebraska, Nevada, New Hampshire. Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, and West Virginia all have passed legislation addressing the general issue of immigration control at the worksite, but with each state enacting its own unique requirements.

On February 7, 2008, the district court upheld the Legal Arizona Workers Act, holding that its licensing sanctions did not make employers "conform to a stricter standard of conduct than federal law." The court also held that the Act provided employers with procedural due process for their claims to be heard.

 

CBOCS West, Inc. v. Humphries   (U.S. Supreme Court)

Retaliation claims under the Civil Rights Act

The Civil Rights Act of 1991 prohibits discrimination in the making and enforcement of contracts. The Supreme Court ruled 5/27/08 that that law allows retaliation claims by employees who allege that discrimination led to their termination. Here, a restaurant manager claimed he was fired in retaliation for complaining about racially discriminatory treatment of another employee, but his employer claimed he was fired for leaving the restaurant safe open.

The Supreme Court held that although the Act does not specifically provide for race retaliation claims, employer conduct after the formation of a contract is subject to Section 1981 because Congress amended the law in 1991. Courts have interpreted Section 1982 to allow suits for retaliation, and Sections 1981 and 1982 have long been interpreted alike.

Employers will face a somewhat expanded scope of potential liability in discrimination cases, both from the ruling that retaliation is actionable and from the additional benefits that plaintiffs have under Sec. 1981 compared to Title VII of the Civil Rights Act, namely a longer statute of limitations, no requirement that EEOC administrative remedies be pursued, and no damages caps.

 

Chamber of Commerce v. Brown   (U.S. Supreme Court)

Preemption of federal labor law

The Supreme Court ruled 6/19/2008 that a California law that prohibits employers who receive more than $10,000 in state funds annually from using those funds to “assist, promote, or deter union organizing” is preempted by the National Labor Relations Act (NLRA). The NRLA provides that companies’ anti-labor speech cannot be considered evidence of an unfair labor practice so long as it does not threaten or coerce workers. The Chamber argued that California’s law violated the NLRA’s safe harbor for anti-union speech, and is therefore preempted. The Court agreed, finding that noncoercive speech is fully protected by the NLRA. Congress intended to leave unregulated uninhibited, robust and wide-open debate on labor disputes.

The impact of the Supreme Court’s decision in this case could be significant for state government contractors, as more than a dozen states were considering adopting laws similar to California’s.

 

Huber v. Wal-Mart Stores, Inc.   (U.S. Supreme Court)

Reasonable accommodation under the ADA

Seventeen years after it was passed, the Americans With Disabilities Act continues to generate litigation over fundamental questions it left unresolved. One involves the requirements for providing a reasonable accommodation to a disabled worker. In this case, the plaintiff became disabled and could no longer perform the essential elements of her job. She sought another vacant job, and her employer considered her application equally with other candidates. Since others were better qualified, she did not get the transfer, but instead was given a less favorable job.

The Eighth Circuit ruled that the employer's procedure treated candidates equally, and that the plaintiff was not entitled to the vacant job when that reassignment would violate a legitimate nondiscriminatory policy of the employer to hire the most qualified candidate.

The company provided a reasonable accommodation to the plaintiff by finding her another job. It may not have been the best alternative for her, but the law only requires a reasonable accommodation.

The Supreme Court initially agreed to hear this appeal, but the parties settled and the case was dismissed without a ruling.

 

Illinois Bell Tel. Co. v. IBEW, Local 21   (U.S. Supreme Court)

Whether recognition clause justifies arbitration of disputes not specified in collective bargaining agreement

This case arises from a dispute between AT&T's subsidiary, Illinois Bell Telephone Co., and its union, the IBEW, which sought to compel arbitration concerning new "performance guidelines" the company implemented for sales staff. The applicable collective bargaining agreement limits arbitration to matters involving the interpretation and application of the agreement's terms or provisions, and it says nothing about the arbitrability of performance guidelines. The Seventh Circuit nevertheless ruled that the guidelines were arbitrable, basing its decision solely on the fact that the agreement contained a recognition clause, i.e., standard language found in virtually every labor agreement in the country which says that the union is recognized as the exclusive bargaining agent for the defined bargaining unit of employees.

The NAM joined with the Council on Labor Law Equality to support Illinois Bell's appeal of this case to the Supreme Court. We urged the Court to take the case, arguing that the lower court's decision converts virtually any company action that is contrary to a union's interests into a violation of a boilerplate recognition clause. Arbitration should only be required where the parties have agreed to it, and courts should decide whether the parties have done so.

On March 17, the Court refused to hear this appeal. This precedent improperly introduces a judicially imposed form of 'interest arbitration' over a limitless set of issues arising under labor agreements that do not authorize such arbitration.


Related Documents:
NAM brief  (January 2, 2008)

 

Meacham v. Knolls Atomic Power Lab.   (U.S. Supreme Court)

Burden of proof in disparate impact suits under the ADEA

Under the Age Discrimination in Employment Act (ADEA), employers may not discriminate against employees 40 years of age or older based on age. However, employers may “take any action otherwise prohibited where the differentiation is based on reasonable factors other than age.” In the mid-90s, Knolls Atomic Power Lab instituted an involuntary workforce reduction, determining which employees to dismiss based primarily on three factors — performance, flexibility, and criticality of skills. Even though years of service also factored into the determination, 30 of the 31 employees terminated were over the age of 40. Subsequently, 26 of the dismissed workers filed suit, alleging age discrimination in violation of the ADEA.

At trial, a jury rendered a verdict in favor of the former employees, based on the employer’s failure to monitor the discretionary process in deciding who should be terminated, which resulted in an unlawful disparate impact on older workers. Although the Second Circuit initially affirmed the verdict, its decision was vacated and remanded as a result of the Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005). In that case, the Court held that in disparate impact suits filed under the ADEA, employers must be given the opportunity to show that their actions were reasonable. On remand, the Second Circuit reversed its earlier ruling, concluding that the employees had the burden of demonstrating the employer’s discretionary termination process was unreasonable and that they failed to carry this burden.

The Supreme Court ruled on 6/19/08 that the employer bears the burden of production and the burden of persuasion under the ADEA in establishing that it acted in reliance on “reasonable factors other than age” in a disparate impact case. This is an affirmative defense that, like other affirmative defenses, the employer must prove. Because this is a disparate impact case, involving alleged discrimination that results in a workplace disparity based on statistical evidence, plaintiffs must still point to a specific employment practice that caused the disparity. The case was sent back to the lower courts to determine whether the employer proved its defense.

 

Noe v. PolyOne Corp.   (6th Circuit)

Lifetime vesting of retiree health care benefits

The NAM and 4 other organizations filed an amicus brief 4/9 urging all the judges on the U.S. Court of Appeals for the Sixth Circuit to review a ruling by three of their members that threatens to impose huge health care liabilities on manufacturers. At issue is whether a union contract implies lifetime health care for retirees if the contract does not specify that health benefits are provided for the length of the contract only. We argue that in the non-union context, courts do not presume that retiree health care benefits are vested for life without a clear intent by the employer to do so, and there is no reason to apply a different presumption in the union context.

The Sixth Circuit is the only federal appeals court to cling to the so-called Yard-Man inference that retiree health benefits vest. This conflicts with the goal of federal labor policy to provide some degree of uniformity around the country, and encourages lawsuits in the Sixth Circuit.

The petition for rehearing was denied on June 2, 2008.


Related Documents:
NAM Brief  (April 9, 2008)

 


Patents, Copyrights and Trademarks -- 2008



Quanta Computer, Inc. v. LG Electronics, Inc.   (U.S. Supreme Court)

Patent exhaustion doctrine

Under the patent exhaustion doctrine, the first authorized sale of a patented product “exhausts” the patent owner’s right to control the buyer’s subsequent use of the product. As a result, patent owners were traditionally precluded from collecting royalties on subsequent sales of their products. In this case, LG Electronics (LGE) sold Intel the unrestricted right to use its patent in making Intel computer chips, but attempted to circumvent the patent exhaustion doctrine by requiring Intel to notify its customers that they were not authorized to combine the Intel chips with any non-Intel products. After some of Intel’s customers disregarded this notice and combined Intel chips with computer memory made by other companies, LGE sued those customers for patent infringement. In ruling in favor of the defendant customers, the district court held that, under the patent exhaustion doctrine, LGE’s rights in its patent were exhausted by Intel’s authorized sale of the chips to its customers. The Federal Circuit reversed, holding that the patent exhaustion doctrine only applies to “unconditional” sales and does not preclude a patent owner from selling its patent rights in a limited manner and imposing conditions on subsequent buyers that allow the patent owner to collect a separate royalty each time that the patented item changes hands.

The Supreme Court ruled unanimously on 6/9/2008 that patent owners can not extend their patent rights beyond the first authorized sale of a patented item. This principle applies to method claims as well as other patent claims. Once a product embodying a patent is sold, its buyer may resell it without being restrained by the patent laws.

 


Product Liability -- 2008



Ackison v. Anchor Packing Co.   (Ohio Supreme Court)

Application of medical criteria law to pending cases

On June 8, 2007, the NAM joined other business groups in filing an amicus brief in this case involving a recently enacted Ohio law that defers claims of injury due to exposure to asbestos until and unless there is evidence of asbestos-caused impairment. The estate of Danny Ackison brought suit to try to establish a relationship, although congestive heart failure and aortic stenosis are listed on his death certificate as the cause of death.

The issue is whether the statute may, consistent with constitutional requirements, be applied to cases pending on the date it was enacted. The defendant, supported by the NAM, argued that it may. The brief outlined the history of asbestos litigation and the severe problems caused to defendants, and to plaintiffs with actual injuries, when plaintiffs bring suit without any actual symptoms or medical evidence that asbestos caused an injury. The statute simply puts such claims on hold until actual symptoms develop. We have participated in similar recent cases in Georgia and Florida.

On Oct. 15, 2008, the Ohio Supreme Court ruled 5-2 that the law may be applied to cases pending on the date it was enacted. It ruled that the law was "remedial and procedural" rather than a retroactive change in vested or substantive rights. The law established a procedural prioritization of asbestos-related cases without putting new substantive burdens on plaintiffs. It also ruled that pleural thickening alone is insufficient to establish a compensable injury for asbestos exposure under common law in Ohio, and the plaintiff had not been diagnosed with any asbestos-related illness or impairment. The legislation does not prevent plaintiffs from pursuing pending actions that satisfy the actual-injury requirement.

The is an important decision upholding the validity of the retroactive application of case-management procedures involving about 40,000 asbestos-related suits. Shortly after the decision, a three-judge panel in Cuyahoga County dismissed 30,000 asbestos claims.

 

Altria Group, Inc. v. Good   (U.S. Supreme Court)

Whether federal labeling law preempts state law deceptive advertising claims

In this case, some smokers sued the makers of Marlboro Lights and Cambridge Lights under Maine’s Unfair Trade Practices Act, alleging that the manufacturer’s advertising the cigarettes as “light” and having “lowered tar and nicotine” was deceptive. They claimed that smokers might compensate for the lowered tar and nicotine by increasing their smoking, thus making the products just as unhealthy as non-light cigarettes.

The federal district court held that the state law claims were preempted by the Federal Cigarette Labeling and Advertising Act, which expressly prohibits states from imposing any requirements “based on smoking and health . . . With respect to the advertising or promotion of any cigarettes,” and gives the Federal Trade Commission exclusive authority to regulate all cigarette labeling and advertising involving the health impact of smoking. The First Circuit reversed, holding that the state law claims were not preempted because they were not based on “smoking and health” but instead on a more general duty not to deceive and thus did not fall within the scope of the Federal Cigarette Labeling and Advertising Act.

The NAM filed an amicus brief urging the Court to reverse the First Circuit. We argued that one of the principal reasons for the FTC is to provide regulatory guidance to businesses in order to comply with laws prohibiting deceptive practices. If plaintiffs can file lawsuits in state court with respect to labeling for which the FTC provides guidance, this would undermine the ability of manufacturers in a variety of industries from relying on guidance from the FTC. Congress empowered the FTC to issue guidance with respect to deceptive acts and practices. Allowing this state lawsuit to proceed would not supplement the FTC's role in the area of labeling -- it would be wholly at odds with federal law.

On Dec. 15, 2008, the Supreme Court upheld the lower court, 5 to 4. The majority held that the federal law is narrowly written and bars claims based on the effect of smoking on health, not claims based on fraudulent statements. It ruled that the FTC's approval of the words "light" and "low tar" was not clear enough specific authorization to impliedly conflict with the state fraud claim. When a preemption law is unclear, the benefit of the doubt goes to the plaintiff asserting a state-law claim.

The dissenting Justices oppose this presumption against preemption, and warned that the test adopted by the majority for determining whether state law is preempted is unworkable and has frustrated many courts. Instead, the dissenters argued that claims such as "American-made," or "the official cigarette of Major League Baseball," would not be preempted, since they do not relate to the effect of smoking on health, but that claims such as "Light" or "lowered tar and nicotine" would be. If a fraudulent advertising claim is preempted, federal regulators rather than juries in every state would decide whether the advertising is fraudulent.


Related Documents:
NAM brief  (April 7, 2008)

 

Behshid v. Bondex Int'l, Inc.   (California Supreme Court)

Causation in asbestos litigation

In an asbestos exposure case, the California Court of Appeal ruled that a plaintiff who had been exposed to multiple asbestos products, only one of which had been made by the defendant, but did not provide any testimony regarding the level of exposure to that product, nonetheless satisfied the court’s requirement that the defendant’s product was a “substantial” factor in causing the plaintiff’s injury.

The NAM joined with seven other groups in an amicus letter urging the California Supreme Court to review this decision. We argued that the lower court permitted liability to be imposed based on speculative testimony regarding specific causation that failed to meet the basic standard established by the California Supreme Court in Rutherford v. Owens-Illinois, Inc., which requires courts to distinguish between products to which a plaintiff was incidentally exposed and those products to which a plaintiff’s exposure was significant enough to be considered a “substantial” factor in causing the harm.

Additionally, we argued that the flimsy causation standard permitted by the California Court of Appeal has been rejected by other states’ courts that are experienced in asbestos litigation. In fact, one of the reasons why California has become a magnet for asbestos cases is because its state courts have lowered its specific causation standard.

On Oct. 28, the court denied review of this case.


Related Documents:
NAM brief  (September 30, 2008)

 

Braaten v. Saberhagen Holdings   (Washington State Supreme Court)

Duty to warn of hazards from third party products

The NAM joined with 7 other organizations urging the Supreme Court of Washington to reverse a lower court ruling that held a valve manufacturer liable for failing to disclose the hazards that arose when the Navy covered the valves with asbestos insulation and installed another company’s asbestos gaskets. Under common law, manufacturers are only liable for hazards in their own products. We opposed the court’s creation of a new duty to warn about hazards a manufacturer does not produce or put in its products. Such a duty would require syringe manufacturers to warn of the drugs that might be used in the syringe, or lighter manufacturers to warn of the hazards of smoking, or bread or jelly manufacturers to warn of the foreseeable risk of peanut allergies in peanut butter and jelly sandwiches. The lower court’s rationale – foreseeability – is unsound policy and invites a flood of new product liability cases, particularly involving asbestos. The duty to warn should be placed on the party in the best position to know the risk, and any economic loss should be borne by the party who caused it.

We are pleased to report that on 12/11/08, the Washington Supreme Court reversed the appellate court and held that makers of non-hazardous component parts have no duty to warn about asbestos products made by others and attached to the components post-sale. The court stated that its decision was based on the majority rule in product liability law that only those within a product's chain of distribution (such as a dealer or distributor) or those who manufacture a product have a duty to warn of the dangers associated with its use.


Related Documents:
NAM motion to re-apply for amicus status  (January 14, 2008)

 

Chemtall Inc. v. Stern   (U.S. Supreme Court)

Procedure for early consideration of punitive damages

The NAM had joined with other groups in August 2007 urging the West Virginia Supreme Court to strike down a trial court plan that requires a determination of punitive damages liability and a punitive damages multiplier before certification of a medical monitoring class, before a full determination of the defendants' liability for medical monitoring, and before any medical monitoring damages have been determined.

The case involves alleged exposure to polyacrylamide, which is used in to treat coal wash water at coal preparation plants. We argued that punitive damages must be based on actual damages, and cannot be determined in a vacuum before actual damages are determined. The trial court had not yet determined who should be in the class of plaintiffs, let alone whether any of them were actually harmed by the plaintiffs or how reprehensible the challenged conduct was to those plaintiffs. Setting punitive damages without making such determinations biases the jury, arbitrarily imposes punishment, and jeopardizes the right to receive a fair trial in West Virginia.

On Nov. 15, the West Virginia Supreme Court denied the appeal. It ruled that determining the constitutionality of punitive damages requires that it wait until the lower court actually enters a judgment awarding punitive damages. It also indicated its reluctance to intervene in pre-trial issues.

After the West Virginia Supreme Court refused to strike down this plan, the NAM filed a brief in the U.S. Supreme Court urging that the decision be reviewed and overturned. On 3/31/08, the Court declined to hear this appeal.

See also earlier cases decided in West Virginia in 2004 and 2007, Chemtall Inc. v. Madden.


Related Documents:
NAM brief  (February 28, 2008)
Summary of Chemtall Inc. v. Madden (West Virginia Supreme Court)  (August 15, 2007)
Summary of Chemtall Inc. v. Madden (West Virginia Supreme Court)  (August 2, 2004)

 

Donoughe v. Hobart Bros. Co.   (Superior Court of Pennsylvania)

Reverse bifurcation of trial in asbestos cases

The flood of asbestos cases filed in Philadelphia over recent years has led the courts there to practice reverse bifurcation, where issues of medical causation and damages are tried before issues involving theories of liability and product identification. The NAM believes this procedure, virtually automatic, is prejudicial to defendant manufacturers. Juries are asked to determine how high the damages are, and then, afterwards, to decide whether the defendants are liable. For hundreds of years, in regular tort cases, liability and damages have been tried simultaneously. 

The NAM and others filed an application Dec. 10 to join as amici, or friends of the court, in a petition for reconsideration of the court’s procedure. The court denied rehearing and sent the case back for trial.

 

Foster Wheeler LLC v. Superior Court   (California Supreme Court)

Whether sophisticated user defense extends to employees of purchaser

The plaintiff in this case worked for the Navy for many years, working around asbestos-containing boilers sold to the Navy by Foster Wheeler. He sued the company and many others for failing to warn him about the dangers of asbestos. The company's defense is based on the principle that a manufacturer does not need to warn a sophisticated user about the hazards of a product that are already known to it. The company asked for a ruling absolving it of liability because the Navy was in a better position and had the responsibility to warn its employees of hazards in the workplace.

The company lost a motion for summary judgment, and appealed to the California Supreme Court. The issue is whether the sophisticated user defense can be asserted against an employee of the sophisticated user. The NAM and other business groups sent a letter to the Court urging it to review this issue, as the issue affects hundreds of pending asbestos-related cases. Many cases recognize that the defense applies in suits by employees of sophisticated users. The Navy is in a much better position than the manufacturer to take proper precautions to protect their workers, and shifting that responsibility to the manufacturer removes the economic incentives that encourage employers to protect the safety of their employees.

On approximately 10/31/08, the California Supreme Court declined to review this case.


Related Documents:
NAM Amicus Letter  (October 14, 2008)

 

Groch v. General Motors Corp.   (Ohio Supreme Court)

Supporting constitutionality of Ohio's new statute of repose

The NAM and other business organizations asked the Ohio Supreme Court to declare that state's 10-year statute of repose to be constitutional. The plaintiff suffered injuries while using a 30-year old trim press and sued his employer and the manufacturers of the machine. A federal court submitted eight questions of law to the Ohio Supreme Court, including ones involving the validity of the statute of repose.

The NAM argued that it is the prerogative of the Ohio legislature to decide broad public policy, including state tort law. When states formed, they delegated to the courts some of their authority to develop common law, but always retained the position as the chief policymaking branch of state government. The legislature is uniquely qualified to weigh and balance the many competing societal, economic and policy considerations involved in changing tort law, while courts are better able to decide individual disputes.

The brief warned about a nationwide effort under way to nullify legislative attempts to change tort law. Statutes of repose are important safeguards against stale litigation, and common sense indicates that a product that has been used reliably for years will ultimately malfunction for reasons outside the control of the manufacturer, such as ordinary wear and tear, improper maintenance or misuse. A statute of repose can help level the playing field between Ohio manufacturers and their foreign competitors, since our nation's principal competitors -- the European Community, Australia and Japan -- have adopted 10-year statutes. Our brief also warned against courts that use an expansive view of their role to override legislation and impose their own economic policy views -- as the Supreme Court did in the highly discredited period known as the Lochner era.

On Feb. 21, 2008, the Ohio Supreme Court affirmed the constitutionality of Ohio’s 10-year statute of repose. However, the court held that retroactive application of the statute of repose to bar a claim for injuries that a plaintiff suffered before the statute took effect was unconstitutional under the Ohio Constitution, which prohibits retroactive application of a law when such application infringes on the exercise of a substantive right. Thus, in this particular case, the 10-year statute of repose will not bar Groch’s claim against the trim press manufacturer.

 

Henry v. Dow Chemical Co.   (Michigan Court of Appeals)

Class action certification

The NAM joined in an amicus brief 4/24/06 urging the Michigan Court of Appeals to reverse a trial court ruling that granted class certification without conducting a rigorous analysis of whether the facts and issues in the case satisfy the factors for class action certification. The trial court failed to give the appropriate level of scrutiny to whether the class claims met the Michigan class action requirements, such as predominance, superiority, typicality and adequacy. It certified a class whose members owned property with varying dioxin levels, including some with no elevated dioxin levels, with different flooding histories, and with different histories of exposure to dioxin. The damage claims varied widely, with some plaintiffs claiming no more than vague concerns. Thus, injury, causation and damages were all highly individualized issues unsuitable for class action treatment.

Our brief highlighted the dangers of allowing cases to be certified as class actions without a rigorous analysis of the class claims. Lax standards for class action certification encourage unwarranted litigation, blackmail settlements, skewed trial outcomes and windfall legal fees. They also make those jurisdictions that use them magnets for statewide class actions, resulting in higher prices, withdrawn products and services, hampered economic development and bankruptcies.

In addition, we urged the court to reject a novel plaintiff’s theory that the class be certified based on the barest minimum alleged commonality – that they are located within the 100-year flood plain of the Tittabawassee River and allegedly share a fear that the river could flood at unknown times and frequency in the future, and could leave contamination on their property. This is a speculative concern by plaintiffs who are not currently injured, and allowing such claims would create a stampede of litigation and drain resources needed to compensate those with real physical injuries and a need for medical care. This theory, if adopted in Michigan, could be used against nearly any industrial facility that someone might fear could cause a hazardous release at some point in the future.

On 1/24/2008, the Michigan Court of Appeals upheld the trial court's certification of the case. It ruled that only clearly erroneous rulings may be overturned, and that what little evidence was available to the trial judge was insufficient to overturn the judge. An invstigation by the Michigal Department of Environmental Quality generally supported the class definition, although the appeals court recognized that the class could have been reduced to the extent property owners had "zero to a little amount of dioxin" in their soil.


Related Documents:
NAM brief  (June 27, 2008)

 

Honer v. Merck and Co.   (California Supreme Court)

Secondhand exposure to hazardous substances

The NAM joined with six other organizations in an amicus letter urging the California Supreme Court to review a lower court ruling that landowners have a duty to protect against off-site injuries that could result from secondhand exposures to asbestos and other substances emitted in the workplace. Whether one person owes a legal duty, as opposed to a moral or ethical obligation, is a policy judgment that must balance providing a remedy with extending exposure to tort liability almost without limit. On Jan. 3, 2008, the court declined to review this appeal.

In this case, a woman sued two companies with New Jersey facilities where her father and brother worked as insulators. The men would bring home clothing with asbestos fibers, and she would wash the clothing and otherwise be exposed to the substance. She sued the companies for strict liability, negligence, fraud and misrepresentation, and premises liability. Only premises liability was at issue here.

The trial court dismissed the claim under a statute of repose, because it was brought more than 10 years after the completion of the insulation work.

The California Court of Appeal reversed, holding that California law shields its residents, like the plaintiff in this case, from out-of-state statutes of repose. Thus, the New Jersey statute of repose did not apply and the plaintiff could bring her claim. The court also held that a premises owner can be liable for secondhand asbestos exposure.

Our amicus letter, which focused on the issue of secondhand exposure liability, argued that 5 other states rejected such liability in recent cases, finding that the mere foreseeability of harm to third parties is not enough to extend the employer's duty of providing employees with a reasonably safe work environment to potential harm outside the workplace. The companies in this case did not spread the release of toxins among the general population.

In addition, this brand new duty requirement for landowners will bring about countless new lawsuits, potentially involving asbestos and other substances and involving a wide variety of people who might come in contact with an exposed worker.

This is another example of a case where courts have been asked to extend liability beyond that which is generally available in our tort system. If such a leap is to be made, it should be considered by state and federal legislatures considering all the policy implications, and not by individual judges.

 

Jesensky v. A-Best Products   (3rd Circuit)

Liability for second-hand exposure

This case is about second-hand exposure to asbestos under Pennsylvania law. A federal district court judge properly ruled that a company has no duty to protect family members of independent contractors against off-site exposure to asbestos. There have been several recent cases involving this issue, and the NAM's amicus brief urges the Third Circuit to join most of them in finding no duty by the company. The NAM joined five other organizations warning that expanding such a duty would lead to a new wave of asbestos litigation. The employer owes a duty of safety in the workplace, but not to distant third-parties whose potential claims are so remote.

On July 11, 2008, the Third Circuit affirmed the dismissal of the complaint, but did not reach the question of liability for third-party exposure. Instead, it ruled that the complaint, filed 12 years earlier and never amended, did not raise a premises liability or failure-to-warn claim that is essential to the case. The ruling has not resolved the substantive issue, which will have to await another case.

 

Liggett Group, Inc. v. Davis   (Florida Supreme Court)

Proof of reasonable alternative design in product design cases

Manufacturers can be sued for defective design, defective manufacturing, and failure to warn of known risks from their products. This suit involved a cigarette smoker who developed lung cancer and sued the manufacturer for defective design and negligent manufacturing of its cigarettes. A jury returned a verdict in her favor for more than $500,000.

On appeal, the manufacturer argued that that the plaintiff did not prove that the cigarettes were dangerous beyond that contemplated by the ordinary consumer, nor did she show that there was an alternative design that would have allowed her to avoid her injury. The NAM and 5 other business and insurance groups filed an amicus brief supporting the company’s position on liability for design defects. We argued that under either old or more recent standards of liability, the plaintiff must show that there is a more reasonable design for the product. Manufacturers should not be subject to insurer-like liability when their products come with risks, if there is no alternative design that will make them less risky. Our brief provided a broad policy perspective that goes went beyond the tobacco products at issue, and showed that holding manufacturers liable for making risk-free products could be devastating to a broad category of other products and industries, such as convertible automobiles, motorcycles, personal watercraft, pharmaceuticals and a cold beer on a hot day. We highlighted the common sense principle that before a product manufacturer can be found liable, there must be something wrong with the product, and implicit in that concept is the requirement that there must be “a better way to build the mousetrap.” Inherently dangerous products are not necessarily unreasonably dangerous.

If a product has no reasonable alternative design (i.e., there is no way to make it safe), the focus is no longer on whether it is defective, but whether it is so lacking in social utility that it should not be marketed at all, and that is a decision for legislators, not the courts.

Unfortunately, on 12/11/08, the Florida Supreme Court declined to hear this appeal, thereby perpetuating the ambiguity in Florida law as to whether injured parties must prove that safer products could be made in order to prevail in liability cases involving inherently dangerous products.


Related Documents:
NAM brief  (June 13, 2008)

 

Lowe v. Philip Morris USA Inc.   (Oregon Supreme Court)

Medical monitoring without injury

The NAM joined with 7 other business groups in urging the Oregon Supreme Court not to recognize a claim seeking medical monitoring when there is no showing of injury. The case involves a claim on behalf of a class of Oregonians who have smoked the equivalent of one pack of cigarettes a day for five years or more and who have not been diagnosed with lung cancer. The plaintiff sought a court-monitored program of medical monitoring, smoking cessation and education, and attorney's fees.

Traditional tort law requires that a plaintiff have some injury before he or she may file suit for damages, including the cost of medical treatment or monitoring. There should be no recovery based on the mere possibility of a future injury. If such a remedy is to be provided, the legislature should make that decision, considering all the daily situations that might lead some to seek medical monitoring and the ramifications for the economy. Medical monitoring claims would create the opportunity for abuse, would burden the courts, and have been rejected by many other courts, including the Supreme Court.

On May 1, 2008, the Oregon Supreme Court affirmed the lower court, rejecting the medical monitoring claim. It ruled that the threat of physical harm in the future is not sufficient harm to bring suit now. The court also rejected the theory that the cost that plaintiffs incurred to undergo medical monitoring on their own was an injury. Purely economic losses, without actual injury to a person or his or her property, are not actionable, said the court. Oregon joins a significant number of other states in rejecting medical monitoring claims without injury. Since 1999, only Missouri and West Virginia have allowed such claims.

 

Mikolajczyk v. Ford Motor Co.   (Illinois Supreme Court)

Risk-utility test for design defects in complex products

This case involves a manufacturer's liability for using a "yielding seat" design rather than a rigid seat design in a car's front seat. A fatal car accident led to a suit alleging defective design, and the lower court allowed the jury to use a simple "consumer expectations" test in determining whether the design was proper.

The NAM joined with the Illinois Manufacturers Association in an amicus brief arguing that the correct standard in design defects cases for complex products is the modern "risk utility" test found in the Third Restatement of Torts: Products Liability. That test looks to the risks and benefits of the product's allegedly defective design and the feasibility of safer alternative designs. The lower courts in this case, however, looked solely to whether the product (a common type of automobile seat) was unreasonably dangerous according to consumer expectations; this is a test found in the older Second Restatement that is still widely applied to manufacturing defects, but not to design defects.

Our brief noted that rigid seat designs create greater risks in some accidents, and that yielding seats are clearly superior and far safer in most rear end collisions. We argued that a jury should be directed to consider whether the benefits of the car's design outweigh the risk of damages, as well as the feasibility of possible alternative designs and their possible effects on the overall safety of the product. The risk-utility test is fair and reasonable in complex products design litigation, and while the consumer expectations test is arbitrary and completely unsuited for this type of case. Its use puts manufacturers in the untenable position of not being able to minimize harmful accidents without incurring tort liability in some cases.

On 10/17/08, the Illinois Supreme Court disagreed, holding that the risk-utility test is not the exclusive test under Illinois law to determine whether a product is designed in an unreasonably dangerous way. Such policies, it ruled, should be changed by the legislature, not the courts.

 

Norris v. Crane Co.   (California Supreme Court)

Causation and consumer expectation test in asbestos litigation

The NAM joined with 7 other business groups in an amicus letter 5/7/08 urging the California Supreme Court to review an appellate court ruling that (1) blamed the defendant company for 50% of the fault in an asbestos case where the plaintiff was only minimally exposed to the defendant's product, and (2) improperly applied a consumer expectation test to a product that the plaintiff knew little about. The lower court allowed a $2.15 million verdict by a plaintiff who was a passerby on a few occasions while work on the defendant's product was being done.

The court relied on the theory that "every exposure to asbestos fibers" was a substantial factor in causing the plaintiff's injury, despite evidence that exposure to asbestos from other products was much higher. Our letter brief argues that a particular exposure or series of exposures must be a substantial factor in bringing about an injury, to a reasonable degree of medical probability. De minimis or incidental exposure is not enough; instead, a court should assess the "length, frequency, proximity and intensity" of exposure. The California Supreme Court should review the case to clarify how this issue will be handled in product liability cases in that state.

The lower court also allowed the plaintiff to take advantage of the consumer expectations test, a legal principle that assesses liability if a consumer expects a product to perform a certain way but it doesn't. The NAM's amicus letter urges review of this ruling, pointing out that the test is difficult to apply, particularly with complex products, and tends to be unworkable for bystanders who do not have any expectations about product performance.

On June 25, the court declined to hear this appeal.


Related Documents:
NAM amicus letter  (May 7, 2008)

 

Rhode Island v. Lead Industries Ass'n, Inc.   (Rhode Island Supreme Court)

Public nuisance from lead pigment

Rhode Island sued and won a jury verdict against 3 former lead pigment manufacturers, ordering them to pay to remove lead paint from more than 300,000 homes in that state, at a cost estimated to be $2.4 billion. The suit, brought on a contingency basis by attorneys at Motley Rice, was premised on the claim that lead paint is a public nuisance. Lead paint has been banned in the United States since 1978, but poor maintenance of old walls in homes and apartments has led to elevated lead levels and associated health problems in children.

On January 30, the NAM and other business groups filed an amicus brief urging the Rhode Island Supreme Court to reverse the verdict because the trial court improperly rewrote the law of public nuisance. Our brief argued that public nuisance law should never be used to replace product liability law. Traditional standards of public nuisance law require that there be an injury to a common public right, that there must be some conduct by the defendants that created a public nuisance, and not merely injury, and that the defendants must have some control over the nuisance, both for imposing liability and for providing a remedy of abatement. The lower court also ignored the need to show proximate cause between a particular manufacturer's actions and an injury.

On July 1, 2008, the Rhode Island Supreme Court unanimously reversed the verdict. Creating new causes of action is a legislative function, and the danger from lead paint was created by landowners who allowed the paint to deteriorate, not by manufacturers who do not have control over proper maintenance in private homes. It ruled that claims against product manufacturers should be brought under product liability law, and concluded that "the state has not and cannot allege any set of facts to support its public nuisance claim." A proper public nuisance claim must allege interference with a public right, something different than an aggregate of private rights by a large number of people. It must also allege conduct of a quasi-criminal nature, and a defendant must have control over the nuisance "at the time the damage occurs." Allowing this suit would have created unpredictable liability for manufacturers in situations where they have no control over the ultimate use and/or maintenance of their products, and would constitute regulation by litigation. The NAM has been very active in opposing the attempted expansion of the public nuisance theory of liability by plaintiffs' lawyers who are attempting to avoid the straightforward requirements of product liability law. Similar cases have been brought against manufacturers of firearms, cigarettes, automobiles, gasoline additives, chemicals and electricity. Many of these also have been rejected.

This decision, coming as it does in the midst of a variety of cases in which plaintiffs are trying to expand notions of public nuisance into product liability, will likely be a very important precedent for other state courts to emulate.


Related Documents:
NAM brief  (January 30, 2008)

 

Riegel v. Medtronic, Inc.   (U.S. Supreme Court)

FDCA preemption of state medical device litigation

A medical device was granted pre-market approval by the Food and Drug Administration (FDA), which studied the device's design, method of manufacture and proposed label. Manufacturers may not change these characteristics after approval is obtained, without further proceedings. However, this case involves whether a private lawsuit in state court may challenge the design, manufacture or labeling of the device, or whether such a suit is preempted by § 360k(a) of the Medical Device Amendments to the Food, Drug and Cosmetic Act. That section preempts any state "requirement" that "relates to the safety or effectiveness" of a medical device and "is different from, or in addition to, any requirement applicable under" the MDA.

The plaintiff alleged injuries from the malfunction of a balloon catheter, and the defendant argued that the FDA's grant of pre-market approval established federal requirements that preempted state tort liability, since such liability would be a state requirement different from or in addition to the federal requirements.

The Supreme Court ruled 2/21/08 that FDA premarket approval does establish a requirement under federal law, and it preempts the suit under state law. It found that the New York law suit raised claims that rely on requirements that are "different from, or in addition to" the federal requirements and that relate to the safety or effectiveness of the approved device. State common-law liability is premised on the existence of a legal duty, and constitutes a "requirement." Justice Scalia's opinion notes that a "State tort law that requires a manufacturer's catheters to be safer, but hence less effective, than a model the FDA has approved disrupts the federal scheme no less than state regulatory law to the same effect." He suggested that tort law, applied by juries, is "less deserving of preservation" than statutory law or regulations, because juries, unlike federal or state officials, do not take into account the benefits of a particular product design along with its risks.

It is clear that Congress can decide to preempt litigation under state common law in order to promote the development and marketing of products whose risks and benefits must be assessed. Allowing such assessment to be made every time there's a new lawsuit would overturn the considered judgment of the federal government.

 

Satterfield v. Breeding Insulation Co.   (Tennessee Supreme Court)

Liability for second-hand exposure to asbestos

This case is about second-hand exposure to asbestos under Tennessee law. The lower court ruled that a company has a duty to protect family members of employees against off-site exposure to asbestos, since such exposure is foreseeable.

There have been several recent cases involving this issue, and the NAM's amicus brief urges the Tennessee Supreme Court to join most of them in finding no duty by the company. The NAM joined six other organizations warning that expanding such a duty would lead to a new wave of asbestos litigation. The employer owes a duty of safety in the workplace, but not to distant third-parties whose potential claims are so remote.

On 9/9/08, the Tennessee Supreme Court ruled that, under Tennessee law, employers owed a duty to individuals who regularly over an extended period of time came into close contact with the asbestos-contaminated work clothes of its employees, to prevent them from being exposed to a foreseeable risk of harm. The court stated that this duty could extend to babysitters, carpool members, or domestic help, should they develop mesothelioma.

 

Snyder v. Superior Court   (California Supreme Court)

Validity of court procedures requiring plaintiffs to link defendant to alleged hazard

The NAM joined with 6 other organizations in support of a general court order in California that requires plaintiffs in asbestos cases to file basic information to support their claims about 8 months after a complaint is filed and allowing defendants to move to dismiss the case if the required report does not identify witnesses or documents linking the defendant to the plaintiff's exposure. Our brief in the court of appeals supported a trial court order as a sound approach to manage complex litigation, to facilitate pretrial resolution of evidentiary and other issues, and to minimize the time and expense of trials.

On 12/18/07, that court ruled that the general order conflicts with a state rule of civil procedure that prohibits the discovery of an attorney's "impressions, conclusions, opinions, or legal research or theories." It held that disclosing the witnesses, their expected testimony, and product identification documents intended to be relied on at trial depends on an attorney's impressions, conclusions and opinions and violates the work product doctrine encompassed by the rule. It overturned the lower court order and reinstated Caterpillar as a defendant in the case.

On January 25, 2008, the NAM filed a brief urging the California Supreme Court to hear this appeal. California's asbestos docket appears to be increasing, and out-of-state parties make up a large percentage of plaintiffs. We urged the court to take the case and recognize the validity of this trial court procedure, which does not interfere with attorney work product or disclose anything that won't have to be disclosed anyway at trial. The procedure helps prevent trial by ambush and coercive settlement power.

On April 9, the court declined to hear this appeal.


Related Documents:
NAM brief  (January 25, 2008)

 

Spiewak v. AC and S, Inc.   (Florida Court of Appeals)

Asbestos medical criteria law

The NAM and five other business groups filed a joint brief on 9/7/07 urging the Florida Court of Appeals to affirm a lower court decision that held Florida’s Asbestos and Silica Compensation Fairness Act to be constitutional. Enacted in June 2005 to preserve funds for individuals actually impaired by asbestos, this Act requires dismissal of claims by individuals who show no such impairment. As a result, claimants who cannot presently demonstrate impairment may only bring their cases after they develop a physical impairment that satisfies the minimum requirements of the law. We argued that this Act should be upheld as constitutional, as Florida’s Third District Court of Appeal concluded in DaimlerChrysler Corp. v. Hurst, another case in which we filed a brief.

Our brief described the asbestos litigation crisis that led Florida to change its law and the need for courts to dismiss cases where no injury has yet been found. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the effect of these claims on solvency, peripheral defendants and the Florida economy.

In May, 2008, the court ruled that the Florida statute could not be applied retroactively to causes of action that have already accrued and that are in litigation. A cause of action is a property right that vests when it accrues to the plaintiff. The statute's requirement to prove an actual malignancy or physical impairment was rejected for those plaintiffs who could show only that they suffered an injury from an asbestos-related, non-malignant disease.

 

Warner-Lambert Co. v. Kent   (U.S. Supreme Court)

Preemption of state drug liability suit

In a class-action lawsuit filed by plaintiffs who were allegedly injured by a drug that had obtained Food and Drug Administration (FDA) approval, the defendant manufacturer would normally be shielded from liability by Michigan’s product liability statute because its drug had been approved by the FDA. Such immunity is lost under the statute’s “fraud exception,” however, if the manufacturer intentionally withheld from or misrepresented to the FDA information about the drug that would have caused the FDA to disapprove it. Plaintiffs attempted to preserve their claim against Warner-Lambert’s FDA-approved diabetes drug, Rezulin, by alleging such fraud.

In a similar case, Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341 (2001), the Supreme Court held that the Food, Drug and Cosmetic Act (federal law) preempts state “fraud-on-the-FDA” claims (claims in which the FDA would not have approved the product but for the fraud), as such claims “conflict with the FDA's responsibility to police fraud.” Although the federal district court held that the preemption found in Buckman applied to the claims in this case, the Second Circuit reversed, holding that plaintiffs’ claims were not preempted because they were traditional state tort law claims (such as claims of defective design and defective manufacturing), not claims based on “fraud-on-the-FDA.”

When it accepted the case for review, the Supreme Court agreed to decide two key issues: 1) whether a state court is preempted from finding fraud when a federal agency has found no fraud, as such a finding would interfere with the agency’s critical functions; and 2) whether a state court can step into the shoes of a federal agency and determine that the agency would not have approved a product if fraud had not occurred.

However, on March 3, 2008, just one week after the oral arguments in the case, the Supreme Court split 4 to 4 on these issues, resulting in a simple affirmance, without opinion, of the Second Circuit's decision.

In June of 2007, the NAM opposed congressional proposals that would eliminate FDA preemption relating to warnings and clinical trial requirements for drugs and medical devices. The proposals would permit states to hold manufacturers liable under a patchwork of state laws for failing to adopt warnings that the FDA specifically rejected. They will also allow judges and juries to substitute unscientific reasoning for the FDA’s expert scientific determinations, with a huge potential for conflicting results. This case, relating to assessing the adequacy and accuracy of FDA regulatory proceedings, could similarly lead to conflicting results on a state-by-state basis.

 

Williams v. American Optical Corp.   (Florida Court of Appeals)

Asbestos medical criteria law

The NAM and five other business groups filed a joint brief on 9/7/07 urging the Florida Court of Appeals to affirm a lower court decision that held Florida’s Asbestos and Silica Compensation Fairness Act to be constitutional. Enacted in June 2005 to preserve funds for individuals actually impaired by asbestos, this Act requires dismissal of claims by individuals who show no such impairment. As a result, claimants who cannot presently demonstrate impairment may only bring their cases after they develop a physical impairment that satisfies the minimum requirements of the law. We argued that this Act should be upheld as constitutional, as Florida’s Third District Court of Appeal concluded in DaimlerChrysler Corp. v. Hurst, another case in which we filed a brief.

Our brief described the asbestos litigation crisis that led Florida to change its law and the need for courts to dismiss cases where no injury has yet been found. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the effect of these claims on solvency, peripheral defendants and the Florida economy.

Despite our best efforts, on 5/28/08, Florida’s Fourth District Court of Appeal reversed and remanded, holding that the Asbestos and Silica Compensation Fairness Act cannot be applied retroactively to defeat causes of action already accrued and in litigation. The court reasoned that applying the statute retroactively would adversely affect the vested rights of plaintiffs, since before the statute was enacted Florida law had recognized a cause of action for damages arising from the disease of asbestosis without any permanent impairment or the presence of cancer.

 


Punitive Damages -- 2008



City of Hope National Medical Center v. Genentech, Inc.   (California Supreme Court)

Fiduciary liability in patent development agreements

The NAM filed an amicus letter urging the California Supreme Court to review a lower court decision that allows plaintiffs to recover tort and punitive damages merely because a defendant refused to pay royalties that it arguably did not owe under the terms of a complex commercial contract.

A jury awarded $200 million in punitive damages against Genentech for breach of contract and fiduciary duty. The crux of the decision on appeal is that fiduciary duties and the potential for punitive damages arise whenever two sophisticated parties, each represented by counsel, enter into a contract in which one party transfers an invention to the other party, and that other party agrees to pay royalties in exchange for exercising an option to patent, develop, and commercially exploit the invention. This fiduciary duty applies to the payment of all royalties called for by the parties’ contract.

The NAM urged review so that the California Supreme Court could reconsider this conclusion. We are concerned that the principle could extent fiduciary obligations, which are stricter and subject to greater penalties, to contract disputes. This expansion of contract law by the courts usurps the power of the legislature to make law and threatens a wide range of contracts that do not necessarily involve patented or secret information.

The NAM urged review so that the California Supreme Court could reconsider this conclusion. We were concerned that the principle could extend fiduciary obligations, which are stricter and subject to greater penalties, to contract disputes. This expansion of contract law by the courts would usurp the power of the legislature to make law and threaten a wide range of contracts that do not necessarily involve patented or secret information.

On 4/24/08, the California Supreme Court threw out the $200 million punitive damages award, holding that punitive damages cannot be awarded for a breach of contract unless there was an actual fiduciary relationship between the parties.

 

Continental Carbon Co. v. Action Marine, Inc.   (U.S. Supreme Court)

Excessive punitive damages award

The NAM joined the American Chemistry Council in an amicus brief urging the Supreme Court to overturn an award of $17.5 million in punitive damages against a manufacturing plant in Phenix City, Alabama. This case involves the release of “carbon black” in the neighborhood of the plant which caused property damage but no harm to individuals. Our brief argued that the large punitive damages award is unconstitutionally excessive because, under established Supreme Court precedent, it is so much larger than other state penalties that might realistically be imposed for comparable misconduct.

Not only did the Alabama Department of Environmental Management (ADEM) impose no civil penalties on the company for the release of carbon black, but the most it could have fined the company was $250,000 for every group of ten violations. To reach an unrealistic multi-million civil penalty the Eleventh Circuit believes ADEM could have imposed, ADEM would have had to issue at least eight separate orders (based on a total of at least eighty separate violations). Neither the record nor common sense supports the court’s unstated assumption that the company would have continued to engage in violations and to incur successive $250,000 penalties after receiving the maximum punishment from ADEM. That assumption ignores the duties owed by the company to its shareholders and is refuted by the record evidence showing that the company took various steps to identify and remedy the causes of the carbon black emissions.

On June 27, 2008, the Supreme Court declined to hear this appeal.

 

Exxon Shipping Co. v. Baker   (U.S. Supreme Court)

Whether absolute size of punitive award is unconstitutionally excessive

The NAM joined other groups in an amicus brief 9/20/07 supporting an appeal of the largest punitive damages award ever affirmed on appeal, $2.5 billion, and larger than the total of all punitive damages awards affirmed by all federal appellate courts in U.S. history. At issue is whether the absolute size of the punitive award against Exxon is excessive in relation to the State’s legitimate interests in retribution and deterrence for the Exxon Valdez oil spill in 1989.

On Oct. 29, the Court agreed to review the case, but limited the issues to whether punitive damages may be awarded at all under maritime law, and if so, whether the damages awarded in this case were constitutionally legitimate. The NAM and others filed another brief on Dec. 26, this time trying to outline for the Court the factors that should be considered when deciding on punitive damages.

The Supreme Court has identified three guideposts for courts to use in determining when a punitive award is unconstitutionally excessive: (1) the degree of reprehensibility of the misconduct; (2) the ratio of the punitive to the compensatory damages; and (3) the difference between the punitive damages and the legislative and/or administrative penalties for comparable misconduct.

Under the first guidepost, our first brief argued that not only was Exxon’s conduct unintentional and not profit-motivated, but it promptly took steps to ameliorate the harm its oil spill caused. This is hardly reprehensible conduct.

Under the second guidepost, the $3.6 billion in compensatory damages, fines, and remediation expenses incurred by Exxon as a result of its conduct already serves to punish and deter; thus, record-breaking punitive damages of $2.5 billion would only add insult to injury. Our brief likened this case to the “ink on the rug” example: if a person ruins a $10,000 rug by spilling a $5 bottle of ink, he would be exceedingly careful never to spill ink on the rug again, even if it cost him “only” $10,005 and he was not otherwise punished.

Under the third guidepost, our brief pointed out that the punitive award in this case is twenty times the amount of the combined federal and state criminal fines imposed against Exxon and over thirty times the maximum amount of civil penalties that could have been imposed, with such a disparity suggesting that Exxon could not have had fair notice of the punishment’s magnitude.

The Ninth Circuit’s treatment of punitive damages is symptomatic of a growing misperception among reviewing courts that the Constitution never requires a punitive award to be less than the compensatory damages, no matter how high the compensatory damages may be. Our brief outlined the continual failure by courts to recognize that large compensatory damages (and other costs borne by the defendant as a result of its tort) can and often do punish and deter in their own right and that the ultimate question in any constitutional inquiry must be whether the absolute amount of the penalty is excessive.

In our merits brief, we outlined 8 considerations that lead to the conclusion that the award in this case was constitutionally excessive. The factors are:

· What is the conduct that is being punished?
· How wrongful was the conduct?
· Who committed the conduct?
· To what extent do compensatory damages, fines and other costs borne by the defendant as a result of its conduct already serve the goals of deterrence and retribution?
· What amount of fines have the expert regulatory agencies determined to be appropriate to punish and deter the same or similar conduct?
· How does the punitive award compare to prior punitive awards for comparable or more egregious conduct?
· Is the punitive award disproportionate to the harm to the plaintiff(s)?
· If the tortfeasor is an individual, what is his or her financial condition?

On 6/25/2008, the Court failed to reach agreement on whether maritime law imposes liability on a corporation for the acts of managerial agents, and the Ninth Circuit approval of such liability was upheld. The Court also ruled that the Clean Water Act does not preempt suits under maritime law for damages from oil spills under maritime jurisdiction.

Finally, the Court ruled 5-3 to declare that federal maritime law imposes certain common law limits on excessive punitive damages, and that a ratio of more than 1 to 1 between punitive damages and compensatory damages is excessive, at least in cases where the defendant company did not act in a way that exhibited "earmarks of exceptional blameworthiness." Reckless conduct, for example, is less blameworthy than intentional or malicious conduct, nor is it "necessarily callous toward the risk of harming others." Action taken or omitted to augment profit is more blameworthy as well. In cases like this, without intentional or malicious conduct, without behavior driven primarily by desire for gain, and without modest economic harm or low odds of detection, a ratio of 0.65 to 1 is a reasonable median ratio, and a 1 to 1 ratio is a "fair upper limit."

The decision is a determination under federal common law applicable in maritime cases, but some of the language will be used to support further arguments raising constitutional limits in future cases of all kinds.

 


RICO Act -- 2008



Bridge v. Phoenix Bond & Indemnity Co.   (U.S. Supreme Court)

Whether reliance is required for mail fraud claim under RICO

The Racketeer Influenced and Corrupt Organizations Act (RICO) is a sweeping statute that allows individuals to sue any person associated with an enterprise that engages in a pattern of racketeering activity, which includes mail or wire fraud. This case involves whether a plaintiff must prove that he or she relied on an allegedly fraudulent act in order to sue.

The defendants were alleged to have submitted false information to Cook County, Illinois, in connection with county tax lien auctions, but the plaintiffs who sued them never saw or relied on that information. The Seventh Circuit allowed the suit to proceed anyway. Other circuits have required a showing a reliance on a material misrepresentation.

The Supreme Court ruled unanimously on 6/9/2008 that RICO does not require proof of reliance. All that is required is proof that the plaintiff's business or property was injured by an act prohibited by RICO. Congress made mail fraud a violation, but did not incorporate the usual state common law requirement that someone rely on the fraud to their detriment. The decision will encourage further RICO-based litigation.

 


Securities Regulation -- 2008



Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc.   (U.S. Supreme Court)

Third-party vendor liability for corporation's SEC 10b-5 violation

The Supreme Court on 1/15/08 affirmed 5 to 3 an 8th Circuit decision that relieved two third-party vendors from liability under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 for deceptive conduct. The Court ruled that the equipment vendors, who agreed with the corporation to engage in a rebate scheme that allegedly had no legitimate business or economic purpose except to artificially inflate the corporation's financial statements, issued no statements to the public that investors relied upon. The Court also reaffirmed that the defendants may not be sued in a private suit for aiding and abetting the corporation's violations; only the SEC or certain state prosecutors may bring such suits.

This was a high profile case in which the Court was being asked to substantially expand the universe of companies that can be sued when a company deceives its own investors. The NAM filed a brief 8/15/07 arguing that expanded liability is not provided for in the statute, and that such expansion would chill legitimate commerce, harm the economy, encourage frivolous claims, increase the costs of litigation, and encourage coercive settlements.

Manufacturers are relieved that the Court stepped in to prevent "creeping liability," where plaintiffs attempt to expand primary responsibility for one's acts to third parties who were not involved in making any misleading statements. The Court properly recognized that Congress did not create a broadened right to sue in this situation, and underscored the need for plaintiffs to show that they relied on fraudulent or misleading statements.

 


Taxation and State Taxation -- 2008



Boulware v. United States   (U.S. Supreme Court)

Return-of-capital rule

In this case, a shareholder who received funds from his corporation and failed to report them as income was convicted of tax evasion. As his defense, the shareholder argued that the funds should be treated as the non-taxable return of the capital he had invested, since there were no other means of returning his capital in light of the corporation’s inability to distribute dividends because it had made no earnings or profits.

On 03/03/08, the Supreme Court unanimously held that a shareholder receiving funds in this manner and accused of criminal tax evasion may claim return-of-capital treatment without producing evidence that, when the distribution occurred, either he or the corporation intended a return of capital. The lower court must now decide on remand whether the diversions in this case were actually non-taxable returns of capital.

 

Ford Motor Co. v. City of Seattle   (U.S. Supreme Court)

Local taxation of unapportioned gross receipts

Seattle and Tacoma, Washington, impose a business activity tax on companies doing business there. In this case, the cities tax wholesalers on all receipts received from wholesale goods delivered in the cities, even though only a small portion of the activities related to those sales are done within those cities. The Washington Supreme Court ruled 5 to 4 that the taxes do not discriminate against interstate commerce.

The NAM joined with the Council on State Taxation and the U.S. Chamber of Commerce in an amicus brief urging the Supreme Court to review this decision. Lower courts are confused over how to treat business activity taxes with respect to apportionment rules between various taxing jurisdictions. State and local authorities are deceptively labeling taxes as either specific to transactions or specific to activities in order to avoid long-standing legal principles that may apply in one instance but not the other.

On Feb. 19, 2008, the Court declined to review this appeal. The case would have been an important vehicle for the Court to clarify the rules by which state and local governments may impose taxes on interstate business. Our brief cited business activity taxes in Kansas City, Missouri, and Bristol, Tennessee, as well as conflicting court decisions over this issue in many states. Because an increasing number of the more than 1,000 local jurisdictions rely on business activities taxes on gross receipts as a major source of revenue, this issue will continue to be a problem for manufacturers until the Supreme Court agrees to decide it.

 

MeadWestvaco Corp. v. Illinois Dep't of Revenue   (U.S. Supreme Court)

Classification of sales gain

On Nov. 13, 2007, the NAM joined with the Council on State Taxation (“COST”) in an amicus brief urging the Supreme Court to overturn an Illinois decision that would subject businesses to unfair and duplicative taxation by multiple states on the same income.

MeadWestvaco’s predecessor, Mead (headquartered in Ohio), acquired the company now known as LexisNexis (another Ohio corporation) for $6 million in 1968, although it allowed LexisNexis to run as an independent business for 26 years, providing cash infusions, profit investment, and oversight rather than hands-on management. After selling Lexis-Nexis for approximately $1.5 billion in 1994, Mead reported the sales gain on its Illinois corporate tax return as non-business investment income. The Illinois Department of Revenue believed Mead should have classified the LexisNexis sale as business income “apportionable” to Illinois and found that Mead owed approximately $3.1 million in Illinois income tax and $1 million in interest. Although a state is not permitted under the Constitution to tax corporate earnings made in other jurisdictions, a state may tax a portion of earnings made within its boundaries. To meet this constitutional requirement, Illinois employs an “apportionment” method to tax the portion of a company’s earnings that can be attributed to Illinois transactions. States generally cannot tax companies incorporated in another state for capital transactions like the sale of an asset, because such transactions do not have the required connection to the state, unless the asset sold served an “operational” rather than an “investment” function.

Mead sought injunctive and declaratory relief in Illinois state court, based on its belief that LexisNexis was a company “investment,” not an “operational” part of its business that would be subject to Illinois taxes. The trial court held, and was affirmed on appeal, that Mead failed to satisfy its burden of proving LexisNexis was not an “operational” asset and thus should have classified the sale as apportionable business income.

Our brief argues that Illinois’ attempt to tax the gain from the sale of LexisNexis, which had functioned as an independent business, conflicts with the decision in Allied-Signal, Inc. v. Director, Div. of Taxation, 504 U.S. 768 (1992), where the Court established that an asset was “operational” only if it was utilized directly in the selling company’s business or was a short-term investment designed to raise cash for daily operating expenses.

Our brief warns that if this decision is affirmed by the Supreme Court, companies are more likely to face out-of-state taxation when they sell assets that might be characterized as serving an operational function, as opposed to simply being an investment.

On April 15, 2008, the Court reversed and remanded the case. It ruled that the lower court erred in considering whether Lexis served an operational purpose in Mead's business after determining that Lexis and Mead were not a unitary business. Instead, the lower court should recognize that a corporate asset could be part of a unitary business if it serves an operational rather than an investment function, and could be taxed by various states as part of the company's unitary business. An asset can be a part of a unitary business even without a payor-to-payee relationship between the owner of the asset and the company that the state wants to tax. The trial court found that Lexis was not a unitary part of Mead's business, but the appeals court reserved that question, so the Supreme Court sent the case back for reconsideration in light of its new guidance.

This decision purports to clarify how to determine whether an asset should be considered part of a unitary business and therefore subject to apportioned taxation by any state where the unitary business does business.

 

United States v. Clintwood Elkhorn Mining Co.   (U.S. Supreme Court)

Statute of limitations for violations of the Export Clause

One federal statute, the Tucker Act, provides a 6-year statute of limitations to sue the government for claims "founded . . . Upon the Constitution." Another statute, the Internal Revenue Code, requires that claims for refund of tax overpayments be filed within 3 years of filing the relevant tax return. The Supreme Court decided 4/15/08 that the longer Tucker Act statute of limitations may not be used for a claim for the recovery of taxes assessed in violation of the Export Clause of the Constitution.

The taxes had been imposed on coal mined in the United States, but those taxes were later found to be unconstitutional. The taxpayers sued the government and won both their back taxes and interest in the lower courts. The Supreme Court found the tax refund statute to be clear on its face, and saw no reason to give taxes imposed in violation of the Export Clause any different treatment from taxes challenged on some other grounds.

 


Antitrust -- 2007



Bell Atlantic Corp. v. Twombly   (U.S. Supreme Court)

Pleading standards in parallel conduct antitrust cases

The NAM joined with DuPont in an amicus brief urging the Supreme Court to hear an appeal by Bell Atlantic of this consumer class action alleging, with merely conclusory allegations, that four Bell companies had conspired to prevent new entry in their respective territories and to refrain from entering each other's territories. The theory of the complaint was that the companies acted in a similar fashion, and that this parallel conduct must have been the result of a conspiracy.

However, antitrust law recognizes that mere parallel conduct, by itself, does not imply collusion or conspiracy, because it is often in a company's own independent self-interest to conduct business that way. Our brief argued that courts should not allow antitrust claims based on parallel conduct, without any allegation of facts relating to actual collusion. If such claims get past an early motion to dismiss, defendant companies will suffer enormous costs during the discovery phase of the litigation, and will be under great financial pressure to settle meritless claims. A lowered pleading standard will encourage plaintiffs to file questionable cases.

On Aug. 25, 2006, the NAM joined with 7 other business organizations in an amicus brief on the merits. We argued that a conspiracy case under the antitrust laws requires evidence that there was a contract, combination or conspiracy, and pleadings filed in the case must allege facts sufficient to show, if proven, that a law was broken. It is perfectly legal for companies to engage in parallel behavior that is arrived at independently of their competitors and that has a business rationale. If such “conscious parallelism” is legal, then it is inappropriate for a court, at any stage of a case, to allow the case to proceed on the inference that parallel behavior between competitors is illegal, unless there is some allegation of facts showing that the parallel behavior was brought about by a conspiracy.

In addition, we argued that courts should consider the risk of abusive litigation and enormous discovery costs when determining whether pleadings provide a sufficient basis for a lawsuit. Courts must use the tools they have to prevent class-action harassment of defendants, and are obligated to ensure a speedy and inexpensive determination of every case. Preventing abusive litigation is critical, especially in a case where virtually every person and business in the United States is part of the plaintiff class and where virtually the entire telephone and high-speed internet industry is alleged to have participated in an antitrust conspiracy.

The Supreme Court agreed. It ruled 5/21/07 that an allegation of parallel conduct and a bare assertion of conspiracy without enough factual matter to suggest that an agreement was made is insufficient to state a claim under Section 1 of the Sherman Act. It ruled that a complaint of this kind must not only be conceivable, it must be plausible. Justice Souter characterized a long-misunderstood statement in a 1957 case as having "earned its retirement." The statement, from Conley v. Gibson, was that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." What this actually means, according to the Court, is that once a claim has first been adequately stated, it may be supported by any set of facts, no matter how inventive, consistent with the allegations in the complaint. Since the claim in this case did not overcome the initial hurdle of plausibility, the lower court decision was reversed. This is an important ruling that will help judges control trial lawyers who overreach with questionable claims.

 

Credit Suisse First Boston Ltd. v. Billing   (U.S. Supreme Court)

Investment bank implied immunity from antitrust liability

Labor agreements are statutorily exempt from the antitrust laws, but are investment banks and institutional investors during initial public offerings? In this case, investors sued 16 investment banks and institutional investors claiming that they conspired to require investors to pay certain "anticompetitive charges". The challenged practices include claims that underwriters and institutional investors were bribed, that purchasers had to buy unrelated securities, and others. The district court dismissed the complaint, finding that the securities laws permit much of the challenged conduct, and that the defendants have implied immunity. The SEC and Solicitor General agreed, but the Second Circuit did not.

The Supreme Court ruled 6/18/07 that the securities laws implicitly preclude the use of the antitrust laws for such conduct. The SEC already regulates the conduct at issue, and private parties can bring suit under the securities laws. Applying antitrust laws to this conduct is simply incompatible with the regulation of securities by the SEC. Any other ruling would interfere with the process of capital formation.

 

Leegin Creative Leather Products, Inc. v. PSKS, Inc.   (U.S. Supreme Court)

Application of per se rule to resale price maintenance

The NAM filed an amicus brief urging the Supreme Court to revisit whether resale price maintenance should always be considered a violation of the antitrust laws subject to treble damages, or whether there are sometimes legitimate business and procompetitive justifications that a court should take into account.

This case arose when a manufacturer of women's leather goods and accessories, selling through boutiques offering personal service and attention, suspended sales to a store that was not respecting its suggested retail price policy. The manufacturer, Leegin Leather, had announced that it would not deal with retailers that discounted its products, in order to promote sales through retailers that provided more service, and to foster an "everyday fair price" approach that prevents customers from feeling cheated if they see the merchandise on sale after they have already bought it.

The company's pricing policy was successful, but the trial court refused to allow the company to introduce evidence of the procompetive justifications for the policy, relying on the 1911 Supreme Court decision in the Dr. Miles case that resale price maintenance is per se illegal.

On 6/28/07, the Supreme Court ruled 5 to 4 to overturn Dr. Miles. It ruled that resale price maintenance can have procompetitive justifications, and that a per se rule against it is inappropriate. Although the plaintiff won a jury verdict of nearly $4 million, the manufacturer may now introduce evidence that its pricing policy has procompetitive justifications.

The NAM has participated in several Supreme Court cases in which we argued in favor of a rational approach in this area. Giving manufacturers the flexibility to establish the price at which their products may be sold can provide a variety of procompetitive benefits, and can help prevent discount dealers from "free riding" on the efforts of their competitors. Often products, such as complex electronic equipment, require retailers that are willing to invest in sales education and advertising.

Our brief in this case argued that the artificial rule in Dr. Miles has forced courts to distort ordinary principles of contract law, and to treat non-price restraints differently, even though they are as important to competition and can have a greater effect on prices than minimum resale prices.

 

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.   (U.S. Supreme Court)

Predatory purchasing

The NAM and the Business Roundtable filed an amicus brief urging the Supreme Court to review a Ninth Circuit decision that allows certain manufacturers to be sued if they pay too much for inputs to their manufacturing process. This is an antitrust case where a competitor claimed that Weyerhaeuser paid more than was “necessary” for hardwood logs in the Pacific Northwest in order to drive its competitors out of business.

The Ninth Circuit held that a jury could regard paying higher prices than necessary as an anticompetitive act, and the jury awarded a judgment for nearly $79 million against Weyerhaeuser. Our brief to the Supreme Court argued that the Ninth Circuit’s standard is dangerous and unworkable, and will subject purchasing decisions to judicial oversight, deterring companies from making efficient purchasing decisions to adjust to rapidly-evolving market conditions, fostering inefficiencies that ultimately harm consumers. Instead, a company should not be liable if it continues to make a profit and does not have any chance of succeeding in its alleged predatory scheme. The antitrust laws should not be used to punish efficient competitors.

On February 20, 2007, the Supreme Court unanimously agreed. It applied the standard of Brooke Group Ltd. V. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), which governs predatory selling claims. A plaintiff must now show, in cases where a defendant is alleged to have bid up the price of inputs to manufacturing, that the defendant lost money and that there was a dangerous probability that the defendant would recoup its losses after its scheme to shut out competitors succeeded.

The NAM and the Business Roundtable filed an amicus brief supporting this result. Our latest amicus brief argued that the antitrust laws are designed to protect competition, not competitors. Whether a price paid for an input to manufacturing is “necessary,” or the volume of inputs purchased is “more than is needed,” is irrelevant to allegations of predatory conduct. Rather, what is important is whether the company can continue to sell its products at a profit. If so, it is operating efficiently, and companies that cannot profit should try to become more efficient, not sue. Even if a company pays higher prices for inputs to manufacturing, as long as it is making money, its success is what competition is all about.

Moreover, many legitimate business reasons exist for a company to pay more for raw materials than others might consider “necessary.” There may be limited supplies available, and both market conditions and consumer demand may change rapidly. A manufacturer must have the flexibility to make buying and selling decisions without being second-guessed by judges applying vague standards of liability, particularly when treble damages and attorneys’ fees can be imposed for the wrong choice. Business needs rules that can be implemented on a day-to-day basis by ordinary business people – not by industrial organization economists or lawyers – so that they can continue to improve productivity and efficiency and compete in today’s marketplace.

 


Attorney's Fees -- 2007



Sole v. Wyner   (U.S. Supreme Court)

Availability of attorneys' fees for preliminary injunction that is later overturned

A federal law (42 U.S.C. § 1983) allows individuals and companies to sue the government for deprivation of any rights, privileges or immunities, and a prevailing party can recover attorneys' fees. The issue in this case is whether a party can obtain attorneys' fees for winning a preliminary injunction, even though the government ultimately won the case on the merits.

The 11th Circuit awarded attorneys' fees to a group of peace protestors who obtained a preliminary injunction to allow them to create a nude peace symbol on a Florida beach, even though the state's regulations ultimately were upheld.

Although federal courts had been split on the attorney’s fees issue, the Supreme Court clarified the issue on June 4, ruling unanimously that plaintiffs who gain a preliminary injunction do not qualify for an award of attorney’s fees if the merits of the case are ultimately decided against them.

 


Benefits -- 2007



Williams v. Rohm and Haas Pension Plan   (7th Circuit)

Whether COLAs are accrued benefits that must be included in lump sum retirement payouts.

Retirees are typically given a choice of either a lump sum retirement payout or an annuity, paid over their lifetime. Annuities often have a cost-of-living adjustment that is made every year in the future, but lump sum payments do not. In this case, the plaintiff took the lump sum payout, then sued the pension plan administrator, claiming that a cost-of-living adjustment for those choosing an annuity is an "accrued benefit" and must be paid to all retirees, including those taking the lump sum.

The Seventh Circuit agreed, ruling that COLAs are accrued benefits for those taking both annuities and lump sum payments, even though the plan provides otherwise. The NAM filed an amicus brief supporting a petition for rehearing by the pension plan administrator. We urged the court to examine the pension plan as a whole, as required by the Seventh Circuit's earlier decision in the Hickey case, and others. Failing to do so would cause many plans to be rewritten or eliminated. The decision interferes with the autonomy of the contracting parties to define their relationship, could lead to more prevalent underfunding of pension plans, and could encourage more retirees to choose lump sum payments, which is becoming a risky trend.

On Oct. 10, 2007, the court refused to rehear this case.

 


Civil Procedure -- 2007



Daniel Measurement Services, Inc. v. Eagle Research Corp.   (U.S. Supreme Court)

Application of Due Process Clause when there is neither evidence of damage nor adequate appellate review

The courts of West Virginia have earned the American Tort Reform Association's designation as being the nation's #1 Judicial Hellhole®. This case exemplifies the problems that manufacturers face in that state. A jury awarded $10.5 million for an alleged breach of a confidentiality agreement, even though there was no evidence of injury to the plaintiff. When the defendant appealed to the West Virginia Supreme Court of Appeals, the state's only appellate court, the court declined to hear the appeal.

Daniel Measurement Services appealed to the U.S. Supreme Court, arguing that the Due Process clause requires both evidence of harm and adequate judicial review of a jury award.

The NAM was joined by 3 other business groups in an amicus brief supporting the appeal. We explained our concern that the trial court had adopted a blanket policy against summary judgment even when it had concern that the facts accepted in the light most favorably to the plaintiff might not support a claim. According to the judge, ". . . This ain't Texas, this ain't Kansas, this is West Virginia, and we don't give summary judgment." We also argued that the Due Process Clause requires some meaningful level of pre- and post-trial review as a safeguard against arbitrary or excessive compensatory damage awards.

Unfortunately, the Supreme Court declined to hear the appeal on 11/26/2007.

 


Class Actions -- 2007



Engle v. Liggett Group, Inc.   (Florida Supreme Court)

Class action certification

The Florida Supreme Court 7/6/06 overturned a $145 billion punitive damages judgment by a lower state court against tobacco companies, but reinstated an inappropriate class certification decision. The suit was brought on behalf of a class of Florida residents who claim deleterious health effects related to cigarette smoking.

In reversing the punitive damages award, the court recognized the requirements set forth by the Supreme Court of the United States in State Farm Mut. Auto Ins. Co v. Campbell in 2003. Under that decision, there must be a reasonable relationship between punitive damages and the underlying compensatory damages. Since the compensatory damages have not been set in this case, it was impossible for the Florida courts to justify any punitive damages award.

Unfortunately, the court also reinstated the lower court’s defective certification decision. The NAM and the Washington Legal Foundation had filed a joint amicus brief urging it not to certify the class. We argued that Florida should use the normal criteria for certifying a case as a class action, namely, that common questions of law or fact predominate over questions affecting only individual members and that a class action is superior to other available methods of adjudication. The plaintiffs argued, however, that certification of the class "serves the public interest" even if the case does not otherwise meet the requirements for class certification. There is also a dispute over whether the class can be decertified in Phase 2 of the trial; we argued that it can, because the original certification was only preliminary.

Although the class punitive damages award was overturned, individual claims for actual and punitive damages may proceed. There are important individual issues relating to reliance and causation that must be proven.

In August, 2006, the NAM supported Liggett's petition for rehearing the case. Since the petition was denied, individual cases have been filed at the trial level.

 

Langbecker v. Electronic Data Systems   (5th Circuit)

Class action certification in ERISA case

The NAM joined with the Business Roundtable and the U.S. Chamber of Commerce in a brief challenging the trial court's certification of a class action involving employees of EDS who sued the company to recover losses in the value of their 401(k) portfolio when the company's stock dropped substantially. Our brief argued that § 404(c) of ERISA provides an express statutory defense to employers when stock funds in 401(k) plans are controlled by employees. The employer is not responsible for losses resulting from the investment decisions of employees. In addition, many of the employees signed releases relieving the employer of liability for investment losses, and we argued that the plain language of those releases bars a class action suit.

On January 18, 2007, the 5th Circuit overturned the class certification and sent the case back to the district court to reconsider whether this case can be handled as a class action. It ruled that, while employees may be able to sue under § 502(a)(2) of ERISA, they cannot bring an action under § 404(c) on behalf of the plan. It ruled that a Department of Labor interpretation of § 404(c) was unreasonable, and that some employees may not sue under this section if one reason for their losses was their own exercise of control over the assets. Because the class certification decision should take into account the extent to which employees controlled their own stock transactions, the court remanded the case for further consideration of this factor.

The court also ruled that releases signed by individual employees are pertinent to the certification question, and the plaintiffs may not be adequate representatives of the entire class, since there are potential conflicts over remedies and damages.

 


Criminal Liability -- 2007



Rockwell International Corp. v. United States   (U.S. Supreme Court)

Whistleblower claims

The Supreme Court held 3/27/2007 that whistleblowers who pursue claims under the False Claims Act (FCA) where allegations of fraud upon the federal government have already been disclosed to the public can only do so if they have personal knowledge of the fraud. Under the FCA, to collect a bounty, which can be as high as 30% of the government’s recovery, the whistleblower must be an “original source” of the information that resulted in the claims that were tried to the jury. The Court held that the whistleblower in this case was not an “original source,” as the government did not rely on the whistleblower’s theory related to defects in the piping system, but instead relied on an unrelated theory. Additionally, none of the witnesses he had identified as having relevant knowledge testified and none of the documents he provided was introduced at trial.

This decision is a victory for government contractors, who can face protracted and expensive litigation as a result of opportunistic whistleblower claims. It establishes the public disclosure bar as a mechanism to keep whistleblower litigation focused on only those claims where the whistleblower has the requisite personal knowledge of an alleged scheme to defraud the United States.

 


Discovery -- 2007



In re Complex Asbestos Litigation   (California Supreme Court)

Validity of burdensome standing discovery order

The NAM led a group of national organizations in filing an amicus brief in the California Supreme Court, urging it to overturn an obsolete order by a San Francisco court that requires all defendants in asbestos cases to respond to sweeping and burdensome discovery requirements. The order, General Order No. 129, requires companies to answer 53 interrogatories, most with 4 or more subparts, and to attach all supporting documents. The plaintiff, who is apparently asymptomatic and has normal lung function, sued Watts Regulator Company relying on an alleged contact with one type of Watts valve used one day at one location in 1981. The defendant estimates it will take 3.5 person-years of work and cost $1 million to comply with the discovery order.

The NAM argued that, while the order may have been helpful during the early years of traditional asbestos litigation, the environment has changed and companies that are far removed from direct manufacturing of asbestos have been ensnarled in asbestos litigation. Discovery should now be tailored, as it is in other contexts, to the claims at issue, and normal objections should be available so that discovery actually leads to admissible evidence in the pending action. Burdensome discovery creates unfair pressure to settle cases without regard to the merits of the claim.

In April, 2007, the court declined to review this appeal.

 


Environmental -- 2007



E.I. DuPont de Nemours and Co. v. United States   (U.S. Supreme Court)

Contribution in Superfund cleanup cases

The NAM joined other groups 12/27/06 in an amicus brief urging the Supreme Court to hear an appeal by DuPont involving the costs of cleaning up contaminated Superfund sites. The right to collect a fair share of the cleanup costs from other parties, including governments, who are responsible for contributing to the hazardous wastes in Superfund sites, is critically important to manufacturers and to the cleanup process. Our brief urges the Court to review a Third Circuit decision that denied the right of a manufacturer to seek contributions from other parties that helped create the problem.

We argue that CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, was enacted to facilitate prompt and effective cleanup of contaminated sites, and a right of contribution is integral to achieving this goal. The Third Circuit's decision will impede the national effort to clean up sites, will unfairly burden a few private parties, and will discourage or delay the redevelopment of many of our nation's cities. The court's decision is also in direct conflict with decisions by unanimous panels of the Second and Eighth Circuits.

The brief describes four important categories of cleanups that will be discouraged and/or delayed by the Third Circuit's ruling: (1) thousands of sites polluted by the federal government, (2) thousands of sites subject to corrective action under Subtitle C of the Resource Conservation and Recovery Act (RCRA), (3) Superfund sites, and (4) thousands of brownfields sites whose only realistic potential for cleanup is voluntary action by responsible parties.

The NAM joined with the Superfund Settlements Project, the American Chemistry Council, the American Petroleum Institute and the United States Conference of Mayors in the brief.

On 6/18/07, the Court granted the petition, vacated the lower court's decision and sent the case back for reconsideration in light of its recent decision in United States v. Atlantic Research Corp. The lower court is expected to rule in favor of Dupont.

 

Environmental Defense v. Duke Energy Corp.   (U.S. Supreme Court)

New Source Review permit requirements

On April 2, 2007, the Supreme Court ruled unanimously that the definition of the word “modification” can be interpreted in different ways by the EPA under separate Clean Air Act enforcement regulations with different ways of implementation. It overturned a Fourth Circuit ruling that required EPA to conform the interpretation of “modification” in regulations for the Prevention of Significant Deterioration (PSD) to the interpretation of that word under the New Source Performance Standards (NSPS) regulations.

The NSPS regulations apply when a stationary source is modified so that its hourly emissions rate increases. The PSD regulations require a permit when a modification of a stationary source is a major one and only when it would increase the actual annual emission of a pollutant above the actual average for the two prior years.

The Supreme Court upheld EPA’s decision to impose permit requirements under the 1980 PSD regulations that may apply even though a change to a major stationary source does not increase an emitting unit's hourly emissions rate. It ruled that an enforcement court may not implicitly invalidate the 1980 PSD regulations unless it is shown that review of the underlying issue could not have been obtained in accordance with the normal Clean Air Act judicial review procedures.

In terms of impact, this ruling is limited to an interpretation of the 1980 PSD rules, which have since been amended in 2002. In the rule amendments, EPA clearly indicated that it would use for the future an annual emissions test for PSD and provided specific standards that govern application of that test. Thus, the potential scope of impact for this ruling is limited to enforcement for actions that may have occurred under the prior version of EPA's rules.

The NSR Manufacturers Roundtable, including the NAM, participated in this case in the Fourth Circuit and in the Supreme Court.

 

Massachusetts v. EPA   (U.S. Supreme Court)

Whether EPA must regulate greenhouse gases as pollutants

In a major 5-4 ruling, the Supreme Court decided 4/2/2007 that the EPA must reconsider its decision not to issue new motor vehicle emission standards under its authority under section 202(a)(1) of the Clean Air Act, relating to the regulation of air pollutants associated with global climate change. Under that section, the EPA Administrator must regulate air pollutants when, “in his judgment,” such pollutants “may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7521(a)(1). Several parties petitioned the EPA to set regulatory standards for air pollutants associated with climate change. The EPA denied the petition, concluding that it lacked authority to do so, and that, even if it had authority, it would deny the petition based on various policy considerations not expressly addressed in the statute, including scientific uncertainties, the inefficiency of piecemeal approaches to the climate change issue, and foreign policy concerns.

The D.C. Circuit upheld the EPA’s decision, but the Supreme Court reversed. The majority ruled that the 11 states that filed suit had standing to sue because the standing requirements for challenging agency action unlawfully withheld are not as strict as regular standing requirements. The states need only show that they have suffered a "concrete and particularized injury," but not that the injury is immediate or that a favorable decision will redress that injury. Because the states have a procedural right to protect their interests, they have standing "if there is some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant." It also ruled that states are entitled to special treatment because they have given up some of their sovereign powers to the federal government.

It ruled that Massachusetts will suffer injury to coastal land that it owns, and since EPA did not dispute the existence of a causal connection between man-made greenhouse gas emissions and global warming, EPA's refusal to regulate such emissions contributes to that state's injuries. EPA cannot refuse to regulate just because auto emissions are such a small part of overall greenhouse gas emissions, since many regulations legitimately take incremental steps in addressing massive problems.

The Court held that an agency's denial of a petition for rulemaking is susceptible to "extremely limited" and "highly deferential" judicial review. It found that the plain language of the Clean Air Act defines "air pollutant" to include all airborne compounds of any kind, and regulating the quality of the air does not conflict with the Department of Transportation's authority to regulate automobile efficiency.

Finally, the Court ruled that the Clean Air Act requires EPA to form a judgment on whether greenhouse gases contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. Once it has found such endangerment, it has "significant latitude as to the manner, timing, content, and coordination of its regulations with those of other agencies." To avoid having to impose some regulations, it must either determine that greenhouse gases do not contribute to climate change, or provide some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do. Thus, the Court left open the possibility that EPA could withhold regulation, but only if it grounds its reasons for inaction in the Clean Air Act.

Justices Roberts, Scalia, Thomas and Alito dissented in part because they felt the states did not have standing, and that the Court's new rule giving states preferential treatment has no basis in existing case law. The majority cited a 1907 case that did not involve standing and that neither the states nor any of the supporting briefs mentioned. The dissent argues that a particularized injury to Massachusetts has not been shown, since the affidavits in support of that claim suggest that land subsidence, a non-global-warming cause, is affecting Boston's rising sea level. Injury is not imminent or certainly impending, and a computer model's conceded average error rate is greater than or equal to the projected sea level rise. The alleged connection between the fractional amount of global emissions that might be limited with EPA standards and the loss of Massachusetts coastal land is far too speculative to establish causation. Furthermore, a regulation is not likely to redress Massachusetts' injury, since it will have no proven effect on the voluminous amount of greenhouse gases emitted elsewhere in the world. Referring to a 1973 decision in United States v. Students Challenging Regulatory Agency Procedures (SCRAP), Chief Justice Roberts wrote, "Today's decision is SCRAP for a new generation."

A separate dissent written by Justice Scalia says there is no language in the Clean Air Act that requires EPA to make a judgment on greenhouse gases, and that the Act governs only air pollution, which EPA reasonably decided does not include carbon dioxide high in the atmosphere.

The NAM is part of the CO2 Coalition, which participated in this case in the D.C. Circuit and the Supreme Court. The decision granting standing to states to challenge federal agency action, or inaction, without the same restrictions as other plaintiffs could lead to increased litigation by the states against a variety of federal agency decisions.

 

National Association of Home Builders v. Defenders of Wildlife   (U.S. Supreme Court)

Application of Endangered Species Act to Clean Water Act permits

On June 25, 2007, the Supreme Court ruled 5-4 that the Endangered Species Act does not prevent the EPA from transferring its authority to issue Clean Water Act permits to a state pollution control agency. Transferring such authority is non-discretionary, and the Clean Water Act does not require consideration of statutes not specifically mentioned in that Act when doing so.

Had the Clean Air Act been read to include requirements from other statutes, EPA might have been similarly required to incorporate various other statutory requirements into a variety of laws. This could have affected Section 404 permits, federal flood insurance issued by FEMA, and permits for federal projects that might be required to consider terrorism risk during environmental impact studies under the National Environmental Policy Act.

 

National Parks Conserv. Assn. v. Tennessee Valley Auth.   (6th Circuit)

Statute of limitations for challenging Clean Air Act preconstruction permit compliance

The NAM joined with 4 other business groups in support of a petition for rehearing of an adverse decision by the Sixth Circuit involving how far into the future the EPA or a citizen may challenge in court alleged violations of preconstruction permits under the Clean Air Act. On 8/14/07, the petition was denied.

The statute of limitations for CAA enforcement is 5 years. However, the appeals court ruled that every day a facility operates without the best available control technology constitutes a discrete violation. It also ruled that TVA has an obligation to get a construction permit even after the construction has been completed. A dissenting judge felt that the obligation to get a permit can only be violated once, like a carpenter's contract to repair a roof. Even though there may be aftereffects in each case from the failure to do the original work properly, the violation occurred at one point in time, and only the harms occur later.

Our brief argues that the lawsuit involves factual inquiries that depend on substantial amounts of data, witness testimony and other documentary evidence that becomes stale if not litigated in a reasonable amount of time. An initial inquiry into whether a change made at a facility is a modification covered by the permit requirements involves a complex multi-step analysis, made on a case-by-case basis, based on data existing at the time of the modification. The purpose of a statute of limitations is to prevent vexatious litigation years after acts giving rise to the litigation occur. In any event, companies are still subject to ongoing regulatory requirements, because they are subject to operating permits. There is no allegation that an operating permit was violated in this case.

 

San Francisco BayKeeper v. Cargill Salt Division   (9th Circuit)

Waste containment

The NAM joined with the American Forest & Paper Association, American Petroleum Institute, Chamber of Commerce of the United States, Corn Refiners Association, Grocer Manufacturers of America and the Western States Petroleum Association in an environmental case involving waste containment ponds. The issue is whether a citizen's group can sue a company under the Clean Water Act for damages because the company did not have a permit to use a containment pond for salt processing residues at its salt-making facility in California. The Clean Water Act's jurisdiction extends only to "navigable waters" of the United States, and we argued that there is no jurisdiction over a containment pond that is not hydrologically connected to -- and has no impact on -- any navigable waterway. It is not enough that a pond simply be adjacent to or in proximity to waters of the United States -- there must be a more direct connection.

The Supreme Court's 2006 ruling in the Rapanos case was expected to offer some guidance, but it was a splintered decision.

On March 8, 2007, the Ninth Circuit overruled the lower court's decision. It deferred to the EPA's regulatory definition of "waters of the United States", which does not include waters that are simply adjacent to navigable waters. While wetlands that are adjacent to navigable waters are subject to Clean Water Act jurisdiction, other bodies of water, such as the waste collection pond in this case, are not. The court distinguished the Rapanos decision because it applies only to wetlands. Even if a party were permitted to show that there was some hydrological connection between the pond and navigable waters, the evidence was speculative or insubstantial in this case.

 

Starrh and Starrh Cotton Growers v. Aera Energy LLC   (California Supreme Court)

Waste containment damages

On Sept. 26, the NAM filed an amicus letter urging the California Supreme Court to review two issues in a case of subsurface trespass resulting from migration of wastewater and the subsequent alleged reduction of water quality in an aquifer. First, even though California has a three-year statute of limitations for actions against permanent trespass, the lower court ruled that this trespass was not permanent, but continuing. Our brief argues that such an interpretation improperly eliminates the statute of limitations defense in cases where subsurface water has been migrating for many years.

Second, even though California law is very clear on the measure of damages for a continuing trespass, providing that a plaintiff may recover “the value of the use of the property” that the defendant gained and the “reasonable cost of repair or restoration of the property to its original condition,” the court of appeals nonetheless allowed additional damages that may include profits enjoyed by the defendant that are directly linked to the trespass. Our brief argues that including profits in the calculation of damages overstates the benefit that a company obtains, with the proper measure of damages for “benefits obtained” being the costs that the company avoided by engaging in the challenged activity. That, combined with the actual damages resulting from the trespass, takes away all incentive for the trespass and provides more than full compensation to the plaintiff. Guidance from the California Supreme Court on both of these issues would substantially aid California landowners and businesses by verifying settled principles, eliminating uncertainty and a jackpot-justice approach to litigation, and satisfying the demands of due process to provide fair notice of the law of damages for trespass.

On Oct. 24, the California Supreme Court denied the petition for review.

 

United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority   (U.S. Supreme Court)

Waste flow-control regulation

This is the second time this case has been appealed to the Supreme Court. This time around, the NAM joined with the National Solid Waste Management Association and the American Trucking Associations to urge the Court to review an adverse ruling by the Second Circuit that would allow a municipality, county or state to impose flow-control restrictions on the interstate transportation of solid waste. Flow-control laws allow local jurisdictions to prop up their disposal facilities by preventing waste generated in the locality from being taken anywhere else. The 1994 Supreme Court decision in the Carbone case held that a town's law flow-control ordinance discriminated against interstate commerce. The Second Circuit in this case provided a blueprint for local governments to avoid the Carbone decision by vesting part of the ownership of private waste disposal facilities in a public entity.

Our amicus brief argued that this ruling would seriously disrupt the interstate market in solid waste disposal services, including recyclables, and it ignored the practical economic effect of the ordinance, which is the key determinant when analyzing issues of discrimination against interstate commerce.

On April 30, 2007, the Court affirmed the Second Circuit's ruling, 6 to 3. It held that the county's restrictions treat in-state and out-of-state private business interests equally, and the government has an interest different from and superior to that of private businesses, since government is responsible for protecting the health, safety and welfare of its citizens. The Court was reluctant to interfere with numerous state and local government initiatives undertaken in furtherance of their police power. In addition, most of the burden of the regulation falls on those who voted for the laws, and they can change them through the normal political process.

The decision gives state and local governments vast power to control the disposal of all wastes within their jurisdictions, even though it may be more expensive.

 

United States v. Atlantic Research Corp.   (U.S. Supreme Court)

Contribution in Superfund cleanup cases

The Supreme Court considered 3 cases in 2007 about whether parties that voluntarily undertake to clean up Superfund hazardous waste sites can sue, under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) other parties that contributed to the wastes. On June 11, 2007, the Court ruled unanimously in Atlantic Research that they can. The NAM filed an amicus brief in another, DuPont v. United States, which was sent back to the lower court for reconsideration in light of the decision in this case.

The Court ruled that § 107(a) makes potentially responsible parties (PRPs) liable for any costs of response incurred by any person consistent with the national contingency plan. It reaffirmed that a private party may bring suit under § 113(f) to obtain contribution from other liable parties only after having been sued themselves. It concluded that a private party may sue under § 107(a) even if it has not been sued by some one else.

The right to collect a fair share of the cleanup costs from other parties, including governments, who are responsible for contributing to the hazardous wastes in Superfund sites, is critically important to manufacturers and to the cleanup process. CERCLA was enacted to facilitate prompt and effective cleanup of contaminated sites, and a right to sue for cleanup costs is integral to achieving this goal.

 


ERISA -- 2007



Beck v. PACE International Union   (U.S. Supreme Court)

Fiduciary obligations when terminating pension plans

Suits against company health and pension plan administrators are becoming more common as companies are forced to rein in excess potential liabilities from defined benefit plans. The Supreme Court agreed to review a Ninth Circuit decision that imposes fiduciary obligations on a company's decision to convert a defined benefit pension plan into annuities pursuant to ERISA requirements.

The Ninth Circuit ruled that the company could violate its fiduciary obligation if it doesn't undertake an "intensive and scrupulous investigation" into the possibility of merging the retirement assets into a multi-employer pension plan.

On 6/11/07, the Supreme Court unanimously disagreed. It deferred to an interpretation by the Pension Benefit Guaranty Corporation (PBGC) that the statute does not permit merger as a method of termination. Indeed, such an action could have detrimental consequences for the participants and beneficiaries of a single-employer plan as well as for the plan's sponsors. If a company chose this route instead of liquidating the fund and buying annuities, it would lose the ability to recover any residual assets that remain in the fund after it has satisfied its obligations to employees and retirees. There may also be additional funding requirements attributable to the multi-employer fund down the road.

The Court's decision will make it easier for companies to remove potentially large contingent liabilities from their benefits packages.

 

Dickerson v. Feldman   (2nd Circuit)

Standing of non-participant to sue on behalf of ERISA plan

This case involves whether a participant in a 401(k) plan who cashes out of the plan has standing to sue on behalf of the plan under ERISA for damages that resulted when the company's stock dropped in value. By statute, a plaintiff must be a "participant" in the plan in order to bring suit on behalf of the plan. The plaintiff in this case was a former employee who claimed that certain officers, directors and employees of Solutia, Inc. breached their fiduciary duties under ERISA by imprudently managing the company's 401(k) plan. The company's stock was an investment option in the plan, but the value dropped substantially. This kind of case is known as a "stock drop" suit, and more than 100 suits have been filed in federal courts against numerous major corporations in every major sector. The Dickerson suit was dismissed by the trial court on the ground that the plaintiff, a former employee who had withdrawn his 401(k) balance prior to bringing suit, lacked standing to sue.

The NAM's amicus brief argued that only participants can sue on behalf of an employee benefit plan, and there are tremendous paperwork/recordkeeping requirements that would kick in if the court rules than individuals who cash out of their plans are still “participants” under the law. There are more than 388,000 defined contribution 401(k) plans, covering 43 million active participants. Plan administrators are required to file annual reports and other documents and send summaries to participants, and failure to do so is subject to penalties of from $100 to $1,000 per day. A Department of Labor report estimates the cost of providing this information to range from $34 to $42 per participant, and including former employees in this process would raise the costs for participants. In addition, there are plenty of people who continue to be participants who have standing to bring any appropriate law suit on behalf of the plan.

The case was settled in 2007 without a decision.

 

Graden v. Conexant Systems, Inc.   (3rd Circuit)

Standing of non-participant to sue on behalf of ERISA plan

This case involves whether a participant in a 401(k) plan who cashes out of the plan has standing to sue on behalf of the plan under ERISA for damages that resulted when the company's stock dropped in value. By statute, a plaintiff must be a "participant" in the plan in order to bring suit on behalf of the plan. The plaintiff in this case was a former employee who claimed that certain officers, directors and employees of Conexant breached their fiduciary duties under ERISA by imprudently managing the company's 401(k) plan. The company's stock was an investment option in the plan, but the value dropped substantially.

This case is a "stock drop" suit similar to Dickerson v. Feldman, in which the NAM filed a similar brief. There are more than 100 suits that have been filed in federal courts against numerous major corporations in every major sector.

The NAM's amicus brief argued that only participants can sue on behalf of an employee benefit plan, and there are tremendous paperwork/recordkeeping requirements that would kick in if the court rules than individuals who cash out of their plans are still “participants” under the law. There are more than 388,000 defined contribution 401(k) plans, covering 43 million active participants. Plan administrators are required to file annual reports and other documents and send summaries to participants, and failure to do so is subject to penalties of from $100 to $1,000 per day. A Department of Labor report estimates the cost of providing this information to range from $34 to $42 per participant, and including former employees in this process would raise the costs for participants. In addition, there are plenty of people who continue to be participants who have standing to bring any appropriate law suit on behalf of the plan.

On July 31, 2007, the Third Circuit ruled that the former employee is a "participant" with standing to bring the suit under ERISA. Participants include former employees as long as they have a colorable claim for vested benefits.

 


Expert Testimony -- 2007



Aguilar v. ExxonMobil Corp.   (California Supreme Court)

Exclusion of "expert" witness testimony

The NAM joined with Lockheed Martin Corp., Wyle Laboratories, Inc., Dow Corning Corp. and Goodrich Corp. in an amicus brief in the “Lockheed Litigation Cases.” In this toxic tort litigation, we argued that the lower court judge properly excluded speculative “expert” testimony involving medical causation, and the judge’s authority to do so must be affirmed on appeal. The plaintiffs in this case asked for a much looser standard that would allow a jury to consider certain kinds of expert testimony. We argued that when unreliable expert testimony is admitted, injustice is sure to follow, as it did in the Salem witch trials. Those court decisions were based on ‘expert’ testimony from individuals who insisted they knew a witch when they saw one. If today’s courts are to avoid that kind of hysteria and preserve basic fairness, high standards for logical and reasonable expert testimony must be maintained. Since expert witnesses are allowed to give opinions on subjects that are generally beyond a typical juror’s scope of knowledge, judges must remain as the gatekeepers for our courts, and they should refuse to allow testimony from so-called experts whose theories have not been tested or peer reviewed.

On Nov. 1, 2007, the California Supreme Court dismissed the appeal after a total of four of the seven justices recused themselves from the case. The lower court's decision stands, but was automatically de-published and cannot be cited as precedent without a further order from the court.

 


Free Speech -- 2007



Federal Election Commission v. Wisconsin Right to Life, Inc.   (U.S. Supreme Court)

Corporate political speech

This case came to the Supreme Court in 2006, and it held that, even though the Bipartisan Campaign Reform Act (BCRA) had been upheld on initial challenge, its application in specific factual situations can still be challenged on a case-by-case basis. Wisconsin Right to Life did so, challenging the Section 203 bar on corporations using general corporate funds to pay for targeted broadcast communications that reference a federal candidate within thirty days of a primary election or within sixty days of a general election. A D.C. district court ruled that the law unconstitutionally interferes with First Amendment rights to engage in grassroots advertising campaigns, whereby candidates are mentioned but the focus of the ads is on issues pending in Congress.

The Supreme Court decided 5 to 4 on June 25, 2007 that that section of the law infringes on this group's right to tell the public about their senators' positions on filibustering judicial nominations. Issue advocacy, or expressing a position on an issue, as opposed to express advocacy of the election or defeat of a particular candidate for federal office, is protected by the First Amendment. Chief Justice Roberts' opinion held that issue advocacy may include the mention of a candidate's name, as long as the advocacy doesn't cross over to becoming express advocacy or its "functional equivalent." Ads that urge the listener to call Senator X about legislation are protected, since they involve political speech that may only be restricted to further a compelling interest and in a way that is narrowly tailored to achieve that interest. An ad would be equivalent to express advocacy, and subject to regulation, only if the ad "is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate." Although this test generated some debate among the Justices, future cases will determine whether it will be workable.

This case is important for any business that engages in issue advocacy. The NAM supports the result. Over the years, the line between permissible issue advocacy and impermissible express election advocacy has been reasonably clear, but the BCRA provision at issue prohibited what had been permissible issue advocacy. This is important to organizations like the NAM whose objectives in part are to inform citizens about the impact of legislative proposals on manufacturing, jobs and the economy, even during campaign season.

 


Jurisdiction -- 2007



Watson v. Philip Morris Cos., Inc.   (U.S. Supreme Court)

Removal jurisdiction for company acting "under" officer of United States

Private suits in state court against federal officers, or "any person acting under that officer," can be removed to federal court under the Federal Officer Removal Statute. The issue in this case is whether a highly regulated company qualifies as a person acting under a federal officer. The Supreme Court ruled 6/11/07 that it does not.

This class action was filed against Philip Morris alleging that "light" or "lower tar" cigarette advertisements were deceptive, but the company convinced the Eighth Circuit to remove the case to federal court because its ads were subject to the FTC's comprehensive regulations. The Supreme Court unanimously ruled that simply complying with federal regulations does not mean that a company is "acting under" the direction of a federal officer or agency. Rather, for removal to be appropriate, the company must actually be involved in assisting or helping to carry out the agency's work.

Thus, companies in highly regulated industries cannot use this removal statute to avoid state court systems that are sometimes hostile to them.

 

Waxler Transp. Co. v. Trinity Marine Prods., Inc.   (Louisiana Supreme Court)

Challenging venue grounded on mere allegations of joint liability

Valspar Corporation was sued, along with Trinity Marine Products and others, in Plaquemines Parish, Louisiana, in connection with protective coatings that allegedly contributed to excessive corrosion on barges. The issue in this case is whether jurisdiction is proper in Louisiana for Valspar. Since Valspar has neither its principal place of business nor a principal business establishment there, the case should be sent to another jurisdiction, unless an exception applies.

One exception is when a defendant is jointly liable with a party for whom venue is proper. Plaintiffs argued that Valspar is jointly liable with other parties, but Valspar argued that those allegations are unsubstantiated with any facts.

In light of the Supreme Court's recent decision in the Twombly case to hold plaintiffs to somewhat more stringent pleading requirements, this is another case testing the propriety of a complaint that is not supported by sufficient factual allegations. While the remedy is simply transferring the case to a jurisdiction where venue is proper, the principle is similar, putting a reasonable burden on plaintiffs to sue in the right court using the right theories of liability.

Although the NAM and other business groups filed a motion to join as amici in support of Valspar, our motion was denied on December 21.

 


Labor Law -- 2007



BCI Coca-Cola Bottling Co. v. EEOC   (U.S. Supreme Court)

Cat's paw liability for discrimination

Employers can protect themselves against liability for unlawful discrimination by their representatives if they have procedures in place, and use them, to provide employees with procedural protections. This case involves a supervisor's discriminatory act that led to a subordinate's termination, carried out by the human resources department.

The issue on appeal was whether the employer is automatically liable for discrimination if the supervisor exerted some influence over the formal decision to take a discriminatory employment action, or whether the supervisor must be shown to have been the one principally responsible for the adverse action. The Tenth Circuit here took a middle ground approach, finding liability if the supervisor was part of the causal link to the termination, but allowing the company to absolve itself of liability if it conducted an independent investigation of the allegations against the terminated employee and came to the same conclusion.

This case involves what is being called "cat's paw" liability, where one person (the supervisor) uses another (a human resources manager) to achieve an end. The decision would have helped flesh out the procedures that employers should implement to avoid unintended discriminatory acts, but the Court dismissed the case on 4/12/07 without a decision.

 

Dana Corp. and Metaldyne Corp.   (NLRB)

Secret ballot elections regarding union representation

The NAM and 18 other associations filed a brief at the National Labor Relations Board urging the Board to allow secret ballot elections when there is doubt about whether the employees actually authorized a union to represent them. The cases arose where the companies had agreed to neutrality agreements with the UAW, whereby the companies would not communicate information to employees, or lawfully express views, arguments and opinions which the union perceived as critical of the union. The union then obtained signatures from a majority of the employees authorizing them to represent the employees, but the validity of that majority was subsequently challenged. This neutrality agreement/card-check procedure has proven significantly more effective for union organizing than other methods.

The NAM argued that in this situation the NLRB's procedures should allow for a secret ballot to accurately and definitively determine whether the union enjoys majority support, rather than require employees to have to wait until a contract is negotiated and run its course before being allowed to have an election. The NAM joined with Associated Builders and Contractors, the National Restaurant Association, Printing Industries of America, the Society of Human Resource Managers, and 14 NAM-member employer association groups around the country in the brief.

On Sept. 29, 2007, the NLRB agreed by a vote of 3 to 2. It ruled that employees must have 45 days after their employer recognizes a union based on card-check authorizations to file a petition to decertify the union or to support an election petition from another union. The Board underscored the preferred method of having a secret election to determine the majority status of a union. The majority found that card-check procedures are much less reliable as indicators of employee free choice on union representation than secret elections. To have an election, an employee petition must be supported by 30% or more of the unit employees eligible to vote. The new rule will be applied prospectively only, so the decertification petitions involving the two companies in this case were dismissed.

 

Ledbetter v. Goodyear Tire & Rubber Co.   (U.S. Supreme Court)

Statute of limitations in employment discrimination suits

The Supreme Court issued a 5 to 4 decision on 5/29/2007 addressing the time for filing a claim alleging discrimination in pay under Title VII of the 1964 Civil Rights Act. It ruled that even though the unequal pay may be received with each new paycheck, the statute of limitations on filing a claim begins to run when the alleged illegal pay discrimination first occurred.

Lilly Ledbetter, a female tire plant employee, sued her employer, Goodyear, for allegedly paying her a smaller salary than it paid her male co-workers. In accordance with the statute of limitations, Ledbetter filed her charge with the Equal Employment Opportunity Commission (EEOC) within 180 days of her most recent allegedly discriminatory annual employee evaluation. But at trial she was permitted to introduce evidence of many years’ worth of annual employee evaluations and respective raises to show that she had been continually subject to disparate pay because of her sex. The Eleventh Circuit held that this was improper because “in the search for an improperly motivated, affirmative decision directly affecting the employee’s pay, the employee may reach outside the limitations period created by her EEOC charge no further [than] the last such decision immediately preceding the start of the limitations period.”

The Supreme Court ruled that an employee must file a charge with the EEOC within 180 days after the alleged unlawful employment practice occurred. The majority differentiated between acts that are intentionally discriminatory, such as pay decisions, and acts that are nondiscriminatory and that entail adverse effects resulting from the past discrimination. Even if a past discriminatory act has current effects, a charge must be filed within 180 days of the discriminatory act, not its effects.

The majority also differentiated this case from cases where an employer uses a discriminatory pay structure. In that circumstance, each paycheck constitutes a new discriminatory act, but there is no general rule that a regular paycheck triggers a new period in which to charge discrimination for conduct that occurred long ago.

This is a significant decision that helps insure that complaints about workplace discrimination are handled promptly, as Congress intended.

 

Long Island Care at Home, Ltd. v. Coke   (U.S. Supreme Court)

Deference to agency interpretations

How powerful are government departments when it comes to interpreting the laws they are charged with administering? Typically, courts defer to departmental interpretations that are issued through notice and comment rulemaking, or that are based on particular expertise that the department has because it deals with the subject so extensively. In this case, however, the Department of Labor's interpretation of minimum wage and overtime requirements for "companion services" provided by an agency were not entitled to deference, according to the Second Circuit, because it was inconsistent with some congressional purposes in the law, with other regulations, with past interpretations, and was not sufficiently explained.

On June 11, 2007, the Supreme Court unanimously reversed. It ruled that Congress expressly left several unanswered issues for the Department of Labor to resolve, and the Department did so with notice-and-comment rulemaking. Because the Department's interpretation was reasonable and the final regulation was the "logical outgrowth" of the proposed regulation, the Court accepted it.

 

Norfolk Southern Railway Co. v. Sorrell   (U.S. Supreme Court)

Causation standard under FELA

The Supreme Court granted certiorari 5/15/06 to determine whether the causation standard for employee contributory negligence under the Federal Employers Liability Act (“FELA”) differs from the causation standard for railroad negligence. Under FELA, 45 U.S.C. §§ 51-60, state courts have jurisdiction over personal injury claims brought by railroad employees against their employer, but those courts must apply the common law “as established and applied in the federal courts.” The trial court in the case below applied the jury instructions approved by the Missouri Supreme Court, which provide different substantive standards of causation for determining a defendant-railroad’s negligence than a plaintiff-employee’s contributory negligence. The Missouri Court of Appeals affirmed solely on the ground that the jury instructions approved by the Missouri Supreme Court were binding. In contrast, the Third, Fifth, and Sixth Circuits and the Oregon Supreme Court all have held that FELA’s causation standards for negligence and contributory negligence are the same. Likewise, the model jury instructions in the Fifth, Eighth, Ninth, and Eleventh Circuits also employ the same standard for negligence and contributory negligence. This case is important to any individual or business that may be subject to litigation under FELA.

On Jan. 10, 2007, the Court unanimously decided that FELA requires Missouri to use the same causation standards for negligence and contributory negligence. Since there is no express statutory basis for applying different standards, the common law rule of a uniform causation standard applies. What that standard is has been left to further litigation.

 

Taylor v. Progress Energy, Inc.   (4th Circuit)

Release of FMLA claims

The NAM filed a motion 8/3/05 to join in an industry amicus brief in this case involving an employee’s voluntary release of rights under the Family and Medical Leave Act (FMLA). The plaintiff was paid more than $12,000 as part of an enhanced severance benefits package during a reduction in force, in return for a release of all legal claims relating to her employment. She then sued, claiming the release was ineffective for FMLA claims. A 3-judge panel of the U.S. Court of Appeals for the Fourth Circuit interpreted a Department of Labor (DOL) regulation as requiring DOL or court approval for all waivers, and the employer sought rehearing on this issue by the full court.

The industry brief, filed by the Equal Employment Advisory Council, the U.S. Chamber of Commerce, and the Society for Human Resource Management, argued that employees should be able to voluntarily release claims they may have against their employer under the FMLA without having that release approved by the Department of Labor or a court. The DOL regulation should be declared invalid if it requires supervision of releases. Another court, the 5th Circuit, has ruled that the regulation only applies to releases of future FMLA claims, but the 4th Circuit has created a difficult conflict that threatens to make it virtually impossible for employers to obtain an enforceable general release without litigation, since DOL lacks any vehicle for supervising the hundreds of thousands of releases signed every year.

The NAM needed to file a motion to join the brief because of an unusual Fourth Circuit rule that requires trade associations to disclose their membership lists to the court. To protect the confidentiality of our membership list, we moved to waive the rule and join the brief, but the motion was denied 8/9/05.

The court decided to rehear this case, but affirmed its first ruling on 7/3/07.

 


OSHA -- 2007



AFL-CIO v. OSHA   (D.C. Circuit)

Should OSHA mandate employer-paid personal protective equipment?

On March 5, 2007, the NAM joined with other business groups to urge a federal court to reject an attempt by the AFL-CIO to force OSHA to issue a new regulation that would require employers to pay for nearly all personal protective equipment (PPE) on the job. While many companies already pay for safety equipment, new OSHA rules would establish another regulatory and litigation labyrinth for those and other employers to navigate. OSHA has the authority to require safe working conditions, but our brief argues that the agency does not have the authority to issue an economic regulation that transfers costs and that interferes with collective bargaining. Who pays for safety equipment is irrelevant to whether the employer is providing a safe workplace.

In a related development, on March 6, Rep. Roybal-Allard (D-) introduced H.R. 1327, called the Protective Equipment for America’s Workers Act, which would require that OSHA issue essentially the 1999 version of a proposed rule within 30-days of enactment.

On March 14, the Secretary of Labor told the court that she would publish a final PPE payment rule in November 2007, and moved the court to hold the case in abeyance pending that action. The AFL-CIO promptly supported the Secretary's motion, and the Court agreed.

In our amicus brief, we argued that even if OSHA does have the authority to issue a regulation, it had the discretion to tackle much more significant safety issues on its regulatory agenda first. The proposed rule would have a serious negative impact on all employers.

On 11/15/07, OSHA published a final PPE payment rule, 29 CFR 1910.132, which requires employers to provide certain personal protective equipment at no cost to employees.

 

National Association of Manufacturers v. OSHA   (D.C. Circuit)

Challenging incorporation of ACGIH TLVs by reference

The NAM and 3 other associations filed a petition for review 3/31/06 challenging an OSHA regulation that recognizes “threshold limit values” (TLVs) for certain hazardous substances in the workplace.  Our dispute centered on the fact that OSHA's regulation adopts the TLVs automatically, without providing the public, including the manufacturing sector, an opportunity to comment on them.  OSHA relied on standards developed by a private organization, the American Conference of Governmental Industrial Hygienists (ACGIH), which periodically updates its list of TLVs.

Early in 2006, OSHA incorporated by reference these new values into its hazard communication standard, applicable to manufacturers nationwide.  New numbers for carbon disulfide, iron oxide, propylene, crystalline silica and other substances are now in effect, and OSHA can issue citations when companies fail to incorporate these numbers into material safety data sheets in the workplace, even though the numbers have never been reviewed or offered for public comment by OSHA.

The NAM joined together with American Composites Manufacturers Association, Associated Builders and Contractors, Inc. and the Portland Cement Association in the petition. The U.S. Chamber of Commerce has also intervened in the case.

The Secretary of Labor moved to dismiss the case on the grounds that challenges to regulations like the Hazard Communication Standard must be made within 60 days of the date on which the standard was promulgated, in this case many years ago. We countered that by incorporating new requirements by reference, the OSHA regulation does constitute a new regulation each time that ACGIH changes its TLVs.

On May 11, the D.C. Circuit dismissed the NAM's lawsuit, saying that it should have been filed in 1983 when the HazComm standard was promulgated. It ruled that because employers still have to comply with the same HazComm rule, the rule has not changed and there can be no lawsuit challenging it. The court made this decision recognizing that new TLVs impose new obligations on employers, and that employers have no choice but to treat substances on the list as hazardous.

The NAM is very surprised and concerned about this ruling. It allows OSHA to regulate by proxy, turning over the decision on whether substances are hazardous to an outside organization that does not operate with the procedural and legal constraints that apply to all federal regulatory decisions. Whether a substance is hazardous is now in the hands of a group that has no obligations to Congress, the regulated community or the public at large. This kind of third-party regulation without any procedural or substantive restraints could become a surreptitious way for OSHA or other regulatory agencies to avoid statutory requirements for fairness.

 


Patents, Copyrights and Trademarks -- 2007



KSR International Co. v. Teleflex Inc.   (U.S. Supreme Court)

Obviousness standard for patentability

The Supreme Court 4/30/07 gave guidance on when an invention should be considered “obvious,” and thus unpatentable under 35 U.S.C. § 103(a). The unanimous ruling said, "a combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." A court's analysis of a patent claim "need not seek out precise teachings directed to the challenged claim's specific subject matter, for a court can consider the inferences and creative steps a person of ordinary skill in the art would employ."

The winning party was supported by amicus briefs filed by twenty-four intellectual property law professors and by a consortium of major corporations, including Microsoft and Cisco. Amici contended that not only was the Federal Circuit’s test inconsistent with the statutory language and Supreme Court precedent, but that it had the unfortunate effect of creating incentives for seeking patent rights on obvious extensions of existing technologies.

This case represents the first time in 30 years that the Supreme Court has focused on the obviousness standard for patentability. It is important for every individual or company that seeks or holds a U.S. patent, as the Court has provided an expansive and flexible approach to the obviousness question.

 

Lorillard Tobacco Co. v. Engida   (U.S. Supreme Court)

Standards for injunctions against sales of counterfeit products

The NAM joined with the Washington Legal Foundation in an amicus brief 6/1/07 supporting Supreme Court review of an adverse decision by the 10th Circuit in a counterfeit product case. The 10th Circuit refused to follow numerous other judicial decisions holding that trademark infringement is itself sufficient to show irreparable harm. The manufacturer, Lorillard, sought an injunction against a store that was selling counterfeit goods (Newport cigarettes), and one of the requirements to obtain an injunction is to show that irreparable harm would occur without one.

Our amicus brief argues that counterfeiting is a high-profit activity that poses a serious risk to public health and safety, and has attracted considerable interest from organized crime and terrorist organizations. In many cases the only means to control counterfeiting is to target those who engage in retail sales of counterfeit goods to the public. Products that bear a fake trademark unquestionably cause irreparable harm to the trademark owner. If an injunction against further sales is not available in a case like this, it is hard to imagine when an injunction could ever be obtained against a retailer shown to have sold a small quantity of counterfeit goods.

On 6/25/07, the Court declined to hear this appeal. The lower court's ruling will make it harder for the federal government to convince foreign governments to protect intellectual property rights abroad. It we are unable to provide an effective system of injunctions and penalties for violations on our own soil, it will be difficult to convince others to do so on theirs.

 

Microsoft Corp. v. AT&T Corp.   (U.S. Supreme Court)

Supplying patented components for production overseas

The Supreme Court ruled 4/30/07 that Microsoft did not infringe components of AT&T's patented speech-processing computer. The Court interpreted specific statutory language that prohibits someone from supplying from the United States, for combination abroad, a patented invention's components. Because Microsoft does not export from the United States the actual copies installed on foreign computers, but rather the copies are made abroad from a master version, the Court ruled that it does not "supply" from the United States the "components" under 35 U.S.C. § 271(f).

As long as the copies of the software are made abroad, they fall outside the American patent prohibition. However, AT&T can pursue patent remedies for that conduct in the jurisdiction in which it occurred. The Court suggested that any change in the result should be made by Congress.

 


Product Liability -- 2007



Arbino v. Johnson & Johnson   (Ohio Supreme Court)

Constitutionality of Ohio tort reform

The NAM joined with six business groups supporting the constitutionality of an Ohio civil justice reform statute that caps noneconomic and punitive damages and that adopts a collateral source reform. The amicus brief describes the primary role of the state legislature in developing tort law, which should be respected by the courts. The legislature is uniquely equipped to make fully informed decisions about the need for public policy changes in the law, and can weigh and balance the many competing societal, economic and policy considerations involved. Legislation gives the public advance notice of significant changes affecting rights and duties, and the time to comport behavior accordingly. The brief lists numerous state examples where legislative tort reforms have been upheld, and calls on the court not to nullify legislative policy decisions in a way that is reminiscent of the highly discredited Lochner era of the early Twentieth Century.

On Dec. 27, 2007, the Ohio Supreme Court held that Ohio’s tort-reform statute was constitutional, based primarily on the notion that limits on noneconomic and punitive damages do not deny plaintiffs the right to seek a remedy for their tort claims. The ruling in this case is important to Ohio residents and businesses to help control unreasonable awards and costs associated with litigation.

 

Chapin v. DaimlerChrysler Corp.   (Michigan Supreme Court)

Reliability of "expert" testimony in face of numerous epidemiological studies

This is an appeal of a ruling that from the Michigan Court of Appeals that allowed testimony from an individual about the possibility that dust from brake linings could have caused cancer. The NAM joined with 7 other organizations in an amicus brief urging the Michigan Supreme Court to find the testimony scientifically unreliable and therefore inadmissible at trial. Our amicus brief supported the company’s argument that no epidemiological studies show a causal connection between an auto mechanic’s work and the chance of contracting mesothelioma. Of particular importance are 17 epidemiological studies and reviews since 1980 on this subject, and none has found a positive association with mesothelioma, while they did find a positive association for other jobs. The plaintiff alleged that he contracted the disease from working on brake parts at various times over a 46-year career as an auto mechanic.

The NAM’s brief argued that the use of sound science is particularly important in light of the tremendous impact that asbestos litigation has had on our economy. The court improperly relied on government regulatory exposure limits as a substitute for proof of causation. The trial judge must act as a gatekeeper to prevent unreliable evidence from being admitted, or there will be no pre-trial science defense available for defendants.

On 6/22/07, the Michigan Supreme Court, over a vigorous dissent, declined to hear the appeal. The dissent lists 33 questions relating to the expert testimony in this case that remained unanswered because of the court's refusal to hear the appeal.

 

Chapin v. DaimlerChrysler Corp.   (Michigan Court of Appeals)

Reliability of "expert" testimony in face of numerous epidemiological studies

The NAM joined with 7 other organizations in an amicus brief urging the Michigan Court of Appeals to reverse a trial court order that allowed scientifically unreliable testimony to be admitted at trial. The plaintiff’s expert thought that occupational exposure to brake linings causes cancer. No appellate court has ever ruled that such a conclusion is reliable. Our amicus brief supported the company’s argument that no epidemiological studies show a causal connection between an auto mechanic’s work and the chance of contracting mesothelioma. Of particular importance are 17 epidemiological studies and reviews since 1980 on this subject, and none has found a positive association with mesothelioma, while they did find a positive association for other jobs. The plaintiff alleged that he contracted the disease from working on brake parts at various times over a 46-year career as an auto mechanic.

The NAM’s brief argued that the use of sound science is particularly important in light of the tremendous impact that asbestos litigation has had on our economy. The court improperly relied on government regulatory exposure limits as a substitute for proof of causation. The trial judge must act as a gatekeeper to prevent unreliable evidence from being admitted, or there will be no pre-trial science defense available for defendants.

On 1/30/07, the Court of Appeals affirmed the lower court's ruling, 2 to 1. It held that a judge's role is not to resolve scientific disputes, but rather to filter out expert evidence that is unreliable. Admissible opinions must be rationally derived from a sound foundation. The trial judge was found to have properly used his discretion in allowing one expert testifying using case studies and another using epidemiological studies that showed a conflicting conclusion. This case is being appealed to the Michigan Supreme Court.

 

Chemtall Inc. v. Madden   (West Virginia Supreme Court)

Procedure for early consideration of punitive damages

This case returned on appeal to the West Virginia Supreme Court (see 2004 Decisions for earlier summary). The NAM joined with other groups on 8/13/07 urging the West Virginia Supreme Court to strike down a trial court plan that requires a determination of punitive damages liability and a punitive damages multiplier before certification of a medical monitoring class, before a full determination of the defendants' liability for medical monitoring, and before any medical monitoring damages have been determined.

The case involves alleged exposure to polyacrylamide, which is used in to treat coal wash water at coal preparation plants. We argued that punitive damages must be based on actual damages, and cannot be determined in a vacuum before actual damages are determined. The trial court had not yet determined who should be in the class of plaintiffs, let alone whether any of them was actually harmed by the plaintiffs or how reprehensible the challenged conduct was to those plaintiffs. Setting punitive damages without making such determinations biases the jury, arbitrarily imposes punishment, and jeopardizes the right to receive a fair trial in West Virginia.

The NAM joined with the West Virginia Roundtable, the West Virginia Manufacturers Association, the U.S. Chamber of Commerce and the American Chemistry Council in the brief.

On Nov. 15, the West Virginia Supreme Court of Appeals denied the appeal. It ruled that determining the constitutionality of punitive damages requires that it wait until the lower court actually enters a judgment awarding punitive damages. It also indicated its reluctance to intervene in pre-trial issues.

 

DaimlerChrysler Corp. v. Hurst   (Fla. Dist. Ct. App.)

Asbestos medical criteria law

The NAM joined in an amicus brief with 5 other business groups supporting Florida’s new asbestos/silica medical criteria law, which requires the dismissal of cases brought by plaintiffs who are not physically impaired where asbestos or silica exposure was a substantial contributing factor. Meanwhile, the statute of limitations is tolled -- those cases may be brought after the plaintiffs develop a physical impairment that satisfies the minimum requirements of the law. The trial court ruled that the new statute is unconstitutional with respect to pending cases because it changed the law retroactively.

On February 7, 2007, the Florida Court of Appeal reversed, finding that the statute is valid. It ruled that the statute does not impair a vested interest, since "a person has no property, no vested interest, in any rule of the common law." The legislature may change common law by creating new rights or by eliminating old causes of action, even though "settled expectations may be upset . . . ." To be vested, a right "must be more than a mere expectation based on an anticipation of the continuance of an existing law . . . ."

Our amicus brief described the asbestos litigation crisis that led Florida to change its law and the need for courts to dismiss cases where no injury has yet been discovered. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the effect of these claims on solvency, peripheral defendants and the Florida economy.

The amicus group included the NAM and Associated Industries of Florida, American Insurance Assn., U.S. Chamber of Commerce, American Tort Reform Assn. and American Chemistry Council.

 

Flowserve Corp. v. Bonilla   (Florida Court of Appeals)

Application of medical criteria law to pending cases

The NAM joined in an amicus brief with 5 other business groups supporting Florida’s new asbestos/silica medical criteria law, which requires the dismissal of cases brought by plaintiffs who are not physically impaired where asbestos or silica exposure was a substantial contributing factor. Meanwhile, the statute of limitations is tolled -- those cases may be brought after the plaintiffs develop a physical impairment that satisfies the minimum requirements of the law. The trial court ruled that the new statute is unconstitutional with respect to pending cases because it changes the law retroactively. The judge found that there is "little public interest" served by the new law's requirements.

Our amicus brief challenges this conclusion, describing the asbestos litigation crisis that led Florida to change its law and the need for courts to dismiss cases where no injury has yet been discovered. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the effect of these claims on solvency, peripheral defendants and the Florida economy.

The amicus group included the NAM and Associated Industries of Florida, American Insurance Assn., U.S. Chamber of Commerce, American Tort Reform Assn. and American Chemistry Council.

On 4/4/07, the Florida Court of Appeals reversed, under the precedent that was established in DaimlerChrysler Corp. v. Hurst (Fla. Dist. Ct. App. 2007), in which the court rejected a constitutional challenge to retroactive application of the Asbestos and Silica Compensation Fairness Act.

Finally, on 9/19/07, the Florida Supreme Court denied plaintiffs' petition for discretionary review, citing the same precedent-setting case.

 

Honer v. Ford Motor Co.   (California Court of Appeal)

Secondhand exposure to hazardous substances

The NAM joined with six other organizations urging a California appeals court to affirm a trial court ruling that landowners have no duty to protect against off-site injuries that could result from secondhand exposures to asbestos and other substances emitted in the workplace. Whether one person owes a legal duty, as opposed to a moral or ethical obligation, is a policy judgment that must balance providing a remedy with extending exposure to tort liability almost without limit.

In this case, a woman sued two companies with New Jersey facilities where her father and brother worked as insulators. The men would bring home clothing with asbestos fibers, and she would wash the clothing and otherwise be exposed to the substance. She sued the companies for strict liability, negligence, fraud and misrepresentation, and premises liability. Only premises liability is at issue here.

The trial court dismissed the claim under a statute of repose, because it was brought more than 10 years after the completion of the insulation work.

On 10/15/07, the California Court of Appeal reversed, holding that California law shields its residents, like the plaintiff in this case, from out-of-state statutes of repose. Thus, the New Jersey statute of repose did not apply and the plaintiff could bring her claim. The court also held that a premises owner can be liable for secondhand asbestos exposure.

Our brief, which focused on the issue of secondhand exposure liability, argued that 4 other states rejected such liability in recent cases, finding that the mere foreseeability of harm to third parties is not enough. The employer's duty of providing employees with a reasonably safe work environment does not extend to potential harm outside the workplace. The companies in this case did not spread the release of toxins among the general population. In addition, this brand new duty requirement for landowners will bring about countless new lawsuits, potentially involving asbestos and other substances and involving a wide variety of people who might come in contact with an exposed worker.

This is another example of a case where courts have been asked to extend liability beyond that which is generally available in our tort system. If such a leap is to be made, it should be considered by state and federal legislatures considering all the policy implications, and not by individual judges.

 

Miller v. Ford Motor Co.   (Michigan Supreme Court)

Second-hand exposure to asbestos

The NAM and 7 business organizations filed an amicus brief 4/18/2007 in another asbestos exposure case. This case involves a clear issue whether Michigan law imposes a legal duty on owners of property, on which asbestos-containing products are located, to protect remote third parties from exposure to fibers carried home on clothing of independent contractors working on the property. Several courts have rejected such a duty.

Our brief outlines the impact of asbestos litigation on society, and challenges arguments in favor of a new duty rule as unsound. Liability of property owners to persons with whom they have no relationship are substantially different from liability arising under product liability laws, and a broad new duty would worsen the asbestos liability crisis.

On July 25, the court agreed. It ruled that the property owner in this case owed no duty to a person to protect her from exposure to asbestos fibers carried home on the clothing of a member of her household who was working on the property as the employee of an independent contractor. The court had to weigh various factors in determining whether a legal duty should be imposed on the property owner, including "the relationship of the parties, the foreseeability of the harm, the burden on the defendant, and the nature of the risk presented," with the relationship of the parties the most important factor. It was a very fact-specific analysis. The plaintiff here was a stepdaughter who sometimes washed the contractor's clothes, and during the years 1954-1965, we did not know what we know today about the hazards of asbestos -- thus the harm was not foreseeable. In those circumstances, the court declined to impose a duty on the property owner.

 

Paz v. Brush Engineered Materials, Inc.   (Mississippi Supreme Court)

Medical monitoring

The NAM and 9 other organizations filed an amicus brief urging the Mississippi Supreme Court not to allow medical monitoring claims by asymptomatic plaintiffs. A fundamental principle of tort law has been that a plaintiff must have a present, actual injury to obtain a recovery. Allowing claims that would require a company to pay for medical tests for someone who may never have been injured by exposure to a hazardous substance will foster litigation and divert resources from those who actually do have injuries. These policy decisions should be left to the legislature.

Medical monitoring claims are arising with some frequency in various states. The NAM is lending its support to the overall business community effort to keep tort law claims within their traditional, and reasonable, boundaries.

On January 4, 2007, the Mississippi Supreme Court refused to recognize a cause of action for medical monitoring in the absence of a present injury. It ruled that, unless the defendant engaged in "outrageous" conduct, a physical injury is a necessary element of a negligence claim, and none of the plaintiffs alleging exposure to beryllium have suffered one. Recognizing a medical monitoring claim would be akin to recognizing a claim for fear of future illness.

At the same time, the court reserved the right to consider policy arguments in ruling on such issues. It also reserved the right to create (or discontinue) tort remedies under the common law even when the state legislature has not acted.

Nevada, Alabama, Kentucky, and Michigan have also recently rejected medical monitoring claims.

 

Snyder v. Superior Court   (California Court of Appeal)

Validity of court procedures requiring plaintiffs to link defendant to alleged hazard

The NAM joined with 5 other organizations in support of a general court order in California that requires plaintiffs in asbestos cases to file basic information to support their claims about 8 months after a complaint is filed and allowing defendants to move to dismiss the case if the required report does not identify witnesses or documents linking the defendant to the plaintiff's exposure. Our brief supported the court order as a sound approach to manage complex litigation, to facilitate pretrial resolution of evidentiary and other issues, and to minimize the time and expense of trials.

This is particularly important in asbestos cases, which have bankrupted 85 employers, put 60,000 people out of work, and dragged 8,500 defendants into the litigation. We argued that the Los Angeles Superior Court has the authority to require that a plaintiff have some evidence to show that its lawsuit is not a malicious act -- that there is some evidence linking the defendant to the plaintiff's exposure to the hazard.

On 12/18/07, the Court of Appeal ruled that the general order conflicts with a state rule of civil procedure that prohibits the discovery of an attorney's "impressions, conclusions, opinions, or legal research or theories." It held that disclosing the witnesses, their expected testimony, and product identification documents intended to be relied on at trial depends on an attorney's impressions, conclusions and opinions and violates the work product doctrine encompassed by the rule. It overturned the lower court order and reinstated Caterpillar as a defendant in the case.

This is an unfortunate result that will drag cases on. The plaintiff will ultimately have to put on its case and disclose its witnesses and documents, so this just delays the process and makes it more expensive for all parties.

 


Punitive Damages -- 2007



Ford Motor Co. v. Buell-Wilson   (U.S. Supreme Court)

Clarifying meaning of reprehensibility

The California Court of Appeal affirmed a $55 million punitive damages award against Ford in a product liability case resulting from a rollover of its Explorer SUV. California law allows punitive damages to be awarded upon a showing of malice, and the court held that Ford acted with malice in choosing its design for the Ford Explorer. Ford had argued that there were several objective factors relevant to whether punitive damages were proper, including its conformity with industry customs, compliance with stringent federal regulations, and the fact that the design resulted from a good-faith debate among engineers during the design process. Nonetheless, the Court of Appeal decided that those objective indicators were “irrelevant” to the question of whether punitive damages were permissible, approving the award.

The NAM joined with the Alliance of Automobile Manufacturers in seeking U.S. Supreme Court review, arguing that the Court of Appeal’s application of California punitive damages law violates due process because it deprives Ford of fair notice sufficient to allow it to design its products to avoid punishment. Ford’s good-faith design choice was objectively reasonable because it was consistent with industry standards and federal regulations. We are concerned that manufacturers will simply have no way of knowing whether their reasonable design decisions may be subject to punishment years later. Every product will inevitably fail in certain circumstances, regardless of how high a manufacturer sets the design safety standard. Yet, without clear and objective standards to determine whether a manufacturer acted with the requisite degree of reprehensibility, juries will be left with standardless discretion to award punitive damages in product liability cases.

On May 14, 2007, the Court accepted the case for review, then immediately vacated the lower court's decision and sent the case back for reconsideration in light of the Supreme Court's February decision in Philip Morris USA v. Williams.

 

Philip Morris USA Inc. v. Williams   (U.S. Supreme Court)

Punitive damages

The Supreme Court reviewed this case to answer questions concerning the due process limitations on punitive awards recognized in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), and State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003). The Oregon Supreme Court affirmed a punitive award to a deceased smoker’s widow in the amount of approximately $80 million, which was 97 times the amount of compensatory damages awarded. In reviewing the punitive award, the U.S. Supreme Court was to consider two issues: first, whether the high reprehensibility of a defendant’s conduct can authorize a punitive award of 10 or more times the amount of compensatory damages, and, second, whether a jury may consider effects on third parties not only to determine the appropriate punishment for the plaintiff’s injuries but also to punish the defendant for the third-party harms.

The NAM joined with the Pharmaceutical Research and Manufacturers of American (PhRMA), the American Chemistry Council and the Business Roundtable in an amicus brief describing 21 examples where plaintiffs' lawyers try to multiply punitive damages by citing harm to individuals who are not parties to the case, or by seeking to regulate the conduct of a company or of an entire industry. We oppose juries being asked to substitute their judgment for that of legislatures and regulatory agencies.

On February 20, 2007, the Supreme Court ruled 5 to 4 to overturn the lower court ruling. It held that a jury may not punish a defendant for harming persons who are not before the court. In a nuanced opinion, it ruled that a jury may consider actual or potential harm to others in deciding how reprehensible the conduct was, but may not punish for the harm caused others. Punishment should be assessed based on the claim of the plaintiff before the court. States have some flexibility to determine the rules that will help minimize jury confusion over this standard.

The ruling is an important milestone in the Court's recent willingness to try to insure that punitive damages are properly limited and fair under the Due Process Clause. Key to the decision were votes by Justices Roberts and Alito, whose views on punitive damages were unknown until now.

The court declined to decide what multiplier of actual damages is constitutionally acceptable for determining punitive damages in this case.

 


RICO Act -- 2007



NDS Group PLC v. Sogecable, S.A.   (U.S. Supreme Court)

Definition of “enterprise” in RICO

The NAM filed an amicus brief on 8/13/07, asking the Supreme Court to decide once and for all whether an “enterprise,” as defined under the Racketeer Influenced and Corrupt Organizations Act (RICO), may consist solely of a corporate defendant and its subsidiaries and agents. The NAM is greatly concerned about current RICO pleading standards that encourage strike suits against its members and stifle the ability of American businesses to operate efficiently across multiple jurisdictions through subsidiaries and agents. There is a circuit split over whether a corporation conducts or participates in the affairs of a distinct “enterprise,” within the meaning of the RICO statute, when the only members of the alleged enterprise are the corporation itself and third parties paid by the corporation to conduct business on its behalf.  The Supreme Court has previously established that a RICO defendant must have participated in or conducted the affairs of a distinct enterprise, and not simply the defendant’s own affairs, in order to be found liable under RICO.  In this case, the Ninth Circuit held that the “enterprise” consisted of NDS Group, its wholly-owned subsidiary, NDS Americas, and the agents of NDS Group.

While the Ninth Circuit’s definition of a RICO enterprise accords with that of the Sixth and Eleventh Circuits, it conflicts with that of the Second, Third, and Seventh Circuits, which correctly recognize that an enterprise consisting solely of a corporation and its subsidiaries and agents fails to meet RICO’s well-established “distinctiveness requirement.” This issue continues to be important to every business that relies on third parties to perform corporate functions.

The Supreme Court declined to hear this appeal on Oct. 1, 2007.

 


Securities Regulation -- 2007



Tellabs Inc. v. Makor Issues & Rights Ltd.   (U.S. Supreme Court)

Heightened pleading standards of PLRSA

Intentional wrongdoing is hard to prove. A plaintiff must allege facts that imply that the defendant acted with intent, since few defendants admit that they meant to engage in a tort or an illegal act. This case is about how much a plaintiff must allege in his complaint to satisfy the statutory requirement in the Private Securities Litigation Reform Act of 1995 (PSLRA) that he plead facts giving rise to a "strong inference" of intent.

Tellabs is the defendant, a telecommunications equipment manufacturer. Its stock price dropped dramatically in the early 2000's, and shareholders sued, claiming various improper or fraudulent acts. The court of appeals found that the complaint contained sufficient factual allegations for a jury to infer intent, even though, according to Tellabs, the facts are also consistent with innocent behavior.

The Supreme Court ruled on 6/21/07 that "an inference of scienter must be more than merely plausible or reasonable -- it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent." This decision is based on specific statutory language that provides a pleading standard that is higher than usual. The Court also ruled that this heightened standard does not violate a plaintiff's Seventh Amendment right to a jury trial.

This is an important recognition by the Court that the heightened pleading requirements of the PSLRA were properly designed to dismiss frivolous securities claims at an early stage.

 


Statute of Limitations -- 2007



Altadis USA, Inc. v. Sea Star Line, LLC   (U.S. Supreme Court)

Statute of limitations for "through" bills of lading

This case is about the statute of limitations that applies to claims against carriers that are alleged to have lost or damaged goods shipped between a place in the United States and a place in a territory or possession of the United States, such as Puerto Rico. When cigars were lost on the inland leg of the shipment, the shipper sued the carrier, but was denied his day in court because he missed the one-year deadline for bringing suit.

The shipper appealed, and the Supreme Court agreed on January 5, 2007, to hear the case. The issue on appeal was whether a federal law, namely the Carmack Amendment, which extends the statute of limitations to at least 2 years, applies when the carrier did not issue a separate bill of lading for the inland leg. Instead, the carrier issued a "through" bill of lading for both the sea and land portion of the shipment. There is a conflict in the federal courts on this issue, and the case would have determined how quickly claims must be filed and whether shippers should secure separate bills of lading for separate legs of a shipment. However, the Court dismissed the case on a stipulation in February.

 


Taxation and State Taxation -- 2007



Coltec Inds. v. United States   (U.S. Supreme Court)

Economic substance doctrine

The NAM filed amicus briefs on Jan. 12, 2007, in a pair of cases on appeal to the Supreme Court involving the economic substance doctrine. In order to claim tax deductions or credits for business transactions, companies must meet the technical requirements of the tax code provision and also show that the transaction serves a real economic purpose and is not entered into solely for the tax benefits.

In this case, the NAM and the U.S. Chamber of Commerce urged the Court to review a Federal Circuit decision that overturned a judge's ruling that Coltec's plan to manage future asbestos liabilities satisfied the economic substance doctrine. The appeals court used a de novo standard of review, meaning that they ignored the findings of the trial court and drew their own conclusions from the evidence. Our brief argued that appeals courts should review trial decisions using a "clearly erroneous" standard of review.

In addition, we argued that the appellate court's approach jeopardizes important principles of judicial deference to business judgment. Historically, the business judgment rule has meant that courts should not second-guess business decisions. Excessive governmental intrusion into business affairs chills commercial activity, increases costs and makes decisions more risky. The appeals court's decision sows confusion into the availability of a variety of deductions and credits under the Internal Revenue Code, and calls into doubt a variety of familiar, beneficial activities previously approved by the courts. Several of these common activities are described in the brief.

On Feb. 20, 2007, the Court declined to review this appeal.

 

Dow Chemical Co. v. United States   (U.S. Supreme Court)

Economic substance doctrine

The NAM filed amicus briefs on Jan. 12, 2007, in a pair of cases on appeal to the Supreme Court involving the economic substance doctrine. In order to claim tax deductions or credits for business transactions, companies must meet the technical requirements of the tax code provision and also show that the transaction serves a real economic purpose and is not entered into solely for the tax benefits.

In this case, the NAM joined with the American Chemistry Council and the U.S. Chamber of Commerce in a brief urging the Court to review a Sixth Circuit decision that overturned a judge's ruling that Dow's long-term plan to fund corporate-owned life insurance policies satisfied the economic substance doctrine. The appeals court used a de novo standard of review, meaning that they ignored the findings of the trial court and drew their own conclusions from the evidence. Our brief argued that appeals courts should review trial decisions using a "clearly erroneous" standard of review.

In addition, we argued that a transaction must be considered in its entirety, even if it depends on optional future capital infusions that "seriously depart" from the taxpayer's past conduct. There are a variety of widely used, well accepted and economically sound corporate finance structures that rely precisely on discretionary future capital infusions by the taxpayer, many of which are described in the brief.

On February 20, 2007, the Court declined to hear this appeal.

 

FIA Card Services, N.A. v. Tax Commissioner   (U.S. Supreme Court)

Taxation of out-of-state corporations

The NAM joined with the Council on State Taxation and the National Marine Manufacturers Association in support of an appeal to the Supreme Court of a West Virginia decision that would allow extensive taxation of out-of-state businesses. On 6/18/07, the Court declined to review the appeal.

Historically, the Commerce Clause has protected interstate markets from impermissible state tax burdens through the rule that a state may not impose a tax on an out-of-state business unless it has more than a de minimis "physical presence" in the state. However, many states are aggressively seeking to expand their tax revenues by asserting the power to tax the corporate income of out-of-state businesses that have no physical presence in the taxing state. In this case, West Virginia had adopted a "significant economic presence test" which would permit a state to tax the income of any business with customers in the taxing state, even if it lacked any real property, employees or other contacts there.

The brief fills many pages with examples of difficult and complicated tax situations that will face companies should West Virginia's system be allowed. The effects will be particularly severe on small and mid-sized businesses.

 

Hinck v. United States   (U.S. Supreme Court)

Which courts may hear federal tax abatement claims?

On Jan. 12, 2007, the Supreme Court agreed to determine whether disputes with the IRS over abatement of interest on income tax deficiencies may be brought in any federal district court, or only in the Tax Court. A 1996 law expressly authorized the Tax Court to handle these cases, but Congress did not alter another law that gives other federal courts jurisdiction over the erroneous imposition of taxes.

On May 21, 2007, the Court decided that the Tax Court provides exclusive jurisdiction for judicial review of a failure to abate interest under § 6404(e)(1). Congress clearly set the forum and other requirements for such challenges. The Court found it appropriate that the Tax Court review abatement issues, which involve an evaluation of the internal processes of the IRS, while allowing other courts to handle issues relating to substantive tax law. Even though it may not be as efficient, there is nothing "tellingly awkward" about it.

 


Antitrust -- 2006



Coca-Cola Co. v. Harmar Bottling   (Texas Supreme Court)

Calendar Marketing Agreements

The NAM and the Grocery Manufacturers of America filed a brief urging the Texas Supreme Court to review a lower court decision relating to calendar marketing agreements (special product promotions) that manufacturers offer to retailers. The lower court ruled that a manufacturer with a large market share violated the Texas Free Enterprise and Antitrust Act by using these special promotional programs solely because of the adverse impact on competitors. Our brief argued that the antitrust laws are designed to protect competition, not competitors, and that Coca-Cola's competitors were free to display their products and offer special promotions of their own. We also argued that the Texas law illegally reaches conduct in markets outside that state, adversely affecting interstate commerce.

On October 20, 2006, the Texas Supreme Court overturned the lower court’s decision. It held that plaintiffs, who were bottlers of competing products, had failed to prove an effect on overall competition in any relevant market since consumers could avoid higher prices at one store by simply “going down the street” to another store. Although “consumers may have paid more on occasion in a particular store,” there was no evidence that the calendar marketing agreements “caused consumers to pay higher prices generally.”

The court also held that the Texas Free Enterprise and Antitrust Act does not apply to competitive injury alleged to have occurred outside the state.

 

Eddins v. Redstone   (California Supreme Court)

Defenses to price discrimination

The NAM joined with 5 other organizations in an amicus letter to the California Supreme Court asking it to hear an appeal of a ruling that effectively eliminated summary judgment on four important defenses to price discrimination claims under the Unfair Practices Act (“UPA”), Cal. Bus. & Prof. Code § 17045. This lower court ruling could have serious negative effects on all suppliers in California, as it greatly broadens the conduct that can subject suppliers to liability for “price discrimination” under the UPA, including conduct that is indisputably pro-competitive, innovative and business-justified. The Court declined to hear the appeal.

Our amicus letter argued that companies must have pricing flexibility, and the California statute would outlaw all strongly competitive discounting practices pricing without the four primary defenses that are the subject of this litigation. We support recognition of (1) the meeting competition defense, (2) a functional classification defense, (3) the defense that a discount is not secret if it is generally known and available to competitors, and (4) that the complaining party was buying on like terms and conditions. We were concerned that the lower court’s decision eviscerated these safe harbor defenses.

Joining in the amicus letter were the California Retailers Association, Estee Lauder Companies, Inc., ExxonMobil Corporation, Pfizer, Inc. and Shell Oil Company.

The case arose when video distributors and retailers brought an antitrust conspiracy case against Blockbuster and the major Hollywood movie studios based on innovative revenue-sharing deals that Blockbuster negotiated with each of the studios. Plaintiffs are smaller, independent distributors and retailers, and they were unable to obtain the same discounts as Blockbuster because they were either unwilling or unable to agree to the same terms.

 

Illinois Tool Works Inc. v. Independent Ink, Inc.   (U.S. Supreme Court)

Antitrust case involving tying of patented item

The Supreme Court held 3/1/06 that, because a patent does not necessarily confer market power on the patentee, a plaintiff challenging a tying arrangement under Section 1 of the Sherman Act must prove that the defendant has economic power in the market for the tying product. In his opinion for the Court, Justice Stevens noted that the Court’s past disapproval of tying arrangements was based on a now-discredited belief that such arrangements “serve hardly any purpose beyond the suppression of competition,” and that the Court had more recently moved from relying on presumptions to requiring a showing of actual economic power in the market for the tying product. The Court explained that Congress, antitrust enforcement agencies, and most economists had all rejected the conclusion that a patent necessarily confers market power. Indeed, the presumption that holding a patent creates market power arose in “patent misuse” cases but was rejected in that context by Congress in the 1988 amendments to the patent laws. The Court today likewise eliminated any presumption in the antitrust context that a patent necessarily confers market power on the patent holder. Jones Day lawyers drafted amicus curiae briefs on behalf of the American Bar Association at the petition and merits stages. This case has important implications for any business buying or selling a product that arguably is tied to a patented or copyrighted product.

Decision Below: 396 F.3d 1342 (Fed. Cir. 2005)

 

Shell Oil Co. v. Dagher   (U.S. Supreme Court)

Joint venture price fixing

The Supreme Court held 2/28/06 that it is not per se illegal under Section 1 of the Sherman Act, 15 U.S.C. § 1, for a lawful, economically integrated joint venture to set the prices at which the joint venture sells its products. The joint venture’s formation, which was not challenged, effectively merged Texaco’s and Shell’s domestic gasoline refining and marketing operations, thereby ending competition between the two companies in these lines of business. The Court concluded that although the joint venture’s “pricing policy may be price fixing in a literal sense, it is not price fixing in the antitrust sense,” because the policy was “little more than price setting by a single entity—albeit within the context of a joint venture—and not a pricing agreement between competing entities with respect to their competing products.” This decision is important to any business that is or may become part of a joint venture. Jones Day filed briefs on behalf of Texaco and presented oral argument on behalf of both successful petitioners.

The NAM and the U.S. Chamber of Commerce filed a joint brief 1/14/05 supporting review of this case. We urged the Supreme Court to rule that joint venture pricing is not per se illegal, but rather that it should be analyzed under the rule of reason, which takes into account efficiencies and other valid justifications for the joint venture. The Ninth Circuit’s strict rule would have had a severe chilling effect on the creation and operation of joint ventures, and is at odds with the purpose of the antitrust laws to promote pro-competitive economic activity.

Decision Below: 369 F.3d 1108 (9th Cir. 2004). See also case # 04-805, Texaco Inc. v. Dagher.

 

Texaco Inc. v. Dagher   (U.S. Supreme Court)

joint venture price fixing

The Supreme Court held 2/28/06 that it is not per se illegal under Section 1 of the Sherman Act, 15 U.S.C. § 1, for a lawful, economically integrated joint venture to set the prices at which the joint venture sells its products. The joint venture’s formation, which was not challenged, effectively merged Texaco’s and Shell’s domestic gasoline refining and marketing operations, thereby ending competition between the two companies in these lines of business. The Court concluded that although the joint venture’s “pricing policy may be price fixing in a literal sense, it is not price fixing in the antitrust sense,” because the policy was “little more than price setting by a single entity—albeit within the context of a joint venture—and not a pricing agreement between competing entities with respect to their competing products.” This decision is important to any business that is or may become part of a joint venture. Jones Day filed briefs on behalf of Texaco and presented oral argument on behalf of both successful petitioners.

The NAM and the U.S. Chamber of Commerce filed a joint brief 1/14/05 supporting review of this case. We urged the Supreme Court to rule that joint venture pricing is not per se illegal, but rather that it should be analyzed under the rule of reason, which takes into account efficiencies and other valid justifications for the joint venture. The Ninth Circuit’s strict rule would have had a severe chilling effect on the creation and operation of joint ventures, and is at odds with the purpose of the antitrust laws to promote pro-competitive economic activity.

Decision Below: 369 F.3d 1108 (9th Cir. 2004). See also case # 04-814, Shell Oil Co. v. Dagher.

 

Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc.   (U.S. Supreme Court)

Robinson-Patman Act application to price quotes

The Supreme Court held 1/10/06 that a manufacturer that offers its dealers different wholesale prices may not be held liable for price discrimination under the Robinson-Patman Act, absent any evidence that the manufacturer offered differing prices to dealers that were competing to resell to the same retail customer at the same time. In this case, manufacturer Volvo Trucks North America gave Reeder-Simco GMC and other Volvo dealerships “concessions” that the dealers used in bidding for sales to retail customers. Reeder presented evidence that the concessions from Volvo that other dealers used in successful bids for certain sales were more favorable than (1) the concessions that Volvo gave Reeder for use in successful bids for other sales (“purchase-to-purchase comparisons”), and (2) the concessions that Volvo offered Reeder for use in several unsuccessful bids for other sales (“offer-to-purchase comparisons”).

Reversing the Eighth Circuit, the Supreme Court held that the purchase-to-purchase and offer-to-purchase comparisons could not form the basis for liability under the Robinson-Patman Act because in none of these instances did Reeder compete with other Volvo dealers for a sale to the same customer. In the rare instances that Reeder did compete head-to-head with other Volvo dealerships for the same sale, the Court held that if any price discrimination existed between the concessions offered the dealerships, it was not of sufficient magnitude so as to substantially affect competition between them. The Court emphasized that its interpretation of the statute was more consistent with the broader policies of the antitrust laws, which are geared more to the stimulation of interbrand competition than to the protection of existing competitors. The disposition of this case is relevant to businesses whose decisions are affected by the Robinson-Patman Act.

NAM comment: The NAM 2/2/05 joined with the Truck Manufacturers Association, the Farm Equipment Manufacturers Association, the Association of Equipment Manufacturers and the Business and Institutional Furniture Manufacturer’s Association in an amicus brief urging the Supreme Court to review this decision. On May 20, we filed a second brief, this time on the merits of the issue on appeal.

The Supreme Court’s ruling recognizes the need for flexibility of manufacturers’ pricing decisions when offering quotes on custom purchases like large trucks and farm equipment. Our brief argued that, in the context where dealers are responding to request for bids from potential purchasers, manufacturers may offer their products at prices that vary depending on a variety of competitive factors, all of which can be taken into account to promote interbrand competition. It is normal for manufacturers to choose a price level for made-to-order products on a case-by-case basis that depends on many factors, including the volume the customer is buying or has bought, whether the customer has historically purchased another brand, how busy the assembly plant is, and how high current demand is.

 


Arbitration -- 2006



Buckeye Check Cashing, Inc. v. Cardegna   (U.S. Supreme Court)

Arbitration

The Supreme Court 2/21/06 reaffirmed that a challenge to the validity of a contract as a whole, and not specifically to an arbitration provision within the contract, must be decided by the arbitrator. Respondents sued Petitioner, a provider of check-cashing services, in state court, alleging that the interest rate charged by Petitioner is usurious under Florida law. Petitioner moved to enforce the arbitration clause in its contracts with Respondents, and the Florida Supreme Court held that state contract law and public policy precluded enforcement of an arbitration agreement in a contract challenged as unlawful. In an opinion by Justice Scalia, the Supreme Court reversed. Stressing its prior holdings in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), and Southland Corp. v. Keating, 465 U.S. 1 (1984), the Supreme Court explained that: (1) as a matter of federal arbitration law, an arbitration provision is severable from the remainder of the contract; (2) unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance; and (3) these principles apply in state as well as federal courts. This case is important to any individual or business that may be a party to a contract containing an arbitration clause. Decision below: 894 So. 2d 860 (Fla. 2005)

Decision Below: 894 So. 2d 860 (Fla. 2005)

 


Civil Procedure -- 2006



Moores v. Friese   (U.S. Supreme Court)

State regulation of out-of-state corporation's internal affairs

The NAM and other business groups filed an amicus brief urging the U.S. Supreme Court to review an adverse decision from the California Supreme Court on an issue involving the internal affairs of a corporation. Normally internal affairs, such as the requirements that apply when a shareholder wants to bring a derivative suit on behalf of the corporation against the officers or directors, are governed by the state in which the company is incorporated. In this case, the lower court ruled that a California statute applies to the relationship between the corporation and its directors and officers, including a provision for treble damages liability. The corporation is incorporated in Delaware, which does not allow a treble damages remedy.

The issue on appeal is whether the Commerce Clause and Due Process Clause prohibit one state from substituting its own substantive law for that of the state of incorporation. Our brief argues that only one state should have the authority to regulate a corporation's internal affairs, to avoid conflicting demands. Directors must be able to understand the rules and not have to guess as to which states might assert authority. Our free market system depends on uniform and predictable legal requirements. In addition, due process requires that directors be able to know in advance what law applies to their activities.

This conflict can also arise in cases involving whether a former stockholder has standing to bring suit, whether corporate restructuring must be voted on by shareholders as a single class, whether cumulative voting is allowed, whether shareholders may inspect corporate records, and other internal corporate issues. The issue is important because both California and New York, two of the nation's most important economic powerhouses, purport to regulate out-of-state corporations' internal affairs. Since half of all U.S. publicly traded corporations are incorporated in Delaware, conflicts are bound to arise, and the Supreme Court must resolve this dilemma.

The NAM joined with Technology Network, the Chamber of Commerce, the California Chamber of Commerce, the California Manufacturers and Technology Assn., and the California Business Roundtable in this brief. The Court declined to hear the appeal on October 2, 2006.

 


Class Actions -- 2006



Coker v. DaimlerChrysler Corp.   (North Carolina Supreme Court)

No injury class action

The NAM joined with the American Tort Reform Association in an amicus brief urging the North Carolina Supreme Court to reject a “no-injury” class action brought by purchasers of mini-vans in the mid 1990’s. The plaintiffs claimed that the mini-vans were touted as the “safest mini-van in the world”, but the vans did not have a new brake-shift interlock to prevent a vehicle from accidentally being shifted into gear without depressing the brake. The company argued that the vans performed as promised, and that the plaintiffs cannot sue when there has been no malfunction or injury. The lower courts agreed, ruling that the vans were not warranted to have the interlock, there was no allegation the vehicles were defective without it, the plaintiffs did not contract for, or even know about, the interlock, and no plaintiff sold a van at a diminished value.

Our amicus brief argued that there is no right to sue claiming that a product has a chance to cause future injury. Instead, there must be an actual injury. Adopting the plaintiffs’ theory would allow any product owner to allege harm that may never arise, merely because they are dissatisfied with the product. It would also make North Carolina a magnet jurisdiction for these kinds of claims, raising the cost of doing business and usurping the role of the legislature.

In addition, the plaintiffs are essentially advancing a fraud-on-the-market theory that has never been accepted in North Carolina. That theory applies in some federal securities cases, and has been the subject of significant criticism. There must be proof of causation, i.e., that the statement actually caused the plaintiffs to rely on it and to pay a higher price than they would have otherwise.

On April 7, 2006, the North Carolina Supreme Court affirmed the order dismissing plaintiffs' amended complaint.

 


Criminal Liability -- 2006



Stolt-Nielsen S.A. v. United States   (U.S. Supreme Court)

Court power to scrutinize agreement not to prosecute cooperating company

The issue in this case is whether federal courts have the authority, under the Separation of Powers doctrine, to enjoin federal prosecutors from breaching a binding contractual obligation "not to bring any criminal prosecution" against a company and its executives. It is important for companies that give up their constitutional rights in return for immunity, particularly in the context of the Antitrust Division’s Corporate Leniency Policy. The lower court found that the company had complied with its agreement, yet the Court of Appeals said courts cannot interfere with prosecutorial discretion to indict.

The NAM joined with the Washington Legal Foundation in an amicus brief urging the Supreme Court to hear this case on appeal. On Oct. 30, the Court declined to hear this appeal.

 


Environmental -- 2006



Air-Conditioning, Heating & Refrigeration Institute v. Energy Resources Conservation and Development Commission   (U.S. Supreme Court)

Preemption of California energy regulations

The NAM and five other associations filed an amicus brief 10/14/05 supporting an appeal of a Ninth Circuit ruling that allows California to demand detailed information from manufacturers about energy efficiency.  We argue that the California regulations are preempted by the Energy Policy and Conservation Act of 1975, which sets energy and water-use efficiency standards for appliances and expressly preempts any state regulation that “provides at any time for the disclosure of information with respect to any measure of energy consumption or water use” that differ from federal requirements.  California argues that the law only applies to disclosure of information to consumers and not to the state government itself.  Our brief argues that there is a split in the circuit courts, that there should be no presumption against preemption here, and that the issue is an important and recurring one appropriate for the Supreme Court to resolve.

On 6/19/06, the Court declined to hear this appeal.

 

American Lung Ass'n v. EPA   (D.C. Circuit)

8-hour ozone Phase I Implementation Rule

The NAM, the American Chemistry Council, the American Forest and Paper Association and the American Petroleum Institute filed joint motions to intervene to help defend the EPA against two suits brought by the ALA and 3 environmental groups over some of its Clean Air Act rules. The rules relate to issues that were reconsidered by the EPA as a result of earlier litigation, and are entitled, “Nonattainment Major New Source Review Implementation Under 8-Hour Ozone National Ambient Air Quality Standard: Reconsideration,” and “Implementation of the 8-Hour Ozone National Ambient Air Quality Standard – Phase 1: Reconsideration.”

Industry supports the new rules because they provide reasonable answers to questions relating to the implementation of tougher clean air requirements. First, since the old system of measuring emissions has been revoked, the new rules do not mandate certain contingency measures if an area of the country does not meet those old standards. Second, even though the old standard has been revoked, portions of it remain in place and there are new ways to demonstrate compliance with the standard. Third, new source review permitting requirements will be triggered based on the new 8-hour standard, which generally will apply to fewer facilities.

For further details, see South Coast Air Quality Management District v. EPA.

 

Carabell v. U.S. Army Corps. of Engineers   (U.S. Supreme Court)

Clean Water Act jurisdiction

A divided Supreme Court ruled 6/19/06 that the Army Corps of Engineers may have impermissibly exercised jurisdiction under the Clean Water Act over wetlands connected to tributaries of “navigable waters” only by man-made drains and ditches. To constitute a “navigable water” under the Act, a water or wetland must have a “significant nexus” to waters that are or were navigable in fact or that could reasonably be made so. The Sixth Circuit ruled that even a transitory “hydrological connection” to a tributary of a “navigable water” constituted a “significant nexus,” a test satisfied by the drains and ditches. The Supreme Court reversed and remanded, but no opinion garnered a majority “on precisely how to read Congress’ limits on the reach of the Clean Water Act.”

In the plurality opinion joined by Chief Justice Roberts and Justices Thomas and Alito, Justice Scalia set forth a two-part test for whether wetlands are subject to the Act: “First, that the adjacent channel contains a ‘water of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The plurality concluded that “ecological considerations” warrant treating a wetland as part of an adjacent navigable water only where there is a continuous surface connection—and, thus, a “boundary-drawing problem”—between the wetland and the adjacent navigable water. The plurality remanded the case for consideration of whether the drains and ditches contained a permanent flow of water, and whether they possessed a surface connection sufficient to sustain the Corps’ jurisdiction.

Justice Kennedy, concurring only in the judgment, took issue primarily with the plurality’s rejection of “ecological considerations.” Noting that the “absence of an interchange of waters [may make] protection of the wetlands critical to the statutory scheme,” Justice Kennedy concluded that “wetlands possess the requisite nexus … if the wetlands … significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’” The concurrence also contested the plurality’s permanence requirement. Justice Kennedy did recognize, however, that the wetlands’ proximity to navigable-in-fact waters should be considered “on a case-by-case basis” to avoid “the potential overbreadth of the Corps’ regulations[.]” Justice Kennedy concurred in the remand because the lower courts had not adequately considered “whether the specific wetlands at issue possess a significant nexus with navigable waters.”

This decision is significant to any business involved in the development of property in or around wetlands.

 

In re Final Rule to Implement the 8-Hour Ozone NAAQS -- Phase 1   (EPA)

Ozone regulations

The National Petrochemical & Refiners Association (NPRA) and the NAM 6/29/04 submitted to the EPA a Petition for Reconsideration of the final rule to implement the 8-hour ozone national ambient air quality standard (NAAQS) and the designations and classifications for the ozone standard. Industry is concerned that the timetable for certain facilities in nonattainment areas to come into compliance is too short. At least 15 regions of the country will need more time to come into compliance than is provided by the EPA.

Due in part to our efforts, the EPA reconsidered the issues before publishing its final rule. Industry supports the new rule because it provides reasonable answers to questions relating to the implementation of tougher clean air requirements.

For further details, see American Lung Association v. EPA.

 

New Mexico v. General Electric Co.   (10th Circuit)

Money damages; double recovery

The NAM joined with the American Chemistry Council, American Petroleum Institute, National Mining Association, the U.S. Chamber of Commerce, the U.S. Council for International Business and 5 other associations in an amicus brief 5/27/05 in the U.S. Court of Appeals for the 10th Circuit. We argued that the state of New Mexico may not seek money damages from companies involved in the clean-up of hazardous materials in the South Valley Superfund Site. The lower court had ruled that New Mexico did not prove that it would have used the water under the Superfund site, and therefore could not prove damages.

The NAM brief informed the court that New Mexico’s claim seeks double recovery. The companies worked together for nearly 15 years with the U.S. Environmental Protection Agency and the New Mexico Environmental Department to return water at the site to drinking water standards, yet were being sued to replace the resource that they cleaned up. Allowing such double recovery is a direct threat to the federal and state cleanup programs. To be successful, such cleanup efforts must have the maximum voluntary participation by the companies involved. It is unfair to allow the state with one hand agree to the clean-up plan and implementation at the site, and then have it turn around and sue for damages because it thinks the clean-up should have done more.

In addition, CERCLA (the Superfund law) provides a limited number of ways in which an EPA remediation remedy may be challenged in court. This is to help prevent time-consuming litigation that would hinder the prompt clean-up of Superfund sites. Furthermore, we argued that the state cannot claim damages for the lost use of the water if no one in fact ever suffered damages from not having the water available. Now that the water has been cleaned, it is available for future use. The state admits that the more than $1 billion in damages it seeks will not be used for water quality remediation.

The industrial community and natural resource trustees have been working toward increased cooperation and trust in the resolution of natural resource damage cases at individual sites, as well as to increase mutual understanding and certainty in the process as a whole. Claims like the one brought by the State of New Mexico have the potential to gravely set back this progress.

Attorneys general from 13 other states filed an amicus brief in support of New Mexico.

On October 31, 2006, the Tenth Circuit rejected New Mexico's challenge. It ruled that the state could not challenge CERCLA remediation efforts until they are completed, and seeking money damages does just that. It ruled that CERCLA preempts "any state remedy designed to achieve something other than the restoration, replacement or acquisition of the equivalent of a contaminated natural resource."

The state also has no claim for damages from the loss of water, since New Mexico is part of the Middle Rio Grande Administrative Area, which controls the use of water and substituted another well's water for the water temporarily lost to the clean-up effort. Thus, there was no net loss of water to Albuquerque.

 

New York v. EPA   (D.C. Circuit)

Equipment Replacement Rule case

The NAM is a member of the Equipment Replacement Rule Coalition, which filed a brief 12/9/05 in a suit brought by the State of New York against the EPA over the agency's 10/27/03 final rule titled "Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion." This rule governs the factors that determine whether companies must obtain EPA permits before replacing broken or deteriorating equipment at their industrial facilities. New York challenged the rule as too lenient. The Equipment Replacement Rule Coalition, comprising various trade associations, manufacturers and utilities, generally support the EPA's new rule.

Our brief on the merits argued that EPA has discretion under the Clean Air Act to issue the rule, and that major modifications are not any physical plant changes, but only those that increase an existing unit’s design capacity to emit.

On 3/17/06, the Court vacated the rule. It decided that the Clean Air Act’s permit requirements for “any physical change” do not allow the EPA to expand the category of projects that it views as “routine replacement.” The only exceptions are projects that do not result in emissions increases or that are de minimis. The decision leaves the existing Routine Maintenance, Repair and Replacement Exclusion in place.

 

Pakootas v. Teck Cominco Metals, Ltd.   (9th Circuit)

CERCLA

After the Environmental Protection Agency issued a Unilateral Administrative Order to a Canadian company to conduct a study on contamination of the Columbia River in this country from its smelter in Canada, an Indian tribe sued to enforce the order. The company argued that the EPA does not have jurisdiction under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the U.S. federal district court ruled otherwise. The company appealed, and the Ninth Circuit affirmed, ruling 7/3/06 that the EPA’s order only applied to a “facility,” as it’s defined in CERCLA, within the territorial boundaries of the United States. Even though the smelter was located in Canada, the definition of a facility under CERCLA is an area where a hazardous substance has been deposited or otherwise comes to be located. This is a very broad definition of facility that subjects foreign companies to liability for pollution in the United States.

The court also ruled that the slag located in the United States was leaching hazardous substances, thus satisfying the legal requirement for liability that there be a “release” from the facility into the environment. EPA’s jurisdiction did not extend to the smelter across the border, but does cover the underwater facility and hazardous releases in the United States.

The NAM joined with the National Mining Association supporting Teck Cominco’s appeal. In an amicus brief filed 6/13/05, we argued that CERCLA applies only within this country unless Congress clearly expresses an intent to apply it extraterritorially, which it did not. These kinds of disputes are quintessentially an international concern, not for unilateral action by one country's EPA. Private litigation upsets the resolution of such disputes through diplomatic means, or through the long-standing model of an arbitration group that was specifically established for the smelter in the 1930s. Allowing such litigation in U.S. courts opens them up to worldwide claims, particularly as environmental science improves, and could subject U.S. firms to retaliatory litigation abroad, imposing multiple and conflicting standards on environmental behavior.

Teck Cominco appealed for rehearing. On 7/24/2006, the NAM and the National Mining Association filed a brief in support of this appeal, arguing that the site of the release is irrelevant for resolving the question whether the United States is improperly applying its law to an entity based in another country. The decision ignores the history of negotiated international disputes and transforms CERCLA into a global environmental statute. Rehearing was denied on Oct. 30, 2006.

 

Rapanos v. United States   (U.S. Supreme Court)

Clean Water Act jurisdiction

A divided Supreme Court ruled 6/19/06 that the Army Corps of Engineers may have impermissibly exercised jurisdiction under the Clean Water Act over wetlands connected to tributaries of “navigable waters” only by man-made drains and ditches. To constitute a “navigable water” under the Act, a water or wetland must have a “significant nexus” to waters that are or were navigable in fact or that could reasonably be made so. The Sixth Circuit ruled that even a transitory “hydrological connection” to a tributary of a “navigable water” constituted a “significant nexus,” a test satisfied by the drains and ditches. The Supreme Court reversed and remanded, but no opinion garnered a majority “on precisely how to read Congress’ limits on the reach of the Clean Water Act.”

In the plurality opinion joined by Chief Justice Roberts and Justices Thomas and Alito, Justice Scalia set forth a two-part test for whether wetlands are subject to the Act: “First, that the adjacent channel contains a ‘water of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The plurality concluded that “ecological considerations” warrant treating a wetland as part of an adjacent navigable water only where there is a continuous surface connection—and, thus, a “boundary-drawing problem”—between the wetland and the adjacent navigable water. The plurality remanded the case for consideration of whether the drains and ditches contained a permanent flow of water, and whether they possessed a surface connection sufficient to sustain the Corps’ jurisdiction.

Justice Kennedy, concurring only in the judgment, took issue primarily with the plurality’s rejection of “ecological considerations.” Noting that the “absence of an interchange of waters [may make] protection of the wetlands critical to the statutory scheme,” Justice Kennedy concluded that “wetlands possess the requisite nexus … if the wetlands … significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’” The concurrence also contested the plurality’s permanence requirement. Justice Kennedy did recognize, however, that the wetlands’ proximity to navigable-in-fact waters should be considered “on a case-by-case basis” to avoid “the potential overbreadth of the Corps’ regulations[.]” Justice Kennedy concurred in the remand because the lower courts had not adequately considered “whether the specific wetlands at issue possess a significant nexus with navigable waters.” This decision is significant to any business involved in the development of property in or around wetlands.

 

S.D. Warren Co. v. Maine Board of Environmental Protection   (U.S. Supreme Court)

Clean Water Act jurisdiction

The Supreme Court 5/15/06 decided that river water utilized by private dams is “discharge” within the meaning of Section 401 of the Clean Water Act, 33 U.S.C. § 1341 (a)(1), after the water’s hydroelectric use in the dam. Section 401 requires that if an activity “may result in any discharge into the [Nation’s] navigable water[s],” an applicant for a federal license or permit must obtain a certification that the activity will not violate state water quality standards. The Act does not define the term “discharge,” apart from providing that “[t]he term ‘discharge’ when used without qualification includes a discharge of a pollutant, and a discharge of pollutants.” 33 U.S.C. § 1362(16). The Court unanimously concluded that because the term is not further defined in the statute and is not a term of art, it is to be construed “in accordance with its ordinary and natural meaning”—a “flowing or issuing out.” The Court rejected arguments that a different meaning is dictated by the surrounding language of Section 401, by the meaning of Section 402 of the Act, or by legislative history. This decision is important to any business that may be subject to regulation under the Clean Water Act.

Decision Below: 868 A.2d 210 (Me. 2005)

 

South Coast Air Quality Management District v. EPA   (D.C. Circuit)

8-hour ozone Phase I Implementation Rule (Consolidated with American Lung Assn. v. EPA)

The NAM is part of a joint industry effort to support the Environmental Protection Agency’s 8-Hour Ozone Phase I Implementation Rule. Since enactment of the Clean Air Act in 1990, EPA has been working to implement provisions that establish ozone control requirements and deadlines for compliance. First it established a standard based on a 1-hour measurement system, with 5 classifications of violations (marginal, moderate, serious, severe or extreme). In 1997, EPA replaced the 1-hour standard with a more stringent standard with an 8-hour averaging time, and, after court challenges that went to the Supreme Court, again modified the regulation to provide different compliance timetables depending on the levels of ozone in a particular area.

The State of Ohio sued to delay the 8-hour standard and to force EPA to adopt more reasonable deadlines. It feared that implementation will require the “depopulation strategy,” whereby all local industry must shut down and all local vehicle traffic must be stopped in the Cleveland-Akron area. The Baton Rouge Chamber of Commerce sued to eliminate enforcement under the old 1-hour standard. The American Lung Association, the Natural Resources Defense Council and others, sued to force the use of specific timetables for implementation and to prevent companies from backsliding from the old standard. The NAM and other industry groups intervened in these suits to generally support the EPA’s latest efforts.

Our brief argued that the EPA’s balance of compliance requirements involving either the old 1-hour standard or the tougher 8-hour standard is valid. Nothing in the Clean Air Act requires old standards to remain in effect in perpetuity. Since the old standard was revoked, penalties should not continue to be assessed under that system. We supported EPA’s determination that an area subject to the 8-hour measuring standard should be subject only that the new classification system that goes with it.

On December 22, 2006, the D.C. Circuit vacated the rule and remanded the matter to EPA for further proceedings. The court upheld EPA's decision to revoke the 1-hour ozone standard, but imposed substantial restraints. It struck down EPA's decision classifying nonattainment areas under the generally less demanding Subpart 1 (of Part D of Title I), instead ruling that areas with 8-hour "design values" (the measured concentration of ground-level ozone) above .09 ppm must be classified under Subpart 2. It called EPA's decision to apply only Subpart 1 requirements to areas with 8-hour design values between .08 ppm and .09 ppm unreasonable. In addition, EPA's rules were designed to prevent "backsliding" by regulated industries, and the D.C. Circuit ruled that several requirements continue to apply (such as New Source Review requirements, section 185 emission fees, contingency plans for failure to improve, and local transportation planning restraints).

Until further word from EPA, the new 8-hour designation/classification system was vacated, but the designations/classifications themselves were in a separate rule that was not vacated. Thus, those designations and classifications apparently remain in effect, with State Implementation Plans due in June. In addition, the anti-backsliding provisions under the 1-hour rule are still in effect.

On March 22, 2007, the NAM joined with other organizations in a petition for rehearing. We argued that the court's decision expands EPA's Section 172(e) authority to prevent companies from backsliding on ozone pollution limits. We argued that the backsliding provision applies only if air quality standards are relaxed, and the EPA in fact issued revised standards that are more stringent. In addition, existing case precedent requires that courts defer to EPA interpretations that are reasonable. The court's decision second-guessed the EPA's interpretation, and conflicts with that of another federal appeals court. The petition for rehearing was denied 6/8/2007.

 


ERISA -- 2006



El Paso Tennessee Pipeline Co. v. Yolton   (U.S. Supreme Court)

Lifetime vesting of retirement health care benefits

The trial court and the Sixth Circuit ruled that retirees and surviving spouses were entitled to lifetime health care coverage pursuant to contracts negotiated between their employer and the UAW. The court recognized that there is no statutory right to lifetime health care benefits, but that life and health insurance benefits carry with them an inference that the parties intended them to continue for life. The NAM filed an amicus brief urging the Court to review the case and describing how different federal court rulings frustrate the efforts of companies to adopt consistent national retiree health benefit programs. The lower court's inference that health benefits vest for life imposes an immense and unexpected burden on employers while providing retirees with an unbargained-for windfall. The Supreme Court declined to review this case.

 

Yolton v. El Paso Tennessee Pipeline Co.   (6th Circuit)

Lifetime vesting of retirement health care benefits

The NAM sent a letter 3/13/06 to the Sixth Circuit supporting the petition for rehearing en banc in this case involving whether retirement health care benefits vested for life. The trial court and the Sixth Circuit ruled that retirees and surviving spouses were entitled to lifetime health care coverage pursuant to contracts negotiated between their employer and the UAW. The court recognized that there is no statutory right to lifetime health care benefits, but that life and health insurance benefits carry with them an inference that the parties intended them to continue for life. The NAM’s letter endorses an amicus brief filed by the U.S. Chamber of Commerce that calls on the court to recognize that an employer’s commitment to vest welfare benefits must be stated in clear and express language and should not be inferred lightly. Otherwise, courts will rewrite collective bargaining agreements, undermining federal labor policy promoting such agreements. Medical costs are unpredictable and have been rising rapidly for years, and a presumption that health benefits vest for life creates uncertainty when companies are struggling to survive. The Sixth Circuit will become a magnet jurisdiction for this kind of litigation if retiree benefits are liberally interpreted to survive contract expiration.

The Sixth Circuit declined to rehear the case, and the Supreme Court denied review.

 


Forum non conveniens -- 2006



Fisher Scientific Co. v. Superior Court   (California Supreme Court)

Forum non conveniens in asbestos case

The NAM and 8 other organizations filed an amicus letter urging the California Supreme Court to hear an appeal of a decision that allowed a non-resident plaintiff to sue a company in California even though his only contact with the state was a one-year fellowship 30 years ago. Our letter objects to the growing trend of nonresident plaintiffs flocking to California to file law suits. Other jurisdictions that have become notorious litigation magnets have started to adopt reasonable requirements to help relieve unnecessary congestion in the courts and burdens on jurors and prospective jurors. Six case examples are provided to show how lax the California courts have been.

Also on the brief are the Coalition for Litigation Justice, Inc, National Federation of Independent Business Legal Foundation, Property Casualty Insurers Assn. of America, American Tort Reform Assn., Chamber of Commerce, American Insurance Assn., American Chemistry Council and National Assn. of Mutual Insurance Companies.

On 8/30/06, the California Supreme Court denied our petition.

 


Free Speech -- 2006



Wisconsin Right To Life, Inc. v. Federal Election Commission   (U.S. Supreme Court)

Corporate political speech

The Supreme Court unanimously held 1/24/06 in a per curiam opinion that McConnell v. Federal Election Commission, 540 U.S. 93 (2003), does not foreclose as-applied challenges to the constitutionality of section 203 of the Bipartisan Campaign Reform Act. Section 203 bars corporations from using general corporate treasury funds to fund targeted broadcast communications that reference a federal candidate for thirty days before a primary election or sixty days before a general election. The district court had interpreted McConnell as foreclosing Petitioner Wisconsin Right to Life, Inc.’s First Amendment challenge to section 203 as applied to three particular communications and to grassroots lobbying communications generally. The Supreme Court disagreed, stating that, in its decision in McConnell “upholding § 203 against a facial challenge, we did not purport to resolve future as-applied challenges.” The Court therefore vacated the judgment and remanded for the district court to consider the merits of the as-applied challenge in the first instance. This case is important for any business that is engaged in activity subject to section 203 of the Bipartisan Campaign Reform Act.

Decision Below: 2005 U.S. Dist. LEXIS 17226 (D.D.C. May 9, 2005) (unreported)

 


Government Contracting -- 2006



BP American Production Co. v. Burton   (U.S. Supreme Court)

Statute of limitations for administrative proceedings

The Supreme Court granted certiorari 4/17/06 to determine the statute of limitations governing administrative proceedings brought by the Government for money damages for breach of contract. A federal statute, 28 U.S.C. § 2415(a), bars any “action” by the United States seeking “money damages” for breach of contract unless the “complaint” is filed within six years of when the right of action accrues or within one year of a final decision in an administrative proceeding, whichever is later. In an opinion authored by then-Judge Roberts, the D.C. Circuit, consistent with an unpublished opinion of the Fifth Circuit, concluded that this limitations period does not apply to an administrative order demanding payment of money owed to the Government (here, royalties due under the Mineral Leasing Act). The D.C. Circuit reasoned that such an order is neither an “action” for “money damages” nor a “complaint” within the meaning of section 2415(a) because those terms refer exclusively to actions filed in court. In contrast, the Ninth and Federal Circuits have held, in other contexts, that the six-year limitations period of section 2415(a) applies both to agency enforcement proceedings and to in-court lawsuits seeking damages for breach of contract. Chief Justice Roberts and Justice Breyer recused themselves from this case.

On 12/11/06, the Supreme Court uunanimously affirmed, holding that the six-year statute of limitations for government contract actions does not apply to administrative payment orders. This case is important to any individual or business that may be subject to a statute, like the Mineral Leasing Act, under which an agency may initiate proceedings to recover money pursuant to an agreement.

 


Labor Law -- 2006



Arbaugh v. Y & H Corp.   (U.S. Supreme Court)

Definition of an employer

The Supreme Court unanimously held 2/22/06 that satisfaction of the numerosity component of Title VII’s definition of “employer” is an element of a plaintiff’s claim for relief, not a prerequisite to federal subject-matter jurisdiction. Section 701(b) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e(b), limits the definition of “employer” to those having “fifteen or more employees.” The lower courts in this case held that the numerosity requirement is jurisdictional and thus required dismissal even though it had not been raised by the defendant until after a jury verdict for the plaintiff. Reversing, the Supreme Court analyzed the text and structure of Title VII’s jurisdictional provision, 42 U.S.C. § 2000e-5(f)(3), together with 28 U.S.C. § 1331, the general statute that confers federal-question jurisdiction. The Court concluded that the numerosity requirement contained in Title VII’s definition of “employer” is not a threshold jurisdictional requirement akin to the monetary floor clearly specified for diversity actions in 28 U.S.C. § 1332. In doing so, the Court articulated a bright-line rule: if Congress does not definitively state that a threshold limitation on the scope of a statute is jurisdictional in nature, the courts must treat the restriction as nonjurisdictional. The Court’s decision is important to employers with fewer than fifteen employees and to any business that may be involved in litigation under federal statutes with specifically limited scope.

Decision Below: 380 F.3d 219 (5th Cir. 2004)

 

Burlington N. and Santa Fe R.R. Co. v. United States   (U.S. Supreme Court)

Employment discrimination

The Supreme Court 6/22/06 decided that the anti-retaliation provision in Title VII of the Civil Rights Act of 1964 is not limited to protecting employees from retaliatory action taken by employers that relates to employment or occurs in the workplace. Rather, the provision covers any material action taken by the employer that would likely discourage a reasonable worker from making or supporting a charge of employment discrimination. The Court determined that a plain reading of Title VII indicated that Congress intended to provide employees broad protection from employer retaliation. Specifically, the Court pointed out that unlike the language of the substantive anti-discrimination provision, which limits its scope to actions that affect employment or alter the conditions of the workplace, the wording of the anti-retaliation provision contains no such qualifiers. Congress’s unqualified prohibition against retaliation was a recognition, the Court stated, that employers can effectively retaliate against employees outside of the workplace and in ways that do not relate directly to employment. But the Court was also careful to emphasize that the anti-retaliation provision does not cover petty slights or minor annoyances experienced by an employee who reports discriminatory behavior, but only materially adverse actions. Furthermore, the Court held that a finding of materiality must be based on the perspective of a reasonable worker, rather than on a particular employee’s subjective feelings. This case is of importance to every business covered by Title VII.

Decision Below: 364 F.3d 789 (6th Cir. 2004) (en banc)

 

Domino’s Pizza v. McDonald   (U.S. Supreme Court)

Race discrimination in contracts

The Supreme Court decided 2/22/06 that a shareholder of a corporation cannot bring a claim under Section 1 of the Civil Rights Act of 1866, 42 U.S.C. § 1981, which prohibits discrimination in the making and enforcement of contracts, if the shareholder has no rights under the contract that he claims the defendant’s discrimination impaired. In this case, the plaintiff was the president and sole shareholder of a corporation that entered into a set of contracts with the defendant for the construction of four restaurants. The plaintiff sued, claiming violation of Section 1981, when the defendant terminated these contracts allegedly because the plaintiff is African American. In an opinion authored by Justice Scalia, the Supreme Court today held, based on the language of Section 1981, that a claimant can sue only for discrimination that impairs a contractual relationship if the claimant actually has rights under the contract at issue. In this case, the Court indicated, the plaintiff has no claim because the shareholder of a corporation has no rights and is exposed to no liability under a corporation’s contracts. This case is of interest to any business that forms contractual relationships because it limits the class of plaintiffs who can claim racial discrimination in the making and enforcement of contracts.

Decision Below: 107 Fed. App. 18 (9th Cir. 2004)

 

Olivo v. ExxonMobil Corp.   (New Jersey Supreme Court)

Liability for second-hand exposure

The NAM joined with six other groups in an amicus brief 12/12/05 urging the New Jersey Supreme Court to reject a theory of liability that would hold a company liable for second-hand exposure to a hazard in the workplace. The court, however, ruled 4/24/06 that the company owed a duty to protect against foreseeable harm to an employee’s wife (who laundered his work clothes). The court sent the case back for further proceedings on the extent of the duty owed to the worker and whether the company had satisfied the duty. It also left open the possibility that the company could be exonerated if the hazard-incident-to-work exception applies.

The wife of a contractor allegedly was harmed by asbestos brought home by her husband from work.  Her husband worked as a union pipe welder at over fifty worksites during his 37-year career, sometimes being exposed to asbestos insulation and carrying it home on his clothing.  Sixteen years after his retirement, she was diagnosed with mesothelioma.  Her husband sued 30 companies over her illness.  Whether a landowner or employer is liable to third parties for second-hand exposure to hazardous substances brought home from work is an aggressive new position that plaintiffs are pressing in the courts.  Two state courts have recently refused to create this new liability.  Our brief highlighted the fact that liability to remote parties is a policy issue for the legislature, and that extending it in a case like this is not appropriate because of difficult questions relating to causation, control and limitless liability.

 

Sereboff v. Mid Atlantic Medical Services, Inc.   (U.S. Supreme Court)

Recovering health care expenses advanced to employees

The Supreme Court held 5/15/06 that section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), authorizes an action by a plan fiduciary against a beneficiary to recover specifically identified funds where the beneficiary has recovered for its injuries from a third party. According to the terms of the ERISA plan administered by Respondent, Mid Atlantic Medical Services, a plan beneficiary is required to reimburse Mid Atlantic for benefits paid by the plan if the beneficiary subsequently recovers from a third-party tortfeasor, as Petitioners, the Sereboffs, did. After Mid Atlantic had claimed a lien on the expected proceeds from the Sereboffs’ tort suit, it brought an action under section 502(a)(3) of ERISA to recover approximately $75,000 in medical expenses that it had paid on the Sereboffs’ behalf. The district court approved a stipulation by the parties creating a separate account to segregate the amount sought by Mid Atlantic from the remainder of the Sereboffs’ recovery. Rejecting the Sereboffs’ argument that Mid Atlantic’s claim was really a legal claim for damages, the Supreme Court held that Mid Atlantic’s claim was “equitable” within the meaning of section 502(a)(3) because Mid Atlantic “sought its recovery through a constructive trust or equitable lien on a specifically identified trust, not from the Sereboffs’ assets generally.” In so holding, the Court relied on precedent “from the days of the divided bench” to determine “those categories of relief that were typically available in equity.” This decision is important to any business that maintains an ERISA plan.

Decision Below: 407 F.3d 212 (4th Cir. 2005)

 


OSHA -- 2006



Secretary of Labor v. Cagle's Inc.   (OSHA Review Commission)

Chemical-specific training under HazComm standard

On 4/19/00, the NAM filed a brief urging the Secretary of Labor to hold that the Hazard Communication Standard, 29 C.F.R. § 1910.1200, does not require chemical-specific training. At present, the standard does not require that employers tell employees the name of each hazardous chemical, the hazard it poses and the precautions it requires. OSHA has now instructed its compliance officers that employers must make employees "specifically aware" which hazard category a chemical "falls within" -- which is chemical-specific training. That is an infeasible, if not impossible, burden to carry, for many of the Nation's workplaces contain hundreds or thousands of chemicals. Chemical-specific training is also of dubious worth because, as the Secretary's rulemakers have acknowledged, employees could not reliably recall the massive amount of chemical-specific information that would be required if the interpretation here were upheld. The standard makes clear that conveying chemical-specific information is the function of the material safety data sheet and the label.

The Review Commission ruled in September, 2006 that the hazard communication standard does not require employers to provide chemical-specific training. Instead, it allows them to provide chemical-specific training, but they can also satisfy the regulation by providing training about the categories of hazards present in a workplace, and where they are. Material safety data sheets are used to identify chemical-specific hazards.

 


Patents, Copyrights and Trademarks -- 2006



eBay Inc. v. MercExchange, L.L.C   (U.S. Supreme Court)

Injunctions for patent infringement

The Supreme Court unanimously held 5/15/06 that, for purposes of evaluating permanent injunctions in patent disputes, federal courts must apply the "traditional four-factor framework that governs the award of injunctive relief." To satisfy that test, a plaintiff must demonstrate: (1) that it has suffered an irreparable injury, (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships, a remedy in equity is warranted, and (4) that the public interest would not be disserved by a permanent injunction. The Federal Circuit had applied a "unique" rule favoring "permanent injunctions against patent infringement absent exceptional circumstances," in order to protect the statutory right to exclude others from making use of an invention. The Supreme Court reversed, explaining that "the Patent Act expressly provides that injunctions ‘may’ issue ‘in accordance with the principles of equity.’” The Court concluded that the Federal Circuit's "categorical grant" of injunctive relief cannot be squared with the language of the Patent Act explicitly adopting the traditional principles of equity. The Court analogized cases under the Patent Act to those arising under the Copyright Act, noting that "this Court has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed." This decision is significant to any business that holds a patent or is involved in patent litigation.

Decision Below: 401 F.3d 1323 (Fed. Cir. 2005)

 

Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc.   (U.S. Supreme Court)

Method patents

The Supreme Court 6/22/06 issued a per curiam order dismissing as improvidently granted a petition for certiorari that it previously had limited to the question “[w]hether a method patent . . . directing a party simply to ‘correlate’ test results can validly claim a monopoly over a basic scientific relationship . . . such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.” The method patent at issue claims a process for helping to diagnose vitamin deficiencies. Claim 13 of the patent seeks protection for a method comprising the “assaying [of] a body fluid for an elevated level of total homocysteine” and “correlating an elevated level of total homocysteine . . . with a [vitamin] deficiency.” While the summary order does not explain why the Court dismissed certiorari, Justice Breyer’s dissent (joined by Justices Stevens and Souter) notes two reasons why the Court may have chosen not to resolve the question on the merits. First, “[t]here is a technical procedural reason for not doing so, namely, that LabCorp did not refer in the lower courts to § 101 of the Patent Act, which sets forth subject matter that is patentable, and within the bounds of which the ‘laws of nature’ principle most comfortably fits.” Second, “[t]here is also a practical reason for not doing so, namely, that we might benefit from the views of the Federal Circuit, which did not directly consider the question.”

Decision Below: 370 F.3d 1354 (Fed. Cir. 2004)

 


Preemption -- 2006



Cingular Wireless, LLC v. Mendoza   (U.S. Supreme Court)

Arbitration of consumer disputes

The NAM and 5 other business groups filed an amicus brief 5/5/06 supporting Cingular’s appeal of an adverse decision from a California court involving arbitration of cell phone contract disputes.  The issue on appeal was whether the Federal Arbitration Act (FAA) preempts two state rules that (1) refuse to recognize arbitration provisions that prohibit resolution of disputes by class action, and (2) refuse to allow arbitration of claims for “public injunctive relief.”  On June 5, 2006, the Court declined to hear the appeal.

The lower court decision means that, for consumer products, manufacturers will not be able to avoid class actions and “public injunction” actions through arbitration clauses.  Cingular bent over backwards to provide consumers with an inexpensive way to resolve problems with their wireless phones through arbitration, yet the plaintiffs insisted on ignoring the contract and using the expensive and oppressive class action vehicle instead.  The lower court ruled that consumer contracts with such an arbitration clause are unconscionable.  This decision benefits no one but class action lawyers, while harming consumers by reducing their access to low-cost resolution of disputes.

The case raised an important question whether the FAA preempts this restrictive California interpretation.  Most preemption cases involve discrete interpretations of statutes that affect one sector of the economy, but the FAA applies across-the-board to any industry that wants to include arbitration in its contracts.  While this case arises in the context of a cell phone dispute, the principle will apply to virtually any consumer product sold in California (home to 1/8 of the U.S. population) with a contract or warranty that includes arbitration.

We have long supported the ability of manufacturers to use the FAA to resolve disputes.  We also support the validity of contractual obligations and remedies.  Joining in the brief were The American Bankers Association, the American Financial Services Association, CTIA – The Wireless Association, the National Cable & Telecommunications Association, and the United States Telecom Association.

 

Merrill Lynch v. Dabit   (U.S. Supreme Court)

Preemption of securities class actions under state law

The Supreme Court held 3/21/06 that a state-law class action may be pre-empted by the Securities Litigation Uniform Standards Act of 1998 (SLUSA) regardless of whether the plaintiff has a private remedy under federal law. The SLUSA expressly preempts “covered class action[s] based upon [state law] … by any private party alleging … a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” The Court previously had held that federal law provides a private remedy only for plaintiffs who were induced by the fraud to purchase or sell securities; others, including those who were induced to hold their securities, have no private right of action under federal law. Notwithstanding this limitation on a private right of action, the Court and the Securities and Exchange Commission previously had given a broad interpretation to “in connection with” language found in Section 10(b) of the 1934 Securities Exchange Act and in the SEC’s Rule 10b-5. The Court reasoned that Congress, in importing the “in connection with” language into the SLUSA’s core pre-emption provision, must have been aware of this broad interpretation. Thus, the misconduct alleged in a state-law class action may be fraud “in connection with the purchase or sale of a covered security,” and thus pre-empted by SLUSA, regardless of the identity of the plaintiffs. This decision is important to any business that may be involved in securities fraud litigation.

Decision Below: 395 F.3d 25 (2d Cir. 2005)

 

Petition for Declaratory Ruling on State Fax Laws   (FCC)

Exclusive federal jurisdiction over interstate faxes

The NAM is part of the Fax Ban Coalition, which filed a petition on 11/7/05 with the FCC for a declaratory ruling that the Commission has exclusive jurisdiction over interstate fax communications and that a California law regulating interstate faxes is preempted.

The federal Junk Fax Prevention Act of 2005 does not expressly preempt state fax laws, and some states have different requirements that conflict with it. California recently enacted a law that prohibits any unsolicited advertisements by fax without prior express permission from the recipient. The California law applies to all faxes sent to or from California, and is effective January 1, 2006. The California law does not recognize the "established business relationship" exemption of the federal law, but does provide some exemptions for certain nonprofit organizations. In addition to the petition at the FCC, business groups are also challenging this law in federal district court in California.

On 2/27/06, a federal district court struck down most of the California fax advertisement law, holding that it was preempted by the Federal Communications Act of 1934 to the extent it would have regulated interstate faxes.

On 4/6/06, the Federal Communications Commission announced new rules for unsolicited commercial fax advertisements, under which it adopted proposals made by the Fax Ban Coalition. The new rules implement the JFPA, which allows organizations to send faxes to those recipients with whom they have established business relationships, but requires senders to permit recipients to opt out of receiving future messages.

 


Product Liability -- 2006



County of Santa Clara v. Atlantic Richfield Co.   (California Supreme Court)

Public nuisance

The NAM joined with the American Chemistry Council, the Chamber of Commerce and the California Manufacturers and Technology Ass’n in an amicus letter 4/18/06 urging the California Supreme Court to review a lower court ruling that allows public agencies to sue product manufacturers under a public nuisance claim for abatement based on anticipated future harm. This is a lead pigment case, and the lower court ruling threatens to erode well-established doctrines of product liability and allow plaintiffs to circumvent the statute of limitations. We argue that public nuisance claims greatly expand the potential liability of every manufacturer, even where the products satisfy governmental standards and the state-of-the-art at the time of use. On 6/21/06, the California Supreme Court declined to hear this appeal.

 

DaimlerChrysler Corp. v. Ferrante   (Georgia Supreme Court)

Constitutionality of Georgia medical criteria law

A plaintiff with mesothelioma sued several companies alleging their products were a contributing factor in his disease. While the case was pending, Georgia enacted an asbestos medical criteria statute that imposes a higher standard (“a substantial contributing factor”). The companies appealed a ruling that the new statute is unconstitutional with respect to pending cases because it changes the law retroactively. They argued that the new law is merely procedural, and that the plaintiff failed to show evidence of causation at all.

Our amicus brief described the asbestos litigation crisis that led Georgia to change its law and the need for courts to dismiss cases (without prejudice, meaning they can be filed later) where no injury has yet been discovered. We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the impact of these claims on bankruptcies, peripheral defendants and the Georgia economy.

On Nov. 20, 2006, the Georgia Supreme Court affirmed the lower court, ruling that the new statute affected the plaintiffs' substantive rights and cannot be applied retroactively.

 

Georgia-Pacific Corp. v. Mitchell   (Georgia Supreme Court)

Asbestos medical criteria law

The NAM joined with six business groups in an amicus brief 4/14/06 supporting Georgia’s new asbestos medical criteria law that requires plaintiffs to prove that asbestos was a substantial contributing factor in their claim for damages. The lower court ruled that the new statute is unconstitutional with respect to pending cases because it changes the law retroactively. Our amicus brief described the asbestos litigation crisis that led Georgia to change its law and the need for courts to dismiss cases where no injury has yet been discovered.  We focused on mass filings by non-sick individuals threatening the truly sick, unreliable medical screenings, and the impact of these claims on bankruptcies, peripheral defendants and the Georgia economy.

On Nov. 20, 2006, the Georgia Supreme Court affirmed the lower court, ruling that the new statute affected the plaintiffs' substantive rights and thus could not be applied retractively.

 

In re Administrative Order Regarding Proposed Asbestos-Related Disease Litigation   (Michigan Supreme Court)

Streamlining asbestos litigation

The NAM and other associations filed an amicus brief 8/20/03 urging the Michigan Supreme Court to adopt a statewide inactive docket for asbestos cases in which the plaintiffs do not yet meet medical criteria for asbestos injury.  The statute of limitations for such inactive cases would stop running until the plaintiffs manifested actual injuries.  The petition is designed to allow cases involving plaintiffs with actual injuries to proceed to trial or settlement, and for all others to wait until there is some proof of injury.  This position is strongly opposed by Michigan plaintiffs' attorneys.  The Court asked for comments on two alternatives: (1) creation of an inactive docket and (2) a 2-tier system where cases without actual injuries wait until all cases with injuries are resolved.

On May 23, 2006, the NAM joined with 15 other organizations to support the proposed court administrative order. The proposal relies on medical criteria developed by the American Bar Association Commission on Asbestos Litigation, and does not prevent the filing of any lawsuit or otherwise impair any substantive rights. Our memorandum supports the court’s power to issue an administrative order and asks that the many claims filed as a result of mass screenings where there is no evidence of symptoms or impairment be placed on an inactive docket. Some states do not even recognize the right to file suit without a physical impairment, but this proceeding does not raise any such substantive issues.

Our memorandum also asks that claims by both impaired and unimpaired plaintiffs not be joined in one lawsuit, and cases involving different plaintiffs not be consolidated together without consent or unless the plaintiffs are in the same household.

On 8/9/2006, the Court issued an order prohibiting the bundling of asbestos cases for settlement or trial. Since each case hinges on different facts, it is unfair to lump seriously ill plaintiffs together with other cases. Cases may be joined, however, solely for purposes of discovery.

 

Jefferds Corp. v. Morris   (U.S. Supreme Court)

Venue for out-of-state plaintiffs

This case involves a decision by the West Virginia Supreme Court striking down a law enacted by the state legislature intended to prevent non-resident plaintiffs from suing in state courts unless "all or a substantial part of the acts or omissions giving rise to the claim asserted occurred in this state." The law also allows non-residents to sue in West Virginia if they are unable to obtain jurisdiction in another state where the action occurred.

The NAM filed an amicus brief urging U.S. Supreme Court review of the decision. The case arose when a Virginia resident was injured in Virginia while operating a forklift. He sued Crown Equipment, an Ohio Corporation that designed and manufactured the forklift, and a West Virginia company that had distributed and serviced the forklift. The trial court dismissed the case on the grounds that no substantial part of the acts at issue occurred in West Virginia.

The NAM’s brief argues that the U.S. Supreme Court should decide whether West Virginia’s statute is a proper way to prevent forum shopping. Previous Supreme Court decisions have allowed states to give preference in providing access to the courts to residents over non-residents, to prevent overcrowding and financial strains on the court.

The NAM joined with the American Chemistry Council, American Insurance Association, Certainteed Corp., The Dow Chemical Co., Mobil Corp., Owens-Illinois, Inc. and U.S. Steel Corp. in the brief.

On December 11, 2006, the Supreme Court declined to review this case.

 

Mann v. Cooper Tire Co.   (New York Court of Appeals)

Trade secret protection for product ingredients and formulas

The NAM joined with the Rubber Manufacturers Association 7/3/06 in an amicus brief in an appellate court in New York to protect trade secrets from disclosure to the plaintiffs in a case involving a tire failure. The lower court had agreed with Cooper Tire that its ingredients and formulas for tire manufacturing are critical trade secrets, but an appeals court reversed. Our brief argues that this reversal fails to recognize that the plaintiff must show that the secrets are indispensable to his case.

Trial lawyers have been aggressively seeking tire formulas recently, and the formulas have been obtained through many years of research and development, the disclosure of which would provide a significant competitive benefit to foreign competitors. It could also lead to higher prices and lost jobs.

This case is an important bellwether for how New York will treat trade secrets in a variety of industries that face product liability claims.

The appeal was denied on September 7, 2006. An appeal to the New York Court of Appeals, that state's highest court, was denied in December. The NAM and the Rubber Manufacturers of America filed an amicus brief in support of the appeal on Sept. 14, 2006.

 

Pennsylvania Department of General Services v. United Mineral Products Co.   (Pennsylvania Supreme Court)

Total building replacement remedy for trace PCB levels

The NAM joined several other business organizations 5/9/03 to urge reversal of a ruling holding a duct board manufacturer liable for office building demolition and replacement costs after a fire released trace levels of PCBs.  We argued that absolute liability in this case improperly expands product liability law, since every product has some risk and a mere risk of harm is not necessarily a defect.   Manufacturers should not be insurers of their products.

On 5/25/06, the Pennsylvania Supreme Court reversed, ruling that (1) the full replacement cost of the building is not the proper measure of damages, but factors such as depreciation should be considered to prevent a windfall to the building owner, (2) the manufacturer should not be held strictly liable for unintended uses of the product, such as in a building fire, (3) they may be held liable for remediation of damages caused to property from an increased risk of future harm, and (4) full replacement cost damages were inappropriate when less expensive alternatives may have been available. This is an important Pennsylvania decision on the measure of damages to property when a product poses ongoing hazards.

 


Punitive Damages -- 2006



McGee v. AC and S, Inc.   (Louisiana Supreme Court)

Creating a special category of "hedonic" damages

The Louisiana Supreme Court ruled on 7/10/06 that hedonic damages may be awarded by a jury as a separate component of general damages. Hedonic damages are to compensate for the loss of enjoyment of life.  Most states include hedonic damages in general damages such as pain and suffering, to avoid double recoveries for the same type of loss.  It will now be critical for juries, at least in Louisiana, to be given a clear explanation to prevent them from confusing hedonic damages from pain and suffering. The court limited the availability of hedonic damages to the primary tort victim during his lifetime, but not to his wife, who can recover for loss of consortium, service and society.  Hedonic damages are not available in wrongful death actions.

The NAM joined with 11 other associations and companies in an amicus brief 8/11/05 urging the Louisiana Supreme Court not to create a special category of hedonic damages outside the normal general damages structure. We argued that separately itemizing hedonic damages, which are awarded for a loss of enjoyment of life, on a jury form would threaten to allow double damage recoveries. If the jury form includes a separate line for hedonic damages, juries might award them in addition to general damages, which are also on the form, even though hedonic damages are a subset of general damages. This would create a windfall for plaintiffs and upset settled expectations for companies that are doing business in Louisiana.

 


RICO Act -- 2006



Anza v. Ideal Steel Supply Corp.   (U.S. Supreme Court)

Proximate cause required for RICO claims.

The Supreme Court clarified 6/5/06 the proximate cause requirement of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, in the context of a claim between two competing businesses. The Court held that the plaintiff’s loss of customers was not proximately caused by the defendant’s alleged fraud—a failure to collect and remit sales tax owed to New York State, which enabled the defendant to lower prices and take the plaintiff’s customers. First, the Court stated that the direct victim of the fraud was New York, not the plaintiff. Second, the harm that the plaintiff suffered was caused by different acts (lower prices) than the acts that constituted the RICO violation (tax fraud). Third, the Court reasoned that it would be difficult to determine whether the tax fraud allowed the defendant to lower prices, or even that the defendant’s lower prices caused the plaintiff’s business losses. Overall, the Court determined that the alleged harm was too attenuated from the racketeering activity to allow a civil action. Justices Thomas and Breyer disagreed with the Court’s conclusion that proximate cause was not sufficiently alleged, but Justice Breyer concluded that the plaintiff’s claims were insufficient on other grounds. This decision is significant to all businesses as it clarifies the limits of an increasingly common cause of action among business competitors.

 

Mohawk Industries, Inc. v. Williams   (U.S. Supreme Court)

Definition of "enterprise" in RICO

On 6/5/06, the Supreme Court, in a one-paragraph order, dismissed as improvidently granted a writ of certiorari limited to the question of whether a corporation acting with its own agents can be an “enterprise” for purposes of the RICO statute. The Court sent the case back to the Eleventh Circuit for reconsideration in light of the same day’s decision in Anza.

In originally granting certiorari in Mohawk, the Court had declined to review a proximate causation issue similar to the question presented in Anza. The causation issue is critical, since the claim in Mohawk was by employees who alleged that their wages were depressed by the alleged hiring of illegal aliens. Lower courts may determine that wages are affected by too many factors to identify one as sufficient to show causation of injury.

On remand, the 11th Circuit ruled on 9/27/2006, that "it has long been recognized that hiring illegal workers on substandard wage terms depresses the wage scales of legal workers," and allowed the case to proceed to trial. The NAM filed an amicus brief in this case on the enterprise issue. There is a circuit split over whether a corporation conducts or participates in the affairs of a distinct “enterprise,” within the meaning of the RICO statute, when the only members of the alleged enterprise are the corporation itself and third parties paid by the corporation to conduct business on its behalf.  The Supreme Court has previously established that a RICO defendant must have participated in or conducted the affairs of a distinct enterprise, and not simply the defendant’s own affairs, in order to be found liable under RICO.  The Eleventh Circuit held that a corporation and third-party employment agencies and other recruiters are “distinct entities” with a “common purpose,” and can qualify as an “enterprise” under RICO.  The Eleventh Circuit’s definition of a RICO enterprise accords with that of the Sixth Circuit and conflicts with that of the Second, Third, and Seventh Circuits, which have held instead that third parties that simply perform corporate tasks are, like corporate employees, indistinct from the corporation for RICO purposes; to hold otherwise would discourage corporations from outsourcing corporate functions to third parties.  This issue continues to be important to every business that pays third parties to perform corporate functions.

Decision Below: 411 F.3d 1252 (11th Cir. 2005).

 


Taxation and State Taxation -- 2006



DaimlerChrysler Corp. v. Cuno   (U.S. Supreme Court)

Constitutionality of state investment tax credits

The Supreme Court 5/15/06 held that state and municipal taxpayers do not have standing to challenge under the dormant Commerce Clause an Ohio law providing an investment tax credit to businesses installing new equipment in the state. In an opinion by Chief Justice Roberts, the Supreme Court reasoned that a state or municipal taxpayer’s interest in state revenues is too remote and uncertain to establish the injury required for standing. The Court also rejected the notion of “ancillary standing” under Article III, and instead held that standing must be determined independently for each claim. Last, the Court concluded that the exception for state taxpayer standing under the Establishment Clause should not be extended to the Commerce Clause. This ruling is important to any business benefiting from investment tax credits or similar economic development legislation throughout the country.

The NAM, the Chamber and Council on State Taxation filed an amicus brief 7/20/05 urging the U.S. Supreme Court to review this case.  The plaintiffs, financed by Ralph Nader, are using this decision as a test case to challenge state pro-business tax incentives across the country.  The NAM’s brief highlighted the importance of the case by pointing out the extent to which companies and local jurisdictions rely on tax incentives.  We also argued that the Sixth Circuit’s standard that prohibits state laws that foreclose “tax-neutral decision making” is unworkable and improper.  Nearly every business decision and investment involves tax consequences that influence the decision.  The NAM also filed a brief in the Sixth Circuit.

On 12/5/05, the NAM and the Council on State Taxation filed a brief on the merits, arguing that the proper standard for determining whether a state tax incentive violated the Commerce Clause is whether it penalizes activities occurring in another state. 

Decision Below: 386 F.3d 738 (6th Cir. 2004).

 

Jones v. Flowers   (U.S. Supreme Court)

Adequacy of notice of tax sale

The Supreme Court held 4/26/06 that when a notice of tax sale is returned to the government as undeliverable, due process requires the government to take additional reasonable steps to provide notice before taking the property. Arkansas’s notice procedures were constitutionally deficient because they provided for certified mailings, but provided no additional procedures when that certified mailing is undeliverable. The Court explained that after learning that notice had not reached the owner, the tax commissioner could have resent the notice via regular mail, posted a notice on the front door, or addressed the certified letter to “occupant.” The government is not, however, required to search tax rolls or phone books to determine the taxpayer’s new address. Justice Thomas, joined by Justices Kennedy and Scalia, dissented, concluding that actual notice has never been required by the Court’s decisions, and that reasonableness is determined at the time the notice is sent. The Court’s decision will be of interest to any business that could be affected by notice requirements in forfeiture or other government proceedings.

Decision Below: 359 Ark. 443, __S.W.3d __ (2004).

 

McLane Western, Inc. v. Department of Revenue   (U.S. Supreme Court)

Discriminatory state taxes

The NAM on 6/12/06 joined with the Council on State Taxation and the National Association of Wholesaler-Distributors to urge the Supreme Court to review an adverse decision from a Colorado appeals court. The court endorsed a state tax provision that discriminates against out-of-state distributors and manufacturers. It involves an excise tax on the sale or distribution of tobacco products in Colorado, and the tax is imposed once, upon the occurrence of the first taxable event in the state. Products that are distributed initially out-of-state will incur a higher tax than those distributed entirely within the state, since the increasing value of the product as it passes through distributors within the state will not affect the tax already paid. Our brief sounds the alarm that if this system is allowed to stand, states will have a new way to impose discriminatory taxes on out-of-state manufacturers and distributors.

On October 2, 2006, the Supreme Court declined to review this case.

 

U.S. Smokeless Tobacco Brands Inc. v. Washington   (Washington State Supreme Court)

Tax valuation of products exchanged by related entities

The NAM joined with the Council on State Taxation (COST) in an amicus brief 12/2/05 urging the Washington Supreme Court to review a lower court tax decision that undermines the fair and uniform application of accepted valuation principles. The case involves the how to value for excise tax purposes goods that are exchanged between related entities. The company presented evidence that the fair market value of the goods is the correct measure of value, and presented evidence of that value using standard arm’s-length valuation procedures under Section 482 of the Internal Revenue Code. The Washington court rejected that evidence as inadequate, without saying why or suggesting an alternative valuation method. Our brief argues for a uniform standard for testing affiliate transactions.

The Washington Supreme Court granted review and held arguments in the fall of 2006. The case was settled without opinion at the end of the year.

 


ADEA -- 2005



Smith v. City of Jackson   (U.S. Supreme Court)

Age discrimination includes disparate impact claims

The Supreme Court held 3/30/05 that the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. §§ 621-634, authorizes recovery on a so-called “disparate impact” theory, but that the scope of disparate impact liability under the ADEA is narrower than under Title VII of the Civil Rights Act of 1964. Four Justices interpreted the ADEA to authorize disparate impact claims, and Justice Scalia concluded that this interpretation has been adopted by the EEOC and is entitled to deference. Three Justices concluded that disparate impact claims are not cognizable under the ADEA, and the Chief Justice did not participate. In holding that the standards under the ADEA and Title VII are different, the Court concluded that its prior holding in Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989), which narrowly construed employers’ exposure to liability on a disparate impact theory under Title VII, applies to ADEA claims even though Title VII has been amended to supersede Wards Cove. The Court also emphasized the ADEA’s express provision that it is not unlawful for an employer to make a decision based on “reasonable factors other than age.” The Court explained that this reasonableness test does not include a “business necessity” test, which asks whether there are other ways for the employer to achieve its goals. In her concurring opinion, Justice O’Connor agreed that disparate impact claims, if allowed under the ADEA, are strictly limited to circumstances where the challenged employment practice is not rationally related to some legitimate business objective. Applying the ADEA standards to the case before it, the Court determined that the employee petitioners did not have an ADEA disparate impact claim against the respondent, the City of Jackson, which was represented by Jones Day. This case is important to any employer that may be sued under the ADEA.

Decision Below: 351 F.3d 153 (5th Cir. 2003).

 


Administrative Procedure -- 2005



National Association of Manufacturers v. FCC   (D.C. Court of Appeals)

Facsimile Advertisement Rules Petition for Reconsideration

The NAM and 7 other business associations petitioned the Federal Communications Commission 8/25/03 to reconsider the new "do not fax" rules. Business objections helped convince the FCC to begin a limited reconsideration of the review on 8/18, and to extend the effective date of the fax provisions until Jan. 1, 2005. Our petition pointed out that affected parties were not given adequate notice of the proposed rule change, that the record was inadequate to support the change, that there would be dramatic effects on our associations and our members, that the rule did not properly address potential costs as required by the Regulatory Flexibility Act of 1980, that the FCC exceeded its statutory authority to require written consent to send faxes and that the rule violated First Amendment free speech rights. The FCC failed to act on this petition, but passage of the Junk Fax Prevention Act of 2005 solved many of the compliance problems identified in our petition.

 

Petition for Reconsideration of Facsimile Advertisement Rules   (FCC)

"Do not fax" rules

The NAM and 7 other business associations petitioned the Federal Communications Commission 8/25/03 to reconsider the new "do not fax" rules. Business objections helped convince the FCC to begin a limited reconsideration of the review on 8/18, and to extend the effective date of the fax provisions until Jan. 1, 2005. Our petition pointed out that affected parties were not given adequate notice of the proposed rule change, that the record was inadequate to support the change, that there would be dramatic effects on our associations and our members, that the rule did not properly address potential costs as required by the Regulatory Flexibility Act of 1980, that the FCC exceeded its statutory authority to require written consent to send faxes and that the rule violated First Amendment free speech rights. Petition. The FCC failed to act on this petition, but passage of the Junk Fax Prevention Act of 2005 solved many of the compliance problems identified in our petition.

 

United States v. Olson   (U.S. Supreme Court)

Federal Tort Claims Act, liability of government for mine inspection

The Supreme Court held 11/8/05 that the Federal Tort Claims Act’s authorization of private tort actions against the United States “under circumstances where the United States, if a private person, would be liable to the claimant,” 28 U.S.C. § 1346(b)(1) (emphasis added), does not extend to situations in which a state or municipal entity would instead be liable. The Court rejected the Ninth Circuit’s conclusion to the contrary in cases where “unique governmental functions” such as mine inspections are at issue. Because the Ninth Circuit also erred in concluding that no private-sector analogies exist for mine inspections, the Court remanded the case for consideration of whether under state law a private person in like circumstances would be liable. This case is important to all businesses subject to federal agencies’ inspections similar to those at issue here.

Decision Below: 362 F.3d 1236 (9th Cir. 2004)

 


Attorney's Fees -- 2005



Martin v. Franklin Capital Corp.   (U.S. Supreme Court)

Attorney’s fees

The Supreme Court, in the first opinion authored by Chief Justice Roberts since he joined the Court, held 12/7/05 that when a federal district court remands a case to state court despite the defendant’s objectively reasonable basis for seeking removal, the district court should not award attorney’s fees absent unusual circumstances. Under 28 U.S.C. § 1441, a defendant may generally remove a civil case commenced in state court to federal district court if the case could have been brought in federal court originally. But if the federal court subsequently determines that it lacks jurisdiction, the case must be remanded, and the remand order “may require payment” of attorney’s fees “incurred as a result of the removal.” 28 U.S.C. § 1447(c). In determining when attorney’s fees should be awarded under this provision, the Supreme Court stressed Congress’ twin desires to (1) afford defendants a right to remove when the statutory criteria are satisfied; while (2) deterring improper removals sought merely to delay litigation and impose costs on the plaintiff. Thus, the Court held that, absent unusual circumstances—such as a plaintiff’s delay in seeking remand or failure to disclose facts necessary to determine jurisdiction—a district court may award attorney’s fees under § 1447(c) only where the removing party had no objectively reasonable basis for seeking removal. This case is important to businesses involved in litigation that may be subject to removal.

Decision Below: 393 F.3d 1143 (10th Cir. 2004)

 


Communications -- 2005



FCC v. Brand X Internet Services   (U.S. Supreme Court)

Deference to agency determinations

The Supreme Court decided 6/27/05 that the Federal Communications Commission acted lawfully when it classified cable modem service as an “information service,” subject to minimal regulation under the Communications Act of 1934, and not also as a “telecommunications service.” In the decision under review, the Ninth Circuit declined to defer to the FCC’s interpretation of the Act, because that interpretation conflicted with circuit precedent. The Supreme Court held, however, that a court’s prior interpretation of a statute does not trump an agency construction otherwise entitled to Chevron deference. The only exception is when the earlier court decision holds that a statute is clear and no room is left for agency discretion. Here, the FCC’s interpretation of “telecommunications service” as not encompassing cable broadband is entitled to deference, because the Act is ambiguous as to what it means to “offer” telecommunications and the FCC made a reasonable policy choice. This decision is important to any business regulated under the Communications Act, and to all businesses affected by agency interpretations of statutes.

Decision Below: 345 F.3d 1120 (9th Cir. 2004). Case # 04-277, National Cable & Telecom Association v. Brand X Internet Services.

 

National Cable & Telecom Association v. Brand X Internet Services   (U.S. Supreme Court)

Deference to agency determinations

The Supreme Court decided 6/27/05 that the Federal Communications Commission acted lawfully when it classified cable modem service as an “information service,” subject to minimal regulation under the Communications Act of 1934, and not also as a “telecommunications service.” In the decision under review, the Ninth Circuit declined to defer to the FCC’s interpretation of the Act, because that interpretation conflicted with circuit precedent. The Supreme Court held, however, that a court’s prior interpretation of a statute does not trump an agency construction otherwise entitled to Chevron deference. The only exception is when the earlier court decision holds that a statute is clear and no room is left for agency discretion. Here, the FCC’s interpretation of “telecommunications service” as not encompassing cable broadband is entitled to deference, because the Act is ambiguous as to what it means to “offer” telecommunications and the FCC made a reasonable policy choice. This decision is important to any business regulated under the Communications Act, and to all businesses affected by agency interpretations of statutes.

Decision Below: 345 F.3d 1120 (9th Cir. 2004). See also, Case # 04-281, FCC v. Brand X Internet Services

 


Criminal Liability -- 2005



Arthur Andersen LLP v. United States   (U.S. Supreme Court)

Obstruction of a proceeding through use of document retention policy

The Supreme Court 5/31/05 held that 18 U.S.C. § 1512(b)(2)(A) and (B), an obstruction of justice statute, is not violated unless the defendant is conscious of his wrongdoing and has in mind a “particular official proceeding” that his conduct will obstruct. The Court held that flawed instructions were given to the jury that convicted Arthur Anderson of violating the statute, which prohibits “knowingly . . . corruptly persuad[ing]” another person “with intent to . . . cause” that person to “withhold” documents from, or “alter” documents for use in, an “official proceeding.” The Court noted that it is “not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances.” Focusing on the statute’s “knowingly . . . corruptly persuades” language, the Court held that the government was required to prove that Andersen was conscious of its wrongdoing. The Court rejected jury instructions that excluded a need to show “dishonesty” and that permitted a conviction if Andersen intended simply to “impede” the government’s fact-finding ability by enforcing a document retention policy. Finally, the Court held that the district court erred in leading the jury to believe that a conviction did not require a finding of any nexus between the “persuasion” to destroy documents and any particular proceeding. The Court reasoned that a “knowingly . . . corrup[t] persuade[r]” cannot be someone who persuades another to shred documents under a document retention policy without having in mind any particular official proceeding in which those documents might be material. This case is important to any business with a document retention policy that may face a government investigation and any business that must comply with the document retention requirements imposed by federal law following enactment of the Sarbanes-Oxley Act. Decision Below: 374 F.3d 281 (5th Cir. 2004).

 

Pasquantino v. United States   (U.S. Supreme Court)

Use of fraud statutes to enforce foreign tax claims

The Supreme Court held 4/26/05 that a scheme to defraud a foreign government of tax revenue violates the federal wire fraud statute, 18 U.S.C. § 1343. Petitioners, who were based in New York, carried out a scheme to avoid paying Canadian excise taxes by placing telephone orders for liquor with discount package stores in Maryland and then, after receiving the liquor, smuggling it into Canada. The Court held that petitioners' conduct fell within literal terms of the wire fraud statute, which prohibits the use of interstate wires to carry out "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." First, Canada's right to the uncollected excise taxes, the Court concluded, was property, and petitioners' scheme was aimed at depriving Canada of this property. Second, the petitioners' failure to declare the liquor concealed in their cars was plainly a scheme designed to defraud the Canadian customs officials through misrepresentations. The Court also rejected the petitioners' alternative argument that the common-law "revenue rule" barred this prosecution. The "revenue rule" precludes one nation from enforcing the collection of tax obligations of other nations. The Court held that the present case did not fall within the ambit of the "revenue rule," because petitioners were not prosecuted to recover a foreign tax liability. Rather, this was a criminal prosecution brought by the United States in its sovereign capacity to punish domestic criminal conduct. This decision is important to any business that may be subject to foreign tax laws.

The NAM joined with the National Association of Criminal Defense Lawyers in two amicus briefs opposing the outcome. We argued that the mail and wire fraud statutes protect against crimes against property that is already in the hands of the victim, and that they should not be expanded to apply to the right of a foreign government to collect allegedly accrued but unassessed and uncollected taxes. This is another attempt by federal prosecutors to expand criminal law in the business context. Brief in support of petition (2/27/14); brief on the merits (6/29/04).

Decision Below: 336 F.3d 321 (4th Cir. 2003)

 


Environmental -- 2005



Aviall Services, Inc. v. Cooper Industries, Inc.   (U.S. Supreme Court)

Voluntary cleanup

The Supreme Court held 12/13/04 that a private party who has not been sued under Section 106 or 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. §§ 9606 or 9607, may not obtain contribution under CERCLA Section 113(f)(1), 42 U.S.C. § 9613(f)(1), to recover amounts spent voluntarily remediating contaminated properties. The Court reasoned that Section 113(f)(1) limits a private party to seeking contribution “during or following any civil action” and that reading this provision to allow for contribution in the absence of a civil action to determine liability would render this limitation superfluous. Justice Ginsburg, joined by Justice Stevens, dissented on the ground that Section 107, which provides that persons responsible for cleanup costs under CERCLA “shall be liable for . . . necessary costs of response incurred by any other person,” should be read to create an implied right of action for contribution which is not limited by Section 113(f)(1) .

This case is important for any business that owns properties containing hazardous substances, or that has sold properties in the past to companies that might voluntarily undertake remediation.

Decision below: 312 F.3d 677 (5th Cir. 2002) (en banc).

 

Bates v. Dow Agrosciences LLC   (U.S. Supreme Court)

FIFRA preemption

The Supreme Court 4/27/05 clarified the extent of federal preemption stemming from the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. § 136. FIFRA, which regulates the use, sale and labeling of pesticides, provides that States "shall not impose or continue in effect any requirements for labeling of packaging in addition to or different from those required under this [Act]." The Court held that "[r]ules that require manufacturers to design reasonably safe products, to use due care in conducting appropriate testing of their products, to market products free of manufacturing defects, and to honor their express warranties or other contractual commitments plainly do not qualify as requirements for "labeling or packaging," even if those rules might induce manufacturers to alter product lables. Thus, FIFRA does not pre-empt a group of Texas peanut farmers' state law claims against a pesticide manufacturer for defective design, defective manufacture, negligent testing, and breach of express warranty. In contrast, the Court also concluded that "petitioners' fraud and negligent failure-to-warn claims are premised on common-law rules that qualify as "requirements for labeling or packaging." FIFRA therefore pre-empts those claims unless the corresponding requirements are equivalent to, and fully consistent with, FIFRA's labeling standards - a question to be resolved on remand. This decision is important to any business that is subject to FIFRA.

Decision Below: 332 F.3d 323 (5th Cir. 2003).

 

Massachusetts v. EPA   (D.C. Circuit)

EPA upheld in not regulating greenhouse gases as a pollutant

These cases were filed in 2003 by 12 states and various environmental and other organizations to force the Environmental Protection Agency to regulate greenhouse gases (carbon dioxide, methane, nitrous oxide and hydrofluorocarbons) from new motor vehicles as pollutants. The EPA and 10 other states opposed the suits, and the CO2 Litigation Group, of which the NAM is a member, intervened. On 7/15/05, the D.C. Circuit issued a splintered decision allowing the EPA to continue to decline to regulate greenhouse gases. Judge Randolph ruled that the EPA had discretion and a scientific justification not to regulate greenhouse gases, and, although Judge Sentelle refused to reach this issue, he ruled that the petitioners did not have standing to bring the case. Thus, the EPA’s decision stands. Judge Tatel dissented, arguing that the EPA does have the authority and has failed to give an adequate explanation for not regulating greenhouse gases. Whether the EPA is mandated by statute to regulate greenhouse gases is unresolved. It has declined to do so at this point. The NAM does not believe the EPA has this authority, nor is there sufficient evidence that emissions of greenhouse gases from domestic automobiles endanger public health or welfare.

 

New York v. EPA   (D.C. Circuit)

New Source Review regulations

The NAM is one member of a coalition of associations known as the NSR Manufacturers Roundtable which filed a motion 1/15/03 to intervene in a suit brought by NY, CT, ME, MD, MA, NH, NJ, RI and VT against the EPA's final regulation governing the procedures for companies to install stringent emission controls at their facilities under the Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR) provisions of the Clean Air Act. These states challenged the legality of EPA's rule, and the NSR Manufacturers Roundtable intervened to insure that the court considers the views of manufacturers and the effects of the rule on industry. The Roundtable includes the Alliance of Automobile Mfrs., the American Chemistry Council, the American Forest & Paper Assn., the American Iron and Steel Institute, American Petroleum Institute, the Council of Industrial Boiler Owners, National Mining Assn., the National Petrochemical & Refiners Assn., the Portland Cement Assn. and the NAM.

The NSR Manufacturers Roundtable’s first brief (filed 5/11/04) challenged EPA language in the rule’s preamble and argued that the statutory language, as well as the history of its enforcement, makes clear that the first step of the analysis of whether there is a change to an existing emissions unit at a stationary source is the requirement that the emitting capacity of the existing unit must be increased (i.e., that “new pollution” be created) by the change.

An 8/30/04 brief supported the EPA’s methodology for determining whether annual emissions have significantly increased.

The D.C. Circuit issued a mixed ruling on 6/24/05. It upheld some of the EPA’s decisions, vacated others, and rejected as not ripe industry’s challenge to the rule’s preamble language on the “actual-to-potential” methodology. The court’s main rulings are:

  • EPA may use past emissions and projected future actual emissions, rather than potential emissions, in measuring emissions increases;
  • EPA may use a 10-year lookback period in selecting the 2-year baseline period for measuring past actual emissions from sources other than utilities;
  • EPA may use a 5-year lookback period in certain circumstances for electric utilities;
  • EPA may abandon a provision authorizing states to use source-specific allowable emissions in measuring baseline emissions;
  • EPA may exclude increases due to unrelated demand growth from the measurement of projected future actual emissions;
  • EPA may implement the Plantwide Applicability Limitations (“PAL”) program;
  • EPA may not use the Clean Unit applicability test, which measures emissions increases by looking to whether “emissions limitations” have changed;
  • EPA may not exempt certain pollution control projects that decrease emissions of some pollutants but that cause collateral increases of others;
  • EPA may not waive recordkeeping requirements for sources making changes. EPA will have to justify or revise this waiver.
  •  

    United States v. Duke Energy Corp.   (4th Circuit)

    Permits for power plant repairs

    This case is about whether permits are required when power plant repairs are made to allow boilers to continue in service and operate for more hours than before the renovations. The EPA argued that these repairs were modifications that allowed the boilers to produce more emissions (albeit at the same rate per hour) than authorized by existing permits. Duke Energy argued that the definition of a modification that would necessitate a new permit includes only changes that increase the hourly emission rate, since that is the definition the EPA uses under its New Source Performance Standards (NSPS). The Fourth Circuit ruled 6/15/05 that the EPA cannot interpret the word “modification” two different ways when the statutes in which the word appears define it identically. Consequently, since the definition of modification under the NSPS only applies to changes that increase the hourly emission rate, no permit is required.

    This is a significant victory for any business that generates emissions regulated by the Clean Air Act. American industry would grind to a halt if it were required to scrutinize for potential permits thousands of renovation activities each year. For instance, if the activity is a necessary repair or replacement project, the result could be an extended shutdown of the facility until it could be undertaken.

    The NAM and other business organizations filed a brief 10/15/04 supporting this result. The joint brief argued that New Source Review permit requirements are only triggered when facilities are physically changed or modified to create an increase in emissions over the level approved in the original permit process.

    This case on appeal to the Supreme Court is Environmental Defense v. Duke Energy Corp.

     

    United States v. E.I. DuPont de Nemours and Co.   (3rd Circuit)

    EPA’s power to recover oversight costs at Superfund sites (en banc)

    The Environmental Protection Agency charges companies for remedial planning and remedial action monitoring costs that the EPA incurs, either themselves or through government contractors, while monitoring clean-up activities at Superfund hazardous waste sites. Since its 1993 Rohm and Haas decision, the U.S. Court of Appeals for the Third Circuit (covering Pennsylvania, New Jersey and Delaware) has not allowed such cost shifting from the EPA to manufacturers. That favorable ruling has now been overruled. It held that Congress conferred power on the EPA with an intelligible principle governing the exercise of such power, namely, that the remedial action be “not inconsistent” with the National Contingency Plan, which sets forth methods and criteria for determining the appropriate extent of removal, remedy and other measures. Other provisions also guide and constrain the EPA in its ability to impose oversight costs on responsible parties.

    The NAM joined with the American Chemistry Council, the American Petroleum Institute, the Chamber of Commerce, the Corporate Environmental Enforcement Council, the National Petrochemical and Refiners Association and the Superfund Settlements Project in an amicus brief 7/13/05 in support of DuPont. We argued that Congress never intended for EPA to finance its oversight activities by assessing the costs against those whom it regulates. Such a scheme must be authorized by a “clear statement” from Congress, particularly to avoid the many serious problems with the administration of the program. Our brief provided a detailed look at the history of (1) EPA performing more oversight than necessary, (2) EPA relying too heavily on contractors, (3) EPA not managing its contractors effectively, (4) EPA not negotiating effectively with its contractors, (5) contractors charging for excessive support costs, (6) and contractors having incentives to operate inefficiently.

    In addition, we warned that (1) EPA’s poor documentation and billing practices further reduce accountability, (2) the money collected is placed into special accounts with little accountability to Congress, and (3) an adverse ruling in this case could allow the EPA to assess similar costs under the Clean Air Act and the Clean Water Act. The EPA has been able to reduce its program support costs on an aggregate basis recently.

     


    Expert Testimony -- 2005



    CSX Transportation, Inc. v. Miller   (Maryland Court of Appeals)

    Admissibility of expert testimony

    TThe NAM joined with Maryland Defense Counsel, Inc. supporting CSX's appeal concerning the admissibility of testimony by witnesses who claim to be experts. Our brief argues that Maryland courts should apply more stringent criteria than simply whether an expert's methods have gained "general acceptance." Rather, the more recent Maryland Rules of Evidence require that expert testimony be both relevant and reliable, and the Supreme Court's decision in Daubert provides guidance to help courts apply these criteria. The case involves whether witnesses may testify about whether an employee's arthritis was caused by his job. The court did not reach the issue and dismissed the appeal as improvidently granted.

     


    False Claims Act -- 2005



    Graham County Soil & Water Conservation District v. United States ex rel. Wilson   (U.S. Supreme Court)

    False Claims Act statute of limitations

    The Supreme Court held 6/20/05 that the six-year statute of limitations in the False Claims Act (FCA) does not govern civil actions for retaliation under the FCA. The False Claims Act creates a “qui tam” cause of action for a private person to sue, on the Government’s behalf, an entity for making false claims to the Government for payment. The FCA also provides a cause of action to a whistleblower who has been wrongfully discharged for bringing a qui tam action. Both the qui tam and the retaliatory discharge causes of action are codified at 31 U.S.C. § 3730, but the prohibition on making false claims to the government is set forth at 31 U.S.C. § 3729. The FCA’s limitations provision states in pertinent part that “[a] civil action under section 3730 may not be brought—(1) more than 6 years after the date on which the violation of section 3729 is committed.” 31 U.S.C. § 3731(b). The Court, in a 7-2 decision authored by Justice Thomas, reasoned that the FCA’s limitations provision was ambiguous as to whether it applies to retaliatory discharge actions, because the six-year period does not begin to run until a false claim is made and a retaliatory discharge plaintiff is not required to prove that a false claim was actually made. The Court ruled that the best way to resolve this ambiguity is to construe the reference to “section 3730” in the limitations provision to mean only false claims actions by the Government, § 3730(a), or a private individual, § 3730(b), but not to actions for retaliatory discharge, § 3730(h). The Court then held that retaliatory discharge claims under the FCA are governed by the most closely analogous state statute of limitations. In dissent, Justice Breyer, joined by Justice Ginsburg, argued that the FCA expressly sets forth the limitations period applicable to a “civil action under section 3730,” including a cause of action for retaliatory discharge, and that this period should be deemed triggered by any alleged or suspected violation of federal false claims law. This case is important to any business that is subject to suit under the False Claims Act.

     


    Free Speech -- 2005



    In re Hammond   (Texas Supreme Court)

    First Amendment protection for issue advocacy

    An unsuccessful candidate for election to the Texas state legislature sued the Texas Association of Business (TAB), alleging it violated state election laws when it distributed material about the candidates to voters prior to the 2002 election. A judge ordered TAB to answer the plaintiff's discovery questions, and TAB appealed. The NAM and 58 other organizations filed an amicus brief 5/19/04 supporting TAB, arguing that a state may not restrict free speech rights protected by the First Amendment except in clearly defined and limited circumstances, and the judge must find that TAB expressly advocated the election or defeat of a particular candidate before ordering discovery. Suits like this one by losing candidates against businesses that engage in issue advocacy threaten to cut off or restrict open debate of issues of public importance.

     

    Johanns v. Livestock Marketing Association   (U.S. Supreme Court)

    Statutory assessments for advertising

    The Supreme Court held 5/23/05 that the Beef Promotion and Research Act of 1985 does not violate the First Amendment by imposing a mandatory assessment on all sales and importation of cattle to fund promotional campaigns designed by a government-appointed board and approved by the government. Because the assessment funds the government’s own speech—and not private speech—it is not susceptible to a First Amendment compelled-subsidy challenge. Justice Scalia’s opinion for the Court reasoned that where the government “sets the overall message to be communicated and approves every word that is disseminated, it is not precluded from relying upon the government speech doctrine merely because it solicits assistance from non-governmental sources in developing specific messages.” This analysis, moreover, is unaffected by whether the funds for the promotions are raised by general taxes or through a targeted assessment. Because the issue was not presented by the facts of this case, the Court expressed no view on the constitutionality of a compelled-subsidy program that attributes the government speech to private actors. This case is important to businesses subject to government compelled-subsidy programs.

    Decision Below: 335 F.3d 711 (8th Cir. 2003).See also Case #03-1165, Nebraska Cattlemen, Inc. v. Livestock Marketing Association

     

    Nebraska Cattlemen, Inc. v. Livestock Marketing Association   (U.S. Supreme Court)

    Statutory assessments for advertising

    The Supreme Court held 5/23/05 that the Beef Promotion and Research Act of 1985 does not violate the First Amendment by imposing a mandatory assessment on all sales and importation of cattle to fund promotional campaigns designed by a government-appointed board and approved by the government. Because the assessment funds the government’s own speech—and not private speech—it is not susceptible to a First Amendment compelled-subsidy challenge. Justice Scalia’s opinion for the Court reasoned that where the government “sets the overall message to be communicated and approves every word that is disseminated, it is not precluded from relying upon the government speech doctrine merely because it solicits assistance from non-governmental sources in developing specific messages.” This analysis, moreover, is unaffected by whether the funds for the promotions are raised by general taxes or through a targeted assessment. Because the issue was not presented by the facts of this case, the Court expressed no view on the constitutionality of a compelled-subsidy program that attributes the government speech to private actors. This case is important to businesses subject to government compelled-subsidy programs.

    Decision Below: 335 F.3d 711 (8th Cir. 2003). See also Case #03-1164, Johanns v. Livestock Marketing Association

     


    Government Regulation -- 2005



    American Trucking Associations, Inc. v. Michigan Public Service Commission   (U.S. Supreme Court)

    $100 interstate truck fee

    The Supreme Court 6/20/05 held that a flat fee imposed by Michigan on trucks engaged in intrastate hauling does not unconstitutionally discriminate against interstate hauling. The American Trucking Associations had argued that the fee violates the dormant Commerce Clause because trucks engaged in interstate hauling generally engage in much less intrastate hauling—and, accordingly, bear a much higher burden per mile of intrastate hauling—than trucks devoted solely to intrastate hauling. The Supreme Court disagreed, noting that the flat fee applies equally “to all carriers that make domestic journeys,” and approving generally of “such neutral, locally-focused” fees and taxes. The Court emphasized the absence of record evidence showing that the fee significantly deters interstate trade. The Court also rejected the contention that Michigan’s fee structure violates the “internal consistency” test, which asks what the cumulative effect would be if “all States did the same.” It reasoned that even if an interstate carrier paid similar fees to every state where it also engaged in intrastate hauling, the dormant Commerce Clause would not be violated because the fees would be assessed as a consequence of intrastate activity. This decision is important to any business subject to regulatory fees or taxes on activity wholly within a given state.

    Decision Below: 673 N.W.2d 752 (Mich. 2003).

     

    Granholm v. Heald   (U.S. Supreme Court)

    Restricting interstate wine shipments

    The Supreme Court held 5/16/05 that two state laws that discriminate against out-of-state wineries violate the Commerce Clause and are neither authorized nor permitted by the Twenty-First Amendment. The Michigan and New York laws at issue allow in-state wineries to sell directly to consumers while requiring out-of-state wineries to distribute their wine through wholesalers - a requirement that, in many cases, has in practice foreclosed access to these States' domestic markets by small out-of-state wineries. State laws that "mandate differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter" are subject to a "virtually per se rule of invalidity," under which the law is unconstitutional absent "a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." The Court held that discrimination against out-of-state economic interests is not saved by the States' power to regulate the distribution of alcohol as granted by Section 2 of the Twenty-First Amendment. Section 2 was written "to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation and use[,] ... not to [grant] the authority to pass nonuniform laws in order to discriminate against out-of-state goods." This decision is important to any business that distributes products across state lines, and especially important for producers and distributors of alcoholic beverages. Case numbers: Nos. 03-1116, 03-1120, 03-1274

    Decisions below: 342 F.3d 517 (6th Cir. 2003); 358 F.3d 223 (2d Cir. 2003).

     


    International -- 2005



    Norfolk Southern Railway Co. v. James Kirby Pty Ltd.   (U.S. Supreme Court)

    International trade by sea

    The Supreme Court unanimously held 11/9/04 that, under federal law, (1) a bill of lading’s so-called “Himalaya Clause,” which extends liability limitations to “downstream” parties whose services are used to perform the contract, is to be construed according to ordinary rules of contract interpretation; and (2) as a default rule, “when an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and the carrier agreed.” In this case, a cargo owner hired International Cargo Control (ICC) to arrange for delivery from Australia to Huntsville, Alabama. ICC in turn hired Hamburg Süd, which in turn hired Norfolk Southern Railway for the land leg of the journey, during which the cargo was damaged. Reversing the judgment of the Eleventh Circuit, the Supreme Court held that Norfolk was entitled to the protection of the liability limitations in two bills of lading. The broad language of the bill issued by ICC to the cargo owner extended the limitation of liability to subcontractors like Norfolk, despite the absence of a contract directly between ICC and Norfolk. In addition, the cargo owner was bound by the clause in the bill issued by Hamburg Süd to ICC, because an intermediary such as ICC acts as the cargo owner’s agent for the limited purpose of contracting with subsequent carriers, such as Hamburg Süd, for limitations on liability. This decision is important to any business that engages in international trade by sea.

    Decision Below: 300 F.3d 1300 (11th Cir. 2002).

     


    Jurisdiction -- 2005



    Lincoln Property Company v. Roche   (U.S. Supreme Court)

    Diversity jurisdiction

    The Supreme Court unanimously held 11/29/05 that a defendant may remove an action from state court to federal court on the basis of diversity of citizenship even if a potential but unnamed defendant would not be diverse. The Fourth Circuit remanded this case to state court, despite complete diversity between all named defendants and all named plaintiffs, because it suspected that an entity not named as a party (a limited partnership affiliated with a defendant and operating in the same state as the plaintiffs) was the real party in interest. The Supreme Court reversed, holding that 28 U.S.C. §§ 1332 and 1441 permit removal on the basis of diversity as long as all named defendants are citizens of different states than all named plaintiffs and no named defendant is a citizen of the forum state. The Court explained that a properly joined defendant seeking removal has no obligation to negate the existence of a potential codefendant that the plaintiff permissively might have joined and whose presence in the action would destroy diversity. The Court did not reach the second question presented by the petitioners, concerning the standards for determining the citizenship of a limited partnership, because no limited partnership was a party to the case. This case is important to all businesses that operate in multiple states. Decision Below: 373 F.3d 610 (4th Cir. 2004)

    Decision Below: 373 F.3d 610 (4th Cir. 2004),

     


    Labor Law -- 2005



    IBP, Inc. v. Alvarez   (U.S. Supreme Court)

    Pay for changing clothes

    The Supreme Court 11/8/05 held that under the Fair Labor Standards Act (“FLSA”) and Portal-to-Portal Act, employers must compensate their employees for pre- and post-shift time spent donning or doffing employer-required clothing or equipment and time spent walking between such clothing and equipment stations and the employees’ work areas; compensation for time spent waiting at clothing and equipment stations is not required, however. Regulations promulgated under the Portal-to-Portal Act adopted the “continuous workday rule,” which provides that an employee’s compensable “workday” includes all time from commencement to completion of the employee’s “principal activity or activities.” The Portal-to-Portal Act nevertheless excepts from the FLSA’s coverage time spent on activities “preliminary or postliminary” to the employee’s principal activity. Justice Stevens, writing for a unanimous Court, reiterated the Court’s earlier holding that donning or doffing required equipment constitutes an “integral and indispensable part of the [employee’s] principal activities” and therefore is a compensable part of the workday. Moreover, under the continuous workday rule, time then spent walking between the clothing or equipment station and the employee’s work area also necessarily constitutes part of the compensable workday. Time spent simply waiting to don the first piece of clothing or equipment does not qualify as an “integral or indispensable part of the principal activity,” however, and therefore is not required to be compensated. The decision in these consolidated cases is important to any business whose employees must pick up and/or wear certain clothing or equipment in order to perform their jobs.

    The NAM, the American Chicken Council and the American Meat Institute filed an amicus brief urging the Supreme Court to review the IBP case.

    On 8/1/05, the NAM joined with the U.S. Chamber of Commerce, the Society for Human Resources Management and the Association of International Automobile Manufacturers in a brief on the merits.

    See also Case #04-66, Tum v. Barber Foods.

     

    Tum v. Barber Foods, Inc.   (U.S. Supreme Court)

    Pay for changing clothes

    The Supreme Court 11/8/05 held that under the Fair Labor Standards Act (“FLSA”) and Portal-to-Portal Act, employers must compensate their employees for pre- and post-shift time spent donning or doffing employer-required clothing or equipment and time spent walking between such clothing and equipment stations and the employees’ work areas; compensation for time spent waiting at clothing and equipment stations is not required, however. Regulations promulgated under the Portal-to-Portal Act adopted the “continuous workday rule,” which provides that an employee’s compensable “workday” includes all time from commencement to completion of the employee’s “principal activity or activities.” The Portal-to-Portal Act nevertheless excepts from the FLSA’s coverage time spent on activities “preliminary or postliminary” to the employee’s principal activity. Justice Stevens, writing for a unanimous Court, reiterated the Court’s earlier holding that donning or doffing required equipment constitutes an “integral and indispensable part of the [employee’s] principal activities” and therefore is a compensable part of the workday. Moreover, under the continuous workday rule, time then spent walking between the clothing or equipment station and the employee’s work area also necessarily constitutes part of the compensable workday. Time spent simply waiting to don the first piece of clothing or equipment does not qualify as an “integral or indispensable part of the principal activity,” however, and therefore is not required to be compensated. The decision in these consolidated cases is important to any business whose employees must pick up and/or wear certain clothing or equipment in order to perform their jobs.

    The NAM, the American Chicken Council and the American Meat Institute filed an amicus brief urging the Supreme Court to review the IBP case.

    On 8/1/05, the NAM joined with the U.S. Chamber of Commerce, the Society for Human Resources Management and the Association of International Automobile Manufacturers in a brief on the merits.

    See also Case #03-1238, IBP v. Alvarez

     


    Patents, Copyrights and Trademarks -- 2005



    KP Permanent Make-Up, Inc. v. Lasting Impression, Inc   (U.S. Supreme Court)

    Trademark protection

    The Supreme Court unanimously held 12/8/04 that the possibility of consumer confusion does not preclude the fair-use defense to a claim of trademark infringement, and a party who raises this defense does not have the burden of negating the likelihood of confusion. In an opinion by Justice Souter, the Court reasoned that the Lanham Act places the burden of proving infringement (including the likelihood of confusion) on the trademark holder. See 15 U.S.C. §§ 1114(1), 1115(b). The elements of the fair-use defense, by contrast, do not refer to likelihood of confusion. See id. § 1115(b)(4). Because a party asserting this defense has no independent duty to show that confusion is unlikely, the Court concluded that some possibility of confusion must be compatible with fair use. Although “mere risk” of confusion will not foreclose the fair-use defense, the Court declined to decide whether the extent of likely confusion is relevant to the availability of the defense. Thus, this decision does not resolve the split between the First and Second Circuits, on the one hand, which have held that the fair-use defense can stand regardless of any underlying likelihood of confusion, and the Fourth and Seventh Circuits, on the other hand, which consider the extent of actual or likely confusion. This decision is important to all businesses that could become involved in trademark disputes.

    Decision Below: 328 F.3d 1061 (9th Cir. 2003).

     

    Merck KGaA v. Integra Lifesciences I, Ltd.   (U.S. Supreme Court)

    Patent exception for drug research

    The Supreme Court unanimously held 6/13/05 that the use of a patented compound “in research that, if successful, would be appropriate to include in a submission to the FDA” does not infringe a patent if the user “has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect,” even if the results are not ultimately submitted to the FDA. Integra LifeSciences, a holder of several patents related to biological compounds used by Merck KGaA in research on anti-cancer drugs, brought an infringement action against Merck. The case turned on the application of 35 U.S.C. § 271(e)(1), which states that “uses [of patents] reasonably related to the development and submission of information under a Federal law which regulates the . . . use . . . of drugs” are not acts of infringement. The Court rejected Integra’s contention that § 271(e)(1) does not apply to uses of patented compounds in “experimentation of drugs that are not ultimately the subject of an FDA submission or . . . in experiments that are not ultimately submitted to the FDA,” noting that § 271(e)(1) leaves “adequate space for experimentation and failure on the road to regulatory approval.” This decision will be of great interest to any company that either holds patents commonly used in pharmaceutical research or uses such patents in the course of conducting such research.

    Decision Below: 331 F. 3d 860 (Fed. Cir. 2003).

     

    Metro-Goldwin-Mayer Studios Inc. v. Grokster, Ltd.   (U.S. Supreme Court)

    Copyright on the Internet

    The Supreme Court held 6/27/05 that one who distributes a device with the object of promoting its use to infringe copyrights, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. Although the devices in question (peer-to-peer file sharing computer networking software) may have some lawful uses, the Court noted that the recipients of the software use them primarily to share copyrighted music and video files without authorization. The Court held that the distributors of the software may be held indirectly liable for their users’ copyright infringement under a theory of contributory or vicarious infringement, if the distributors took affirmative steps to encourage direct infringement (e.g., advertising an infringing use or instructing the users how to engage in an infringing use). The Court found ample evidence in this case that the distributors intended to and did profit from third-party acts of copyright infringement, and therefore, the distributors’ activities went beyond mere distribution of the software. The Court based its analysis on the fact that the distributors advertised their software as an alternative to Napster, they failed to develop filtering tools to diminish the infringing activity, and they made money by selling advertising space. This decision is important to businesses that own or control copyrighted motion pictures or sound recordings, or distribute devices that allow peer-to-peer file sharing computer networking software.

    Decision Below: 380 F.3d 1154 (9th Cir. 2004)

     


    Preemption -- 2005



    Mid-Con Freight Systems, Inc. v. Michigan Public Service Commission   (U.S. Supreme Court)

    $100 interstate truck fee

    In Mid-Con, the Supreme Court also held that a state law that imposes an annual fee of $100 upon each truck licensed in that state is not preempted by a provision of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) that precludes states from imposing a “State registration requirement” in excess of $10 per truck. 49 U.S.C. § 14504(b). In a 6-3 decision authored by Justice Souter, the Court reasoned that the “State registration requirement” in this provision of ISTEA refers only to state law procedures for complying with the federal Single State Registration System (SSRS) codified in 49 U.S.C. § 14504. The SSRS, in turn, regulates state law procedures for evidencing proof of insurance and a federal trucking permit and identifying an agent for service of process. The Court concluded that the Michigan statute at issue was not a “State registration requirement” within the meaning of the ISTEA because it made no reference to any of the items regulated by the SSRS, and Michigan had imposed a separate fee on trucks license-plated in Michigan well before the SSRS was enacted. In dissent, Justice Kennedy, joined by Chief Justice Rehnquist and Justice O’Connor, argued that the words “State registration requirement” cannot be limited to only those requirements governed by the SSRS. Rather, “State registration requirement” should be construed to mean any state requirement imposed on an interstate motor carrier in a State, including Michigan’s $100 per-truck fee. This case is important to any business involved in interstate motor carriage and, more generally, to any business that operates in an area where a federal statute defines the scope of federal preemption of state regulation.

    Decision Below: 662 N.W.2d 784 (Mich. 2003)

     


    Product Liability -- 2005



    Beretta U.S.A. Corp. v. District of Columbia   (U.S. Supreme Court)

    Liability without fault

    The NAM joined with the U.S. Chamber of Commerce in an amicus brief 8/22/05 urging the Supreme Court to review a decision of the District of Columbia Court of Appeals upholding D.C.’s automatic liability statute. The law provides that a manufacturer (of certain guns) is strictly liable, “without regard to fault or proof of defect, for all direct and consequential damages that arise from bodily injury or death” if the injury results from use of the product in the District. Our brief argued that this law is unconstitutional because it interferes with interstate commerce. It imposes liability without fault, and it necessarily applies only to out-of-state products that are illegally transported into the District and used in the commission of a crime. The only way for a manufacturer to avoid this virtually unlimited liability is not to make the product. The D.C. law would allow one state to make it unprofitable to conduct business in another state, or could create a complex patchwork of state regulations that would inhibit the ability to conduct business nationwide.

    On 10/3/05, the Supreme Court refused to hear this appeal. Subsequently, the President signed on 10/26/05 the Protection of Lawful Commerce in Arms Act, which protects gun manufacturers from liability for the criminal misuse of their products. The new law resulted in dismissal of this case in the Superior Court, and affirmance of that dismissal by the D.C. Court of Appeals on 1/10/2008.

     

    Craft v. Philip Morris Inc.   (Missouri Supreme Court)

    Fraud allegation

    The NAM filed an amicus brief 11/18/04 arguing that this Missouri class action suit involving the advertising and pricing of Marlboro Light cigarettes should not have been certified as a class action. The suit alleges that consumers were defrauded by the company's claim that Light cigarettes have lower tar and nicotine, and the price of the cigarettes would have been higher had they actually worked as promised. Rather than bring a contract claim for failure to deliver the product advertised, the plaintiffs accused the company of fraud, and alleged that the cigarettes would have cost more if they worked as promised. Thus, their theory is that they should have paid more, and are entitled to the difference between what they paid and what they would have paid without the alleged fraud. This benefit-of-the-bargain approach (1) would convert every product defect claim into a class action in Missouri, (2) disregarded many other factors that affect price, and (3) provided an improper cause of action for plaintiffs that have actually suffered no injury.

    Unfortunately, on 8/16/05, the court ruled that the class was properly certified. The plaintiff alleged that she asserted claims that are typical of the claims of the entire class, that she had no interests antagonistic to those of the class, and that she would fairly and adequately represent and protect the class. The court found that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members. It found that the allegations “go to the condition and labeling of the product at the time it was sold; they do not make defendant’s liability dependent on each consumer’s individual smoking behavior.

    The court also found that the law suit was very carefully worded so as not to specifically allege that consumers relied on advertising representations. Rather, the suit was over a violation of the Merchandising Practices Act and consequent losses. It may be that reliance is an element of the claim, but that should be resolved in another motion, not in a challenge to the class certification analysis. The court also found issues relating to the measure of damages to be irrelevant to the class action analysis.

     

    District of Columbia v. Beretta U.S.A. Corp.   (D.C. Court of Appeals)

    Public nuisance action against gun manufacturers

    The NAM opposed the District of Columbia's law suit that attempted to hold gun manufacturers liable for damages resulting from the criminal misuse of guns. The District is one of several governments that have tried to use aggressive theories of "negligent marketing" and "public nuisance" to garner jury verdicts against manufacturers of legal products that are later misused.

    Our brief argued that DC legal precedents clearly do not allow such suits for negligence, and there can be no public nuisance claim when the manufacturer does not control the property at the time it is alleged to be creating the nuisance.

    On 4/29/04, the Court of Appeals ruled that individual common-law negligence and DC's public nuisance claims must be dismissed. It allowed individual strict liability claims to proceed under DC's medical costs arising from such claims. Plaintiffs will still have to prove on remand that a particular manufacturer's weapon was responsible for their injuries. The court rejected a Commerce Clause challenge to the impact of DC's law on the legal manufacture and sale of firearms in other states.

    The case was reheard by the full complement of judges on the D.C. Court of Appeals. The NAM's last brief was filed on 11/8/04.

    On 4/21/05, the full court again ruled that the negligent marketing and public nuisance claims must be dismissed. The court found it unreasonable and not well circumscribed to impose a general duty on an indeterminate class of manufacturers to make marketing changes that might serve to protect an indeterminate class of potential plaintiffs. The court also rejected a public nuisance claim since it is unreasonable to hold a manufacturer liable for the illegal acts of many parties over whom it has no control. Instead there must be a clear duty, foreseeability and direct causation to impose liability.

     

    Henry v. Dow Chemical Co.   (Michigan Supreme Court)

    Medical monitoring

    The Michigan Supreme Court ruled 7/13/05 that medical monitoring is not a recognized legal claim in Michigan. Nevada, Kentucky and Alabama have also rejected such claims. The NAM joined with the U.S. Chamber, the American Tort Reform Association, the American Chemistry Council, the Coalition for Justice and the Property Casualty Insurers Association of America on 8/3/04 in arguing that individuals who may be merely exposed to hazardous substances but do not suffer actual adverse effects should not be able to demand payment for medical monitoring. Allowing such claims will clog the courts with litigation, impair justice for the truly injured, and provide an undeserved windfall to healthy plaintiffs. Whether such a claim should be recognized is a legislative judgment that courts should not be making.

    The Michigan court agreed with these arguments. It said that the legislature should decide whether to allow medical monitoring claims would “drain resources needed to compensate those with manifest physical injuries and a more immediate need for medical care. . . . actual harm – an injury that is manifest in the preset – is required in order to state a viable claim.”

    We also filed a similar brief on 12/15/03 urging the court to review the case.

     

    Price v. Philip Morris Inc.   (Illinois Supreme Court)

    Fraud in advertising

    The Illinois Supreme Court 12/15/05 threw out a $10.1 billion judgment against Philip Morris in a consumer class action. This claim alleged fraud in the advertising of "light" cigarettes. The Court ruled 4 to 2 that § 10(b)(1) of the Illinois Consumer Fraud Act barred the suit.

    That section provides that the fraud statute does not apply to company actions that are specifically authorized by laws administered by state or federal officials. However, merely complying with federal labeling and advertising rules, according to the court, is not enough to trigger this exemption. Instead, the court found that the Federal Trade Commission has specifically authorized the use of the terms “lights” and “lowered tar and nicotine” in labeling and advertising. The only condition in the FTC’s authorization was that the descriptive terms be accompanied by a clear and conspicuous disclosure of the tar and nicotine content.

    The history of low tar and nicotine cigarette regulation is a classic example of regulation by litigation. The court described how the FCC communicated to the cigarette industry the circumstances under which they may use “low tar” descriptors in their advertising and packaging. The FCC did this by bringing an enforcement action against one company, then negotiating a consent decree that announced to the entire industry what behavior is and is not authorized. This “regulation by consent decree” constitutes specific federal authorization sufficient to fall within Illinois’ exemption from fraud liability.

    There were a number of other issues in the case that the court declined to address, except to say that they raised serious issues about which court had grave reservations. Justice Karmeier wrote that the case should be dismissed because the plaintiffs failed to show that they sustained any actual damages.

    The NAM and the Illinois Manufacturers' Association urged the court in 2003 to overturn the judgment. Our brief focused on the lack of evidence that any consumer suffered economic damages given that cigarette prices were unaffected once the company changed its product advertisements, and the excessive $3 billion punitive damages award that was not proportional to the degree of reprehensibility shown, out of line with comparable state laws and improper in that it took into account the wealth of the defendant

     

    Simon II Litigation v. Philip Morris USA Inc.   (2nd Circuit)

    Limited fund punitive damages class action recertification

    The U.S. Court of Appeals for the Second Circuit ruled 5/6/05 that Judge Jack Weinstein improperly certified a class of plaintiffs for purposes of awarding punitive damages, without any finding of actual liability. The NAM joined with the Washington Legal Foundation 6/4/03 urging an appeals court to overturn the certification of this class action by smokers against cigarette manufacturers. The judge had found that because there is a constitutional limit on the amount of punitive damages that can ultimately be awarded, the case could be certified under the rule governing "limited fund" cases. We argued that this class should not be certified under that rationale since the court did not quantify the amount in the limited fund. Second, the court's nebulous standard would allow virtually any mass tort case to be certified as a class action. Third, the manufacturers' due process rights were violated by an order (1) that prohibits certain plaintiffs from withdrawing from the litigation and (2) that applies New York law to the claims of all class members.

    The appeals court unanimously overturned the class certification because it didn't fit into the limited fund category. Said the court, "[T]here is no evidence by which the district court could ascertain the limits of either the fund or the aggregate value of punitive claims against it, such that the postulated fund could be deemed inadequate to pay all legitimate claims."

     

    Smith v. Lead Industries Ass'n, Inc.   (Maryland Court of Appeals)

    Reliance as an element of fraud

    A suit was filed by a Baltimore mother on behalf of her three small children who were allegedly injured by lead paint in their house. A key issue in this appeal is whether they can prove fraud under Maryland law. The paint industry, supported by an amicus brief on 12/7/04 from the NAM and other business organizations, argued that a long-standing and necessary element in a fraud claim is proving that the injured party relied on misrepresentations made by the manufacturer. Reliance is only present when the misrepresentation substantially induced the plaintiff to act. We also argued that "fraud in the air," or statements made to the world at large, can not be the basis for liability. If it were, any consumer could sue for misstatements by manufacturers whether or not they heard the statements or acted on them. This would broadly expand liability and free it from the commonsense bounds developed over centuries. Instead, the government should enforce consumer protection statutes that apply to the public at large.

    The Maryland Court of Appeals sent the case back to the lower court in April because of procedural problems with the appeal. The court did not address the substantive issues covered in our amicus brief.

    This case is another in a growing trend of cases in which plaintiffs are trying to convert product liability and negligence claims into claims for fraud. Courts must be extremely wary of expanding legal theories when plaintiffs confuse the elements of their claims and suggest that traditional legal duties are shifting under the law. We urged the Maryland Court of Appeals, its highest court, to reject such attempts.

     

    United States v. Philip Morris USA Inc.   (D.C. Circuit)

    Disgorgement not a civil RICO remedy

    The NAM and the U.S. Chamber filed a joint brief on 8/3/04 in this $280 billion government suit against the tobacco industry opposing the theory that disgorgement is a remedy available under the Racketeer Influenced and Corrupt Organizations Act (RICO). Such a claim improperly avoids the procedural safeguards in the criminal forfeiture provisions of RICO and conflicts with precedent under comparable provisions of another statute on which it was patterned -- the Clayton Act. We do not believe RICO was intended to provide disgorgement of profits as a remedy. The government is trying to do an end-run around the strict procedural requirements under RICO when it attempts to seize assets alleged to be the ill-gotten gains of racketeering activity.

    On 2/4/05, the D.C. Circuit ruled that disgorgement is not a remedy in civil suits under RICO. The law is limited to forward-looking remedies that are aimed at future violations. These include divestment, injunctions and dissolution, but not disgorgement of past gains.

     

    White-Rodgers v. Bitler   (U.S. Supreme Court)

    Testimony of expert witnesses

    The NAM and the American Tort Reform Association filed an amicus brief 6/9/05 supporting this appeal to the U.S. Supreme Court in this case involving the testimony of expert witnesses. A judge’s role in deciding whether to allow a so-called expert to testify is often critical to the outcome of a case. Expert witnesses are allowed by testify by the judge because they have specialized knowledge on subjects that the jury doesn’t really know enough about. They are given much more leeway in testifying about their opinions on what happened, and even on the ultimate issue in the case. It is crucial that whatever basis they have for giving their opinions be grounded in sound science that can either be verified by testing or that has been vetted through peer review. Juries are not expected to sort out a legitimate expert witness from a junk scientist.

    Our brief argues that the Supreme Court’s Daubert ruling in 1993 requires that judges act as gatekeepers and keep out testimony that is not properly supported by science. A court must make sure that an expert’s conclusions flow from his or her methodology. An expert on one product design should not be allowed to opine on products designed another way. If an expert’s opinion can be easily tested, it should be. Reliable expert testimony should not require a leap of faith.

    The Court declined to review the appeal on 10/3/05.

     


    Punitive Damages -- 2005



    Simon v. San Paolo U.S. Holding Co.   (California Supreme Court)

    Punitive damages

    The California Supreme Court ruled 6/16/05 that a $1.7 million punitive damages award was unconstitutionally excessive when compared with the underlying compensatory damages award of $5,000 (the amount spent by the plaintiff to hire a lawyer). This issue arose in the context of a real estate transaction gone bad, and the jury awarded $5,000 for promissory fraud.

    The central issue was whether the punitive damages should be based on the plaintiff’s actual damages or the $400,000 in profit he claims he lost when the deal fell through. Because that loss was not proven and damages were not awarded for it, the court refused to use it as a basis for calculating punitive damages. Using the $5,000 loss as the base number, the court reduced the punitive damages award to just $50,000, 10 times the actual loss. It held that the claim for lost profits was not caused by the fraudulent conduct at issue and that the plaintiff would not have received the property even if no fraudulent statements had been made. In an appropriate case, however, punitive damages may be based on harm that was likely to occur, even if it did not actually occur. The fraud in this case was a single instance, resulting in only a small financial loss. But the court took into consideration the financial condition (i.e., the size) of the defendant, so that the amount of the punitive damages could serve as a deterrent against further fraudulent conduct. It decided that $50,000 in punitive damages was the maximum that could be considered constitutional given all the facts and circumstances of this case.

    The NAM, the California Chamber of Commerce, the American Chemistry Council, Unocal Corp. and the American International Group, Inc. had filed an amicus brief 10/13/04 supporting this result. Our brief argued that the lower court misapplied the Supreme Court’s recent guidance in the State Farm case, and ignored the state legislature when it failed to reasonably limit the punitive damages award. We also argued that the lower courts allowed punitive damages far in excess of comparable civil penalties under state law, a factor the U.S. Supreme Court has also required to be taken into account.

     


    RICO Act -- 2005



    Bank of China v. NBM L.L.C.   (U.S. Supreme Court)

    Reliance as an element of a RICO case

    The Court granted certiorari 6/27/05 in a case that presents the questions whether a civil RICO plaintiff, who seeks to establish liability based on the predicate offenses of mail fraud, wire fraud, and bank fraud, must establish “reasonable reliance.”  The case stems from alleged fraud spanning a number of years, allegedly committed by the defendants (including a former employee) against the Bank of China.  Specifically, the Bank alleged a scheme whereby various defendants borrowed funds from the Bank under false pretenses, converted them into different currencies, and ultimately pocketed them.  At trial, the district court instructed the jury that the Bank could prove the RICO frauds even if its agents or employees permitted or participated in the fraud.  The jury ultimately found liability, and awarded the Bank over $35 million.  The Second Circuit, however, reversed, holding - in accord with the Fourth, Fifth, Sixth, Eighth, and Eleventh Circuits, but in conflict with the First, Third, Seventh, and Ninth Circuits - that the Bank was required to demonstrate “reasonable reliance” for the mail and wire fraud counts.  The Second Circuit also held, as a matter of first impression, that “reasonable reliance” must also be established for bank fraud.  The case is of significant potential import to any company victimized in a manner compensable under civil RICO.

    The Court initially agreed to hear the appeal, but dismissed the case without opinion on 11/15/05.

    Decision Below:  359 F.3d 171 (2d Cir. 2004)

     


    Securities Regulation -- 2005



    Dura Pharmaceuticals, Inc. v. Broudo   (U.S. Supreme Court)

    Loss causation in fraud-on-the-market 10b-5 litigation

    The Supreme Court held 4/19/05 that allegation and proof of an inflated stock price at the time of the stock purchase are insufficient to plead and prove loss causation in a securities fraud action. Rather, plaintiffs must allege and show that they suffered an actual loss and that the defendant's misrepresentations caused that loss. After purchasing stock in Dura Pharmaceuticals, Respondents brought a class-action suit against Dura for securities fraud. In their complaint, Respondents alleged that they had suffered economic loss due to payment of artificially inflated prices for Dura securities. The district court dismissed the complaint for failure to allege loss causation adequately, but the Ninth Circuit reversed. Justice Breyer's opinion for the court explains that payment of an inflated purchase price does not itself result in a loss to the buyer because, at the time of purchase, the buyer possesses a stock equal in value to the inflated price. Furthermore, even if the buyer later sells the stock at a lower price, his loss may result from factors other than the earlier misrepresenation. The Court also held that mere allegation that a plaintiff purchased stock at an inflated price is insufficient to plead economic loss or loss causation. Although "ordinary pleading rules are not meant to impose a great burden upon a plaintiff," a complaint must "provide a defendant with some indication of the loss and the causal connection that the plaintiff has in mind."

    This case is important to individuals and businesses subject to private securities litigation alleging a violation of Rule 10b-5 (17 C.F.R. § 240.10b-5).

     


    Takings -- 2005



    Kelo v. City of New London   (U.S. Supreme Court)

    Taking of property for economic development

    The Supreme Court held 6/23/05 that the public use requirement in the Takings Clause of the Fifth Amendment is not violated when private property is condemned for the sole purpose of “economic development” that may increase tax revenues and improve the local economy. The Court concluded that, although the power of eminent domain may not be used to take one person’s land simply to confer a private benefit on a particular private party, the takings at issue here were part of a “carefully formulated . . . economic development plan” that the City believed would provide “appreciable benefits to the community.” The Court emphasized that the public use component of the Takings Clause does not require condemned lands to be open for use by the general public. Rather, the Court stated, it long ago adopted a broad understanding of “public use” to mean “public purpose.” Finally, the Court rejected petitioners’ urgings for heightened judicial scrutiny of the government’s determination that a public purpose will be served by a taking. The Court reasoned that absent an evident basis for suspicion, such determinations are entitled to significant deference. This decision is important to any business that pursues or participates in a development project with the assistance of the state’s eminent domain power; this decision is equally important to any business that may be subject to a taking aimed solely at economic development.

    Decision Below: 843 A.2d 500 (Conn. 2004)

     

    Lingle v. Chevron U.S.A., Inc.   (U.S. Supreme Court)

    Taking of property via rent control

    The Supreme Court 5/23/05 unanimously repudiated its prior statements that government regulation of private property effects a taking if it does not substantially advance legitimate state interests. The Court held that the standards set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), govern regulatory takings challenges unless the regulation requires an owner to suffer a permanent physical invasion of her property, deprives an owner of all economically viable use of her property, or is connected to a land-use exaction. Under Penn Central, the Court emphasized, the existence of taking "turns in large part, albeit not exclusively, upon the magnitude of a regulation's economic impact and the degree to which it interferes with legitimate property interests," and the "character of the governmental action" also "may be relevant." The Court held that the "substantially advances" formula is not "a stand-alone regulatory takings test that is wholly independent of Penn Central." The "substantially advances" test, the Court reasoned, "suggests a means-ends" test that "has some logic in the context of a due process challenge" but "does not help to identify those regulations whose effects are functionally comparable to government appropriation or invasion of private property." This case is important to any business that is subject to a regulation that might be deemed a compensable taking of property.

    Decision below: 363 F.3d 846 (9th Cir. 2004).

     

    Rancho Palos Verdes v. Abrams   (U.S. Supreme Court)

    No right to sue for denial of cell tower permit

    The Supreme Court held 3/22/05 that an individual may not enforce the limitations on local zoning authority set forth in § 332(c)(7) of the Communications Act of 1934 through an action for money damages under 42 U.S.C. § 1983. After Petitioner, the City of Rancho Palos Verdes, denied Respondent's application to construct a radio tower on his property, Respondent filed an action seeking, among other things, injunctive relief under the Communications Act and money damages under § 1983. The district court held that the Communications Act provided the exclusive remedy for the City's actions and that Respondent could not obtain damages under § 1983, but the Ninth Circuit reversed. Justice Scalia's opinion for the Court explained that authorizing a § 1983 action to remedy violations of the Communications Act would distort the scheme of expedited judicial review and limited remedies expressly created by the Act. Because Congress intended the judicial remedy expressly authorized by the Communications Act to be exclusive, foreclosing an alternative remedy under § 1983, the Court reversed the Ninth Circuit's judgment. This case is important to business in the telecommunications field.

    Decision below: 354 F.3d 1094 (9th Cir. 2004).

     

    San Remo Hotel L.P. v. San Francisco   (U.S. Supreme Court)

    Procedure for takings claims

    The Supreme Court 6/20/05 held that a federal takings claim may not be litigated in federal court after state court litigation that is preclusive under state law, even where the claim was not ripe for litigation in federal court before the state court litigation. The Court has previously held that a property owner who alleges that his property was taken by the state without fair compensation generally must seek relief in the state court system prior to litigating his claim in the federal courts. At the same time, the full faith and credit statute, 28 U.S.C. § 1738, mandates that if a state court decides a particular issue, that decision precludes subsequent litigation in federal courts to the same extent that it precludes subsequent litigation in state court. The Supreme Court held that it could not carve out an exception to this statute to ensure that a litigant receives a day in federal court, after already having his day in state court. The Court clarified, however, that a facial takings challenge is ripe for federal court litigation without prior resort to state court. If a plaintiff asserts both a facial challenge and an as-applied challenge, the ability to pursue the facial claim in federal court can be preserved if the federal court invokes Pullman abstention and the plaintiff does not voluntarily litigate the facial challenge while litigating the as-applied challenge in state court. This decision is important to all businesses that may be subject to an uncompensated taking of property.

    Decision Below: 362 F.3d 1088 (9th Cir. 2004)

     


    Taxation and State Taxation -- 2005



    Commissioner v. Banks   (U.S. Supreme Court)

    Taxation of contingent fees

    The Supreme Court held 1/24/05 that when a litigant’s recovery constitutes taxable income, any portion of the recovery paid to his attorney pursuant to a contingent-fee agreement is taxable. The Court reasoned that the Internal Revenue Code defines “gross income” as “all income from whatever source derived,” 26 U.S.C. § 61(a), and a taxpayer cannot exclude economic gain from his gross income by assigning it to his attorney in advance. This decision resolves a split between the Circuits on the tax treatment of contingent fees. Because contingent-fee arrangements are a standard feature in tort and other types of litigation, this case resolves an important and often-recurring issue for litigants.

     

    Cuno v. DaimlerChrysler Corp.   (6th Circuit)

    State investment tax credit program

    The U.S. Court of Appeals for the Sixth Circuit 1/18/05 denied DaimlerChrysler's petition for rehearing of an adverse ruling on state investment tax credits for business. The NAM and the U.S. Chamber filed a joint brief 9/20/04 urging the full court to overrule a panel decision declaring Ohio's 1995 investment tax credit program to be unconstitutional as violating the commerce clause. The decision threatens hundreds of similar state tax laws in which a state offers a business a tax break to invest in their state. The plaintiffs, financed by Ralph Nader, are using this decision as a test case to challenge state pro-business tax incentives across the country. However, the NAM argued that invalidating state tax credit programs would have devastating effects upon both manufacturers and states. States would no longer be able to bargain with businesses by trading tax relief for more jobs, worker training, research and development, environmental remediation or other important state goals. We argued that the Supreme Court has already approved tax laws that allow a state to bestow benefits on its citizens, and that this local assistance does not burden interstate commerce.

     

    McNeilus Truck & Manufacturing, Inc. v. County of Dodge   (Minnesota Supreme Court)

    Tax assessment of manufacturing property

    The NAM joined with the Minnesota Chamber of Commerce in urging the Minnesota Supreme Court to allow manufacturing plants to be assessed for tax purposes using reasonable comparable properties that may include out-of-state facilities. The nature and extent of the market within which to determine a property's market value depends on the type of property involved, and artificial distinctions based on state boundaries should not be dispositive. Even if there are differences in the value of property arising from the state in which it is located, the assessments can be adjusted to reflect those differences. Minnesota's Tax Court adopted a rule that potentially distorts the valuation of all manufacturing property in Minnesota, burdens the ability of Minnesota manufacturers to compete on fair and equal terms with competitors in other states, and ignores relevant and probative evidence of true market value.

    On November 10, the Minnesota Supreme Court ruled that the tax court’s application of a de facto evidentiary ruling barring consideration of all comparable sales outside Minnesota violates that court’s duty to assess property as market value and utilize its independent judgment. It is appropriate to consider land values outside of the state because buyers may well be looking outside the state for comparable property. As long as the properties are in “economic proximity,” they are comparable. The case was sent back to the tax court to evaluate the discrepancies between the county expert’s valuation of the property at $9 million and the taxpayer expert’s valuation of it at $2.8 million.

     


    ADEA -- 2004



    General Dynamics Land Systems, Inc. v. Cline   (U.S. Supreme Court)

    Reverse age discrimination not covered

    The Supreme Court held 2/24/04 that the Age Discrimination in Employment Act (“ADEA”) does not prohibit employers from favoring older employees over younger ones, so-called “reverse age discrimination.” The ADEA protects workers over age 40 from age discrimination. This case concerns a collective-bargaining agreement that eliminates retirement health benefits for employees except those who are currently over age 50. Thus, employees that are between the ages of 40 and 50—employees who are protected under the ADEA—would not receive retirement health benefits. The Sixth Circuit concluded that the agreement violates the ADEA, because in its view the ADEA prohibits all discrimination against employees, including discrimination in favor of older employees. The Supreme Court disagreed. It concluded that the ADEA’s structure, purpose, history, and relationship to other federal statues conclusively demonstrate that Congress did not intend the ADEA to prohibit benefits that favor older workers over younger ones. This case is important to all employers that are covered by the ADEA.

    The NAM filed an amicus brief 3/21/03 urging the Supreme Court to take this action. We joined with the Equal Employment Advisory Council, the LPA, the U.S. Chamber, the American Benefits Council and the ERISA Industry Committee in asking the Court to take the case. The ruling could have undermined employer efforts to provide any health benefits to retirees. It could also have raised litigation concerns over a variety of other employment-related decisions whereby older workers are chosen for promotions or other employment actions for which younger employees over 40 are also eligible.

     


    Alien Tort Statute -- 2004



    Doe I v. Unocal Corp.   (9th Circuit)

    Aiding and abetting liability under Alien Tort Statute (en banc)

    The NAM filed a joint amicus brief 4/30/03 with USA*Engage, the National Foreign Trade Council, the U.S. Chamber, the U.S. Council for International Business, and the Organization for International Investment. We supported an appeal by Unocal of an adverse judgment holding the company liable for “aiding and abetting” the acts of the Burmese (Myanmar) military in providing security for a pipeline project. We argued that the alien tort provision of the Judiciary Act of 1789 provides jurisdiction to federal courts but does not provide a substantive cause of action. There must be some other statute that defines violations of law that are actionable. Before oral argument could be held in December, 2004, the parties reached a settlement in principle.

     

    Sosa v. Alvarez-Machain   (U.S. Supreme Court)

    Alien Tort Statute

    The Supreme Court held 6/29/04 that the Federal Tort Claims Act (“FTCA”), which excludes “any claim arising in a foreign country,” 28 U.S.C. § 2680(k), does not authorize a claim against the United States for a false arrest executed in a foreign country just because the arrest was planned in the United States. The Court rejected the so-called “headquarters doctrine,” which allowed FTCA suits for harm alleged to have occurred in a foreign country so long as the harm could be linked to negligent guidance or planning that occurred in the United States. Tort claims are historically regarded as “arising in” the place where the “last act necessary to establish liability occurred,” and there is no evidence that Congress intended “arising in” under the FTCA to have a different meaning.

    The Court also held that the Alien Tort Statute, 28 U.S.C. § 1350 (“ATS”), is principally jurisdictional, but that “at the time of enactment the jurisdiction enabled federal courts to hear claims in a very limited category defined by the law of nations and recognized at common law.” Thus, although the ATS does not allow “the creation of a new cause of action for torts in violation of international law,” it does encapsulate the “understanding that the common law would provide a recognized cause of action for the modest number of international law violations with a potential for personal liability [in 1789].” “[A]ny claim based on the present-day law of nations [must] rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized.” The Court’s ruling on the scope of the ATS is particularly significant to transnational corporations and domestic businesses with foreign activities. The NAM's press release welcomes this ruling.

    The NAM and others urged the Supreme Court 10/6/03 to review this case. Since 1980, foreign plaintiffs have been filing suits in federal courts for conduct involving activities that occur in foreign countries. The NAM and other organizations, as well as the U.S. Government, began to challenge these suits, arguing that U.S. law only provides a forum, and that there must be a separate statute, such as the Torture Victim Protection Act of 1991, that confers substantive rights that a foreign plaintiff can assert here. In addition, we challenged the Ninth Circuit's ruling that the law of nations can be determined from non-binding international declarations, unratified or non-self-executing treaties, and unreliable commentary. The decision of the Ninth Circuit raises serious separation of powers issues, and highlights the foreign policy concerns that underlie the vast majority of these cases. Clarifying these issues is important both in fighting the war on terrorism and in preventing American companies from being uniquely subjected to liability for the acts of agents of foreign governments. Joint brief filed with the National Foreign Trade Council, USA*Engage, the Chamber of Commerce and the U.S. Council for International Business.

    On 1/23/04, the NAM filed a brief on the merits calling for strict limits on the ability of foreign nationals to use U.S. federal courts to allege violations of rights in their countries. We argued that the ATS was never intended and does not create a substantive cause of action; rather, it only allows federal courts to hear claims arising under already recognized international standards of conduct. The brief argued that such suits are not allowed unless an international standard of behavior has the assent of the U.S. government, is obligatory and is specific. Allowing these suits to continue also creates serious substantive and procedural conflicts that Congress never intended when it passed the law in 1789. See also United States v. Alvarez-Machain.

     

    United States v. Alvarez-Machain   (U.S. Supreme Court)

    Alien Tort Statute

    The Supreme Court held 6/29/04 that the Federal Tort Claims Act (“FTCA”), which excludes “any claim arising in a foreign country,” 28 U.S.C. § 2680(k), does not authorize a claim against the United States for a false arrest executed in a foreign country just because the arrest was planned in the United States. The Court rejected the so-called “headquarters doctrine,” which allowed FTCA suits for harm alleged to have occurred in a foreign country so long as the harm could be linked to negligent guidance or planning that occurred in the United States. Tort claims are historically regarded as “arising in” the place where the “last act necessary to establish liability occurred,” and there is no evidence that Congress intended “arising in” under the FTCA to have a different meaning.

    The Court also held that the Alien Tort Statute, 28 U.S.C. § 1350 (“ATS”), is principally jurisdictional, but that “at the time of enactment the jurisdiction enabled federal courts to hear claims in a very limited category defined by the law of nations and recognized at common law.” Thus, although the ATS does not allow “the creation of a new cause of action for torts in violation of international law,” it does encapsulate the “understanding that the common law would provide a recognized cause of action for the modest number of international law violations with a potential for personal liability [in 1789].” “[A]ny claim based on the present-day law of nations [must] rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized.” The Court’s ruling on the scope of the ATS is particularly significant to transnational corporations and domestic businesses with foreign activities. The NAM's press release welcomes this ruling.

    The NAM and others urged the Supreme Court 10/6/03 to review this case. Since 1980, foreign plaintiffs have been filing suits in federal courts for conduct involving activities that occur in foreign countries. The NAM and other organizations, as well as the U.S. Government, began to challenge these suits, arguing that U.S. law only provides a forum, and that there must be a separate statute, such as the Torture Victim Protection Act of 1991, that confers substantive rights that a foreign plaintiff can assert here. In addition, we challenged the Ninth Circuit's ruling that the law of nations can be determined from non-binding international declarations, unratified or non-self-executing treaties, and unreliable commentary. The decision of the Ninth Circuit raises serious separation of powers issues, and highlights the foreign policy concerns that underlie the vast majority of these cases. Clarifying these issues is important both in fighting the war on terrorism and in preventing American companies from being uniquely subjected to liability for the acts of agents of foreign governments. Joint brief filed with the National Foreign Trade Council, USA*Engage, the Chamber of Commerce and the U.S. Council for International Business.

    On 1/23/04, the NAM filed a brief on the merits calling for strict limits on the ability of foreign nationals to use U.S. federal courts to allege violations of rights in their countries. We argued that the ATS was never intended and does not create a substantive cause of action; rather, it only allows federal courts to hear claims arising under already recognized international standards of conduct. The brief argued that such suits are not allowed unless an international standard of behavior has the assent of the U.S. government, is obligatory and is specific. Allowing these suits to continue also creates serious substantive and procedural conflicts that Congress never intended when it passed the law in 1789. See also Sosa v. Alvarez-Machain.

     


    Antitrust -- 2004



    3M Co. v. LePage's Inc.   (U.S. Supreme Court)

    Antitrust implications of bundled rebates

    The NAM joined with the Washington Legal Foundation 7/28/03 to support 3M's petition for Supreme Court review of a Third Circuit decision that allows monopolization suits against 3M for giving "bundled rebates" to retailers, even though the products were sold to them above the manufacturer's cost. Our brief sought a bright-line rule that provides manufacturers with some greater certainty that reducing prices will not be subject to antitrust challenge. On 6/29/04, the Court declined to hear the appeal.

     

    F. Hoffman-LaRoche Ltd. v. Empagran, S.A.   (U.S. Supreme Court)

    US antitrust jurisdiction

    The Supreme Court held 6/14/04 that foreign plaintiffs cannot pursue antitrust claims in U.S. courts where the adverse foreign effect of the anticompetitive conduct is independent of any adverse domestic effect. The Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), which provides that the Sherman Act does not apply to conduct involving trade or commerce with foreign nations, creates an exception for conduct that significantly harms imports, domestic commerce, or American exporters. The Court reasoned that principles of comity counsel against applying the FTAIA exception where foreign conduct causes independent foreign harm that alone gives rise to an antitrust claim. Applying U.S. antitrust laws under such circumstances would create a serious risk of interference with the sovereign authority of other nations to regulate their commercial affairs. The Court also reasoned that the language and history of the FTAIA suggest that Congress designed the Act to clarify, and perhaps to limit, but not to expand the scope of the Sherman Act as to foreign commerce. The case is important to any company facing antitrust claims based upon multinational transactions affecting U.S. commerce.

     

    Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP   (U.S. Supreme Court)

    Antitrust essential facilities doctrine

    The NAM filed an amicus brief supporting manufacturers’ right not to be subject to general jurisdiction for lawsuits in any state. A Louisiana court held that Hunt Refining Co. could be sued in Louisiana by an out-of-state plaintiff for alleged exposure to benzene in Mississippi on the theory that the company could be sued for any claims arising elsewhere in the country because the company registered to do business in Louisiana. Manufacturers should not be subjected to burdensome lawsuits in states where they do not have continuous and systematic contact. The NAM’s brief argued that 1) the theory that a company is subject to general jurisdiction was rejected by the U.S. Supreme Court; 2) companies do not relinquish fundamental due process rights by registering to do business in a state; and 3) allowing general jurisdiction in this case could turn Louisiana into a magnet for forum shopping in mass tort or other cases. In a win for manufacturers, this case was dismissed.

     


    Class Actions -- 2004



    Aspinall v. Philip Morris Cos., Inc.   (Massachusetts Supreme Judicial Court)

    Certification of class action for fraud without reliance

    The NAM filed an amicus brief supporting a lower court ruling that decertified a class of plaintiffs that alleged an unfair and deceptive practice for marketing Marlboro Lights with the descriptors “Lights” and “lowered tar and nicotine.” The plaintiffs alleged that the price of cigarettes should have been lower because some smokers may compensate for the low nicotine by smoking more, thus undermining the claim of low nicotine. We opposed certifying a class on a “diminished value” claim whereby plaintiffs could recover under a theory that they paid more than they should have for the cigarettes, since every product defect claim could be converted from a contract claim to a fraud claim. Also, fraud-on-the-market theories have been rejected in the securities context, and “no injury” class actions should be rejected as well.

    The Massachusetts Supreme Judicial Court ruled 8/13/2004 that the class was properly certified, saying that consumers need not have relied on the allegedly deceptive advertising. The plaintiffs need not prove any actual physical harm to recover for deception. They will be allowed to try to prove that the price they paid for the "light" cigarettes was higher than it would have been if the representations had been true. Moreover, even if they cannot prove actual damages, they are entitled to recover statutory damages simply because the deceptive act occurred.

    Three dissenting judges argued that the Massachusetts statute requires that members of the class must show that the deceptive practice actually caused an injury.

     


    Criminal Liability -- 2004



    McNab v. United States   (U.S. Supreme Court)

    Mens rea

    The NAM joined with the National Association of Criminal Defense Lawyers, the NFIB Legal Foundation and the National Wilderness Institute in an amicus brief supporting Supreme Court review of an Eleventh Circuit decision upholding 8-year prison sentences for individuals who imported lobsters into the United States in violation of Honduran regulations. The defendants were prosecuted under the federal Lacey Act, which prohibits importing fish and wildlife in violation of foreign laws. Our amicus brief argued that cases like this eliminate the requirement of mens rea, or criminal intent, from prosecutions for "public welfare offenses" by business people. Public welfare offenses typically have involved modest penalties for regulatory violations, but more laws are criminalizing such violations, and now the Lacey Act criminalizes violations of foreign laws. On 2/23/04, the Court declined to review this appeal.

     


    Discovery -- 2004



    Intel Corp. v. Advanced Micro Devices, Inc.   (U.S. Supreme Court)

    Discovery of documents

    The Supreme Court held 6/21/04 that 28 U.S.C. § 1782 – which authorizes federal courts to allow discovery by “interested person[s]” for use “in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation” – authorizes, but does not require, federal district courts to provide discovery to “interested person[s]” in foreign proceedings. The Supreme Court noted that, in determining whether assistance is appropriate under Section 1782, courts should consider the following factors: (1) whether the person from whom discovery is sought is a participant in the foreign proceedings, as the need for assistance generally is not as apparent where a foreign tribunal can exercise its own jurisdiction over those appearing before it to order the production of evidence; and (2) whether – after taking into account the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government, court or agency to federal-court assistance – the Section 1782 request conceals an attempt to circumvent foreign proof-gathering limits or other policies of a foreign nation or the United States. Further, the Supreme Court stated that courts may reject or trim unduly intrusive or burdensome Section 1782 requests. This case is important to any business that is, or could become, involved in proceedings before foreign tribunals.

    The NAM filed an amicus brief supporting Intel's appeal.

     


    Environmental -- 2004



    Alaska, Department of Environmental Conservation v. EPA   (U.S. Supreme Court)

    EPA authority over state CAA permitting

    The Supreme Court held 1/21/04, in a 5-4 decision, that the Environmental Protection Agency (“EPA”) may override a state’s exercise of authority under Section 169(3) of the Clean Air Act (“CAA”), 42 U.S.C. § 7479(3). Under the CAA, a new facility in an “attainment,” or already-clean, area must use the “best available control technology” (“BACT”) to control the emission of certain regulated pollutants. Section 169(3) provides that a “permitting authority” (ordinarily a state environmental agency) may determine the BACT for a proposed facility in an attainment area on a case-by-case basis taking into account several enumerated factors. The Supreme Court held that the BACT requirement constrains a state’s exercise of discretion under Section 169(3). It further held that the EPA had authority, under Sections 113(a)(5) and 167 of the CAA, to verify whether a state had complied with the BACT requirement and issue a stop-construction order if a state’s BACT selection is unreasonable. This case is important to any business engaging in activities that implicate the CAA or other federal statutes delegating authority to the States.

     

    Engine Manufacturers Association v. South Coast Air Quality Management District   (U.S. Supreme Court)

    Preemption of state motor vehicle emission requirements

    The Supreme Court held 4/27/04 that Section 209(a) of the Clean Air Act, 42 U.S.C. § 7543(a), preempts California air-quality-management district regulations that require certain motor vehicle fleet operators to purchase vehicles that the State has classified as “low emission” or that operate on an alternative fuel. Section 209(a) provides that no “State or political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines covered by this part.” The Court rejected arguments that the word “standard” in Section 209(a) reaches only production mandates imposed on manufacturers, and does not encompass purchase restrictions. The Court held that this argument was inconsistent with the plain meaning of “standard” and would create a nonsensical regulatory regime in which a manufacturer could not sell federally approved vehicles because state law would abrogate a purchaser’s right to buy them. The outcome of this case is important to the entire transportation industry.

    The NAM and 7 other business organizations filed an amicus brief 8/29/03 arguing that the fleet rules conflict with the Clean Air Act and are preempted.

     


    ERISA -- 2004



    Aetna Health Inc. v. Davila   (U.S. Supreme Court)

    ERISA preemption of negligence suit against employer health plan

    The Supreme Court held 6/21/04 that Section 502(a) of the Employee Retirement Income Security Act of 1974 ('ERISA"), 29 U.S.C. § 1132(a), completely preempts a state tort claim seeking damages for an allegedly erroneous determination of entitlement to a benefit under an ERISA-governed health benefit plan. The Court reemphasized its long-standing rule that “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore preempted.” The Texas statute at issue, which imposed a duty to “exercise ordinary care when making health care treatment decisions,” requires “interpretation of the terms of . . . benefit plans” as an “essential part” of the claim. Accordingly, suits under it are in fact designed “to rectify a wrongful denial of benefits promised under ERISA-regulated plans” and therefore preempted.

    The NAM joined with the American Assn. of Health Plans, the Chamber of Commerce and the American Benefits Council in a brief 8/22/03 urging the Supreme Court to rule this way. State suits threaten to expand liability, increase health care costs, compromise routine plan administration decisions, and undermine the decisions of Congress. Without a nationally uniform ERISA system, employees will face higher co-pays, higher deductibles, higher premiums and fewer drug and treatment options under employer-sponsored plans.

    The cases are important to all employers maintaining an ERISA benefits plan. The NAM will continue to work to insure that Congress does not upset the balance between encouraging employer-provided health benefits and the rights of employees and their families to prompt and accurate decisions on whether certain medical services are covered by their benefit plans. See also case # 03-83, CIGNA Healthcare of Texas, Inc. v. Calad.

     

    Central Laborers’ Pension Fund v. Heinz   (U.S. Supreme Court)

    Cutback in early retirement benefits after subsequent employment

    The Supreme Court unanimously held 6/7/04 that an amendment to a pension fund expanding the categories of post-retirement employment that trigger suspension of early-retirement benefits violates the “anti-cutback” provision of the Employee Retirement Income Security Act (“ERISA”). 29 U.S.C. § 1054(g). Participants in a multiemployer pension plan retired after qualifying for early-retirement benefits, which were conditioned on the retirees not engaging in certain types of post-retirement employment. The plan sponsor later amended the plan to expand the categories of prohibited employment. The Supreme Court held that this amendment violated ERISA’s anti-cutback rule. The Court explained that the anti-cutback provision is central to ERISA’s purpose of protecting employees’ expectations of receiving promised benefits. By placing significantly greater restrictions on the receipt of early-retirement benefits, the amendment reduced the value of respondents’ pension rights and undercut their expectations. The Court also found support for its conclusion in an IRS regulation that adopts the same reading of ERISA’s anti-cutback provision. This case is significant to all businesses that create and/or administer ERISA-governed pension plans.

     

    CIGNA Healthcare of Texas, Inc. v. Calad   (U.S. Supreme Court)

    ERISA preemption of negligence suit against employer health plan

    The Supreme Court held 6/21/04 that Section 502(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a), completely preempts a state tort claim seeking damages for an allegedly erroneous determination of entitlement to a benefit under an ERISA-governed health benefit plan. The Court reemphasized its long-standing rule that “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore preempted.” The Texas statute at issue, which imposed a duty to “exercise ordinary care when making health care treatment decisions,” requires “interpretation of the terms of . . . benefit plans” as an “essential part” of the claim. Accordingly, suits under it are in fact designed “to rectify a wrongful denial of benefits promised under ERISA-regulated plans” and therefore preempted.

    The NAM joined with the American Assn. of Health Plans, the Chamber of Commerce and the American Benefits Council in a brief 8/22/03 urging the Supreme Court to rule this way. State suits threaten to expand liability, increase health care costs, compromise routine plan administration decisions, and undermine the decisions of Congress. Without a nationally uniform ERISA system, employees will face higher co-pays, higher deductibles, higher premiums and fewer drug and treatment options under employer-sponsored plans.

    The cases are important to all employers maintaining an ERISA benefits plan. The NAM will continue to work to insure that Congress does not upset the balance between encouraging employer-provided health benefits and the rights of employees and their families to prompt and accurate decisions on whether certain medical services are covered by their benefit plans. See also case # 02-1845, Aetna Health Inc. v. Davila.

     


    Expert Testimony -- 2004



    Roberti v. Andy's Termite & Pest Control, Inc.   (California Supreme Court)

    Admissibility of expert testimony

    The NAM joined with other associations and 10 companies in an amicus letter 1/26/04 urging the California Supreme Court to review a lower court ruling that allowed an expert to testify that animal studies of pesticides and autism can be extrapolated to humans. We urge a rule similar to the landmark Daubert case that prohibits such speculative or unreliable testimony, as most states do. The Court refused to hear the appeal.

     


    Labor Law -- 2004



    Barnhart v. Thomas   (U.S. Supreme Court)

    Social Security eligibility

    The Supreme Court 11/12/03 upheld the Social Security Administration’s determination that a claimant is not disabled -- and therefore ineligible for disability insurance benefits and Supplemental Security Income -- if the claimant is able to perform her previous work, regardless of whether that previous work exists in significant numbers in the national economy. The Court held that the SSA’s interpretation of 42 U.S.C. § 423(d)(2)(A) was a reasonable one, and therefore entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). This case is important to any business that provides disability benefits and is entitled to a set-off when an employee becomes eligible for Social Security benefits.

     

    Cavin v. Honda of America, Inc.   (6th Circuit)

    FMLA notice requirements

    The NAM and the Equal Employment Advisory Council filed an amicus brief 10/23/03 supporting Honda's petition to rehear a Sixth Circuit decision that restricts that company from adopting formal reporting requirements for employees that want to avail themselves of time off under the Family and Medical Leave Act (FMLA). We argue that the court should reassess a 3-judge panel's ruling that allowed an FMLA suit to proceed. The court ruled that Honda's procedures were too strict and that it was sufficient that the employee gave "timely verbal or other notice" that he was going to miss work for reasons that satisfy the requirements for FMLA leave. We argue that companies are allowed to enforce reasonable notice procedures, that written notices need only be waived for medical emergencies, that restricted compliance requirements will discourage more generous leave benefits, and that other circuit courts are in conflict with the Sixth Circuit. Review denied 2/04.

     

    Gratz v. Bollinger   (U.S. Supreme Court)

    Equal protection

    In a 5-4 decision in Grutter, the Supreme Court 6/23/03 upheld the University of Michigan Law School’s admissions policy that allowed race to be considered as one of many factors in an individualized admissions process. Endorsing Justice Powell’s concurring opinion in Regents of the University of California v. Bakke, 438 U.S. 265 (1978), the Court first held that “student body diversity is a compelling state interest that can justify the use of race in university admissions.” Distinguishing this case from its companion, Gratz, the Court then held that the law school’s program, which centered on using race as a “plus” factor in an individualized process to achieve a “critical mass” of underrepresented minorities was constitutional because it “bears the hallmarks of a narrowly tailored plan.” Finally, the Court noted that because “the number of minority applicants with high grades and test scores has indeed increased” in the 25 years since “Justice Powell first approved the use of race to further an interest in student body diversity in the context of public higher education,” it “expect[ed] that 25 years from now, the use of racial preferences will no longer be necessary to further” that interest.

    In Gratz, the Supreme Court held 6-3 that the University of Michigan’s use of racial preferences in its undergraduate admissions violates the Equal Protection Clause of the Fourteenth Amendment, Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and 42 U.S.C. § 1981. The Court first noted that, as set forth in Grutter, the use of race in admissions can be a compelling interest capable of supporting narrowly-tailored means. However, the Court held that “the University’s policy, which automatically distributes 20 points, or one-fifth of the points needed to guarantee admission, to every single ‘underrepresented minority’ applicant solely because of race,” is not narrowly tailored to achieve the University’s asserted compelling interest in diversity. Responding to the University’s contention that more individualized consideration is “impractical” for such a large institution, the Court stated that “the fact that the implementation of a program capable of providing individualized consideration might present administrative challenges does not render constitutional an otherwise problematic system.”

    These cases are significant to all institutions of higher education. They are also important to employers and government contractors whose personnel and other decisions are subject to equal protection and similar civil rights requirements. A group of large employers supported the school's affirmative action program because it encouraged diversity in the student body, which makes a more diverse pool of potential workers from which to choose. See also case #02-241, Grutter v. Bollinger

     

    IBEW, Wal-Mart Stores, Inc. & IBM Corp.   (NLRB)

    Right to have representative in investigatory interview of non-union employee

    IBEW, Wal-Mart Stores, Inc. & IBM Corp. The NAM and other business groups urged the NLRB to reinstitute its position prior to the Epilepsy Foundation case (2000) that non-union employees do not have statutory right to have a third-party representative with them during an investigatory interview by their employer. On 6/15/04, the NLRB agreed. Because employers are subject to increasing legal obligations regarding employment discrimination, financial fraud and heightened security concerns, the Board found sufficient justification for adopting a policy that gives greater weight to the employer's right to conduct investigations than to an employee's right to have a co-worker present during a confidential interview. We were concerned that third party presence in such investigations will hinder getting at the truth and maintaining confidentiality. Employers are under substantial legal and moral pressure to fully and adequately address sexual or racial discrimination, financial malfeasance, simple theft or violence, job-impairing drug use, or terrorism and other homeland security issues. The NAM joined with the EEAC, Associated Builders & Contractors, the U.S. Chamber of Commerce, the Society for Human Resource Management and the International Mass Retail Association in the amicus brief in this case.

     

    In re California Assembly Bill 1889   (NLRB)

    Seeking injunction against state contractor labor relations restraints

    The NAM and 4 other business groups 6/28/02 urged the NLRB to sue California to enjoin the enforcement of that state’s Assembly Bill 1889, which is now law and is being enforced. We feel strongly that the National Labor Relations Act preempts the law, which pervasively regulates the labor relations activities of private sector recipients of state funds, lessors of state property, and anyone else doing business with California. It prohibits employers from using state funds and state property for a wide variety of otherwise legitimate labor relations activities, while allowing union-friendly activities such as recognizing a union without a secret ballot representation election. Before the NLRB could act, a federal court enjoined the provisions at issue. The 9th Circuit affirmed on 4/2/04 in a case captioned Chamber of Commerce v. Lockyear.

     

    Jones v. R.R. Donnelley & Sons Co.   (U.S. Supreme Court)

    § 1981 statute of limitations

    The Supreme Court unanimously held 5/4/04 that the four-year statute of limitations set forth in 28 U.S.C. § 1658 applies to a civil action brought under 42 U.S.C. § 1981(b). Section 1981(b), created by the Civil Rights Act of 1991, expanded protection of the right to “make and enforce contracts” by defining this phrase to include “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” 28 U.S.C. § 1658 creates a default four-year statute of limitations for civil actions arising under a federal statute enacted after December 1, 1990. Although Section 1981 was enacted long before December 1, 1990, the addition of subsection (b) occurred after that date. The Supreme Court held that the four-year limitations period applied, explaining that a cause of action “aris[es] under” an Act of Congress enacted after December 1, 1990, and therefore is governed by Section 1658’s 4-year statute of limitations, “if the plaintiff’s claim against the defendant was made possible by a post-1990 enactment.” This case is important to all entities that are or may become involved in litigation under 42 U.S.C. § 1981(b) or other federal statutes amended after December 1, 1990.

     

    Pennsylvania State Police v. Suders   (U.S. Supreme Court)

    Whether sexual harassment is actionable without "tangible employment action"

    The Supreme Court 6/14/04 clarified the circumstances under which employers may assert affirmative defenses to Title VII-based claims that a hostile work environment created by a supervisor culminated in constructive discharge. The Court held that , to establish “constructive discharge,” a plaintiff must show that her work environment was so intolerable that her resignation qualified as a fitting response. If “constructive discharge” is established, the employer may, consistent with the Court’s 1998 decisions in Ellerth and Faragher, assert affirmative defenses that: (i) the employer exercised reasonable care to prevent and correct the harassment, and (ii) the plaintiff unreasonably failed to take advantage of any employer-provided or other opportunities to correct or avoid harm. If, however, the plaintiff resigned in reasonable response to official employer actions changing her employment status − such as humiliating demotions, cuts in pay, or transfers − then the employer may not assert these affirmative defenses. This decision is important for all employers subject to Title VII.

     

    Raytheon Company v. Hernandez   (U.S. Supreme Court)

    ADA eligibility

    On 12/2/03, the Supreme Court decided 7 to 0 that an employer may, without violating the Americans with Disabilities Act (“ADA”), maintain a policy against rehiring former employees terminated for violating workplace conduct rules, such as testing positive for cocaine. The Ninth Circuit had held that such a policy “violates the ADA, as applied to employees with the disability of drug addiction whose only work-related offense was testing positive for drug use but are now rehabilitated.” The Supreme Court ruled that the company's "no-hire policy is a quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules." The policy was litigated under a disparate treatment analysis. As long as the employer could show a legitimate, nondiscriminatory reason for the refusal to hire, and the employee could not show that the decision was actually made on the basis of his disability, the employer wins. Unresolved was whether the employee would win under a disparate impact theory -- that is, whether the employer's no-hire policy falls more harshly on people protected by the ADA than on others. This theory was not raised in a timely manner in the litigation.

     

    Yates v. Hendon   (U.S. Supreme Court)

    Single employer ERISA plans

    The Supreme Court held 3/2/04 that a sole proprietor or sole shareholder of a business may qualify as a “participant” in a pension plan covered by the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA’s “text contains multiple indications that Congress intended working owners to qualify as plan participants.” Moreover, the Court reasoned, “Congress’ aim is advanced” by this reading: “The working employer’s opportunity personally to participate and gain ERISA coverage serves as an incentive to the creation of plans that will benefit employer and non-owner employees alike.” Accordingly, the Court held that “[i]f the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants.” This case is important to all single-owner businesses that maintain ERISA plans.

     


    OSHA -- 2004



    Trinity Inds., Inc. v. Chao   (5th Circuit)

    Specific standard prevails over general OSHA standard

    The NAM and the Shipbuilders Council of America filed an amicus brief 10/9/03 supporting Trinity's appeal of an adverse decision by the Occupational Safety & Health Review Commission relating to a citation involving hot work in a confined space. OSHA cited the company under a general standard, while its regulations say that if a particular standard is "specifically applicable" to a practice, then the particular standard prevails over any different general standard. We argued that particular standards should prevail over general standards for good reasons: particular situations may involve different feasibility, cost-benefit and significant-risk considerations, and specific standards give employers greater notice of their requirements. On 7/23/04, the Court denied the appeal, ruling that the general standard covered more than the specific and was not preempted to that extent.

     

    UAW v. Chao   (3rd Circuit)

    OSHA discretion not to regulate metalworking fluids

    The NAM and the U.S. Chamber of Commerce filed a joint amicus brief 12/16/03 opposing an effort by the United Auto Workers to force OSHA to promulgate regulations governing the use of various metalworking fluids. We argued that OSHA has discretion to decide whether to issue a regulation and is not forced to do so by an inconclusive advisory committee report. On 3/22/04, the Third Circuit ruled that even though an advisory committee recommends a standard, the Secretary of Labor still has statutory authority to exercise her discretion not to promulgate one. It was neither arbitrary nor capricious for the Secretary to set other priorities for OSHA rulemakings that deal with more serious health and safety issues. Metalworking fluids come in a variety of types, numerous combinations and many forms, and sorting out the differences and effects would consume an enormous amount of OSHA's time and resources. A union cannot demand, and the courts will not require, that OSHA undertake such an exercise except in "rare and compelling circumstances."

     


    Patents, Copyrights and Trademarks -- 2004



    Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.   (U.S. Supreme Court)

    Jurisdiction over patent claims in Fed. Cir.

    The Supreme Court decided 6/3/02 that a defendant’s assertion of a patent law counterclaim does not grant the U.S. Court of Appeals for the Federal Circuit (which has exclusive jurisdiction over patent appeals) appellate jurisdiction where the plaintiff’s complaint does not allege a claim arising under patent law. The Court recognized that the Federal Circuit is vested with exclusive appellate jurisdiction wherever the district court’s jurisdiction is based on 28 U.S.C. § 1338, which confers “original jurisdiction of any civil action arising under any Act of Congress relating to patents . . . .” Because Section 1338(a) uses the same “arising under” language as 28 U.S.C. § 1331, which confers general federal-question jurisdiction, the Court extended the “well-pleaded-complaint” rule to Section 1338. The Court held that “whether a case ‘arises under’ patent law ‘must be determined from what necessarily appears in the plaintiff’s statement of his own claim in the bill or declaration.’” (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808 (1988)). Thus, the Court’s decision clarifies that the “well-pleaded-complaint” rule applies to both Section 1331’s federal-question jurisdiction and Section 1338’s patent jurisdiction not only where the defendant raises a federal or patent-law-based defense (as dictated by the Court’s previous rulings), but also where the defendant brings a federal or patent-law-based counterclaim in response to litigation. This decision is important to all corporations that hold patent rights and/or litigate patent-related disputes.

     

    Peterson v. BASF Corp.   (Minnesota Supreme Court)

    Consumer dispute over product pricing

    NOTE: The Minnesota Supreme Court heard this case twice. This is the first time they heard this case. On 12/29/00, the NAM filed an amicus brief with the Minnesota Supreme Court challenging the application of New Jersey’s Consumer Fraud Act to the differential pricing and distribution of two herbicides with the same active ingredient. At the end of January, that court declined to hear this appeal.

    The more expensive herbicide was registered under state law for use on both major and minor crops. However, the newer and less expensive product was registered only for use on major crops, even though the EPA permits its use on minor crops. A group of farmers who grow minor crops filed suit against BASF under a New Jersey unfair competition statute prohibiting "unconscionable commercial practices." The appellate court found that BASF could be held liable for not selling the newer product for minor crop use due to the difference in pricing between the two similar herbicides.

    The NAM urged a reversal of the appellate court’s ruling, as this application of the New Jersey statute effectively forces compulsory licensing of a valid United States patent for a field of use the patent holder chose not to exploit. This not only infringes on federal patent rights, but also discourages firms from devoting substantial resources to the discovery, development and marketing of inventions that may require higher pricing to be profitable.

    After trial, the NAM filed an amicus brief 8/21/02 supporting BASF's appeal of an adverse jury award, treble damages and costs totaling over $52 million. The appeal involved a variety of issues under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), patent law, pesticide law and consumer fraud law. The NAM's brief argued that the New Jersey law is preempted by federal patent law because patent owners are entitled to license the use of patented products with restrictions. A "field of use" restriction is a valid right of patent owners, where they can license a patented product for a particular market or application. In addition, we argue that a state may not question the validity of a patent under its own consumer fraud laws. Patent issues are the exclusive province of the federal patent system and must be decided under federal law.

    On 3/11/03, the court rejected the appeal, allowing the award to stand, without discussing the NAM argument. It found that the trial judge did not abuse his discretion and that an issue involving class certification had been previously appealed. The Minnesota Supreme Court agreed to review this case, and upheld the jury verdict on 2/19/2004.

     

    Peterson v. BASF Corp.   (Minnesota Supreme Court)

    Patent rights

    The NAM and the American Chemistry Council joined forces to file an amicus brief 6/25/03 in the Minnesota Supreme court urging the court to recognize that the New Jersey Consumer Fraud Act is preempted by federal patent law with respect to issues relating to marketing of patented products. On 2/19/04, the court upheld a jury award of $56 million.

     


    Preemption -- 2004



    Nixon v. Missouri Municipal League   (U.S. Supreme Court)

    Preemption of municipal cable networks

    The Supreme Court held 3/24/04 that Section 101(a) of the Telecommunications Act of 1996, 47 U.S.C. § 253, does not “affect the power of States and localities to restrict their own (or their political inferiors’) delivery of [telecommunications] services.” Under the Act, States and localities may not “prohibit[] the ability of any entity” to provide interstate telecommunications services. With this decision, the Court interpreted the term “any entity” to encompass private entities and not public entities, although the Court declined to establish a precise line between the two categories. The Court reasoned that the text “any entity” does not necessarily include public entities because “‘any’ can and does mean different things depending on the setting.” In addition, federal preemption of state and local prohibitions on public entities would lead to “strange and indeterminate results,” owing to the fact that such entities still would require funding and, in the case of some political subdivisions, an independent source of authority to provide telecommunications services. Finally, the alternative interpretation would “interpos[e] federal authority between a State and its municipal subdivisions” and thereby would contravene the rule that, absent a plain statement to the contrary, federal statutes should be “read in a way that preserves a State’s chosen disposition of its own power.” This decision is important to the entire telecommunications industry.

    The NAM is part of the High Tech Broadband Coalition, which joined with the Fiber-to-the-Home Council in an amicus brief 10/24/03 on the merits of this appeal. The brief argued that municipalities are a critical force driving the deployment of broadband in rural America, and that Congress intended the Act to promote competition and accelerate deployment. The Court's decision allows states to restrict the deployment of broadband systems by local governments.

     


    Product Liability -- 2004



    Chemtall Inc. v. Madden   (West Virginia Supreme Court)

    Medical monitoring class action

    The NAM joined with other groups on 8/2/04 urging the West Virginia Supreme Court to overturn a ruling that certified as a class action a suit seeking medical monitoring of healthy employees and their children in seven states under different state laws for exposure to polyacrylamide at 8 companies. Because the laws and standards for applying them are so different for each state, some plantiffs' claims are not typical of the entire class. Instead, the class action should include residents of West Virginia and individuals who allege that injuries occurred to them in West Virginia. The NAM joined with the West Virginia Manufacturers Association, the U.S. Chamber of Commerce, the American Chemistry Council, the Coalition for Litigation Justice and the Property Casualty Insurance Association of America.

    On 12/2/04, the court agreed. It threw out the class certification order, saying the lower court had (1) failed to conduct a meaningful analysis of the variations in the laws of the several states included in the class action, (2) failed to conduct a thorough analysis and make detailed findings when deciding whether the plaintiff’s representatives presented claims and defenses typical of the class (that is, based on the same legal theory), (3) improperly included subclasses that had no representatives from other states whose laws differ from West Virginia's, and (4) improperly concluded that the statute of limitations had not yet begun to run. This is a significant limitation on attempts by trial attorneys in West Virginia to overstate the size and reach of a class action law suit.


    Related Documents:
    Summary of Chemtall v. Stern (same case on appeal)  (February 28, 2008)

     

    City of Chicago v. Beretta U.S.A. Corp.   (Illinois Supreme Court)

    Public nuisance

    The Illinois Supreme Court 11/18/04 dismissed an improper "public nuisance" suit against multiple gun manufacturers. The city of Chicago had alleged that defendants created a public nuisance because they knowingly or recklessly sold guns that they knew would be possessed illegally. Chicago sought an injunction based upon ongoing costs to public health and safety even though defendants were generally in compliance with all state and federal laws. The court, in conformance with the NAM's amicus brief, refused to acknowledge "a public right to be free from the threat that some individuals may use an otherwise legal product (be it a gun, liquor, car) in a manner that may create a risk of harm to another."

    The court acknowledged that defendant's lack of control of the guns at the time of their illegal use would not have precluded plaintiffs' claim. However, the court declined to establish causation because the criminal acts were too remote to establish a legal basis for a nuisance claim. Furthermore, the court held that the criminal misuse of the guns was not a foreseeable result of the lawful sale of the firearms. If plaintiffs' theory had been accepted, the city would have been able to ask trial courts to use their injunctive power to regulate firearms through the judiciary rather than the legislature.

     

    District of Columbia v. Beretta U.S.A.   (D.C. Court of Appeals)

    Negligent marketing and public nuisance liability

    The NAM opposes the District of Columbia's law suit that attempts to hold gun manufacturers liable for damages resulting from the criminal misuse of guns. The District is another jurisdiction that is trying to use aggressive theories of "negligent marketing" and "public nuisance" to garner jury verdicts against manufacturers of legal products that are later misused. Our brief argued that DC legal precedents clearly do not allow such suits for negligence, and there can be no public nuisance claim when the manufacturer does not control the property at the time it is alleged to be creating the nuisance. On 4/29/04, the Court of Appeals ruled that individual common-law negligence and DC’s public nuisance claims must be dismissed. It allowed individual strict liability claims to proceed under DC’s automatic and semi-automatic weapons ban, as well as subrogation claims by the DC government for medical costs arising from such claims. Plaintiffs will still have to prove on remand that a particular manufacturer’s weapon was responsible for their injuries. The court rejected a Commerce Clause challenge to the impact of DC’s law on the legal manufacture and sale of firearms in other states.

     

    Ileto v. Glock   (9th Circuit)

    Negligent marketing and public nuisance liability

    The NAM filed an amicus brief 12/18/03 supporting Glock's petition for rehearing en banc and urging the Ninth Circuit to overturn a ruling that allows negligent marketing and public nuisance claims to be litigated against manufacturers of guns that were eventually used by criminals. On 5/28/04, the Ninth Circuit refused to rehear the case, over strong dissents from 8 judges, sending it back for trial. This case affects any manufacturer of lawful, non-negligently produced products that can foreseeably be criminally misused.

     

    Rhyne v. Kmart Corp.   (North Carolina Supreme Court)

    Constitutionality of state cap on punitive damages

    The NAM joined with the American Tort Reform Association 7/17/03 in an amicus brief urging the North Carolina Supreme Court to uphold the constitutionality of that state's statutory cap on punitive damages at $250,000 or three times compensatory damages, whichever is greater. The court agreed on 4/2/04, recognizing the validity of the state legislative power to decide appropriate levels of punitive damages in civil litigation.

     

    Shannon v. Boise Cascade   (Illinois Supreme Court)

    Suit for deceptive advertising by consumers who did not hear ads

    The NAM filed an amicus brief 3/17/03 urging reversal of an appellate court decision that allows consumers to sue product manufacturers for defects under state consumer fraud act (tort), when the proper remedy should be under contract law. Unless the ruling is changed, consumers who never heard alleged misrepresentations in advertising could still sue for deceptive advertising. On 4/2/03, the Supreme Court of Illinois refused to accept the NAM brief, but the result nevertheless turned out well.

    The Illinois Supreme Court ruled on 2/5/04 that consumers who do not hear deceptive advertising cannot sue the manufacturer for damages related to the advertising. The court rejected the theory that the advertising created a market that would not have otherwise existed, thus giving rise to a claim for damages for plaintiffs who made purchases in that market. This is a substantial victory for Boise and all manufacturers whose products are advertised and sold to consumers in Illinois, and is additional precedent for the argument that this fraud-on-the-market theory should not be accepted other states.

     

    State Farm Mutual Auto Insurance Co. v. Campbell   (U.S. Supreme Court)

    Punitive damages

    The NAM filed a brief 8/23/04 asking the Supreme Court to review once again an adverse decision of the Utah Supreme Court in this punitive damages case against State Farm. In 2003, the Court issued a landmark ruling settting strict standards under which lower courts may allow the imposition of punitive damages. The Utah court all but ignored several of these standards when the case came back to it for review. State Farm appealed that ruling, which imposed a $9 million punitive damages award on top of a $1 million award for emotional distress. The NAM argued that Utah should comply with the Supreme Court's pronouncements that the historical tradition of double, treble and quadruple damages is "instructive" and that, when compensatory damages are "substantial," a 1:1 ratio may be the constitutional maximum. We also urged the Court to enforce the "third guidepost," involving the disparity between the punitive damages award and "civil penalties authorized or imposed in comparable cases." We argued that a $9 million award, when Utah's legislature imposes a $10,000 fine on comparable claims under the Unfair Claims Practices Act, is an attempt to eviscerate the third guidepost as a meaningful constraint. On 10/4/04, the Supreme Court denied review of the appeal.

     

    Union Pacific Railroad Co. v. Barber   (U.S. Supreme Court)

    Wealth as a factor in assessing punitive damages

    The NAM joined with the American Tort Reform Association in a brief 9/10/04 urging the Supreme Court to review an Arkansas Supreme Court decision that allowed the use of evidence of the wealth of the defendant to justify an enormous punitive damages award in a non-fatal personal injury railroad-crossing negligence case. In the punitive damages phase of this case, the only evidence the jury was given was evidence of the net worth of the defendant, and the state supreme court also referenced the defendant's financial position and net worth. A $25 million punitive damage award was assessed on top of a $5 million compensatory damages award. We argued that the U.S. Supreme Court should provide guidance on this issue, and not allow conduct alleged to have occurred in other states to infect an award in Arkansas. Allowing evidence of wealth innevitably arouses the passions and prejudices of a jury, and improperly takes the focus away from the wrongful act and puts in on a company that reinvests its earnings rather than distributes them to its shareholders. The Supreme Court declined to hear this appeal on 10/12/04.

     

    Young v. Bryco Arms, Inc.   (Illinois Supreme Court)

    Public Nuisance

    The Illinois Supreme Court ruled 11/18/04 that a public nuisance theory of liability cannot be used against a company that lawfully manufactures and non-negligently sells products -- here, handguns – when there is an intervening transfer of the product to a third party and that person criminally misuses the product. The case had threatened to undermine the ability of any manufacturer to produce and sell products that are lawful and non-defective, simply because they may be criminally misused by some remote possessor of the product, even many years after the original sale by the manufacturer. Most courts have rejected the public nuisance theory in such cases, but a few troubling jurisdictions that are allowing these cases to proceed could wreak havoc on manufacturers.

    The Court based its ruling on the legal definition of public nuisance. The claim requires proof of a public right, the defendant’s substantial and unreasonable interference with that right, evidence that such interference proximately caused an injury, and the fact of an injury. Examining only the proximate causation issue, it ruled that the acts of the manufacturers do not constitute a legal cause of injury because the causation between their acts (manufacturing the products and selling them to dealers) and the ultimate injury was broken by the intervening criminal acts of third parties not under their control. Those criminal acts are not reasonably foreseeable, just as it is not reasonably foreseeable that an automobile owner who lends his car to another would reasonably expect that person to lend it to a third person who will use it to commit a crime. Any other rule would make the manufacturer of a car liable for the acts of anyone who drove the car, a strict liability rule that is goes beyond reasonable foreseeability. In this case, some of the guns used in the crimes went through six or eight sets of hands before reaching the ultimate criminal users.

    The court recognized the highly regulated nature of the firearms industry, and concluded that legal liability for the misuse of guns is a legislative decision and is not within the province of the judicial branch to create.

    The NAM filed an amicus brief 3/26/03 urging the Illinois Supreme Court to rule the way it did.

     


    Securities Regulation -- 2004



    Alliant Energy Corp. v. Bridge   (U.S. Supreme Court)

    Wisconsin regulation of out-of-state acts by utility holding companies

    The NAM, the Edison Electric Institute, the American Gas Assn., and the National Assn. of Water Companies filed a joint amicus brief supporting review and reversal of a Seventh Circuit decision that allows state regulation of out-of-state investments and transactions of public utility holding companies. The law prohibits investors from buying stock without state approval and blocks the company from owning 25% or more of non-utility assets. The Court declined to review this case on 1/12/04.

     

    SEC v. Edwards   (U.S. Supreme Court)

    Definition of securities

    The Supreme Court 1/13/04 held unanimously that “an investment scheme promising a fixed rate of return can be an ‘investment contract’ and thus a ‘security’ subject to the federal securities laws.” In the case before the Court, investors had purchased payphones from a promoter’s subsidiary and had leased them back to the promoter in exchange for promises of fixed monthly payments. The Court reaffirmed that a contract is an “investment contract” if it “involves an investment of money in a common enterprise with profits to come solely from the efforts of others.” This definition encompasses “the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” The appropriate focus is the promise of “profits” in the form of a financial return – whether fixed or variable – to the investor. The profits to the investor can be expected “to come solely from the efforts of others” even if the promised return is guaranteed by contract and does not depend upon the profitability of the investment scheme as a whole. This decision is important to all businesses engaged in activities that are, or could be, subject to SEC oversight.

     


    Taxation and State Taxation -- 2004



    Florida Power & Light Co. v. United States   (Federal Circuit)

    Highway excise tax

    The NAM is a member of the Mobile Machinery Coalition, which, along with the Edison Electric Institute, the National Rural Electric Cooperative Association and the American Gas Association, filed an amicus brief 10/24/03 supporting a challenge to a lower court interpretation that certain very heavy mobile equipment (with attached pintle hooks) is subject to substantial highway excise taxes. On 7/8/04, the Court ruled that there is no exemption from excise taxes for heavy mobile equipment with pintle hooks. Many pieces of mobile equipment are affected, including electric utility maintenance equipment, digger derricks, concrete pumpers and well-servicing equipment. The ruling affects not only annual excise taxes, but also federal fuel excise taxes, a twelve percent retail excise tax, and an excise tax on replacement tires, with a combined annual cost of hundreds of millions of dollars to industry. The Mobile Machinery Coalition is working on a legislative solution to this problem.

     

    Lippe v. Bairnco Corp.   (2nd Circuit)

    Unpublished opinions

    The NAM sent a letter to the U.S. Court of Appeals for the Second Circuit saying that its decision in this asbestos bankruptcy case is important and should be published, so that it can be cited as precedent for other cases. The decision involved the point at which a company becomes insolvent, which occurs when its assets are less than its "probable liability" on existing debts as they become absolute and matured. According to the court, the future claims of persons exposed to asbestos -- but not yet symptomatic -- are not accrued tort claims and do not give rise to a debtor-creditor relationship under New York law. Thus, a company with numerous suits by asymptomatic asbestos claimants can continue to carry on its business without considering such claims as debts and without risking having payments made to others subject to challenge as "fraudulent" under the bankruptcy laws.

     


    Civil Procedure -- 2003



    Intel Corp. v. Hamidi   (California Supreme Court)

    Mass e-mails as trespass to property

    The California Supreme Court ruled 6/30/03 that sending thousands of e-mail messages to company employees is not a "trespass to chattels" under California law. To give rise to a cause of action, such e-mail must in some way damage or harm the company's computer server, and the messages in this case did not rise to that level. The only damage to the company was the cost required to deal with reactions to the content of the e-mail messages, but that was not damage to the computer system itself.

    The NAM and 6 other groups had filed an amicus brief on 8/7/02 urging the court to rule otherwise. The former employee's e-mails questioned job security and the trustworthiness of supervisors, recruited for clandestine networks and pressured valued employees to quit their jobs. We argued that the company should have been able to obtain an injunction against the abusive e-mail. The NAM joined with the following groups in the brief: California Employment Law Council, California Manufacturers & Technology Association, eBAY, Inc. Information Technology Industry Council, Semiconductor Industry Association and Silicon Valley Manufacturing Group.

     

    National Park Hospitality Ass'n v. U.S. Dep't of the Interior   (U.S. Supreme Court)

    Federal government contracts

    The Supreme Court held 5/27/03 that a facial challenge to a regulation promulgated by the National Park Service, which defines the term “concession contract,” was not ripe for judicial review. The regulation at issue, 36 C.F.R. § 51.3, defines “concession contracts” as “not contracts within the meaning of” the Contract Disputes Act of 1978 (“CDA”), 41 U.S.C. § 601 et. seq., which provides certain procedural safeguards to parties who contract with the federal government. Petitioner, a non-profit trade association that represents concessioners doing business in the national parks, challenged the validity of the National Park Service regulation. The Supreme Court ruled, however, that petitioner’s challenge was not ripe for judicial review because it had failed to demonstrate (1) hardship; and (2) that the issue presented was ripe for judicial review. On the hardship prong, the Court reasoned that the regulation merely expresses the Park Service’s view on whether a concession contract is a contract within the meaning of the CDA, but does not create any “adverse effects of a strictly legal kind” because the Park Service is not empowered to administer the CDA. On the ripeness prong, the Court held that, although the issue presented was a “purely legal one,” further factual development and a concrete dispute would aid judicial resolution of this issue. Justice Stevens concurred in the judgment, on the basis that petitioner lacked standing because it had not alleged a sufficient injury in fact. Justice Breyer, joined by Justice O’Connor, dissented. This case is important to any business that contracts to provide goods or services to the federal government.

     


    Class Actions -- 2003



    Dow Chemical Co. v. Stephenson   (U.S. Supreme Court)

    Class action settlements

    The Supreme Court 6/9/03 chose not to resolve a circuit split on the questions of whether res judicata bars relitigation of adequacy of representation through a collateral attack on a class action settlement and, if it does not, whether adequacy of representation should be determined as of the time of the original litigation or in view of subsequent developments in the law and facts. Veterans who claimed to suffer post-1994 injuries as a result of exposure to Agent Orange collaterally attacked a $180 million class settlement benefiting veterans with pre-1994 claims. One group (“the Isaacson respondents”) filed in state court and were removed to federal court, while another (“the Stephenson respondents”) filed directly in federal court. The Second Circuit held that the veterans had not been adequately represented in the class action and that res judicata did not bar relitigation of the issue. In a per curiam opinion, the Supreme Court vacated the Second Circuit’s judgment as to the Isaacson respondents and remanded the case for further consideration in light of Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28 (2002), which held that the All Writs Act is not a substitute for original jurisdiction and therefore cannot provide an independent ground for removal. As to the Stephenson respondents, an equally-divided Court affirmed the Second Circuit. This case is important to parties involved in class action litigation in the federal courts as well as parties seeking removal of cases from state courts.

    The NAM filed an amicus brief in this case.

    Decision Below: 273 F.3d 249 (2d Cir. 2001)

     

    Green Tree Financial Corp. v. Bazzle   (U.S. Supreme Court)

    Arbitration of class action suits

    The Supreme Court 6/23/03 remanded this case, which concerns the issue of whether a court may graft class-action procedures onto an arbitration agreement covered by the Federal Arbitration Act ("FAA"), for further consideration. The Court found the language of the parties’ contract sufficiently unclear to preclude resolution of the issue. No provision clearly allowed or prohibited class arbitration, and the Court concluded that the contract’s requirement that disputes be resolved by "one arbitrator selected by us [Green Tree] with consent of you [Green Tree’s customer]" was not inconsistent with class arbitration because it did not require selection and consent of an arbitrator by every class member. By requiring the parties to submit "[a]ll disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract" to an arbitrator, the Court found the parties’ contract also required the question of whether the contract allows class arbitration to be submitted to and decided by the arbitrator. The Court distinguished this question from "gateway matters" for court decision, such as "whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy." This case is important to all businesses that include arbitration clauses in their contracts.

     

    Norfolk & Western Railway Co. v. Ayers   (U.S. Supreme Court)

    FELA suit for asbestos claims

    The Supreme Court decided 3/10/03, by a vote of five to four, that a railroad worker suffering from asbestosis as a result of on-the-job exposure to asbestos may recover mental-anguish damages under the Federal Employers’ Liability Act ("FELA") for a genuine and serious fear of developing cancer--with the burden on the worker to prove that his fear is genuine and serious. The Court reasoned that if a worker is sick with asbestosis, his fear of cancer "accompanies a physical injury" and is therefore compensable under existing case law. The Court also held--on this point unanimously--that FELA does not provide for apportionment of damages between railroad and non-railroad causes. A worker may recover all his damages from the railroad, leaving the railroad to seek contribution in turn from other tortfeasors. This case is of interest to all parties involved in asbestos-related litigation with common carrier railroads.

    The NAM, the Coalition for Asbestos Justice, Inc., the American Tort Reform Association, the American Chemistry Council and the American Petroleum Institute filed an amicus brief on the merits in this case. The NAM argued that companies should not be held 100% liable under a joint and several liability theory where they are in fact only minimally to blame for any damages. The courts are much to blame for the current liability crisis involving asbestos, and many having abandoned traditional procedural protections and substantive limits on recovery.

     

    Syngenta Crop Protection, Inc. v. Henson   (U.S. Supreme Court)

    No federal jurisdiction under All Writs Act in class action

    On 11/5/02, the Supreme Court unanimously ruled that a federal district court may not exercise removal jurisdiction over a state-court suit that has the potential to undermine a federal consent order. The plaintiff in Henson persisted in prosecuting an action in Louisiana state court even after stipulating in a federal class action settlement that he would dismiss the state-court action. The defendants removed the Louisiana action to federal district court, asserting federal jurisdiction under the All Writs Act, which authorizes federal courts to "issue all writs necessary or appropriate" in aid of their jurisdiction. The district court in Louisiana asserted jurisdiction and transferred the case to the district in Alabama that had approved the class action settlement. The Alabama district court dismissed the action. Parting company with the Second, Third, Sixth, Seventh, and Eighth Circuits, the Eleventh Circuit vacated the district court's order and held that neither the All Writs Acts alone nor the All Writs Act together with the federal removal statute authorized the exercise of removal jurisdiction to control "diehard" state-court litigants intent on undermining a federal consent order.

    The Supreme Court ruled that the All Writs Act does not furnish removal jurisdiction. For a case to be removed from a state to a federal court, there must be some other basis for asserting federal jurisdiction.

    This case is important to all businesses facing class action suits. The decision makes settlement agreements somewhat less certain, unless the parties make sure that the agreements are comprehensive and include state court suits. It is also possible that a settling party can ask a state court to dismiss the suit as barred by the settlement agreement, even though it can't ask the federal court to do so. The Court's decision in this case means that there must be some express judicial authority for a federal court to exercise jurisdiction, a principle that will be crucial in emerging cases under the Alien Tort Claims Act. Such express authority is also proposed in the Class Action Fairness Act legislation currently before Congress.

     


    Environmental -- 2003



    Bonnette v. Conoco, Inc.   (Louisiana Supreme Court)

    Speculative damages

    The Louisiana Supreme Court emitted a glimmer of sanity 1/28/03 when it overturned lower court rulings that made a company liable for speculative injuries and unproven damages from materials in soil taken from company property. We challenged the use of the “linear no-threshold” model of causation in tort litigation. This model essentially states that any level of exposure to a toxic agent is sufficient to cause injury.

    This is an important asbestos contamination case because the trial court and the appellate court awarded damages without any actual injuries: the claims arose from a slightly increased chance of contracting cancer and the fear of getting cancer, along with property damage. 143 plaintiffs filed suit, and then sought class action status. The trial court awarded from about $18,000 to $48,000 to individuals in 4 families.

    In its ruling, the Louisiana Supreme Court rejected 6 to 1 the trial court's awards for a "slightly" increased risk of contracting an asbestos-related disease, emotional distress and punitive damages. It allowed an award for property damage.

    The NAM supports the bedrock principle that proof that the defendant’s behavior actually caused harm should be a prerequisite to redress in our tort system lest our courts become flooded with lawyer-driven claims brought on behalf of persons who merely fear, but do not yet have and may never have, an injury.

     

    National Services Industries, Inc. v. New York   (2nd Circuit)

    Successor liability under CERCLA

    The NAM, Allied Waste Industries, Inc. and the National Solid Wastes Management Association filed an amicus brief 2/7/03 urging the court to reverse a district court ruling that holds an innocent business asset purchaser liable under CERCLA as a “successor” for Superfund damages caused by the selling company. Brief. (CERCLA is the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, which governs the clean-up of Superfund sites.)

    On 12/17/03, the court ruled, as most other federal courts have, that CERCLA does not include the "substantial continuity" doctrine. Courts must look to traditional common law rules of successor liability, instead of more liberal rules designed to expand the net of CERCLA liability. The court agreed that imposing an onerous "substantial continuity" standard would deter economically beneficial transactions and impose unpredictable liability of purchasers, depressing the price they would be willing to pay for a company's assets.

    This is a big win for NSI and other companies that want to buy the assets of other companies without assuming unknown Superfund liabilities. The case was sent back to the trial court for further proceedings, but the ruling overturned a judgment of $12,449,479.51 against NSI.

     

    United States v. Alcan Aluminum Corp.   (2nd Circuit)

    Joint CERCLA liability

    The NAM filed an amicus brief 6/5/01 with other organizations challenging a district court ruling that Alcan has joint and several liability under CERCLA for processing waste that is commingled with other wastes, without regard to its benign nature. The brief also argued that CERCLA should not be applied retroactively.

    In January, the Second Circuit ruled that Alcan could not avoid joint and several liability because its waste was not merely at background levels (since it contained PCBs that are not naturally occurring), and that the harmed caused could not be separated from the overall damage at the cleanup site. The court also ruled that CERCLA may be applied retroactively. The decision makes it harder for companies that contribute only small amounts of materials to a hazardous waste cleanup site to limit their liability for a much larger share of the cleanup costs.

     


    ERISA -- 2003



    Black and Decker Disability Plan v. Nord   (U.S. Supreme Court)

    Treating physician rule does not apply to ERISA plans

    The Supreme Court unanimously held 5/27/03 that an employer-sponsored disability plan need not defer to the determination of a patient’s treating physician as to whether benefits should be extended. Petitioner, the Black and Decker Disability Plan, denied an employee’s request for long-term disability benefits after it determined that the employee's back injury did not prevent him from doing his job. The employee’s physician, however, had a contrary view, and the employee sued petitioner. Justice Ginsburg’s opinion for the Court explained that while the Secretary of Labor has imposed the “treating physician rule” in regulations governing the Social Security disability program, the Secretary has expressly disavowed imposing the same requirement on ERISA plan administrators. Indeed, the Court stressed that deference was due to the Secretary’s view that the purposes of ERISA are best served by preserving employers’ flexibility to design procedures for processing claims under disability plans. This case is significant to all businesses that offer disability plans governed by ERISA to their employees.

    The NAM and the Michigan Manufacturers Association filed an amicus brief 2/24/03 opposing the treating physician's rule. We argued that the lower court wrongly assumed that a company cannot administer its own benefit plan without an inherent conflict of interest, even though ERISA allows for company administration. Second, the court confused an administrator’s ERISA-defined fiduciary duty to all company employees with a duty to individual employees. And third, it interfered with ERISA’s "freedom of contract" by erroneously applying Social Security’s "treating physician rule."

     

    Kentucky Association of Health Plans, Inc. v. Miller   (U.S. Supreme Court)

    Preemption of "any willing provider" statutes

    A unanimous Supreme Court held 3/2/03 that ERISA does not preempt two Kentucky statutes prohibiting health insurers from excluding willing and qualified health-care providers from "exclusive provider networks." Although ERISA generally preempts all state laws that relate to any employee benefit plan, laws regulating insurance, banking or securities are saved from preemption. The Court established a two-pronged test for determining whether a state statute regulates insurance, and thus is not preempted by ERISA: First, is the statute "specifically directed toward entities engaged in insurance"? Second, does the law "substantially affect the risk pooling arrangement between the insurer and the insured"? The Court held that the Kentucky statutes’ consequential effects on health-care providers did not alter the fact that they are specifically directed toward entities engaged in insurance. It further held that by forcing health insurers to expand the class of health-care providers from whom an insured may receive health services, and thereby undermining the insurer’s ability to obtain discounted rates from providers in return for exclusive access to its members, the laws substantially affect the risk-pooling arrangement between insurer and insured. The decision in this case is important to all businesses involved in the health-care industry.

    The NAM filed a joint amicus brief 9/11/02 arguing that "any willing provider" laws do not benefit employees because they do not compel doctors to join an MCO, and they do not restrain cost increases because doctors who might otherwise reduce costs to gain volume will be unwilling to do so in a fully open network. If anything, costs will increase from the volume of credentialing, education, billing, and quality and claims management. The NAM joined with the American Association of Health Plans, Inc., the Health Insurance Association of America, and the Blue Cross Blue Shield Association in the brief.

     


    Free Speech -- 2003



    McConnell v. Federal Election Commission   (D.D.C.)

    Campaign reform

    Constitutionality of Bipartisan Campaign Reform Act of 2002.

    The NAM and 3 other organizations sued the Federal Election Commission and the Federal Communications Commission for a permanent injunction against enforcing the new Bipartisan Campaign Reform Act of 2002 (BCRA). The BCRA seeks to ban core political speech by corporations for a period that may range from 30 days to more than a full year before a federal election. The complaint charged that, "Merely using common ways of referring to pending legislation, such as the 'Shays-Meehan' . . . or 'Kennedy-Kassebaum' bills, may expose corporations and labor organizations to criminal penalties." In addition, a fall-back provision is unconstitutional because it prohibits, at all times, companies from financing any broadcast communication that "promotes or supports . . . or attacks or opposes a candidate" and "also is suggestive of no plausible meaning other than an exhortation to vote for or against a specific candidate." The NAM suit charged that this language violates core First Amendment rights and due process.

    The suit also challenged a new provision that expands and obscures the existing ban on corporate speech that is "coordinated" with a candidate, campaign or political party. The provision repealed an existing regulatory definition of "coordination" and instructs the FEC to issue a new regulation that conforms with vague and intrusive standards of "coordination." Another provision expanded company reporting requirements to speech that does not expressly advocate the election or defeat of a candidate, and even required reporting of prospective communications irrespective of whether the communications are actually made.

    On 5/2/03, the district court issued a splintered, 1600-page decision striking down the limitations of soft money contributions from corporations, unions and individuals, limiting issue ads if they appear to urge the election or defeat of a candidate, and deciding that the definition of coordination of speech (one of the NAM's issues) was upheld. An appeal to the Supreme Court was filed. On May 19, the district court issued a stay of its ruling, reinstating the BCRA.

     

    McConnell v. FEC   (U.S. Supreme Court)

    Constitutionality of Bipartisan Campaign Reform Act of 2002

    The NAM and 3 other organizations sued the Federal Election Commission and the Federal Communications Commission for a permanent injunction against enforcing the new Bipartisan Campaign Reform Act of 2002 (BCRA). The BCRA seeks to ban core political speech by corporations for a period that may range from 30 days to more than a full year before a federal election. The complaint charged that, "Merely using common ways of referring to pending legislation, such as the 'Shays-Meehan' . . . or 'Kennedy-Kassebaum' bills, may expose corporations and labor organizations to criminal penalties." In addition, a fall-back provision is unconstitutional because it prohibits, at all times, companies from financing any broadcast communication that "promotes or supports . . . or attacks or opposes a candidate" and "also is suggestive of no plausible meaning other than an exhortation to vote for or against a specific candidate." The NAM suit charged that this language violates core First Amendment rights and due process.

    The suit also challenged a new provision that expands and obscures the existing ban on corporate speech that is "coordinated" with a candidate, campaign or political party. The provision repealed an existing regulatory definition of "coordination" and instructs the FEC to issue a new regulation that conforms with vague and intrusive standards of "coordination." Another provision expanded company reporting requirements to speech that does not expressly advocate the election or defeat of a candidate, and even required reporting of prospective communications irrespective of whether the communications are actually made.

    On 5/2/03, the district court issued a splintered, 1600-page decision striking down the limitations of soft money contributions from corporations, unions and individuals, limiting issue ads if they appear to urge the election or defeat of a candidate, and deciding that the definition of coordination of speech (one of the NAM's issues) was upheld. On May 19, the district court issued a stay of its ruling, reinstating the BCRA. In July, the NAM filed its brief on the merits.

    The Supreme Court ruled 12/10/03 that most of the BCRA is constitutional.

     

    Nike, Inc. v. Kasky   (U.S. Supreme Court)

    Protection for commercial speech

    The Supreme Court 6/26/03 dismissed the writ of certiorari in this case as improvidently granted. Nike arose out of Nike’s efforts to answer critics who accused it of mistreating and underpaying foreign workers. Mark Kasky sued Nike for what amounted to false advertising under the "private attorney general" provisions of two California statutes. Nike argued that the First Amendment barred the suit. The California Supreme Court held that Nike’s statements defending itself were a form of “commercial speech” subject to regulation. That court remanded for further proceedings, noting that it was not clear whether Nike had made any false statements. The U.S. Supreme Court granted certiorari to answer two questions: (1) whether a corporation participating in a public debate may face liability for false advertising on the ground that its statements are a form of commercial speech designed to affect consumer behavior; and (2) assuming a corporation’s statements in a public debate are commercial speech, whether the First Amendment permits a legal regime like California’s. Justice Stevens, joined by Justice Ginsburg in full and Justice Souter in part, concurred to explain three grounds for dismissing the writ: the judgment was not final, neither party had standing to invoke the jurisdiction of the Court, and pragmatic reasons counseled against premature adjudication of the important constitutional questions presented. Justices O’Connor, Kennedy, and Breyer dissented from the dismissal.

    The case is important to all businesses and could have far-reaching effects on state and federal law regulating advertising. The issue could return to the Supreme Court in the future.

    The NAM filed an amicus brief 2/28/03 supporting Nike. We argued that a manufacturer responding to attacks on its products or business practices should enjoy the same protections enjoyed by others who enter public debate. The Supreme Court has already recognized that just because there is an economic motivation does not mean that the speech is any less protected under the First Amendment.

     


    Government Regulation -- 2003



    Pharmaceutical Research & Manufacturers of America v. Walsh   (U.S. Supreme Court)

    State authority to compel product rebates

    In a highly splintered opinion, the Supreme Court concluded 5/19/03 that the “Maine Rx Program” does not violate the Commerce Clause and could not be preliminarily enjoined from implementation on preemption grounds. The Program authorizes the State of Maine to negotiate agreements with drug companies for rebates on Medicaid drug purchases. Further, where no rebate agreement is entered with respect to a drug, the State may subject the drug to a “prior authorization” procedure, under which a doctor’s prescription will not qualify for reimbursement approval unless authorized by a state agency. The Court held that the Program does not violate the Commerce Clause because it does not regulate the price of any out-of-state transaction and does not impose a disparate burden on out-of-state competitors. Six justices also concluded that the district court erred when it preliminarily enjoined the Program on the ground that it was preempted by the Medicaid Act. No five Justices could agree, however, on a single rationale for this result.

    A plurality of Justices (Justices Stevens, Souter and Ginsburg) held that the Medicaid Act conferred substantial discretion on States such that a state rebate program could modestly undercut the Act without being preempted by it. Moreover, any determination about the Program’s impact on a Medicaid patient’s access to drugs would be sheer conjecture during a preliminary hearing. In an opinion concurring in part and concurring in the judgment, Justice Breyer took a similar tack, concluding that the Program could not be enjoined on preemption grounds simply upon a showing that the Medicaid Act would be harmed. Rather, Justice Breyer concluded that a court would have to conduct a careful balancing of harm and benefit and should give the Secretary of Health and Human Services an opportunity to comment on a State’s rebate program before enjoining it.

    Justice Scalia provided a fifth vote for the result in the case, but adopted an entirely different approach to the preemption question in his concurrence in the judgment. He concluded that the only remedy permitted for a State’s failure to comply with its Medicaid Act obligations is set forth in the Act itself –- termination of funding by the Secretary. The instant suit was thus entirely improper. Justice Thomas also authored an opinion concurring in the judgment, but adopting a separate rationale. He concluded that the Program is not preempted as a matter of law because neither the Medicaid Act nor the relevant regulations contains a provision precluding States from negotiating prices for non-Medicaid drug purchases.

    Finally, Justice O’Connor wrote a dissenting opinion on the preemption issue (in which the Chief Justice and Justice Kennedy joined), reasoning that the Program related to no purpose of the Medicaid Act and impeded its goal of helping the Act’s beneficiaries access medically necessary prescription drugs.

     


    International -- 2003



    Dead Sea Bromine Co. v. Patrickson   (U.S. Supreme Court)

    Foreign Sovereign Immunities Act

    The Supreme Court held 4/22/03 that a corporation may invoke the protections of the Foreign Sovereign Immunities Act (“FSIA”) only if a foreign state itself, as distinguished from another government corporation, directly owns a majority of the corporation’s shares, and even then only if the foreign state owns those shares at the time the complaint is filed. The two companion cases involved a pair of Israeli chemical companies that the Israeli government owned through several intermediate holding companies. By the time suit was filed in state court in Hawaii, Israel had privatized the companies. After the named defendants impleaded them into the case, the Israeli companies invoked the FSIA to remove the case to federal court. The Supreme Court offered two alternative grounds for holding that the Israeli companies were not entitled to invoke the FSIA. First, Congress intended that corporate formalities apply to questions of “ownership” under the FSIA. Here, Israel did not “own” the companies; instead, it owned shares of other companies that in turn owned shares of the chemical companies. Second, even if Israel had owned the companies within the meaning of the FSIA at one time, the companies still would not have qualified for the protections of the Act, because Israel had sold its interest in them by the time suit was filed. Relying on Congress’s use of the present tense in the relevant provision and drawing an analogy to diversity jurisdiction, the Court concluded that a corporation’s status under the FSIA should be determined at the time of filing of the complaint. Justices Breyer and O’Connor dissented on the first point, finding no policy reason why Congress would distinguish between directly owned subsidiaries and subsidiaries owned through an intermediate holding company. The decision is important to all parties who are, or have dealings with, companies indirectly owned by foreign governments.See also case # 01-593, Dole Food Co. v. Patrickson

     

    Dole Food Co. v. Patrickson   (U.S. Supreme Court)

    Foreign Sovereign Immunities Act

    The Supreme Court held 4/22/03 that a corporation may invoke the protections of the Foreign Sovereign Immunities Act ("FSIA") only if a foreign state itself, as distinguished from another government corporation, directly owns a majority of the corporation’s shares, and even then only if the foreign state owns those shares at the time the complaint is filed. The two companion cases involved a pair of Israeli chemical companies that the Israeli government owned through several intermediate holding companies. By the time suit was filed in state court in Hawaii, Israel had privatized the companies. After the named defendants impleaded them into the case, the Israeli companies invoked the FSIA to remove the case to federal court. The Supreme Court offered two alternative grounds for holding that the Israeli companies were not entitled to invoke the FSIA. First, Congress intended that corporate formalities apply to questions of "ownership" under the FSIA. Here, Israel did not "own" the companies; instead, it owned shares of other companies that in turn owned shares of the chemical companies. Second, even if Israel had owned the companies within the meaning of the FSIA at one time, the companies still would not have qualified for the protections of the Act, because Israel had sold its interest in them by the time suit was filed. Relying on Congress’s use of the present tense in the relevant provision and drawing an analogy to diversity jurisdiction, the Court concluded that a corporation’s status under the FSIA should be determined at the time of filing of the complaint. Justices Breyer and O’Connor dissented on the first point, finding no policy reason why Congress would distinguish between directly owned subsidiaries and subsidiaries owned through an intermediate holding company. The decision is important to all parties who are, or have dealings with, companies indirectly owned by foreign governments. See also case # 01-594, Dead Sea Bromine Co. v. Patrickson

     

    Wisconsin Project on Nuclear Arms Control v. U.S. Dep't of Commerce   (D.C. Circuit)

    FOIA not available for export license applications

    To receive permission to export products that have dual uses – i.e., both commercial and military – manufacturers must supply the federal government with confidential information about the transactions. The plaintiffs in this case sought information from more than 10,000 applications under the Freedom of Information Act (FOIA), claiming that a significant lapse in the Export Administration Act could not be fixed by statutory language retroactively extending the date when the EAA was in effect.

    The NAM filed an amicus brief in this case on July 26, 2002, urging the court to affirm a ruling that validated the FOIA exemption protecting the confidentiality of dual-use export license applications. Ultimately, the court ruled that the exemption was still valid even though the Export Administration Act had technically lapsed, since Congress intended its protections to remain in force under other authorities.

     


    Issue Advocacy -- 2003



    Ex parte Campbell   (Texas Court of Criminal Appeals)

    Grand jury investigation of protected speech

    The NAM filed an amicus letter 7/11/03 urging a Texas appellate court to order a halt to contempt citations against employees of the Texas Association of Business. These executives were ordered to answer grand jury questions relating to protected speech (issue advocacy) without a showing that the speech was subject to regulation by the state. The NAM believes that issue advocacy is entitled to full constitutional protection. The petition was denied on 10/10/03.

     


    Jurisdiction -- 2003



    Anschutz v. Superior Court   (California Supreme Court)

    Long-arm jurisdiction

    The NAM and the Washington Legal Foundation filed an amicus letter in the Supreme Court of California urging that court to review a decision involving California's long-arm jurisdiction over an out-of-state defendant. We argued that California must not claim personal jurisdiction over an individual (or a parent corporation) simply because that person owns a company that does business in California. While such a company might be subject to litigation in California, their owners, including individuals and corporations, should not be likewise subject to suit unless they engage in activities that satisfy minimum constitutional due process requirements that would put them on notice. The issue is important, especially in light of California's increasing reputation for anti-business litigation, because corporations and individuals will be less likely to invest in companies that do business in California if their personal or corporate assets will be put in jeopardy.

    The court declined to review this appeal.

     


    Labor Law -- 2003



    Breuer v. Jim’s Concrete of Brevard, Inc.   (U.S. Supreme Court)

    Removal of FLSA cases from state to federal court

    The Supreme Court unanimously held 5/19/03 that the provision of the Fair Labor Standards Act of 1938 ("FLSA") providing that suit "may be maintained...in any Federal or State court of competent jurisdiction" does not bar removal of an FLSA action from state to federal court. The federal removal statute, 28 U.S.C. § 1441(a), provides that if an action over which the federal district courts have original jurisdiction is brought in state court, it may be removed by the defendant to federal district court "[e]xcept as otherwise expressly provided by Act of Congress." The Supreme Court held that there was no question that this FLSA suit could have been brought initially in federal district court. And 29 U.S.C. § 216(b)’s "may be maintained" language is ambiguous, and thus does not "expressly" prohibit removal. This case is important to all entities that are or may become involved in litigation brought in state court under the FLSA.

     

    Desert Palace, Inc. v. Costa   (U.S. Supreme Court)

    Direct evidence not required in mixed motives cases

    The Supreme Court 6/9/03 held unanimously that a plaintiff need not present direct evidence of discrimination in order to obtain a “mixed-motive” jury instruction under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (the “Act”). In a “mixed-motive” case, both legitimate and illegitimate reasons motivated the employment decision at issue. Under the Act, “an unlawful employment practice is established” if the plaintiff demonstrates that his or her race, color, religion, sex, or national origin was a “motivating factor,” but an employer can limit the available remedies by demonstrating that it “would have taken the same action in the absence of the impermissible motivating factor.” The Court emphasized the fact that, in defining the term “demonstrates” to mean satisfaction of “the burdens of production and persuasion,” the Act does not include language that would require these burdens to be met by direct evidence or some other heightened showing. The Court reasoned that, in the face of the statute’s silence, it would be inappropriate to depart from the conventional rule of civil litigation that requires a plaintiff to prove his case by a preponderance of the evidence, using direct or circumstantial evidence. This decision, which rejects the heightened evidentiary burden previously recognized by several courts of appeals, is important to all employers covered by Title VII and similar statutes.

     

    Grutter v. Bollinger   (U.S. Supreme Court)

    Equal protection

    In a 5-4 decision in Grutter, the Supreme Court 6/23/03 upheld the University of Michigan Law School’s admissions policy that allowed race to be considered as one of many factors in an individualized admissions process. Endorsing Justice Powell’s concurring opinion in Regents of the University of California v. Bakke, 438 U.S. 265 (1978), the Court first held that “student body diversity is a compelling state interest that can justify the use of race in university admissions.” Distinguishing this case from its companion, Gratz, the Court then held that the law school’s program, which centered on using race as a “plus” factor in an individualized process to achieve a “critical mass” of underrepresented minorities was constitutional because it “bears the hallmarks of a narrowly tailored plan.” Finally, the Court noted that because “the number of minority applicants with high grades and test scores has indeed increased” in the 25 years since “Justice Powell first approved the use of race to further an interest in student body diversity in the context of public higher education,” it “expect[ed] that 25 years from now, the use of racial preferences will no longer be necessary to further” that interest.

    In Gratz, the Supreme Court held 6-3 that the University of Michigan’s use of racial preferences in its undergraduate admissions violates the Equal Protection Clause of the Fourteenth Amendment, Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and 42 U.S.C. § 1981. The Court first noted that, as set forth in Grutter, the use of race in admissions can be a compelling interest capable of supporting narrowly-tailored means. However, the Court held that “the University’s policy, which automatically distributes 20 points, or one-fifth of the points needed to guarantee admission, to every single ‘underrepresented minority’ applicant solely because of race,” is not narrowly tailored to achieve the University’s asserted compelling interest in diversity. Responding to the University’s contention that more individualized consideration is “impractical” for such a large institution, the Court stated that “the fact that the implementation of a program capable of providing individualized consideration might present administrative challenges does not render constitutional an otherwise problematic system.”

    These cases are significant to all institutions of higher education. They are also important to employers and government contractors whose personnel and other decisions are subject to equal protection and similar civil rights requirements. A group of large employers supported the school's affirmative action program because it encouraged diversity in the student body, which makes a more diverse pool of potential workers from which to choose. See also case #02-516 Gratz v. Bollinger

     

    State ex rel. Diehl v. O'Malley   (Missouri Supreme Court)

    Jury trial in employment discrimination case

    The NAM filed a joint amicus brief with Associated Industries of Missouri, the Greater Kansas City Chamber of Commerce, the Missouri Bankers Association, and the Missouri Chamber of Commerce and Industry urging the Missouri Supreme Court to affirm ruling that state’s Human Rights Act on employment discrimination provides trial by judge, not by jury. We argued that the Act is clear on its face, and is supported by legislative history and the Missouri Constitution. Allowing jury trials in such cases would burden small manufacturers, clog the courts and lead to venue shopping.

    On 1/28/03, the Missouri court held there is a right to trial by jury for money damages.

     

    Washington Employers Concerned About Regulating Ergonomics v. Washington Dept. of Labor and Industries   (Washington State Supreme Court)

    Ergonomics regulation

    The NAM joined with hundreds of companies and other associations in a brief 11/13/02 on the appeal of an adverse ruling in a case where the business community challenged the validity of Washington's new ergonomics regulation. The brief argues in part that the issuance of the rule violated the Regulatory Reform Act of 1995 by not having a cost-benefit analysis prior to adoption, that the eventual cost-benefit analysis was poor, and that the Department exceeded its statutory authority in attempting to regulate simple physical activity in the workplace.

    On 11/4/03, Washington voters approved the ballot initiative rescinding the Washington State ergonomics rule. The initiative would also bar the state from adopting another ergonomics rule unless a federal standard is put in place. The overreaching ergo regulation would have required all employers (private and public) to identify jobs likely to cause "work-related musculoskeletal disorders." Employers then would have been required to do whatever was "technologically or economically feasible" to eliminate ergonomic hazards. This state regulation was as bad as the old Clinton federal ergonomics regulation.

    A big congratulations to the Washington State business community--especially the NAM ’s state affiliate, The Association of Washington Business-- for its part in rescinding the regulation. This is a very big victory for all of the business community especially manufacturers. It is also a substantial loss for the unions because future adoption of comprehensive, but misguided, ergonomics rules at the state level will be even more difficult.

     


    OSHA -- 2003



    Consolidated Appeal of ANSI Z365 Standard   (ANSI)

    Management of Work-Related Musculoskeletal Disorders

    The American National Standards Institute (ANSI) accredited a committee to develop a national consensus standard on work-related musculoskeletal disorders. The committee finalized its work, and the NAM, the National Coalition on Ergonomics and 16 other organizations filed a joint appeal to ANSI on 1/24/03. Our appeal opposed the standard because: (1) it was developed by a committee that does not represent all affected interests, (2) it did not adequately consider objections during the process, (3) it raised barriers to participation, manipulated the work and gave inadequate notices, and (4) the final result is not a true consensus of views. Adoption of this standard represents an end-run around the process of developing a national position on ergonomics at the U.S. Department of Labor. There was great concern that the proposed ANSI standard would be used by OSHA in the future as the basis for "general duty clause" citations against manufacturers.

    On 10/7/03, the ANSI Executive Standards Council (ExSC) found that there were serious questions as to “whether the NSC has been able to satisfy fully [the criterion of providing continuity of administrative oversight and support of its standards activities] in the past and whether it will be willing and able to do so going forward.” It expressed particular concern about the continuing delay in answering the appeal filed in January and its “passive” responses to questions about its commitment in the future.

    In light of these concerns, the ExSC imposed three conditions on NSC: (1) it must reaffirm its willingness to provide the resources necessary to serve as the Secretariat of ASC Z365, (2) it must hold a hearing on all pending appeals within 60 days, and (3) it must be audited by ANSI's Audit Director. If these conditions are not met, “then the accreditation of ASC Z365 with NSC as the Secretariat shall be withdrawn and any affected ANSs [American National Standards] shall also be withdrawn.”

    On 10/29/03, In a very big victory for the NAM and its members, the NSC decided to surrender its role as secretariat to the Z365 Committee. A consensus could not be reached after the NSC spent 13 years and over a half million dollars working with the flawed committee. The Z365 proposal would not have carried the same weight as an OSHA ergonomics regulation, but the NAM and its members were concerned that OSHA could have used the voluntary ergonomics “consensus” standard to cite companies as a recognized hazard under its General Duty Clause.

     


    Patents, Copyrights and Trademarks -- 2003



    Dastar Corp. v. Twentieth Century Fox Film Corp.   (U.S. Supreme Court)

    Liability for illegal copying under the Lanham Act

    The Supreme Court held 6/2/03 in Dastar that a party who distributes a creative work taken from the public domain does not violate Section 43(a) of the Lanham Act, which prohibits the “false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion . . . as to the origin . . . of [its] goods.” Dastar copied a series of videotapes created by Twentieth Century Fox, labeled the product with a different name, and marketed it without attribution to Fox. The Supreme Court held that Section 43(a) only prohibits a party from misrepresenting the identity of “the producer of the tangible product sold in the marketplace.” “The consumer who buys a branded product does not automatically assume that the brand-name company is the same entity that came up with the idea for the product, or designed the product – and typically does not care whether it is. The words of the Lanham Act should not be stretched to cover matters that are typically of no consequence to purchasers.” Here, the tangible product at issue are videotapes that Dastar produced, and the Lanham Act does not prohibit Dastar from distributed these tapes without crediting Fox as the company that originally created the television series. This case is important to all businesses who create or distribute works subject to the Lanham Act’s provisions.

     

    DVD Copy Control Association, Inc. v. Bunner   (California Supreme Court)

    No First Amendment right to decrypt DVDs

    On 7/11/02 the NAM joined with Microsoft, AOL Time Warner, Boeing, Ford Motor Company and others in a brief on the merits asking the Supreme Court of California to overturn a lower court's decision allowing a website operator to publish a computer program that will defeat encrypted security codes on DVDs. The issue extends well beyond DVD copying to the routine theft and destruction of the intellectual property of American businesses. We believe an injunction is appropriate and that there is no countervailing right of free speech.

    On 8/25/03, the California court agreed, ruling that an injunction against the offending program does not violate the publisher's free speech rights. Although computer code is entitled to protection as speech, the court held that the trade secrets law was "content neutral." Its purpose is to promote and reward innovation and technological development and maintain commercial ethics. This purpose was sufficient to allow a restraint on the website operator.

     

    Eldred v. Ashcroft   (U.S. Supreme Court)

    New copyright Act is constitutional

    The Supreme Court held 1/15/03, by a 7-2 margin, that the 1998 Copyright Term Extension Act’s (“CTEA”) twenty-year base copyright term enlargement for pre-enactment works does not violate either the Copyright and Patent Clause’s directive that copyright protection be “for limited Times” or the First Amendment’s speech protections. In rejecting petitioners’ Copyright Clause arguments, the Court relied heavily on the concession that the CTEA’s base copyright term qualifies as a “limited Tim[e]” when applied to post-enactment works. The Court reasoned that a time span appropriately limited as applied to future copyrights does not cease to be limited when applied to existing copyrights. It further relied on Congress’ consistent practice of applying previous copyright- and patent-term extensions to existing and future works. Finally, the Court held that, in enacting the CTEA, Congress rationally determined that longer copyright terms would encourage restoration and public distribution of works and rationally responded to a 1993 European Union directive establishing a copyright term of life plus seventy years but denying this protection to any national of a non-European Union country that does not confer reciprocal protections. The Court further held that CTEA does not violate the First Amendment, reasoning that the temporal proximity of the adoption of First Amendment and the Copyright and Patent Clause indicates the Framers’ view that the limited monopoly conferred by a copyright is compatible with principles of free speech. Moreover, the CTEA did not abrogate many First Amendment protections built into copyright law, including the doctrine of "fair use" and the extension of protection only to expression, and not ideas. The Eldred decision is important to any business that owns copyrights or seeks to use copyrighted materials.

     

    Moseley v. V Secret Catalogue, Inc.   (U.S. Supreme Court)

    Trademark dilution

    The Supreme Court unanimously held 3/4/03 that the Federal Trademark Dilution Act, 15 U.S.C. § 1125(c), requires the owner of a famous mark to show actual dilution of his mark – not merely a likelihood of dilution – in order to obtain injunctive relief against another person’s commercial use of a mark or trade name. The Court reasoned that the statutory language requires this result by making injunctive relief available if the other person’s use of a mark “causes dilution of the distinctive quality” of the famous mark. The Court also provided limited clarification of the types of evidence that can prove actual dilution, which the statute defines as a reduction in “the capacity of the famous mark to identify or distinguish goods or services.” 15 U.S.C. § 1127. Proof of the consequences of dilution (such as loss of sales or profits) is not necessary. On the other hand, “at least where the marks at issue are not identical, the mere fact that consumers mentally associate the junior user’s mark with a famous mark is not sufficient.” Consumer surveys or other direct evidence of dilution may be necessary, but not if circumstantial evidence proves dilution, as when junior and senior marks are identical. This decision is important to any business that owns a famous mark or uses a mark or trade name that is similar to a senior, famous mark.

     

    Peterson v. BASF Corp.   (Minnesota Court of Appeals)

    Preemption by patent laws of state consumer fraud suit

    The NAM filed an amicus brief 8/21/02 supporting BASF's appeal of an adverse jury award, treble damages and costs totaling over $52 million for a suit alleging violation of the New Jersey Consumer Fraud Act and other claims. The appeal involved a variety of issues under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), patent law, pesticide law and consumer fraud law. The NAM's brief argued that the New Jersey law is preempted by federal patent law because patent owners are entitled to license the use of patented products with restrictions. A "field of use" restriction is a valid right of patent owners, where they can license a patented product for a particular market or application. In addition, we argue that a state may not question the validity of a patent under its own consumer fraud laws. Patent issues are the exclusive province of the federal patent system and must be decided under federal law.

    On 3/11/03, the court rejected the appeal and allowed the case to go forward on theories of negligence and public nuisance.

     


    Preemption -- 2003



    American Insurance Association v. Garamendi   (U.S. Supreme Court)

    Impact of state law on US foreign relations

    The Supreme Court held 5-4 on 6/23/03 that the California Holocaust Victim Insurance Relief Act (“HVIRA”) interferes with the President’s conduct of the nation’s foreign policy and is therefore preempted. The HVIRA required, as a condition to state licensure, that all insurers provide certain details about every insurance policy issued by them in Europe between 1920 and 1945 and provides Holocaust victims with a private right of action to compel payment of insurance claims if the insurer is, at the time of suit, legally related to the issuer of the policy. Applying its decision in Zschernig v. Miller, 389 U.S. 429 (1968), the Court held that “resolving Holocaust-era insurance claims . . . is a matter well within the Executive’s responsibility for foreign affairs” and is a matter “in which national, not state, interests are overriding.” The HVIRA stands in “clear conflict” with the Executive’s policies and practices to resolve Holocaust-era insurance claims and therefore must yield. Justice Ginsburg, joined by Justices Stevens, Scalia, and Thomas, dissented. She would have held that because “no executive agreement or other formal expression of foreign policy disapproves of state disclosure laws like the HVIRA,” the statute survives preemption. This case is specifically important to insurers, but is more broadly important to businesses who face increasing efforts by states to regulate conduct that touches upon foreign affair.

     


    Product Liability -- 2003



    Ford Motor Co. v. Smith   (U.S. Supreme Court)

    Punitive damages

    The NAM joined with 11 other business groups 4/4/03 seeking review of two multimillion dollar punitive damages awards. We argued that the Court needs to provide clear guidance on the standards for punitive damages in product liability cases: (1) when are design decisions sufficiently reprehensible to warrant a punitive sanction, (2) what ratio of punitive damages to actual damages is appropriate (63 to 1 in Romo and 5 to 1 in Smith), (3) how should punitive damages relate to comparable criminal conduct, and (4) what about other juries that exonerate or also punish defendants for the same design decisions. These appeals were be affected by the Court's landmark punitive damages decision in State Farm v. Campbell on 4/8/03, and were vacated and sent back for further proceedings. The Ninth Circuit reduced the Romo award from $290 million to $24 million on 11/25/03. See also Ford Motor Co. vs. Romo

     

    Ford Motor Co. v. Romo   (U.S. Supreme Court)

    Punitive damages

    (S. Ct., petitions for cert.) -- The NAM joined with 11 other business groups 4/4/03 seeking review of two multimillion dollar punitive damages awards. We argued that the Court needs to provide clear guidance on the standards for punitive damages in product liability cases: (1) when are design decisions sufficiently reprehensible to warrant a punitive sanction, (2) what ratio of punitive damages to actual damages is appropriate (63 to 1 in Romo and 5 to 1 in Smith), (3) how should punitive damages relate to comparable criminal conduct, and (4) what about other juries that exonerate or also punish defendants for the same design decisions. These appeals were be affected by the Court's landmark punitive damages decision in State Farm v. Campbell on 4/8/03, and were vacated and sent back for further proceedings. The California Court of Appeal reduced the Romo award from $290 million to $24 million on 11/25/03. See also Ford Motor Co. v. Smith

     

    In re Bridgestone/Firestone North American Tire, L.L.C.   (Texas Supreme Court)

    Forum non conveniens

    The NAM joined with the American Tort Reform Association and the American Legislative Exchange Council 5/19/03 supporting an appeal arguing that Texas courts should dismiss a group of lawsuits brought by 197 plaintiffs from Mexico and Venezuela against a tire manufacturer for car accidents occurring in those countries. We argued that the Texas legislature cracked down on foreign suits and intended for Texas courts to dismiss cases where so many factors favor having the case heard elsewhere. The courts need to support the legislature's attempts to clean up that state's former reputation as a magnet jurisdiction for jackpot justice, particularly when foreign plaintiffs have so much to gain by coming here. The motions for mandamus and rehearing were denied on 6/5/03.

     

    James v. Arcadia Machine & Tool   (N.J. Super. Ct. App. Div.)

    Public nuisance claim in gun suit

    The NAM supported this appeal of a trial court ruling that a suit against a manufacturers (here, handguns) could go forward on aggressive new theories of negligent marketing and public nuisance. The NAM brief, filed 6/19/02, argues that an allegation that a product is defectively manufactured should be handled under the relevant New Jersey statute, and that a general allegation about loss to a municipality could result in a company having no liability to the victim of a crime or accident but rather having liability to a municipality where the injury occurred. This case should be heard as a product liability suit, not as a public nuisance suit.

    On 3/11/03, the court rejected the appeal and allowed the case to go forward on theories of negligence and public nuisance.

     

    Sprietsma v. Mercury Marine   (U.S. Supreme Court)

    Preemption by Federal Boat Safety Act

    The Supreme Court unanimously held December 3, 2002 that the Federal Boat Safety Act (“FBSA”) does not preempt state common-law tort actions based on an alleged duty to install propeller guards on recreational motorboats. The Court held that the FBSA does not expressly preempt such claims because the statute’s preemption provision is “specific and detailed,” whereas its savings provision is “general” in its preservation of “liability at common law.” Moreover, such a reading does not produce “anomalous results” because Congress could rationally decide not to preempt common-law claims that “necessarily perform an important remedial role in compensating accident victims.” The Court further held that the Coast Guard’s decision not to regulate propeller guards does not impliedly preempt propeller-guard claims because that decision “reveals only a judgment that the available data did not meet the FBSA’s ‘stringent’ criteria for federal regulation” and does “not convey an ‘authoritative’ message of a federal policy against propeller guards.” Finally, the Court held that the FBSA does “not so completely occupy the field of safety regulation of recreational boats as to foreclose state common-law remedies.” This decision is the latest in a series of recent preemption rulings from the Court and is important to all businesses facing product liability claims involving a federal safety-regulation backdrop.

     


    Punitive Damages -- 2003



    State Farm Mutual Auto Insurance Co. v. Campbell   (U.S. Supreme Court)

    Landmark decision setting standards for punitive damages

    The Supreme Court 4/7/03 struck down a $145 million punitive damages award in a case where full compensatory damages were $1 million. The Court stated that substantive due process requirements ordinarily prohibit a punitive award where the ratio between punitive damages and compensatory damages exceeds single digits. When the compensatory award is substantial, as in the case before the Court, the Constitution often will limit a punitive award to the amount of the compensatory award. The Court also concluded that the $145 million award improperly punished the defendant for an alleged nationwide scheme of misconduct. The Court reasoned that states generally lack authority to punish extraterritorial conduct, regardless of whether that conduct was unlawful where it occurred. A punitive damages award also may not be used to punish and deter conduct that bears no relation to the plaintiffs’ harm. This case is important to any business that is or may become subject to liability for punitive damages.

    The NAM filed an amicus brief on 8/19/02 arguing that the application of Utah's punitive damages law to conduct in other states that is not directly related to injury in Utah violates the Full Faith and Credit Clause of the Constitution.

     


    RICO Act -- 2003



    PacifiCare Health Systems, Inc. v. Book   (U.S. Supreme Court)

    Enforceability of arbitration clause

    Finding the issue not yet ripe for review, the Supreme Court refused on 4/7/03 to determine whether parties could be compelled to arbitrate RICO claims even if the relevant arbitration provisions prohibited recovery of "punitive" or "extracontractual" damages (ostensibly affording claimants less than "meaningful relief" given that their RICO treble damages claims would therefore be barred). In particular, the Court found the arbitration provisions to be ambiguous in light of the Court’s prior characterization of RICO treble damages claims as remedial in nature. Because the parties did not appear to expect initial resolution of this contractual ambiguity by the courts and it was unclear how the arbitrator would interpret the relevant provisions, the Court reversed the lower courts’ refusal to grant the motion to compel arbitration. The eventual outcome of this case is important to any business which includes in its agreement mandatory arbitration provisions that bar the recovery of punitive damages.

    The NAM filed an amicus brief supporting the enforceability of the arbitration clause.

     

    Scheidler v. NOW, Inc.   (U.S. Supreme Court)

    Injunctive relief in RICO cases

    The Supreme Court decided 2/26/03 that injunctive relief is not available against anti-abortion protesters for "extortion" in a private suit under the Racketeer Influenced and Corrupt Organizations Act (RICO). The 8-to-1 ruling held that blocking an abortion clinic was not extortion under the Hobbs Act because the protesters did not obtain any property. Interfering with the use of the property, and even shutting down the facility, does not constitute extortion, and the property owners could not bring an action under RICO.

    The Court did not reach a second issue in the case -- whether a private plaintiff may obtain an injunction under Sec. 1964(c) of RICO.

     


    Statute of Limitations -- 2003



    O'Connor v. Boeing North American, Inc.   (9th Circuit)

    Statute of limitations

    The NAM and six other organizations filed an amicus brief urging review of a Ninth Circuit panel's decision that California’s long-standing “discovery rule” for determining when the statute of limitations begins to run is preempted by federal law (42 U.S.C. § 9658). We prefer a rule whereby the clock begins to run when the plaintiff “knew or should have known of the injury and its cause.” The Ninth Circuit's decision overturns 100 years of precedent and makes it easier to bring suits against manufacturers. It conflicts with rulings in several other states, and creates a new federal "knowledge" standard.

    The petition for review was denied.

     


    Taxation and State Taxation -- 2003



    Boeing Co. v. United States   (U.S. Supreme Court)

    Federal taxation

    The Supreme Court held 3/4/03, in a 7-to-2 decision, that Treasury Regulation § 1-861-8(e)(3) is a proper exercise of the IRS’s authority to interpret Internal Revenue Code § 861. The regulation requires, for purposes of computing the tax liability of export subsidiaries, the allocation of research and development costs based on categories enumerated in the Standard Industrial Classification, rather than a company’s chosen grouping. The Internal Revenue Code defers or, in some cases, waives the tax liability of export subsidiaries known as Domestic International Sales Corporations ("DISCs") and Foreign Sales Corporations ("FSCs"). This decision is important to any domestic corporation that has organized DISCs and FSCs and thus has a strong incentive to allocate costs in a way that maximizes these subsidiaries’ profits.

     


    ADEA -- 2002



    Adams v. Florida Power Corp.   (U.S. Supreme Court)

    Disparate impact claims under ADEA

    The Supreme Court on 4/1/02 dismissed this appeal. The lower court's decision stands. The Supreme Court was to decide whether a plaintiff can sue under the Age Discrimination in Employment Act (ADEA) for age discrimination on the grounds that a facially neutral policy of the employer has a disparate or uneven impact on people age 40 and above. This case involves a series of terminations that the plaintiffs alleged impacted older employees more than younger ones. The Eleventh Circuit agreed with the lower court that these types of "disparate impact" claims are not covered under the ADEA. Although such claims are covered under Title VII of the Civil Rights Act of 1964 for other kinds of discrimination, the court found that the ADEA specifically allows an employer to take action based on "reasonable factors other than age." Other courts of appeals are widely divergent on how to handle disparate impact claims under the ADEA. The Eleventh Circuit's ruling means that employees may still be able to prove that an employer actually discriminated on account of age, but they may not simply rely on statistics showing that the burden of a particular policy falls disproportionately on older workers.

     


    Class Actions -- 2002



    Devlin v. Scardelletti   (U.S. Supreme Court)

    Class action settlement appeals

    Resolving a circuit split, the Supreme Court held 6/10/02 that a nonnamed class member who has timely objected to a class settlement at a fairness hearing can bring an appeal without intervening. The Court recognized that only parties to a lawsuit or those that become parties may appeal, but noted that it had never restricted the right to appeal to named parties. The Court reasoned that a nonnamed party’s objections cannot effectively be served by the named class representatives, because once the named representatives reach a settlement over objections of other class members, the interests of the two groups diverge. The fact that nonnamed class members are not considered parties for purposes of the complete diversity requirement of 28 U.S.C. § 1332 is not decisive, as they may be parties for some purposes and not for others. The Court rejected the argument that class members should be required to formally intervene for purposes of appeal, noting that intervention would serve little purpose and that a procedure allowing nonnamed class members to object at the fairness hearing without intervening should also allow them to appeal the district court’s decision to reject their objections. This decision is important to all businesses that are or may become involved in class actions.

     

    Ford Motor Co. v. McCauley   (U.S. Supreme Court)

    Requirements for diversity jurisdiction

    The Supreme Court granted certiorari 2/19/02 to resolve a circuit split regarding whether the cost to the defendant of complying with an injunction sought by a plaintiffs' class satisfies the federal diversity statute's $75,000 amount-in-controversy requirement. The plaintiffs' class in the Ford case sought an injunction reinstating a rebate program offered by the defendants. According to plaintiffs, the cost to the defendants of complying with the proposed injunction would have exceeded the $75,000. The circuit courts are nearly evenly split over how to value an injunction for jurisdictional purposes, with about half looking to the benefit each individual plaintiff would derive from the proposed injunction and half looking to the higher of the benefit to each plaintiff or the cost to the defendant of compliance. The Ninth Circuit compromised and held that the correct approach depends on the "nature of and value of the right asserted." If each plaintiff or class member is asserting an individual right, the court must consider the cost to the defendant, but only the cost of an injunction running in favor of one plaintiff. If the right is "common and undivided," the court must consider the higher of the benefit to each plaintiff or the cost to the defendants of a judgment in the plaintiffs' favor. This case is of interest to all companies involved in class action litigation in the federal courts.

    On 10/15/02, the Court dismissed its review of the case as improvidently granted.

     

    General Electric Capital Corp. v. Thiessen   (U.S. Supreme Court)

    Certification of class actions

    On 2/12/02, the NAM filed an amicus brief urging review of a 10th Circuit ruling that trial judges may not look at the merits of a case to determine whether to certify it as a class action. The certification decision is the crucial point in a class action case, since defendants bear tremendous pressure to settle cases after they have been certified, even if there is a good chance they will win on the merits. In our brief, the NAM argues that a judge must look at t he facts of the case to determine whether numerous plaintiffs are "similarly situated" under class action requirements. Also, we argue that the class action mechanism should not be used in employment discrimination cases that must be split into two trials (one to determine whether discrimination occurred and another to determine individual damages). The NAM brief was filed jointly with the Washington Legal Foundation. The Supreme Court declined to hear the appeal on 6/17/02.

     

    Hopeman Brothers, Inc. v. Acker   (U.S. Supreme Court)

    Aggregation of plaintiffs in asbestos ases

    The NAM joined with the Coalition for Asbestos Justice, Inc., the American Tort Reform Association, and the U.S. Chamber of Commerce in filing an amicus brief urging the Supreme Court to accept for review a ruling from the Virginia Supreme Court that compounds the problem of class action certification in general and asbestos litigation in particular. The case involves 1,300 plaintiffs and 25 defendant companies, and our brief argues that the trial court's ruling allowing a mass consolidation of claims deprives the defendants of constitutionally guaranteed due process. The trial court refused to test whether the plaintiffs have issues in common, and even admitted that consolidation would adversely affect the rights of the parties to a fair trial. Defendants did not have right to conduct basic discovery and the court did not give the defendants information on how subsequent phases of the trial would proceed. Allowing mass aggregations of claims in such circumstances invites other plaintiffs, sometimes with no injuries, to jeopardize recoveries by the truly sick, resulting in additional bankruptcies, and leading to greater pressure on solvent attenuated defendants.

     

    Lucent's 3d Supp. to Petition for Declaratory Judgment   (FCC)

    Preemption of state phone regulation

    Although not technically an amicus brief, comments filed 7/29/02 by the NAM with the Federal Communications Commission support the position that that agency should tell a Madison County, Illinois, court to dismiss a class action suit that undermines its jurisdiction. The underlying suit claims that high rental charges for home telephones and inadequate notice of alternatives hurt consumers. But the FCC has already acted to deregulate home telephone equipment, and a state court suit constitutes an indirect and retroactive regulation of the type preempted by the FCC's action. Preemption of such suits is a fundamental tenet of constitutional law, and crucial to a rational national tort liability system.

    The suit was settled in 2002, with the lawyers receiving $84.5 million in fees and expenses, the plaintiff class members receiving a total of $8.4 million in rebates, and some charities receving $50 million worth of free calling cards.

     

    Pitts v. American Security Insurance Co.   (North Carolina Supreme Court)

    Certification of class actions

    The NAM filed an amicus brief 3/4/02 urging the North Carolina Supreme Court to reverse an appeals court decision that threatens to make North Carolina a favorite jurisdiction for class action suits against manufacturers. We argue that the lower court failed to take into account important defenses and difficult damages questions before certifying the class. The initial decision to certify a class action is crucial in determining the outcome of such cases, since the certification decision, in the words of a federal appeals court, places "inordinate or hydraulic pressure on defendants to settle, avoiding the risk, however small, of potentially ruinous liability." The NAM continues to argue that judges must engage in a "rigorous analysis" of the underlying facts in a proposed class action, as well as questions relating to defenses and damages, before certifying a case as a class action.

    On 10/4/2002, the North Carolina Supreme Court split 2-2, leaving the lower court decision intact but with no precedential value.

     


    Communications -- 2002



    National Cable Television Assocation, Inc. v. Gulf Power Co.   (U.S. Supreme Court)

    FCC can regulate fees to use utility poles

    The Supreme Court held 1/16/02 that, under the Pole Attachments Act, 47 U.S.C. § 224, the Federal Communications Commission ("FCC") has authority to set reasonable rates for utility-pole attachments that provide (1) commingled cable and high-speed (“broadband”) Internet service, and (2) wireless telecommunications equipment. The Court reasoned that the Act unambiguously provides that the FCC has the authority to “regulate the rates, terms, and conditions for pole attachments,” and defines “pole attachments” to include “any attachment by a cable television system.” (emphasis added). Also relying upon the plain text of the Act, the Court further reasoned that any pole attachments by a “provider of telecommunications service,” including those “which are composed of distinctively wireless equipment,” are subject to the FCC’s rate-setting jurisdiction. This decision is important to all cable, wireless telecommunications, and utility companies.

    A split panel of the Eleventh Circuit had held that the FCC has no authority to regulate Internet service because Internet service is neither cable service nor telecommunications service. The court also held that the statute does not apply to wireless communications, relying on the statute’s definition of "utility" and the legislative history. This case is important to utility and telecommunications companies and has the potential to impact all businesses that use the Internet.

     

    Verizon Communications, Inc. v. FCC   (U.S. Supreme Court)

    FCC regulation of local telephone service

    The Supreme Court 5/13/02 upheld the authority of the Federal Communication Commission (the “FCC”) to promulgate certain regulations under the Telecommunications Act of 1996 (the “Act”). The challenged regulations, among other things, (1) required state utility commissions to set the rates charged by incumbent local telephone service companies for leasing network elements in keeping with a prescribed "forward-looking economic cost" calculation, and (2) required incumbents to combine such elements at the request of new entrants leasing these elements from them. Several incumbent companies challenged these regulations as beyond the FCC’s authority under the Act. The Supreme Court held that the plain language of the Act authorized the FCC to set rates on a "forward-looking" basis untied to the incumbents’ investments. The Court rejected the incumbents’ argument that the particular methodology prescribed by the FCC exceeded the FCC's authority, finding that the challenged method was a reasonable means to establish “just and reasonable” rates as allowed by the Act. Finally, the Court held that the FCC could require incumbents to combine network elements, finding that the language of the Act was ambiguous in this regard and that the FCC's rule was reasonable under Chevron. Justice Breyer, joined in part by Justice Scalia, dissented, disagreeing with the Court's conclusion "that the specific pricing and unbundling rules at issue . . . Are authorized by the Act.” This opinion is important to companies operating in the telephone industry.

     


    Criminal Liability -- 2002



    Hansen v. United States   (U.S. Supreme Court)

    Knowledge requirement in RCRA

    The NAM filed an amicus brief 2/28/02 urging the Court to review an Eleventh Circuit decision on the "responsible corporate officer" doctrine. We opposed court expansion of the doctrine to eliminate a knowledge requirement in Resource Conservation and Recovery Act (RCRA) criminal and "knowing endangerment" cases. In this case, the owner of a chemical business, his son (who served as a temporary vice president) and a supervisor were all convicted of Clean Water Act and RCRA violations and sentenced to prison, on charges brought four years after the plant closed, based on an allegation that they "knowingly endangered" the health and safety of workers. The "responsible corporate officer" doctrine has allowed prosecutions without proof that company management had actual knowledge of regulatory violations. Cert. petition denied 6/3/02.

     


    Environmental -- 2002



    American Trucking Associations, Inc. v. EPA   (D.C. Circuit)

    Ozone and particulate matter regulation

    This litigation by the NAM and other business groups against the EPA went all the way to the U.S. Supreme Court in 2001 (see Whitman v. American Trucking Associations, Inc.) . The Court remanded it to the D.C. Circuit for further proceedings regarding the validity of EPA's standard for ozone and particulate matter. On 3/26/02, the D.C. Circuit found that the EPA's 1997 NAAQS rules for PM2.5 and ozone are neither arbitrary nor capricious. The Court denied petitions for review except to the extent the Supreme Court’s 2001 decision and the D.C .Circuit’s 1999 decisions require further action by the EPA.

    The D.C. Circuit began by pointing out that its earlier decisions addressed only whether the Clean Air Act (or the EPA’s reading of the CAA) adequately limits the EPA’s discretion. However, the 3/26 decision involves whether the EPA reasonably exercised its discretion under the CAA. The Court found that the agency was not arbitrary and capricious in promulgating either rule.

    With respect to PM2.5, the Court said that the EPA need not “identify perfectly safe levels of pollutants” and need not “definitively identify pollutant levels below which risks to public health are negligible.” Importantly, the Court also rejected environmental groups’ challenges to the PM2.5 standard as insufficiently stringent.

    On ozone, the Court found that the EPA had a basis for its conclusion that the existing one-hour standard was inadequate. Based on the rulemaking docket, the Court concluded that the EPA’s choice of the 0.08 parts per million level was not arbitrary and capricious. Earlier holdings that the 8-hour ozone implementation policy is unlawful and that the EPA must consider evidence of ground-level ozone’s beneficial effects are left undisturbed by this ruling.

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Interim Guidance on federally permitted releases suspended

    The NAM and 12 other organizations sued the EPA on March 17, 2000. Its petition for review challenged the EPA's interim guidance on the definition of federally permitted releases for air emissions. As a result of the suit, the EPA suspended the Interim Guidance on 5/19/00 in a motion to the court.

    On 4/17/02 the Environmental Protection Agency (EPA) published its "Guidance on the CERCLA Section 101(10)(H) Federally Permitted Release Definition for Certain Air Emissions." This guidance supersedes the December 17, 1999 Interim Guidance, which is now deemed to be withdrawn. The NAM praised the new guidance in a press release.

    The new guidance clarifies the discussion of volatile organic compounds (VOCs) and particulate matter (PM) limits and controls and when releases of hazardous substances which are constituents of these pollutants could qualify for the FPR exemption under CERCLA [Comprehensive Environmental Response, Compensation, and Liability Act] and EPCRA [Emergency Planning and Community Right-to-Know Act]. The Guidance also adds a section addressing nitrogen oxide (NO) and nitrogen dioxide (NO2). The guidance also discusses certain releases from minor sources and announces a forthcoming guidance document that addresses grandfathered sources.

    The lawsuit was dismissed voluntarily.

     

    National Electrical Manufacturers Association v. Sorrell   (U.S. Supreme Court)

    Vermont light bulb labeling law

    The NAM joined with the Electronic Industries Alliance in an amicus brief 11/20/01 urging the Second Circuit to rehear a case in which Vermont's light-bulb labeling law was upheld. Our concern is that state laws must be narrowly tailored not to unduly interfere with the free flow of goods nationwide, and Vermont's law relating to light bulbs containing mercury could seriously disrupt the distribution system of these products. The court denied the petition for rehearing on 1/8/02.

    The NAM filed an amicus brief supporting Supreme Court review of this issue, since there are many situations where states may enact laws that purport to affect both in-state and interstate commerce equally, but that as a practical matter make it extremely expensive for manufacturers and distributors to comply with conflicting, or simply different, labeling requirements at the end-user level. The Supreme Court declined to hear this appeal on 6/10/02.

     

    New York v. Federal Energy Regulatory Commission   (U.S. Supreme Court)

    FERC regulation of access to electricity

    The Supreme Court held 3/4/02 that the Federal Energy Regulatory Commission (FERC) may require that a public utility transmit competitors' electricity over its lines on the same terms that it applies to its own energy transmissions if the utility has unbundled the cost of transmission from the cost of energy when billing its retail customers. The Court also held that FERC's decision not to impose the same requirement on utilities that continue to offer only bundled retail sales was a permissible policy choice. This case is important to all businesses engaged in the transmission or sale of energy.

     

    United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority   (U.S. Supreme Court)

    Waste flow-control regulation

    The NAM supported an appeal to the Supreme Court of an adverse ruling by the Second Circuit that would allow a municipality, country or state to impose flow-control restrictions on the interstate transportation of solid waste. Flow-control laws allow local jurisdictions to prop up their disposal facilities by preventing waste generated in the locality from being taken anywhere else. The 1994 Supreme Court decision in the Carbone case ruled that a town's law flow-control ordinance discriminated against interstate commerce. The Second Circuit in this case provided a blueprint for local governments to avoid the Carbone decision by vesting part of the ownership of private waste disposal facilities in a public entity. The NAM filed a joint brief arguing that this ruling will seriously disrupt the interstate market in solid waste disposal services, including recyclables, and is based on a myopic focus on who owns the facility. On 1/7/02, the Supreme Court declined to review this case.

     

    United States v. Power Engineering Company   (10th Circuit)

    Overfiling

    The NAM supported a challenge to a district court ruling that allowed the EPA to "overfile," or bring a separate enforcement action under the Resource Conservation and Recovery Act (RCRA) against a company already being prosecuted by the Colorado Dept. of Public Health and the Environment. Other courts of appeals have taken the NAM’s position that such overfiling is illegal. The NAM's brief was filed on 9/17/01 with the American Iron and Steel Institute, the American Petroleum Institute, the Chamber of Commerce of the United States, the Environmental Federal of Oklahoma, the Michigan Manufacturers Association and the Western States Petroleum Association. On 9/4/02, the court affirmed, ruling that EPA's interpretation of RCRA is "not unreasonable."

     


    ERISA -- 2002



    Great-West Life & Annuity Insurance Co. v. Knudson   (U.S. Supreme Court)

    Suits against ERISA beneficiaries

    By a vote of 5-4, the Supreme Court ruled 1/8/02 that an action by an ERISA fiduciary for reimbursement of payments made to a beneficiary of an ERISA plan is an action for legal relief, not equitable relief, and is therefore not covered under 29 U.S.C. § 1132(a)(3). After an automobile accident left Janette Knudson a paraplegic, her health plan paid benefits totaling approximately $411,000 to her medical providers. The plan included a provision entitling it to recover third-party benefits paid to Knudson for her medical expenses. After Knudson settled a lawsuit related to the accident, the plan sought reimbursement for its medical expense payments. The Supreme Court affirmed the Ninth Circuit's ruling and held that a reimbursement action does not seek equitable relief, and that federal courts therefore lack jurisdiction under § 1132(a)(3). The dissenting justices thought Congress did not mean to perpetuate the obsolete English-based distinction between legal and equitable remedies in this part of ERISA.

    The Court’s opinion means that ERISA trustees must generally try to obtain their remedies in cases like this in state court, although many such suits may be prohibited by state law. The decision will make it harder for ERISA plan administrators to obtain reimbursement of health benefits paid to beneficiaries that are also compensated by third parties.

     

    Rush Prudential HMO, Inc. v. Moran   (U.S. Supreme Court)

    ERISA preemption of suit against HMO

    The Supreme Court held 6/20/02 in a 5-4 decision that the Illinois Health Maintenance Organization Act, as applied to health benefits provided by a health maintenance organization under contract with an employee welfare benefit plan, is not preempted by the Employee Retirement Income Security Act of 1974 (ERISA).

    The Illinois Act provides recipients of health coverage by HMO's with a right to independent medical review of certain denials of benefits. In this case, one such recipient sought independent review of a denial of benefits and the HMO refused to provide the independent review. When the recipient sued to compel compliance with the Illinois Act, the HMO argued that the recipient's cause of action was completely preempted under ERISA.

    Although ERISA contains an express preemption provision, it also contains a saving clause providing that it should not be construed to preempt "any law of any State which regulates insurance, banking, or securities." In determining that the Illinois Act "regulates insurance," the Court first applied a "common-sense view of the matter," which requires that in order to be deemed as "regulating" insurance, a law must be specifically directed toward that industry. Next, the Court applied three factors it had identified in a previous case to confirm its conclusion that the Act regulates insurance — i.e. whether the law targets practices or provisions that (1) have the effect of transferring a policyholder's risk, (2) are an integral part of the policy relationship between insurer and insured, and (3) are limited to entities within the insurance industry. The Court then found that the Illinois Act satisfied the second and third factors. The Court therefore held that the Illinois Act fell within ERISA's saving clause and was not preempted by ERISA.

     


    Free Speech -- 2002



    Thompson v. Western States Medical Center   (U.S. Supreme Court)

    FDA advertising prohibition is unconstitutional

    The Supreme Court ruled 5 to 4 on 4/29/02 that a law allowing the FDA to prohibit drug advertising in return for exemptions from standard compounded-drug approval requirements violates the First Amendment. The Supreme Court has struggled for years to come up with a consistent rationale for deciding the constitutionality of restrictions on commercial speech. In this case, it found that the government had not shown that its prohibition on advertising was reasonable. The government has the burden to show that its regulation did not go too far to regulate commercial speech, and the Court found that the FDA could have banned large-scale production of compounded drugs without banning the advertisement of compounded drugs for sale on a more limited basis. This and other alternatives to the ban on advertising made the ban excessive.

     


    International -- 2002



    Roe v. Unocal, Inc.   (Louisiana Superior Court)

    Alien tort litigation

    The NAM sent a letter to the Legal Adviser at the Department of State urging the Administration to take an active role in cases brought in U.S. courts by foreign nationals against American companies. Typically these cases involve allegations that arise from actions by a foreign sovereign, and U.S. court involvement in such disputes could undermine the exclusive authority of the President to speak for the United States on issues relating to relations with foreign states.

     


    Labor Law -- 2002



    Adarand Constructors, Inc. v. Mineta   (U.S. Supreme Court)

    Court declines to review validity of race-conscious federal contracting procedures

    The Supreme Court granted certiorari 3/26/01 to determine whether federal subcontracting procurement procedures using race-conscious presumptions violate the Equal Protection Clause. Following the Supreme Court’s decision in Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995), which held that such procedures are to be reviewed under the demanding "strict scrutiny" standard, the Tenth Circuit held that the government’s revised procedures satisfy that standard, accepting the government’s evidentiary showing that the measures are necessary to remediate the effects of past discrimination in government contracting markets. The case is of importance to businesses bidding for federal subcontracting, but on 11/27/01, the Court dismissed the writ of cert. as improvidently granted. It will not decide the issue.

    Lower Court Opinion: 228 F.3d 1147 (10th Cir. 2000)

     

    BE&K Construction Co. v. NLRB   (U.S. Supreme Court)

    NLRA's policy to penalize employers that unsuccessfully sue unions

    The Supreme Court held 6/24/02 that the National Labor Relations Board (“Board”) may not sanction an employer that brought an unsuccessful suit against a union unless the Board first finds, at a minimum, that the suit was brought for the purpose of “impos[ing] the costs of the litigation process” on the union, “regardless of the outcome, in retaliation for NLRA protected activity.” In reaching this holding, the Court rejected the Board’s view that the Board may sanction an employer for committing an unfair labor practice if (1) a court earlier found an employer’s suit unmeritorious, and (2) the Board subsequently finds that the “suit is one ‘brought with a motive to interfere with the exercise of protected” union activity.’” The Court reasoned that “the Board’s definition broadly covers a substantial amount of genuine petitioning,” such as when an employer files “suit to stop conduct by a union that [the employer] reasonably believes is illegal under federal law, even though the conduct would otherwise be protected under the [National Labor Relations Act].” From there, the Court concluded that the Board’s definition of retaliation cuts into the First Amendment right to petition the government and, therefore, violates the Constitution. In casting about for a permissible definition of retaliation, the Court stated that “evidence of antiunion animus” is insufficient “to infer retaliatory motive” because, as a practical matter, most “[d]isputes between adverse parties generate” ill will. Rather, the Court made clear that the touchstone for prohibited retaliatory suits is whether the suit was brought simply to “impose the costs of the litigation process” on the union. This case is particularly important to employers that may want to challenge labor-union activities directed at them in response to an employer-union dispute.

     

    Chevron U.S.A., Inc. v. Echazabal   (U.S. Supreme Court)

    ADA coverage for conditions affected by certain work

    The Supreme Court ruled 9-0 on 6/10/02 to uphold an EEOC regulation permitting an employer to defend against an ADA claim by showing that the worker’s disability on the job would prose a direct threat to his, rather than a co-worker’s, health. This means that an individual with a disability cannot use the ADA to require an employer to provide a reasonable accommodation to work in a location that may be hazardous to him. Instead, the employer can refuse to put the person in harm’s way.

    Two points are clear from the Court’s ruling. First, the EEOC has the authority to fill in gaps that Congress left in the statute when the ADA was passed. In this case, the EEOC properly interpreted a broadly worded employer defense to include situations that are hazardous to the affected employee himself.

    Second, the Court recognized that employers are in a very difficult position when trying to comply with the employee accommodation requirements of the ADA and the safety and health requirements of the Occupational Safety and Health Act (OSH Act). It found that the EEOC could reasonably resolve this conflict by refusing to hold the employer liable for acting to protect employees from hazards that the employees themselves are willing to risk.

    This decision is an important victory for all companies subject to the ADA. It gives employers a path with some breathing room between government demands for maximum workplace safety and competing demands by employees who are willing to risk their lives on jobs that others can do more safely. It highlights a fundamental question that will continue to cause conflict. To what degree are we willing to sacrifice an individual’s need for a job to prevent injuries to that person in the workplace?

    This will not open the floodgates for companies to refuse to hire individuals based on broad types of conditions. Companies must make individual determinations in each case to conclude that a particular workplace is not suitable for a particular employee’s condition. They must consider reasonable medical judgments based on “the most current medical assessment of the individual’s present ability to safely perform the essential functions of the job," and must consider "the imminence of the risk and the severity of the harm portended." Thus, there will continue to be cases where these choices are evaluated by the courts.

     

    Edelman v. Lynchburg College   (U.S. Supreme Court)

    EEOC claims

    The Supreme Court held 3/19/02 that claimants filing a discrimination charge with the EEOC are not required to verify the charge allegation during the applicable filing period, but instead verify the allegations after the expiration of the filing period. The Court held that an EEOC regulation permitting the "relation-back" of a verification of an otherwise timely charge was an "unassailable" interpretation of § 706(b) of Title VII. The Court reasoned that the filing deadline and verification requirement are separate, distinct, and intended to achieve "two quite different objectives." This decision is important to all employers subject to the federal employment discrimination laws.

     

    Equal Equipment Opportunity Commission v. Waffle House, Inc.   (U.S. Supreme Court)

    EEOC suit is independent of arbitration

    The Supreme Court held on 1/15/02 that an agreement between an employer and its employees requiring the arbitration of employment-related disputes does not prevent the EEOC from seeking judicial relief on behalf of an individual employee under the Americans with Disabilities Act ("ADA"). The Court noted that the ADA empowers the EEOC to exercise the same enforcement powers, seek the same remedies, and employ the same procedures as are set forth in Title VII of the Civil Rights Act of 1964. Since 1991, the EEOC has been able to pursue reinstatement, backpay, and compensatory or punitive damages on behalf of individual employees under Title VII. Accordingly, the EEOC may pursue those same remedies on behalf of individual employees under the ADA.

    The Court rejected the suggestion that the Federal Arbitration Act's policy favoring the arbitration agreements limits the scope of the EEOC's powers under the ADA. The Federal Arbitration Act requires the courts to treat arbitration agreements as they would other contracts, but it does not expand the reach of such agreements. Because the EEOC was not a party to the arbitration agreement between the respondent and its employees, the Court concluded that the EEOC was not bound by that agreement.

    This case is of interest to any employer that has entered into arbitration agreements with its employees.

    While the Court’s decision is an understandable reading of the EEOC’s power, it illustrates the conflict between that power and the Federal Arbitration Act, which was enacted to allow parties to settle disputes by themselves. It is obviously unfair for an employee to agree to arbitrate employment disputes, and then to turn around and bring in the EEOC to sue the employer.

    Now that employers know what the rule is, they will be less certain that arbitration clauses will be as effective as had been hoped. Employees now have two opportunities to make a claim against an employer: if they fail to convince the EEOC to intervene on their behalf, they can still proceed with arbitration on their own. And if the EEOC intervenes, a company must face the power of the federal government.

    Nevertheless, we expect that companies will continue to use arbitration extensively, in part because it is quicker and simpler for both sides, and in part because EEOC suits have traditionally represented a relatively small fraction of all employment related litigation.

     

    Hoffman Plastic Compound v. NLRB   (U.S. Supreme Court)

    NLRB back-pay remedy for illegal alien

    The Supreme Court held 3/27/02 that federal immigration policy, as expressed in the Immigration Reform and Control Act of 1986 (IRCA), forecloses awards of backpay to illegal aliens. Chief Justice Rehnquist, writing for the Court, noted that while the National Labor Relations Board enjoys considerable discretion in fashioning remedies for violations of the nation’s labor laws, that discretion is limited not only by the labor laws themselves, but also by other federal statutes and policies. Combating the employment of illegal aliens is one such policy – a policy that Congress elevated to a central role in immigration law when it enacted IRCA. Granting backpay to an illegal alien, as the Board did in this case, runs directly counter to that policy. Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, dissented, emphasizing that backpay serves important remedial purposes, such as deterrence of labor law violations. Furthermore, he contended, by rendering the labor laws toothless in cases involving illegal aliens, the Court’s decision creates an incentive for employers to hire illegals, and thus thwarts immigration policy. This case is important to all employers.

     

    Mulder v. NLRB   (U.S. Supreme Court)

    Using compulsory union dues for organizing another company

    The NAM and Associated Builders & Contractors filed an amicus brief supporting a petition for cert. in this case involving union dues. We argue that employees may not be required to pay portion of union dues for organizing a competitor’s business, since such expenditures by unions are not germane to collective bargaining and violate prohibitions in the 1988 Beck case.

     

    National Railroad Passenger Corp. v. Morgan   (U.S. Supreme Court)

    Title VII statute of limitations

    The Supreme Court, in a splintered decision, decided 6/10/02 that the statute of limitations for employment discrimination suits depends on the type of discrimination alleged. Plaintiffs alleging that a discrete act by an employer constitutes unlawful discrimination must file a charge with the EEOC within 180 or 300 days of the act (depending on the state), while plaintiffs alleging a hostile work environment may charge that a series of acts prior to that time are illegal, as long as one occurred within the 180- to 300-day time window.

    Hostile work environment claims are treated differently because they involve repeated conduct that may occur over a period of days or even years. They involve an analysis of all the circumstances of the allegedly offensive workplace, including the frequency of the discriminatory conduct, its severity, whether it is physically threatening or humiliating, and whether it unreasonably interferes with an employee's work performance. All that the Court requires is that some act contributing to the claim fall within the statutory period. The Court tempered its broad interpretation of the time window for hostile work environment claims by emphasizing that an employer can raise fairness issues relating to a plaintiff's tardiness in filing suit.

    Significantly, the Court left open “the timely filing question with respect to ‘pattern-or-practice’ claims brought by private litigants”—an issue arising typically in the class or collective action context.

     

    Ragsdale v. Wolverine Worldwide, Inc.   (U.S. Supreme Court)

    FMLA notification requirements

    The Supreme Court held 5 to 4 on 3/19/02 that 29 C.F.R. § 825.700(a), a Department of Labor regulation purporting to implement the Family and Medical Leave Act (“FMLA”), exceeds the Secretary of Labor’s authority under the Act. The FMLA guarantees eligible employees twelve weeks of leave in a one-year period to attend to family health problems or the birth or adoption of a child. Under 29 C.F.R. § 825.700(a), employers were required specifically to inform employees when their leave is considered FMLA time, or else the leave did not count against the FMLA entitlement. The Court held that this regulation is a categorical penalty on employers that is incompatible with the FMLA’s comprehensive remedial scheme. It wrongly presumes that all employees are harmed by an employer’s failure to provide notice, alters the employee’s burden of proof under the Act, and punishes employers that allow employees to take more leave than the FMLA requires. This case is important to all business covered by the FMLA.

     

    Swierkiewicz v. Sorema N.A.   (U.S. Supreme Court)

    Specificity of discrimination complaint

    The Supreme Court on 2/26/02 unanimously held that an employment discrimination complaint is not required to allege facts constituting a prima facie case of discrimination under the framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). That framework, the Court noted, establishes an evidentiary standard, not a pleading requirement. Before discovery, the nature of the required prima facie case may be difficult to determine, and discovery could reveal direct evidence of discrimination that would render McDonnell Douglas altogether inapplicable. Further, requiring a heightened pleading standard is inconsistent with Federal Rule of Civil Procedure 8(a)(2), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” This decision is important to any employer subject to federal employment discrimination statutes.

    The Second Circuit had ruled that merely stating that the employee was Hungarian in a workplace predominantly comprising French workers was a complaint with insufficient specificity to put his employer on notice of his discrimination claims. The court also ruled that an allegation that the company president wanted to "energize" his department was insufficient to raise an inference of age discrimination. The High Court reversed this ruling.

     

    Tamko Roofing Products v. United Steelworkers   (U.S. Supreme Court)

    Arbitration

    The NAM filed an amicus brief urging the Supreme Court to review an 11th Circuit ruling that allowed a labor arbitrator to reinstate an employee who had been fired for racially harassing a third-party worker. The arbitrator ruled that since there was no written policy prohibiting racial harassment of outsiders, an employee could not be fired for doing so. This decision undermines an employer's ability to comply with antidiscrimination laws.

    Our brief argued that the case involves situations where collective bargaining agreements are in effect. Employers needs to be able to root out racial harassment, and arbitrators should respect not only the at-will employment doctrine but also the business judgment rule. Employment policies need not memorialize in writing every conceivable standard of behavior, including compliance with the thousands of laws and regulations that apply to personal behavior of employees.

    Unfortunately, the Court on 2/19/02 declined to hear the appeal.

     

    TNS, Inc. v. NLRB   (6th Circuit)

    Walk-offs in hazardous conditions

    The NAM filed an amicus brief 6/13/00 asking a federal appeals court to overturn an NLRB decision that allows employees to walk off the job anytime they may feel they're being exposed to dangerous working conditions--without regard to factual evidence.

    The court was to decide two key issues: 1) who decides what are abnormally dangerous working conditions; and 2) if employees walk off, can the company hire permanent replacements?

    The NAM argued that there must in fact be "abnormally dangerous" workplace conditions before employees may walk out. Federal, state and local safety and health agencies that monitor workplace conditions--not the NLRB--should make that decision.

    On 7/10/02, the court upheld the NLRB's legal rulings but vacated on factual grounds and because the case was not resolved in a reasonable time.

     

    Toyota Motor Manufacturing, Kentucky, Inc. v. Williams   (U.S. Supreme Court)

    Scope of ADA coverage

    The Supreme Court unanimously ruled on 1/8/02 that an individual cannot establish the existence of a disability under the Americans with Disabilities Act by simply showing that she is restricted from performing certain elements of a single job.

    The plaintiff in this case had carpal tunnel syndrome and tendinitis, and the lower court had found that Williams could be considered disabled due to her inability to perform certain manual tasks associated with her job. On appeal, the Supreme Court ruled that the inability to perform a single job - or, as here, elements of a single job - cannot be the basis for finding a disability. Rather, there must be "an impairment that prevents or severely restricts the individual from doing activities that are of central importance to most people's daily lives. The impairment's impact must also be permanent or long-term."

    Moreover, the Court said that an individual can't prove a disability merely by submitting evidence of a medical diagnosis of an impairment. Instead, there must be evidence that the limitation caused by their impairment in terms of their own experience is substantial. Each person must show that central activities in his or her daily life are severely restricted.

    On March 5, the NAM filed an amicus brief in the Supreme Court supporting Toyota’s petition to review this case. The brief, written by Peter Susser and Joseph Schuler at Littler Mendelson, highlights the erroneous result and the serious consequences for manufacturers if it is allowed to stand. The petition for cert. was granted, and the NAM filed a brief on the merits on 6/28/01, along with the Equal Employment Advisory Council.

     

    US Airways, Inc. v. Barnett   (U.S. Supreme Court)

    ADA and seniority

    The Court narrowly reversed the lower court ruling, finding that a bona fide seniority system generally need not be disrupted to provide a reasonable accommodation to a qualified employee under the ADA.

    The Ninth Circuit had ruled that companies must engage in an interactive process when determining an employee's qualification for a reasonable accommodation under the Americans with Disabilities Act. In this case, a disabled employee received a transfer to an easier job in the mail room, but was bumped from that job when two other employees with greater seniority applied for jobs there. The Supreme Court decided that the ADA does not require an employer to reassign a disabled employee to a different position as a "reasonable accommodation" where another employee was entitled to hold the position under the employer's bona fide and established seniority system. Decided 4/29/02.

     

    Washington Employers Concerned About Regulating Ergonomics v. Washington Dept. of Labor and Industries   (Thurston County Superior Court)

    Ergonomics regulation challenge

    The NAM has joined with WE CARE, a broad-based coalition of 230 private and public employers and other organizations, to sue the State of Washington over its new ergonomics standards, which are to become effective July 1, 2002. The suit charges that the rule requires "unnecessary, scientifically unsupported and economically irrational modifications" to the workplace, and that the state's actions are unauthorized, procedurally defective and arbitrary and capricious. The suit asks that the rule be declared invalid.

    Ruling from the bench, the judge threw out a large business coalition suit, including the Association of Washington Business and the NAM, that challenged Washington State's new ergonomics regulation. The court rejected challenges involving cost/benefit analysis, timeliness, statutory authority, the validity of the evidence supporting the rule, and the sufficiency of the implementation plan.

     


    Patents, Copyrights and Trademarks -- 2002



    Festo Corp. v. Shoketsu Kinzoku Kabushidi Co.   (U.S. Supreme Court)

    Patent law doctrine of equivalents

    The Supreme Court unanimously held May 28, 2002 (1) that any narrowing amendment of a patent claim made in order to satisfy a requirement of the Patent Act may produce a prosecution-history estoppel precluding application of the doctrine of equivalents with respect to the claim; and (2) that the scope of such an estoppel does not automatically preclude every assertion of equivalence, but rather is limited to recovering under the doctrine of equivalents subject matter that was surrendered by the narrowing amendment. With regard to the latter issue, the Court held that the patentee bears the burden of proving that the amendment does not surrender the equivalent at issue. The Federal Circuit had imposed an absolute bar against application of the doctrine of equivalents where the claim at issue had been the subject of any narrowing amendment to secure patentability. The case is important to all businesses holding patents or operating in an industry where competitors hold patents.

    Lower Court Opinion: 234 F.3d 558 (Fed. Cir. 2000).

     

    Philip Morris USA Inc. v. Reilly   (1st Circuit)

    Trade Secrets

    The NAM and other groups filed an amicus brief urging the court to overturn a decision that requires the disclosure of company trade secrets without compensation. While this case concerns the ingredients and formulas information in tobacco products, it posed a direct threat to trade secrets for every company that engages in research and development and that depends on intellectual property. The lower court ruled that a Massachusetts law may require public disclosure of trade secret information without just compensation simply because the disclosure "could reduce risks to public health," a highly speculative and amorphous standard. Surprisingly, the lower court ruled that trade secrets are not property at all. On 12/2/02, the First Circuit agreed with us that trade secrets deserve as much protection under the Takings Clause of the Constitution as do any other property.

     

    Symbol Technologies, Inc. v. Lemelson Medical, Education & Research Foundation   (Federal Circuit)

    "Submarine patents"

    The Federal Circuit ruled that companies sued for patent infringement can defend themselves by using the doctrine of "laches," which prohibits parties from suing after an unreasonable and unexplained delay. This case involves "submarine patents," which arise from applications filed many years before the patents are actually issued. During these years, entire industries grow to rely on what turns out to be a patented invention, only to be sued for infringement. The NAM filed an amicus brief 12/16/00, arguing that lengthy delay in enforcing the Lemelson bar-coding patents was unreasonable, and that the courts should step in to stop the suit. The problem created when submarine patents surface is particularly difficult in fast-paced industries with rapid innovation and short product cycles. The Lemelson patents alone have led to infringement suits against hundreds of companies, although the patents were pending for two to three decades before finally surfacing long after the technology had become integral to major manufacturing industries.

     


    Product Liability -- 2002



    Cincinnati v. Beretta U.S.A. Corp.   (Ohio Supreme Court)

    Nuisance and negligent marketing suit

    On 4/11/01, the NAM and the Ohio Manufacturers' Association filed a joint brief supporting the lower court's rejection of Cincinnati's claims for solely economic losses from gun use. Among other things, the NAM argued that economic losses are not covered by product-liability, implied-warranty or common-law strict liability law. In a significant setback for manufacturers on 6/12/02, the Ohio Supreme Court ruled 4 to 3 that this complaint could go forward on theories of (1) public nuisance that the design, manufacturing, marketing, or sale of the product unreasonably interferes with a right common to the public, (2) negligence arising from the manufacturer’s duty to take steps to prevent foreseeable harm to the public, and (3) common law product liability for negligent design and failure-to-warn (but not statutory product liability, which requires physical rather than simply economic injury). The court also rejected a Commerce Clause argument.

     

    Mt. Olivet Tabernacle Church v. Emerson Electric Co.   (Pennsylvania Supreme Court)

    Spoliation of evidence

    On 7/1/02 the NAM filed an amicus brief in the Pennsylvania Supreme Court regarding spoiling evidence relating to a product failure in a product liability suit. The case involves a fire allegedly started by a water heater, but the defendant company did not have an opportunity to independently examine the fire scene before it was cleaned up (although the cleanup occurred 18 months after the fire). We argued that fairness to manufacturers accused of product liability demands that relevant evidence be preserved for a reasonable amount of time, and that a trial court should impose some sanction for failure to do so, such as dismissal of the suit or allowing the jury to make an adverse inference against the plaintiff. The Pennsylvania court affirmed the lower court ruling without an opinion, implicitly denying the NAM's request for relief.

     


    Punitive Damages -- 2002



    In re New Orleans Train Car Leakage Fire Litigation   (Louisiana Supreme Court)

    Punitive damages without adjudication of compensatory damages

    The NAM joined other groups in an amicus brief 8/29/01 supporting an appeal of the largest punitive damages award in Louisiana history ($2.5 billion for 8,000 class members). We argued that due process does not allow the court to impose a class-wide punitive damages award before the compensatory damages claims of all class members have been adjudicated (only 20 plaintiffs' claims had been adjudicated). Punitive damages should bear some reasonable relationship with compensatory damages, and that cannot be established where compensatory damages have not been resolved. Many business groups joined together on the brief: the NAM, the American Tort Reform Association, the Chamber of Commerce, American Chemistry Council, American Petroleum Institute, Louisiana Assn. of Business and Industry, and Louisiana Mid-Continent Oil and Gas Association. The case was settled by the parties, and in September, 2002, the Louisiana Supreme Court dismissed the appeal as moot.

     

    Romo v. Ford Motor Co.   (California Supreme Court)

    Constitutional limits on punitive damages

    The NAM filed an amicus letter supporting Ford's appeal of a $290 million punitive damages award. The NAM argued that California violates the Constitution if it subjects conduct that occurred wholly outside California to California's unique punitive damage laws, where California has no significant contacts with or legitimate regulatory interest in that conduct. If California can punish out-of-state conduct that is legal or subject to different laws in other states, then it does not give "Full Faith and Credit" to those other laws as required by Article IV of the Constitution. It also may not intrude upon the legislative power of Congress by projecting its regulatory authority -- via a jury's punitive damage award -- to all 50 states.

     


    Statute of Limitations -- 2002



    TRW, Inc. v. Andrews   (U.S. Supreme Court)

    Statute of limitations in Fair Credit Reporting Act

    The Supreme Court decided 11/13/01 that § 618 of the Fair Credit Reporting Act, which establishes the statute of limitations for actions brought under the Act, does not implicitly incorporate the "discovery rule." It ruled that the discovery rule, whereby a statute of limitations is tolled, or suspended, until a plaintiff discovers an injury, is limited to only a few situations, such as medical malpractice and latent disease cases. Section 618 imposes a general, two-year statute of limitations, and contains an express exception only for cases of willful misrepresentation. This case is important to the wide spectrum of businesses that participate in and rely upon the credit reporting industry. In addition, the case is also important to all businesses with current or future tort exposure. Jones Day represented TRW in this case.

    Lower court opinion: 225 F.3d 1063 (9th Cir. 2000)

     


    Takings -- 2002



    Tahoe Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency   (U.S. Supreme Court)

    Temporary moratorium on development is not necessarily a taking

    The Supreme Court held 4/23/02, 6-3, that a temporary moratorium on development of land surrounding Lake Tahoe was not a per se taking and, therefore, that any taking claim arising from the moratorium must be analyzed under the Court’s Penn Central test. To address concerns that development was causing Lake Tahoe to lose its legendary clarity, the Tahoe Regional Planning Agency imposed a temporary moratorium on building around the Lake. The Court rejected the Tahoe-Sierra Preservation Council’s argument that the moratorium deprived landowners of all economic use of the land, which would result in a per se taking under the Court’s Lucas decision. In so ruling, the Court focused on the temporary nature of the moratorium, noting that governments frequently delay access to, or use of, property in a variety of contexts including building permits, zoning ordinances, and orders that enforce health codes. Analysis of the temporary taking in this case required evaluation of all the relevant circumstances under the Penn Central analysis, rather than application of a categorical rule. The dissenters (Chief Justice Rehnquist, joined by Justices Scalia and Thomas) would have held that the moratorium deprived landowners of the entire value of their property and thus required compensation. This case is important to all businesses that deal with land use regulation matters and further defines the Court’s approach to takings clause cases, particularly its increased reliance on the Penn Central test.

     


    Taxation and State Taxation -- 2002



    DaimlerChrysler AG v. Olson   (U.S. Supreme Court)

    State jurisdiction over out-of-state company

    The NAM filed an amicus brief 2/1/02 opposing a Texas Court of Appeals ruling that a Texas court has "general jurisdiction" over a German company. At issue is whether nonresident defendants can be sued in a state where they conduct no activities. The NAM's brief raises an additional concern that the Texas court used an "alter ego" analysis that treats a parent corporation as if it had the same activities in Texas as did its subsidiary. By disregarding basic principles of corporate law, the Texas decision sets a dangerous precedent that threatens to make every corporate parent subject to jurisdiction wherever any company it owns has minimal business activities. Texas also improperly justified its jurisdictional reach by focusing on the company's web site (with a "contact us" email feature) and its use of a federal court in Texas to enforce its trademark rights. The Supreme Court declined to hear this appeal on 5/20/02.

     

    Gross v. Commissioner   (U.S. Supreme Court)

    Valuation of S Corporations

    On 7/19/02 the NAM and 7 other associations filed an amicus brief in the Supreme Court urging review of an adverse Sixth Circuit ruling that allowed the IRS to retroactively change the valuation rules for S-corporations (generally small businesses), disrupting the "willing buyer-willing seller" standard and interfering with the administration of employee stock ownership plans and estate tax planning. The Supreme Court rarely decides cases that primarily affect only small corporations. On 10/7/02, the Court declined to hear this appeal.

     


    Antitrust -- 2001



    FTC v. H.J. Heinz Co.   (D.C. Circuit)

    Merger law

    The D.C. Circuit ruled 4/27/01 that the federal district court improperly failed to grant an FTC motion for a preliminary injunction against the Heinz/Beech-Nut merger in the baby-food industry. It ruled that the equities favor the status quo until the case can be fully tried, and that the FTC showed a substantial likelihood of success on the merits, given the concentration in the market and the high barriers to entry. It rejected rebuttal arguments about a lack of competition between the companies, the extent to which the merger would enhance efficiencies, the need for innovation, and the existence of structural barriers to collusion.

    The NAM filed an amicus brief in this case on 12/29/00, supporting the merger of Heinz and Beech-Nut. The companies are the second and the third largest manufacturers in the jarred baby food industry respectively, behind industry leader Gerber.

    The district court denied the Federal Trade Commission’s ("FTC") request for a preliminary injunction of the merger, even though it found that the resulting high market concentration could amount to a prima facie case under Section 7 of the Clayton Act, which prohibits mergers that substantially lessen competition. The concern was rebutted by the potential for merger-related efficiency gains that could allow the newly combined entity to more effectively compete with Gerber, leading to more intense competition, not less. Thus, the merger was more like a shift from one to two companies competing in the industry, rather than from three to two.

    The FTC appealed to the U.S. Court of Appeals for the District of Columbia Circuit, arguing that high market concentration, combined with steep barriers to entry and lack of a failing firm, is dispositive for purposes of a preliminary injunction, regardless of other factors. Heinz and Beech-Nut countered that the totality of the circumstances should be evaluated, including market realities such as efficiency gains. The NAM supported the latter position, as merger-related efficiencies can have a positive economic impact by enabling manufacturers to improve existing product offerings and introduce innovative and higher-quality products at competitive prices.

     


    Arbitration -- 2001



    Circuit City Stores, Inc. v. Adams   (U.S. Supreme Court)

    Arbitration in employment contracts

    In a 5-4 decision, the Supreme Court held that the Section 1 of the Federal Arbitration Act ("FAA") exempts from the Act’s coverage only employees who are engaged in interstate transportation. The FAA compels judicial enforcement of arbitration agreements "in any...contract evidencing a transaction involving commerce," 9 U.S.C. § 2, but excludes from the act’s coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," 9 U.S.C. § 1. The Court rejected the Ninth Circuit’s broad reading of the exclusion to exempt all contracts of employment and held that the statute confines the exemption to transportation workers, reasoning that the statutory text itself foreclosed any argument that the exemption applied to all employment contracts. Justices Souter, Stevens, Ginsburg, and Breyer dissented, arguing that the broader reading of the statute was supported by the language of the statute itself and its legislative history. This case will have significance for the many employers who utilize employment contracts containing arbitration agreements.

     

    Eastern Associated Coal Corp. v. United Mine Workers   (U.S. Supreme Court)

    Arbitration award involving drug use

    Under the labor contract between Eastern and the union, employees may be fired only for "just cause," and discharges are subject to arbitration. Smith, a truck driver for Eastern, failed a drug test. Eastern wanted to fire Smith, but the arbitrator ordered his reinstatement. A year later, Smith failed a second drug test, and was again reinstated by the arbitrator, although Smith was suspended for three months, required to pay the arbitration costs, and informed that another failed test would result in discharge. Eastern went to court, seeking to have the second arbitral award vacated. Eastern lost in the district court, lost again in the Fourth Circuit, and lost a third time November 28, 2000 when the Supreme Court announced its ruling in this case.

    Because the labor contract makes arbitral decisions final, and because Eastern did not claim that the arbitrator exceeded the scope of his authority, the court held that Eastern must be deemed to have bargained for Smith's reinstatement unless the arbitral award violated public policy. The Court held that it did not. Examining the omnibus Transportation Employee Testing Act and DOT’s implementing regulations, the Court found "rehabilitative concerns" along with the obvious safety concerns, and therefore concluded that the arbitrator's decision did not run contrary to an "explicit," "well defined," "dominant" public policy. Although emphasizing that this public policy exception is "narrow", the Court stopped short of saying that public policy would be violated only "where the arbitration award itself violates positive law." Justice Scalia, joined by Justice Thomas, took the majority to task for leaving this door open, characterizing the Court's ruling as inviting "obstructive litigation."

    Lower court opinion: 66 F. Supp. 2d 796 (S.D. W.Va. 1998), aff’d, 188 F.3d 501, 1999 WL; 635632 (4th Cir. Aug. 20, 1999).

     


    Attorney's Fees -- 2001



    Buckhannon Bd. & Care Home, Inc. v. West Virginia Department of Health & Human Resources   (U.S. Supreme Court)

    Attorney's fees not available in some settled cases

    The Supreme Court 5/29/01 held that a party to a mooted lawsuit is not entitled to attorney’s fees and costs as a "prevailing party" for purposes of the Fair Housing Amendments Act of 1988 under the "catalyst" theory, wherein a party that has produced its desired result by causing a voluntary change in the defendant’s conduct would be considered to be "prevailing." The Court, noting that its holding applies equally to "prevailing party" fee-shifting provisions in a variety of federal statutes, held that some legal change must be ordered by the court in order for a party to be considered "prevailing." The Court also strongly suggested, contrary to dictum from previous cases, that private settlements, not enforced through consent decrees, cannot produce "prevailing" parties for fee-shifting purposes. The case is of importance to all defendants in actions under statutes with fee-shifting provisions, who may contemplate disposing of those cases by modifying their conduct, or by settlement.

     


    Environmental -- 2001



    Piney Run Preservation Association v. County Commissioners   (4th Circuit)

    Discharge permit provisions

    The NAM applauded the Fourth Circuit's 10/10/01 ruling in this case giving public and private permit holders under the Clean Water Act a margin of protection for discharges that would be reasonably contemplated in their permits. The Court held that there is a "protective shield" within which limited deviations in the properties of the permitted discharges are allowed, as long as the permit holder complies with the terms of the permit and the challenged discharges are within the "reasonable contemplation" of the permitting authority at the time the permit was granted.

    The NAM had filed an industry amicus brief with the Fourth Circuit in April on behalf of the defendants in the case. Plaintiffs sued when it was learned that a county-run wastewater treatment facility was discharging warm water into a local stream, even though its environmental permit did not expressly allow for heated discharges.

    NAM general counsel Jan Amundson said, "Although this ruling would suggest that future permit applicants need to be diligent and comprehensive with specific language during the application process, it should also send a signal to those contemplating nit-picking nuisance suits. The courts may be losing their patience for them."

     

    South Camden Citizens in Action v. NJ Dept. of Environmental Protection   (3rd Circuit)

    Disparate impact of environmental permits

    The NAM filed an amicus brief with the American Chemistry Council and the Chemical Industry of New Jersey on 6/29/01 opposing a citizen suit alleging that state environmental permits discriminate against racial or ethnic groups. This case involves the proposed development of a "brownfield," an area of abandoned, inactive or underutilized industrial sites that are located in urban areas that are disproportionately populated by minority and/or low-income citizens. Development of these sites attracts new industrial facilities, providing net benefits to their communities.

    The Third Circuit had wisely granted a stay of the district court’s decision, thus allowing St. Lawrence Cement Co. to start operations and remain open until a Merits Panel could hear the case. The district court 5/10 ignored the U.S. Supreme Court’s 4/24 Sandoval decision, which said private individuals may not sue states under Civil Right Act Title VI over unintended consequences of state agency decisions, including permits for manufacturing facilities.

    The NAM's brief argued that EPA's "disparate impact" regulations cannot be enforced by private plaintiffs under 42 U.S.C. § 1983, nor can they be enforced by private plaintiffs under section 602 of Title VI of the Civil Rights Act of 1964. Such claims are "so vague and amorphous -- so subjective and standardless-- that they strain judicial competence." The NAM brief said the district court ruling "opens up state environmental permits to collateral attacks in federal court . . . based on criteria that are not clearly delineated, understood or agreed upon." In addition, it "will result in federal courts throughout the nation sitting as local zoning boards reviewing environmental permit decisions."

    On 12/17/01, the Third Circuit agreed, ruling that there is no private right of action under Section 602 of the Civil Rights Act to enforce the "disparate impact" rules of the EPA.

     

    Whitman v. American Trucking Associations, Inc.   (U.S. Supreme Court)

    Clean Air Act regulations

    On 2/27/01, the Supreme Court rejected two main arguments in a challenge by the NAM and other industry groups of the Environmental Protection Agency’s power to set national air-quality standards under the federal Clean Air Act.

    EPA concedes that these basic air-quality standards drive regulatory and compliance expenditures that run into the hundreds of billions of dollars per year. Nevertheless, the legal test applied by EPA, and approved by the Court, permits EPA to ignore the tools that have proven most effective in shaping and implementing effective regulatory programs.

    These tools include, among others, consideration of indirect as well as direct effects; identification of significant risks of public heath; assessment of the costs and benefits of alternative margins of safety in preventing health risks; and a keen awareness of the practical and real-world effects of regulatory choices. These very tools are now at work shaping the regulatory policies of other federal agencies, including the Occupational Safety and Health Administration, and there is no reason that they could not be effectively applied to EPA as well.

    The Supreme Court ruled that costs may not be taken into consideration when EPA sets clean air quality standards. It also ruled that the Clean Air Act is not an unconstitutional delegation of legislative power from Congress, since it includes language that "fits comfortably within the scope of discretion" previously permitted under prior Supreme Court precedents.

    The Court did, however, remand the case for the lower court and the EPA to determine other issues and to reconsider how to reconcile conflicting interpretations of the implementation schedule for compliance. The NAM will actively pursue its remaining complaints about the ozone and particulate matter regulations.

     


    ERISA -- 2001



    Egelhoff v. Egelhoff   (U.S. Supreme Court)

    ERISA preemption of beneficiary designation law

    The Supreme Court held 3/21/01 that the Employee Retirement Income Security Act (ERISA) preempts a Washington probate statute that conflicts with ERISA’s requirements for plan administration. Washington’s statute provides that interests in non-probate assets -- including life insurance policies, employee benefit plans and annuities -- granted to a spouse are automatically revoked upon dissolution of the marriage. Two months after his divorce, Mr. Egelhoff was killed in a car accident. His children from a previous marriage sought recovery of the life insurance proceeds that had been paid to Mrs. Egelhoff as the named beneficiary. The Washington Supreme Court held that the state statute was not preempted by ERISA and thus operated to revoke Mrs. Egelhoff’s interest in the insurance proceeds at the time of the dissolution.

    Reversing the Washington Supreme Court, the Court held that the state statute is expressly preempted by ERISA because it improperly requires plan administrations to pay benefits to beneficiaries chosen by state laws, rather than those identified in plan documents. The Court noted that the statute also interferes with nationally uniform plan administration. Justices Breyer and Stevens dissented arguing that the statute’s subject -- family property -- is an area of traditional state regulation and that the state statute posed no significant obstacle to ERISA’s enforcement.

    The NAM filed two amicus briefs in this case, one urging the Court to hear the appeal, and the second on the merits. We were pleased with the outcome.

     

    Georgia-Pacific Corp. Salaried Employees Retirement Plan v. Lyons   (U.S. Supreme Court)

    Calculation of benefits in retirements accounts

    The NAM 3/13/01 filed an amicus brief supporting Georgia-Pacific's petition for cert. in this case involving the 11th Circuit's decision on how to calculate retiree pension benefits in a cash-balance retirement account. Businesses might think that the current account balance in a cash-balance account would be the pay-out amount, but this court held that a plan administrator must instead project the employee's retirement benefit forward to retirement age using the plan's interest crediting rate, and then discount the value of the benefit back to the present using a lower interest rate specified in a Treasury Department regulation. This often results in a larger payout to retirees, undermining company expectations and puts a substantial penalty on companies that offer early retirements.

    The NAM urged the Supreme Court to hear this appeal, but they refused on 4/2/01. Cash-balance plans are a relatively new, and enormously successful, form of employer-sponsored pension plan in use by about 20% of Fortune 1000 companies. Employers must know the extent of their future obligations, and we had hoped for a resolution that recognizes the validity of Section 203(e) of the Employee Retirement Income Security Act (ERISA), which conflicts with IRS regulations that have never been finalized.

     

    Montesano v. Xerox   (2nd Circuit)

    Retirement Income Guarantee Plan

    The NAM filed a brief, along with the ERISA Industry Committee and LPA, on 4/5/01 supporting a company's denial of full-time employee benefits to contract workers (temps, third-party employees). A group of contract workers claimed they were entitled to benefits under the company's pension, stock ownership, profit sharing, medical and life insurance plans).

    "The plaintiffs were repeatedly told and signed agreements indicating that they understood that they were not entitled to Xerox benefits," the NAM told the court. It "defies common sense to think that Xerox would have taken all these steps if the company had intended its plans to provide benefits . . . ."

    Xerox won in district court, but the workers appealed. AARP and the National Employment Lawyers’ Association have urged the appeals court to reverse the decision.

    On 7/3/01, the Second Circuit affirmed the district court's ruling. This is an important decision that will hamper efforts by contract workers to claim eligibility for benefits reserved for full-time employees.

     


    False Claims Act -- 2001



    Riley v. St. Luke's Episcopal Hospital   (5th Circuit)

    Qui tam suits under False Claims Act

    The Fifth Circuit ruled 5/25/01 that qui tam lawsuits, suits brought under the False Claims Act, do not violate the Take Care and Appointments Clauses of the Constitution. The NAM filed an amicus brief asking that prosecutorial authority be returned to the executive branch, rather than to allow private suits, but the court found no constitutional problem with the suits. This is true even when the Justice Department deems cases unworthy of pursuit.

     


    Free Speech -- 2001



    City News and Novelty, Inc. v. Waukesha, Wis.   (U.S. Supreme Court)

    Case for prompt judicial review of adult establishments' licensing scheme was dismissed as moot

    On 1/17/01, the Supreme Court dismissed as moot its grant of certiorari to address whether a licensing scheme for adult businesses, which triggers First Amendment prior-restraint concerns, must guarantee prompt judicial review (i.e., prompt determination of the plaintiff’s claims), or merely provide for prompt access to judicial review (i.e. the right to promptly file for judicial review). After the grant of certiorari, the petitioner withdrew its license renewal application and failed to express any intent to pursue a license in the future. The dismissal leaves a circuit split on this issue unresolved, a state of affairs that has obvious implications for all businesses concerned with the First Amendment implications of licensing schemes.

     

    Lorillard Tobacco Co. v. Reilly   (U.S. Supreme Court)

    Billboard restrictions

    The Supreme Court on 6/28/01 struck down several Massachusetts regulations governing the advertising and sale of cigarettes, cigars and smokeless tobacco as unconstitutional. T he Court struck down several provisions of the regulations. It held that the Federal Cigarette Labeling and Advertising Act ("FCLAA") pre-empts the Commonwealth’s attempt to require cigarette packages and cigarette advertising to bear statements regarding smoking and health beyond those required by the FCLAA. The Court also held that Massachusetts’ outdoor and point-of-sale advertising regulations relating to smokeless tobacco and cigars violate the First Amendment because they were not sufficiently tailored to avoid conflict with the First Amendment’s free speech guarantees. In so doing, the Court applied the Central Hudson test for commercial speech, which some had thought the Court might modify or abandon in this case.

    The Court upheld other portions of Massachusetts’ regulations. It found that the FCLAA did not restrict the ability of States and localities to enact generally applicable zoning restrictions that apply to cigarettes on equal terms with other products. It also found that regulations requiring retailers to place tobacco products behind counters and requiring customers to have contact with a salesperson before they are able to handle such products do not violate the First Amendment.

     


    Government Contracting -- 2001



    Business Roundtable v. United States   (U.S. District Court for the District of Columbia)

    Blacklisting rule withdrawn by Bush Administration

    On 12/22/00, the NAM joined other business associations in filing a complaint challenging the Clinton Administration’s "blacklisting" regulations for federal contracting. These rules revise the Federal Acquisition Regulations ("FAR") to mandate that only those deemed by the contracting agency to be in "satisfactory compliance with the law" are eligible for a federal contract. This includes federal, state, and even foreign laws, with an emphasis on tax, labor and employment, environmental, antitrust, and consumer protection laws. Furthermore, every contractor must certify whether they have violated federal or state law in those fields within the three preceding years, with civil and criminal penalties for being incorrect. The NAM is concerned that these regulations will inject an unacceptable level of subjectivity and uncertainty into the federal contracting process, and is urging the District Court to find them contrary to law.

    Effective 4/3/01, the Bush Administration suspended the rule for 270 days or until the regulation is repealed. Published at the same time was a proposed rule that would permanently repeal the blacklisting regulation. The rule was completely revoked on 12/27/01.

    On April 27, the NAM and the other plaintiffs filed a notice of voluntary dismissal of the suit. Thanks go to the law firms of Wiley, Rein & Fielding and Ogletree, Deakins, Nash, Smoak & Stewart for their work in bringing this issue to a successful conclusion.

     

    G & G Fire Sprinklers, Inc. v. Lujan   (U.S. Supreme Court)

    Public contract law

    The Supreme Court 4/17/01 upheld a California Labor Code provision authorizing the state to order that payments due a contractor on a public works project be withheld if the state determines that a project subcontractor failed to comply with certain Code requirements; the contractor may, in turn, withhold payment to the subcontractor under the provision. Additionally, the provision creates a right of action in the Contractor or his assignee to sue the state agency that awarded the contract for breach of contract. A divided panel of the Ninth Circuit held that because the scheme failed to provide the subcontractor with any hearing before or after payments are withheld, it violated the Fourteenth Amendment's Due Process Clause. In a brief opinion, a unanimous Supreme Court reversed, holding that because the subcontractor could sue the awarding agency as the contractor's assignee, or bring a common law breach-of-contract action in its own right, it was not denied an opportunity to be heard. The decision is important to all businesses that engage in public contracts and, more broadly, to any business that may be subject to a provision similar in effect to the one at issue in this case.

     

    OXY USA, Inc. v. Babbitt   (10th Circuit)

    Retroactive changes in oil and gas lease royalties

    When the federal Minerals Management Service issued orders directing OXY USA and Shell Oil Co. to pay additional oil and gas drilling royalties, they sued, claiming that the government’s charges were unilateral, retroactive contract changes that were prohibited by the statute of limitations. The NAM supported a petition for rehearing en banc, and the 10th Cir. agreed, reversing an earlier panel ruling. The case is important to companies with federal MMS leases, but also shows that NAM participation can help convince an appellate court to reconsider the decision of some of its judges.

     


    Government Regulation -- 2001



    Alexander v. Sandoval   (U.S. Supreme Court)

    Suits against state agencies under Title VI

    On 4/24/01 the U.S. Supreme Court ruled 5-4 that there is no private right of action to enforce "disparate impact" regulations under Title VI of the Civil Rights Act, except in the case of "intentional discrimination." The NAM filed a friend of the court brief on 11/13/00, with the Supreme Court, arguing that Congress did not create a private right of action in federal court against a state agency receiving federal financial assistance. The NAM argued that a cause of action for disparate impact under Title VI would be applicable to environmental permitting statutes such as the Clean Air Act and the Clean Water Act. Exposing permit applicants to these ill-defined lawsuits unrelated to protecting the environment would add substantial uncertainty and delay to the already arduous process of obtaining an environmental permit.

    This case involved a challenge to Alabama’s English-only policy for administering driver’s license examinations brought under disparate impact regulations drafted by the Department of Transportation and Department of Justice. One of the issues was whether private individuals could enforce disparate impact regulations by suing state agencies that receive federal grant funds. The Eleventh Circuit held that they could.

    This stunning decision from the Supreme Court supports the NAM's and the Business Network for Environmental Justice's (BNEJ) argument to EPA's Draft Revised Guidance for Investigating Title VI Administrative Complaints Challenging Permits, that nothing in Title VI or its legislative history suggests that Congress ever imagined that this law would be used to prohibit unintentional disparities in environmental quality.

    This decision was expected to have a major impact on an April 19, 2001, U.S. District Court of New Jersey decision. That court held that the New Jersey Department of Environmental Protection violated the EPA's disparate impact regulations (section 602) of Title VI by issuing a permit that only considered technical-emissions standards, and not the "totality of the circumstances" surrounding the operations of a proposed cement facility. However, in May, that court reaffirmed its decision, holding that the state must consider factors that a cement facility may cause an adverse disparate impact on an overwhelmingly minority community in New Jersey.

     

    United States v. Mead Corp.   (U.S. Supreme Court)

    Limited deference to Customs rulings

    In an 8-1 decision, the Supreme Court held 6/18/01 that a tariff classification is not entitled to judicial deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), but may command appropriate respect according to its persuasiveness under Skidmore v. Swift & Co., 323 U.S. 134 (1944). The Court found that there was no indication that Congress intended to delegate to the United States Customs Service the authority to issue tariff classifications with the force of law, as evidenced by the lack of formality and procedural safeguards associated with issuance of the rulings and the fact that the rulings are not binding on third parties, and therefore the rulings were not entitled to Chevron deference. The Court held, however, that a ruling may merit some deference in proportion to its persuasive value. The Court remanded the matter to the lower courts for an assessment of whether any deference to the ruling was appropriate under the factors first recognized in Skidmore. Justice Scalia issued a vigorous dissent, concluding that the consequences of the majority opinion "will be enormous, and almost uniformly bad," for judicial review of administrative action, arguing that any authoritative or official agency rulings should be accorded Chevron deference. This ruling is important to any business that engages in federal agency litigation.

     


    International -- 2001



    Traffix Devices, Inc. v. Marketing Displays, Inc.   (U.S. Supreme Court)

    Federal trade dress protection

    The Supreme Court held 3/20/01 that the Lanham Act’s trade dress protection -- which does not apply to "functional" features of a device -- did not apply to a product feature that was the subject of expired utility patents. Marketing Displays’ patented dual-spring design permitted its road signs to withstand strong wind. When the patents expired, TrafFix Devices began manufacturing road signs using a similiar dual-spring design. Marketing Displays sued under the Lanham Act, claiming that the use of the design infringed its trade dress.

    A unanimous Court rejected Marketing Displays’ claim, reversing the Sixth Circuit. It held that "[w]here the expired patent claimed the features in question, one who seeks to establish trade dress protection must carry the heavy burden of showing that the feature is not functional, for instance by showing that is merely ornamental, incidental, or arbitrary aspect of the device." Because the dual-spring design was the central advance claimed in the expired patents and was clearly functional in that it was "essential to the use or purpose of the article" or affected "the cost or quality of the article," the Court ruled that Marketing Displays had failed to meet its burden of proof.

     


    Labor Law -- 2001



    Epilepsy Foundation v. NLRB   (D.C. Circuit)

    Investigatory interviews

    On 11/2/01, the D.C. Circuit ruled that the NLRB acts legally when it requires that employees in non-union workplaces be given the right to have a co-worker or other individual with them during an investigatory interview by an employer. Section 7 of the National Labor Relations Act protects the right of an employee to engage in concerted activities for the purpose of mutual aid or protection, and having a co-worker present during an investigatory interview is justifiable to ensure that the employer "does not initiate or continue a practice of imposing punishment unjustly." However, the court refused to apply the NLRB's revised interpretation retroactively in this case. It will be applied in future cases.

    The NAM and other groups filed an amicus brief on 5/15/01 objecting to the extension of so-called Weingarten rights of union employees to non-union workers, arguing that an individual non-union employee's representative does not represent the interests of the entire workplace.

     

    Green Tree Financial Corp. v. Randolph   (U.S. Supreme Court)

    Arbitration of consumer sale may be enforceable even without knowing specific costs in advance

    Randolph financed the purchase of her mobile home through Green Tree Financial Corporation. Randolph sued Green Tree alleging that it had violated the Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and the Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691-1691f, by requiring Randolph to arbitrate her statutory causes of action. The Eleventh Circuit held that the district court’s order compelling arbitration was appealable and that the arbitration agreement was unenforceable because Randolph’s ability to vindicate her statutory rights would be undone by steep arbitration costs.

    The Supreme Court held 5 to 4 on 12/11/00 that an arbitration agreement is not rendered unenforceable because it does not identify who will pay the costs of an arbitration or how much those costs might be: "The risk that Randolph will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement." The Court left open the question whether an arbitration agreement would be enforceable if large arbitration costs in fact precluded a claimant from vindicating federal statutory rights. Resolving a circuit split, the Court also held unanimously that a district court’s order compelling arbitration and dismissing with prejudice the underlying claims is a final decision with respect to an arbitration and thus immediately appealable under the Federal Arbitration Act. This case is important because it affirms that arbitration clauses in consumer contracts, employment agreements, and other transactions involving parties with unequal financial resources are not per se unenforceable because those clauses are silent on who shall pay the costs of arbitration. It leaves open, however, the question of what costs may be imposed in such cases.

     

    NLRB v. Kentucky River Community Care, Inc.   (U.S. Supreme Court)

    Some nurses are supervisors under NLRA

    In a partial victory for the NLRB, the Supreme Court 5/29/01 affirmed the Board’s rule that the burden of proving that an employee is a "supervisor" for purposes of the National Labor Relations Act falls on the party making the claim. Accordingly, the Court affirmed that the Board had properly placed the burden of proof on the operator of a mental health care facility, where the operator had claimed that its six registered nurses were supervisors and should therefore be excluded from an employee bargaining unit. Nevertheless, the Board failed to win the Court’s approval for its decision to reject the employer’s offer of proof. Under the National Labor Relations Act, an employee is a supervisor if his or her exercise of authority over other employees requires the use of "independent judgment." According to the Board’s interpretation of the Act, however, employees do not use independent judgment when they exercise "ordinary professional or technical judgment in directing less-skilled employees to deliver services in accordance with employer-specified standards." The Court rejected that interpretation, finding no justification for its categorical exclusion of employees who would otherwise fall within the Act’s definition of a "supervisor.”

    This decision will broaden the class of individuals that the NLRB must recognize as supervisors under the NLRA.

     

    PGA Tour, Inc. v. Martin   (U.S. Supreme Court)

    PGA rules must yield to golfer under ADA

    The Supreme Court held 5/29/01 that Title III of the Americans With Disabilities Act (ADA) covers professional golf tournaments, and thus regulates the rules by which such tournaments are organized and conducted. In this case, the PGA had refused to allow Casey Martin, who suffers from a rare circulatory disease in his leg, to use a golf cart during tournaments. Although the PGA conceded that allowing Martin to use a cart was both a reasonable and necessary accommodation, it argued that doing so would fundamentally alter the nature of the tournaments in which he sought to play. Rejecting that argument, the Court concluded that the PGA’s "walking rule" was not an "essential attribute" of the game of golf. And, noting that the ADA requires evaluation of the disabled person’s needs on an individualized basis, the Court held that in light of Martin’s particular medical condition, allowing him to use a cart would not fundamentally alter the nature of the PGA’s tournaments.

    Note that the decision interprets Title III of the ADA relating to public accommodations, while Title I covers employers generally, and has a defense based on "undue hardship of the operation of the business." These provisions use different language, and the Title III defense that a service or facility would be "fundamentally altered" is not at issue in most cases against manufacturers. However, the Court's willingness to second-guess the judgment of the PGA in this context shows how the ADA may be used to interfere with reasonable decisions of employers in other contexts.

     

    Pollard v. E.I. DuPont de Nemours and Co.   (U.S. Supreme Court)

    No statutory caps on front-pay damages

    The Supreme Court on 6/4/01 held that an award of "front pay," (i.e., money awarded an employee for lost compensation during the period between judgment and the reinstatement of the employee’s job, or in lieu of such reinstatement) is not an element of compensatory damages under Title VII, and thus not subject to a $300,000 damages cap imposed by 42 U.S.C. § 1981a(b)(3). One important effect of the Court’s holding will be to prevent employees asserting front pay claims from having the right to proceed before a jury. The case is important to employers subject to federal employment discrimination laws.

    NAM Comment: Plaintiffs in civil rights cases have an obligation to mitigate damages if they feel they can no longer work for their previous employer because of discrimination. As a result, the size of front-pay damages may not be nearly as great as potential punitive damages against employers that are found liable. Nevertheless, there are some instances where front-pay awards have been sizeable, and now it is clear that plaintiffs may seek both front pay damages without a cap and other compensatory and punitive damages with a cap.

     

    The Park Associates, Inc. v. NLRB   (D.C. Circuit)

    Successorship bargaining issues

    The NAM joined in an amicus brief urging the D.C. Circuit to reverse a recent 2 to 1 NLRB ruling. The ruling required the new owner of a company to bargain with the union that represented the employees of the company before it was sold, in spite of the fact that a majority of the employees signed a petition to decertify the union as their representative. The decision undermines employee freedom of choice, forcing upon them an artificial and unwanted relationship which could give rise to industrial strife and tension. The NAM, joining with the Master Printers of America, the Center on National Labor Policy, Inc., and Associated Builders and Contractors, Inc., argues that the National Labor Relations Act gives an employer the right not to recognize a union when it has a good faith doubt that the union represents a majority of its employees.

     


    OSHA -- 2001



    National Association of Manufacturers v. OSHA   (D.C. Circuit)

    Ergonomics regulation overturned

    In November, 2000, OSHA released its final regulation on ergonomics. This oppressive and unreasonable rule was pushed through to completion with unprecedented speed and with considerable changes from the proposed to the final versions. Large number of manufacturers were alarmed, and the NAM took action, suing the agency for acting outside its authority and outside the procedures required for such a drastic regulation. In cooperation with the National Coalition on Ergonomics, the NAM led an industry-wide effort to coordinate the legal effort in court, and a subsequent legislative effort in Congress.

    Soon after the NAM filed a lengthy statement of legal issues in court, Congress stepped in to overturn the regulation by passing a joint resolution of disapproval, which, on March 20, 2001, was signed by President Bush. OSHA is prohibited from implementing the regulation, and may not issue one in substantially the same form without congressional authorization. The litigation was subsequently dismissed as moot.

     

    National Association of Manufacturers v. Chao   (D.D.C.)

    Recordkeeping rule

    The NAM filed suit on 3/19/01 against the Secretary of Labor, challenging the new occupational safety and health recordkeeping rule issued by the Clinton Administration on January 19, 2001. While there are significant improvements under the new rule, which was slated to go into effect in 2002, the NAM was concerned that the rule requires manufacturers to report injuries and illnesses that are not work-related, including pre-existing conditions caused by non-work-related activities. The rule also includes in the definition of injuries and illnesses symptoms that are wholly subjective. Other objections include the requirement that standard threshold shifts of 10 dB(A) in hearing are recordable as an illness. On 4/25/01, the NAM requested of Secretary Chao that the litigation and the effective date of the regulation be stayed until January 1, 2003 to allow sufficient time for appropriate review by the new leadership at the Department of Labor. On 7/3/01, the Department published a notice in the Federal Register stating that the rule will go into effect as scheduled on January 1, 2002, except for provisions related to hearing loss and musculoskeletal disorders (see below). The Department filed a motion to dismiss, claiming that the NAM does not have the right to challenge the regulation before an enforcement action is initiated, and we vigorously opposed that motion.

    This motion was mooted when the NAM and OSHA agreed on 11/16/01 to a settlement (below). The settlement agreement provides that:

  • OSHA will focus on assistance and not enforcement during the first 120 days, provided the employer is attempting to meet recordkeeping obligations and agrees to bring records into compliance;
  • A case will be considered work-related only if "an event or exposure in the work environment is a discernible cause of the injury or illness or of a significant aggravation to a pre-existing condition."
  • A case is not recordable as a restricted work case if an employee experiences minor musculoskeletal discomfort and a health care professional determines that the worker is fully able to perform the job and the employer restricts the employee's work to prevent a more serious condition from developing.
  • A worker's own report of an injury or illness does not establish the existence of an injury or illness. Instead, the employer must first decide if an injury or illness has occurred, and may refer the employee to a health care professional to help determine whether an injury or illness exists.
  • Providing oxygen to an employee will not necessarily trigger the recording requirement. "If oxygen is administered as a purely precautionary measure to an employee who does not exhibit any symptoms of an injury or illness, the case is not recordable," the agreement says.

  • Related Documents:
    Settlement Agreement  (December 27, 2001)

     


    Patents, Copyrights and Trademarks -- 2001



    Eli Lilly and Co. v. Barr Laboratories, Inc.   (Federal Circuit)

    Double patents

    On 6/20/01, the NAM, along with the Biotechnology Industry Organization, the Pharmaceutical Research and Manufacturers of America and the Federal Circuit Bar Association, filed an amicus brief supporting a petition for rehearing en banc in this case. The brief supports the so-called "two-way test" in approving patent applications involving double patents. Double patenting can occur when an applicant claims an invention broadly at an early stage and then more narrowly as the invention is refined, particularly as its commercial potential becomes clear. Each patent must be separately justified. The two-way test -- which requires a showing that the claims of each patent are unpatentable over the claims of the other -- protects the inventor whose applications, through no fault of his own, are examined and issued in reverse order relative to their filing dates, so that the inventor's improvement will not defeat the patentability of his own basic invention.

    Surprisingly, the court, over the objection of four judges, denied our motion to file the brief on 6/27/01. The petition for rehearing was denied without comment on 7/18/01.

     

    New York Times v. Tasini   (U.S. Supreme Court)

    Copyrights and collective works

    The Supreme Court held 6/25/01 that electronic databases that reproduce individual articles contributed by freelance writers to collective publications (e.g., newspapers, magazines, etc.) are not privileged by § 201(c) of the Copyright Act, and thus infringe on the writers’ copyrights. Agreeing with the reasoning of the Second Circuit, the Court held that because such databases reproduce individual articles independent of the context in which they originally appeared (i.e., surrounding articles, photographs, advertisements, etc.), such reproduction could not be deemed a reproduction or revision of the original publication, nor the production of a later collective work within the same series. Consequently, electronic databases such as NEXIS may no longer include in their public offerings individually copyrighted material extracted from collective works without first obtaining the author’s permission. The decision is important to all publishers.

     


    Preemption -- 2001



    The Buckman Company v. Plaintiff’s Legal Committee   (U.S. Supreme Court)

    Medical Devices Amendments of 1976 preempts fraud claims under state law

    Resolving a circuit split, the Supreme Court held that the Food, Drug, and Cosmetic Act, as amended by the Medical Device Amendments of 1976, preempts state-tort-law claims predicated on an alleged fraud against the Food and Drug Administration ("FDA"). Plaintiffs were injured by bone screws surgically inserted in their spines, a use the FDA twice refused to approve. The plaintiffs alleged that Buckman, a consulting firm, helped the screw’s manufacturer fraudulently obtain FDA approval by misrepresenting that the screws would be used in arm and leg bones. The Court held that these "state-law fraud-on-the-FDA" claims were impliedly preempted. Writing for a seven-justice majority, Chief Justice Rehnquist explained that the FDA has ample power "to punish and deter fraud against the Agency," that it uses this power "to achieve a somewhat delicate balance of statutory objectives," and that state-law fraud-on-the-agency claims would upset that balance. This decision is important to all businesses whose products are subject to pre-marketing approval by a federal agency.

     


    Product Liability -- 2001



    Busani v. United Services Automobile Association   (Washington State Supreme Court)

    Certification of class actions

    The NAM filed a brief on 5/11/01 seeking review of an improper class action certification order that allows 20,000 different plaintiffs to use Washington state law to circumvent other state insurance regulation and legal defenses. The Washington court denied the appeal in June.

    The NAM had asked the Washington Supreme Court to grant discretionary review over whether such class certification is appropriate in light of the important limitations on the use of class action suits. In this case the defendant and most of the plaintiffs lived outside Washington, most of the accidents occurred outside Washington, most of the claims were filed and processed outside Washington, and the claims could not be resolved without a variety of individualized factual and legal determinations.

    The NAM argued, in an amicus brief filed 5/11/01, that cases like this should not be certified as class actions. The class action process is being abused by plaintiffs’ lawyers to generate common fund fee awards. Allowing a class action suit in this instance would let Washington’s law override the insurance regulation of many other states, possibly allowing recoveries for claims that are not covered elsewhere and removing defenses that might be available to the company in other states. This is unfair, expensive and is part of a trend that encourages extortionate settlements.

     

    Hamilton v. Beretta U.S.A.   (New York Court of Appeals)

    Gun manufacturers not liable for negligent distribution or market-share apportionment of liability

    On 4/26/01, the New York Court of Appeals ruled 7-0 in favor of manufacturers in a case alleging negligent distribution of guns and market-share liability for all manufacturers of guns. The U.S. Court of Appeals for the Second Circuit, which asked the NY Court of Appeals for its opinion, is expected to dismiss the case.

    First, the court ruled that the manufacturers do not owe victims of handgun violence a duty to exercise care in the marketing and distribution of handguns. Manufacturers do not generally have a duty to control the conduct of third persons to prevent them from harming others. Nor do they have a duty to control the marketing and distribution of guns without any evidence that certain classes of dealers presented a greater threat than others. While there may be liability if a manufacturer knows or has reason to know that a distributor is engaging in substantial sales of guns into the gun-trafficking market on a consistent basis, there was no such showing made here. The court also ruled that manufacturers do not have a duty to investigate and identify corrupt dealers, particularly where such investigations can disrupt pending criminal investigations and endanger the lives of undercover officers.

    Second, it ruled that liability may not be apportioned among manufacturers according to their share of the market. The NAM was concerned that market-share liability would spread from its original incarnation in the DES case of 1989 to manufacturers of other products. However, the court ruled that the DES case was unique. It could be distinguished from the gun case on a number of grounds, including the fact that, unlike DES, guns can often be traced to the manufacturer. Thus, there was no reason to depart from the traditional principle that a plaintiff must prove that a particular product caused an injury.

    This is a major victory for all manufacturers. It is a stunning conclusion to years of uncertainty and apprehension about potential liability for marketing of legal products that are misused. The NAM filed amicus briefs in this case in the Second Circuit and in the NY Court of Appeals seeking this result.

     

    Kennedy v. Southern California Edison Company   (9th Circuit)

    Causation in toxic tort

    On 8/10/00, the NAM filed an amicus brief requesting a rehearing en banc to allow the Ninth Circuit Court of Appeals to reevaluate its initial holding in this toxic tort case. The current decision allows a plaintiff suing under California law to prove causation by merely demonstrating that exposure to a chemical or substance elevated their risk of illness, even if that elevated risk was only one in 100,000. This standard represents a radical and unwarranted departure from previous California law, which required that a defendant’s conduct be "a substantial factor in bringing about an injury."

    Allowing recovery when exposure slightly increases the possibility of injury, without requiring proof that it actually caused the injury, threatens to dramatically increase the liability of those who manufacture products sold in California. The NAM opposes this unnecessary and unreasonable expansion of traditional product liability principles.

    The court issued an order on 9/19/01 withdrawing the controversial opinion.

     


    Punitive Damages -- 2001



    Cooper Industries, Inc. v. Leatherman Tool Group, Inc.   (U.S. Supreme Court)

    De novo appellate review of punitive damage

    On 5/14/01, the Supreme Court agreed with the NAM's 12/4/00 amicus brief and ruled 8-1 that the constitutionality of a punitive damage award must be reviewed under a de novo standard, not an "abuse of discretion" standard. This decision has important implications for all businesses in this era of increasingly large, even crippling, punitive damages awards. Manufacturers faced with unreasonably high punitive damage awards in product liability litigation are more likely to get a fair result under a de novo standard of review.

    The Court ruled that reviewing punitive damages requires an analysis whether they are grossly excessive, a fluid concept that depends on the context. It found that appellate courts must use de novo review to maintain control of, and to clarify, the legal principles through case-by-case application at the appellate level. Allowing appellate courts this power helps to unify precedent and "stabilize the law."

    The NAM is relieved that the Supreme Court has approved more rigorous appellate court control of the difficult process of determining when and in what amounts to impose punitive damages for wrongful conduct. This will help prevent excessive awards.

     


    RICO Act -- 2001



    Attorney General of Canada v. RJ Reynolds Tobacco Holdings, Inc.   (2nd Circuit)

    RICO suit over foreign taxes

    The Second Circuit Ruled 10/12/01 that Canada may not use the Racketeer Influenced and Corrupt Organizations Act (RICO) to sue American tobacco manufacturers for taxes they alleged were not paid for cigarettes imported into Canada. The Court found that, under long-established common law "revenue rule," the courts of one country will not enforce the tax judgments or claims of another. Furthermore, since Congress did not intend to abrogate the revenue rule when it passed RICO, the court found that Canada had no right to sue under RICO to enforce their tax laws.

    The NAM had argued in an amicus brief in this case that the revenue rule required the Court to limit foreign governments' use of United States courts for tax collections, which, if unrestricted, would be harmful to American business interests. Click here to see the opinion.

     


    Takings -- 2001



    Palazzolo v. Rhode Island   (U.S. Supreme Court)

    Taking

    The Supreme Court held 6/28/01 that wetlands regulations limiting construction on shore land did not constitute deprivation of all economic use of the property and therefore did not constitute a taking. However, the Court remanded the case for further consideration of whether the regulations worked a partial taking for which plaintiff must be compensated. Specifically, the Court held that a takings claim is not barred by the fact that the plaintiff acquired title after the effective date of the state’s regulations. Although a court must take into account the fact that a party’s investment-backed expectations are diminished by the existence of such regulations, acquiring title after regulations become effective does not necessarily bar the claim.

     


    Taxation and State Taxation -- 2001



    United Dominion Industries, Inc. v. United States   (U.S. Supreme Court)

    Tax carryback of product liability losses

    The Supreme Court 6/4/01 held that an affiliated group of corporations filing a single consolidated income tax return pursuant to 26 U.S.C. § 1501 must calculate its "product liability loss" for carry-forward and carry-back purposes on a consolidated, single-entity basis rather than on a separate-member basis aggregating the product liability losses of the constituent companies. The case is important to corporate taxpayers that file, or are considering filing, a consolidated return with affiliated corporations.

    The NAM filed an amicus brief in support of this result on 1/11/01. We believe this decision is the correct result both as a matter of law and from an administrative point of view. Requiring consolidated groups to determine product liability losses on an individual member basis would create an administrative nightmare and lead to massive litigation.

     


    ADEA -- 2000



    Reeves v. Sanderson Plumbing Products Inc.   (U.S. Supreme Court)

    Burden of proof in ADEA cases

    In an important employment decision, a unanimous Supreme Court resolved a split among the circuits on 6/12/00 in ruling that a plaintiff's prima facie case of discrimination, combined with sufficient evidence for a reasonable factfinder to reject the employer's nondiscriminatory explanation for its decision, may be adequate to sustain a finding of liability for intentional discrimination. The plaintiff is not always required to introduce additional, independent evidence of discrimination because the trier of fact may infer the ultimate fact of discrimination from the falsity of the employer's explanation. When considering a motion for judgment as a matter of law, the court must review all of the evidence in the record, drawing all reasonable inferences in favor of the nonmoving party, without making credibility determinations or weighing the evidence. Under the particular circumstances of this ADEA (Age Discrimination in Employment Act) case, the Supreme Court held that the employer was not entitled to judgment as a matter of law.

     


    Administrative Procedure -- 2000



    Connecticut General Life Insurance Company v. Commissioner of Internal Revenue   (U.S. Supreme Court)

    Deference to IRS lawyers

    On 10/12/99, the NAM filed an amicus brief urging the U.S. Supreme Court not to give deference to an agency's lawyers when interpreting an ambiguous regulation. In November, the Court declined to hear the case.

    The case was significant because it applied to all regulations issued by all federal agencies, and it raised a serious question about the power of agency lawyers to set policy. In this case, the Third Circuit ignored previous decisions by other courts and gave deference to the IRS's litigating position on a Treasury regulation. The decision was made even though taxpayers are prohibited from citing contrary IRS letters as precendent. By refusing to give each side's arguments equal consideration, the Third Circuit gave the IRS an unfair advantage against the taxpayer.

    Under the Third Circuit's rule, the IRS can take inconsistent positions in similar cases, be accorded deference by the courts, and whipsaw taxpayers caught in the middle. The consequences are serious.

     


    Antitrust -- 2000



    Concord Boat Corp. v. Brunswick Corp.   (8th Circuit)

    Above-cost, non-exclusive discounts

    On 2/4/99, the NAM filed an amicus brief urging the Eighth Circuit to reverse a $133-million judgment against a manufacturer for alleged antitrust violations arising from offering above-cost, non-exclusive discounts. The decision was reversed on 3/24/00.

     


    Audits -- 2000



    In re Kaiser Aluminum and Chemical Co.   (5th Circuit)

    Government access to internal audits

    On 6/12/00, the Fifth Circuit ruled that a company has no privilege preventing disclosure of investigatory audits --undertaken for safety or environmental reasons -- to government investigators after an accident. The NAM amicus brief urged strict protections for self-critical evaluations from government prosecutors.

     


    Environmental -- 2000



    Arizona Public Service Co. v. EPA   (D.C. Circuit)

    Indian tribal authority under the Clean Air Act

    The NAM filed suit against the EPA 4/10/98 arguing that an EPA rule improperly granted Indian tribes authority to act under the Clean Air Act. On 5/5/00, the D.C. Circuit upheld EPA’s 2/2/98 Final Air Quality Planning and Management Rule for Indian Tribes ("Rule"). In April, 2001, the Supreme Court declined to hear the appeal.

    The Rule provides that the EPA will delegate to any federally recognized Indian Tribe, upon receipt of a properly completed tribal application, authority to implement federal Clean Air Act ("CAA") programs over lands located within the exterior boundaries of what EPA refers to as "Indian Country", as that term relates to a tribe. "Indian Country" thus includes all lands within the boundaries of a traditionally federally recognized Indian reservation (including privately owned, non-Indian lands), lands within the boundaries of off-reservation areas held in trust for a tribe by the federal government, and other lands over which a tribe can demonstrate that it has jurisdiction. Under the Rule, off-reservation "trust lands" include those lands purchased or acquired by a tribe or tribal member and placed into trust--including lands acquired for commercial and gaming casino purposes. The EPA’s definition of Indian Country conflicts with the far more restrictive definition of "reservation" used by Congress, the federal courts and even the EPA in other federal laws, cases and regulations governing tribal affairs.

    Pursuant to the Rule, tribes may also "redesignate", as "Class I" areas for air quality management purposes, lands located outside of traditional reservation boundaries. Under current federal law, only lands within such boundaries may be redesignated as Class I. Redesignation to Class I status invokes the most stringent federal air quality protection standards relating to the siting of new or modified manufacturing facilities in areas sometimes located several hundred miles away from the Class I area.

    Other features of the Rule include the elimination of the Title V requirement for review in state court of adverse tribal operating permit decisions and permitting delays and the insulation of tribes from citizen suits for asserted violations of the law. Moreover, upon approval of a tribal authority application under the Rule, state air permitting agencies will be stripped of their own authority to issue or renew installation, operation and other air permits to industrial sources located or seeking to locate within Indian Country, and existing state air permits issued to such sources will be invalidated.

    Prior to issuance of the Rule, tribes, like states, were required to affirmatively demonstrate the public health, welfare and environmental bases for their assertion of environmental authority over lands that are clearly otherwise within their jurisdiction. That is no longer the case. The Court’s decision now allows the EPA (an administrative agency), in conjunction with tribes, to redraw state boundaries for regulatory purposes and to dispossess state permit holders of substantial rights. The EPA asserts that other federal environmental laws similarly allow EPA to delegate to a tribe authority to regulate other environmental media within "Indian Country".

    The Petitioners in the case included, among others, the State of Michigan, several Arizona and New Mexico utility companies, the National Association of Manufacturers, the American Forest and Paper Association, the Michigan Chemical Council, the Rhinelander Area Chamber of Commerce and the Timber Producers Association of Michigan and Wisconsin, Inc. It is their position, among others, that decisions to redraw state boundaries for regulatory purposes must be made within the framework of established federal law and the United States Constitution, with full public participation, and not at the whim of federal administrative agencies. For more information regarding the Rule, contact Brian J. Renaud of Howard & Howard Attorneys, P.C., at (248) 723-0356, counsel in the case for NAM, AF&PA, the Michigan Chemical Council, the Rhinelander Area Chamber of Commerce, Inc. and the Timber Producers Association of Michigan and Wisconsin, Inc. Case decided on 5/5/00.

     

    Friends of the Earth v. Laidlaw Environmental Services, Inc.   (U.S. Supreme Court)

    Ability of individuals bringing citizen-suits to seek civil penalties

    Friends of the Earth brought an enforcement action against Laidlaw pursuant to the citizen-suit provision of the Federal Water Pollution Control Act (Clean Water Act). They alleged ongoing violations by Laidlaw of certain permits and sought monetary penalties, declaratory judgment, injunctive relief, attorneys’ fees and costs.

    The district court found that Laidlaw had committed several permit violations and imposed a penalty of $405,800. The court did, however, deny plaintiffs’ request for declaratory judgment and injunctive relief because Laidlaw’s violations had not harmed the environment and Laidlaw had been in substantial compliance for several years at the time the court issued its final order.

    The plaintiffs appealed the size of the penalty to the Fourth Circuit Court of Appeals, but did not challenge the denial of injunctive relief. Laidlaw argued that plaintiffs lacked standing. Applying Steel Co. v. Citizens for a Better Environment, the court concluded that "this action is moot because the only remedy currently available to Plaintiffs—civil penalties payable to the government—would not redress any injury Plaintiffs have suffered." It vacated the order of the district court and remanded the case with instructions to dismiss the action.

    On January 12, 2000, the Supreme Court reversed by a vote of 7 to 2. It held that the case is not moot even where the company has come into compliance with its permit, since it was in violation at the time of the complaint, and its violations could continue into the future if undeterred. It sent the case back to the lower courts to determine whether there was any chance that the company might still violate its permit in the future. The ruling is a step back from the Steel Company decision, where it found that citizen suits could not be filed for wholly past permit violations.

     

    Gulf Metals Inds., Inc. v. Delta Lloyds Ins. Co.   (Texas Supreme Court)

    Insurance policy pollution coverage

    The NAM filed an amicus brief with Halliburton Co. and Dresser Industries, Inc. on March 13, 2000 in a case involving how a standard insurance policy will be interpreted with respect to pollution. States have developed different interpretations of the standard language, and the NAM supports an interpretation that would allow coverage for unexpected and unintended discharges or emissions, even though they may not occur quickly. The Texas Supreme Court declined to hear this appeal on April 13.

     

    Pacific Lumber Co. v. Marbled Murrelet   (U.S. Supreme Court)

    Attorney’s fees under Endangered Species Act

    The NAM filed an amicus brief supporting a request for attorneys' fees where the lumber company won a citizen suit brought against it under the Endangered Species Act. (S. Ct., cert. denied 1/21/00).

     

    United States v. van Loben Sels   (9th Circuit)

    Criminal liability for waste water

    On February 28, 2000, the NAM filed an amicus brief opposing the criminal prosecution of a manufacturing CEO for the company's pollution release into a local waste treatment plant. The Ninth Circuit denied the petition for rehearing on 4/14/00. The issue involved whether a public sewer system should be considered part of the "environment" for purposes of the sentencing guidelines.

     


    ERISA -- 2000



    Pegram v. Herdrich   (U.S. Supreme Court)

    Definition of fiduciaries under ERISA

    In an important decision bearing on the ongoing national debate about the quality of managed health care, the Supreme Court held 5/12 that treatment decisions made by the physician employees of a health maintenance organization (HMO) are not fiduciary acts within the meaning of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (ERISA). The Supreme Court reversed the United States Court of Appeals for the Seventh Circuit’s decision that HMO patients could sue HMOs and their physician employees for at least some treatment decisions under 29 U.S.C. § 1109(a), which authorizes suits against ERISA fiduciaries.

     


    False Claims Act -- 2000



    Vermont Agency of Natural Resources v. United States ex rel. Stevens   (U.S. Supreme Court)

    Qui tam suits

    The Second Circuit held that the False Claims Act, 31 U.S.C. § 3729-3733, authorizes private relators to bring qui tam suits against states, and that such suits are not barred by the Eleventh Amendment. Shortly before oral argument, the Supreme Court asked for supplemental briefing on whether a qui tam relator has Article III standing. Reversing the Second Circuit, the Supreme Court held that although a qui tam relator has Article III standing to sue as an assignee of the United States, the False Claims Act does not authorize qui tam suits against states. Because it resolved the case on statutory grounds, the Court did not reach the Eleventh Amendment question. The NAM had challenged the standing of qui tam plaintiffs, but the issue was never reached.

     


    Free Speech -- 2000



    Junger v. Daley   (6th Circuit)

    First Amendment challenge to export controls on encryption software

    On 3/8/99, the NAM filed an amicus brief in this case involving a First Amendment challenge to export controls on encryption software. The Sixth Circuit decided on 4/4/00 that computer source code is protected speech under the First Amendment.

     

    Los Angeles Police Department v. United States Reporting Publishing Corp.   (U.S. Supreme Court)

    Access to government records

    A California law requires publication of the names of individuals arrested by state and local law enforcement agencies, but permits access to the addresses of these individuals only for certain statutorily-approved purposes. On 12/7/99, the Supreme Court upheld the law against a facial challenge. This challenge was brought by the United Reporting Publishing Corp., a company that sells the addresses of arrestees to attorneys, insurance companies, drug counselors, and others who wish to conduct business with the arrestees, which is an impermissible purpose under California law. Apparently unable to argue that application of the statute to it violated the First Amendment, the company contended that the statute violated the rights of others such as its potential customers and was therefore overbroad. The Supreme Court, however, held that overbreadth analysis was inapplicable because the law merely denied access to government information and, consequently, its application to the publisher would not chill the speech of others, at lease based upon information that they already possessed.

    The Court did not rule on the publisher’s equal protection challenge to the California law, and, as Justice Scalia stressed in concurrence, the opinion did not preclude an "as applied" challenge to the law by the publisher’s customers and other speakers.

     

    Nixon v. Shrink Missouri Government PAC   (U.S. Supreme Court)

    First Amendment does not prevent limits on campaign contributions

    On January 24, 2000, the U.S. Supreme Court ruled 6 to 3 that a Missouri state campaign contribution law that limits individual donations to candidates does not violate the First Amendment under Buckley v. Valeo, 424 U.S. 1(1976).

    A lawsuit was filed alleging that the law violates the First Amendment right to free speech and association. The district court entered judgment for the State. The Eighth Circuit struck down the law as failing the Buckley standard which requires a compelling state interest for contribution limits. The State argued that the compelling interest was the corruption or perception of corruption brought about when candidates accept large campaign contributions. The State failed, however, to prove that corruption is a real problem in Missouri and it is a direct result of large campaign contributions. The Eighth Circuit stated that even if there exists a compelling state interest, the State could not show that the law was narrowly drawn to serve that interest.

    Over-regulation can distort the marketplace of political ideas. Contributions made to campaigns on all levels is an exercise in free speech and political activity. The Supreme Court, however, determined that campaign limits do not violate the First Amendment, leaving states free to restrict manufacturers from participating in the free exchange of political ideas.

     


    Government Regulation -- 2000



    FDA v. Brown & Williamson Tobacco Corp.   (U.S. Supreme Court)

    Whether FDA has jurisdiction to regulate tobacco products

    On 3/21/00, the Supreme Court held that Congress has not given the Food and Drug Administration authority to regulate tobacco products marketed without manufacturer claims of therapeutic benefit. In 1996 the FDA had asserted such authority and promulgated regulations governing tobacco products’ promotion, labeling, and accessibility to children and adolescents. In holding that the FDA lacked authority to issue these regulations, the Court noted that if tobacco products were subject to the FDA’s jurisdiction, the FDA would be required to ban them pursuant to the Food, Drug, and Cosmetic Act because they cannot be used safely for any therapeutic purpose. Congress, however, has foreclosed a ban of such products, choosing instead to create a distinct regulatory scheme for tobacco that focuses upon labeling and advertising. Accordingly, the Court concluded there was no room for tobacco products within the FDCA’s regulatory scheme. The Court also noted that, prior to 1996, the FDA had consistently stated that it lacked authority to regulate tobacco products as customarily marketed and that this longstanding interpretation had been ratified by Congress, which had enacted numerous statutes regulating tobacco directly and had on several occasions rejected bills that would have given the FDA regulatory authority over tobacco. Under the circumstances, the Court concluded that the FDA’s assertion of regulatory authority was not entitled to deference.

     


    International -- 2000



    Wal-Mart Stores, Inc. v. Samara Brothers, Inc.   (U.S. Supreme Court)

    Lanham Act trade-dress protection

    On 3/22/00, the Supreme Court held that product design can never be an "inherently distinctive" form of unregistered trade dress and is entitled to protection under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), only upon a showing that it has acquired a "secondary meaning" that results in identification of the product’s source. The Court distinguished product design trade dress from other forms of trade dress, including word marks and packaging, because product design trade dress, unlike other the forms, almost invariably is not intended to identify the source of the product, but rather "to render the product itself more useful or more appealing." Jones Day represented the International Mass Retail Association as amicus curiae in support of the (successful) petitioner in this case.

    Lower court opinion: 165 F.3d 120 (2d Cir. 1998).

     


    Jurisdiction -- 2000



    Free v. Abbott Labs., Inc.   (U.S. Supreme Court)

    Diversity jurisdiction

    On 4/3/00, an evenly divided Supreme Court affirmed the judgment below. The Fifth Circuit had held that 28 U.S.C. § 1367 overruled Zahn v. International Paper Co., 414 U.S. 291 (1973), thereby allowing the federal district court to retain jurisdiction over a diversity-based class action even though each member of the class did not satisfy the amount-in-controversy requirement of 28 U.S.C. § 1332. The courts of appeals have divided on this question, which is very important to businesses that wish to avoid defending class actions in state court. The Supreme Court's decision, however, will not resolve this question since affirmance by an equally divided Court has no precedential effect and binds only the parties to the litigation.

    Lower court opinions: 176 F.3d 298 (5th Cir. 1999); 51 F.3d 524 (5th Cir. 1995).

     


    Labor Law -- 2000



    Gemini, Inc. v. Thorson   (8th Circuit)

    FMLA coverage

    The NAM’s amicus brief failed to convince the Eighth Circuit to reject a Department of Labor regulation that allows the common cold, flu and other minor ailments to qualify as "serious health condition[s]" under the Family & Medical Leave Act. Case decided on 3/3/00.

     

    Local 702, IBEW v. NLRB   (D.C. Circuit)

    Company lockout of union engaged in inside-game tactics

    On 10/15/99, the NAM filed a brief supporting the NLRB’s decision allowing a company to lock out employees who engage in inside-game tactics. The D.C. Circuit ruled 5/9/00 to uphold the company’s lockout.

    Union employees use "inside game" tactics to win bargaining-table concessions, slowing down the work pace, refusing to work overtime, asking for minute instructions from supervisors, filing mass charges with government agencies, calling in sick, or otherwise impeding or disrupting operations without actually going on strike. By taking the strike inside, union employees continue to be paid. The company in this case faced this situation and locked them out.

    The U.S. Court of Appeals for the D.C. Circuit affirmed an NLRB decision in favor of the company, Central Illinois Public Service Co. (CIPSCO). The court and the Board allow companies to lock out such employees, as a legitimate countervailing economic weapon. According to the court, lockouts are not "inherently destructive of employee rights," and the employer had a "legitimate and substantial business justification" for the lockout. A lockout is a reasonable tool to help bring about a resolution of collective bargaining negotiations, and there was no evidence of anti-union animus on the part of the employer.

     

    UAW v. Chelsea Inds., Inc.   (NLRB)

    Withdrawal of recognition of union

    The NAM joined the U.S. Chamber of Commerce in filing a brief 5/18/98 opposing an NLRB proposal that would require elections whenever employees want to decertify their union as their authorized collective bargaining representative. In Chelsea, the Board ruled that an employer may not rely on signatures from a majority of workers to decertify a union, if the signatures were received during the first year of the union's representation of the employees. In Levitz, the Board ruled that an employer may not withdraw recognition from a union unless the union "has actually lost the support of the majority of the bargaining unit employees." It also ruled that an employer needs uncertainty, but not disbelief, as to a union's continuing majority status in order to seek a Board-conducted election by its employees. Also filed under as UFCW v. Levitz Furniture Co.

     

    UFCWU v. Levitz Furniture Co.   (NLRB)

    Withdrawal of recognition of union

    The NAM joined the U.S. Chamber of Commerce in filing a brief 5/18/98 opposing an NLRB proposal that would require elections whenever employees want to decertify their union as their authorized collective bargaining representative. In Chelsea, the Board ruled that an employer may not rely on signatures from a majority of workers to decertify a union, if the signatures were received during the first year of the union's representation of the employees. In Levitz, the Board ruled that an employer may not withdraw recognition from a union unless the union "has actually lost the support of the majority of the bargaining unit employees." It also ruled that an employer needs uncertainty, but not disbelief, as to a union's continuing majority status in order to seek a Board-conducted election by its employees.

     

    United States Bakery, Inc. v. Schneider   (U.S. Supreme Court)

    Preemption of state overtime claim

    This case involves federal preemption of claims by union employees that they are entitled to overtime pay under state law for work they did under a collective bargaining agreement. The NAM filed an amicus brief 3/1/2000 urging the court to reverse a Washington Supreme Court decision that would allow a class action, worth at least $40 million in this case, to proceed on the theory that baker-salespersons are not "outside salespersons" under state law. The NAM’s brief cites federal precedent that local claims involving the interpretation of collective bargaining agreements are preempted. The Supreme Court declined to review the case.

    The case has implications for any unionized company with an agreement that defines, either explicitly or implicitly, certain employees as exempt or not exempt from the overtime laws. Preemption applies whenever the remedies sought, such as overtime pay, depend on or are inextricably intertwined with an interpretation of the provisions of the collective bargaining agreement.

    If a company and a union agree to classify certain employees as salespersons, union employees should not be able to enjoy the benefits of the contract, then sue later, claiming they didn't like the contract.

     


    Patents, Copyrights and Trademarks -- 2000



    Reiffin v. Microsoft Corp.   (Federal Circuit)

    Challenge to "submarine" patents

    The NAM sought to affirm a lower court decision limiting the ability of patent claimants to file "submarine" patents with claims that "surface" years later, when other companies have already developed substantial commercial interests without knowledge of the patent. The D.C. Circuit, however, overturned the lower court ruling on 6/5/00..

    In this case, the plaintiff claimed that several Microsoft software applications make unlawful use of his patented computer technology. Microsoft contended that the plaintiff failed to include an essential element of the invention as originally disclosed in the written description of the invention in a continuation application filed years later. The District Court agreed with Microsoft, holding that plaintiff's patents are invalid because they failed to meet a specific aspect of the written description requirement contained in the patent act.

    In its brief, the NAM urged the appellate court to protect manufacturers from patentees who obtain claims that are broader than their disclosed invention. Manufacturers who invest hundreds of millions of dollars in technology are faced with the threat of "submarine patents", when an applicant intentionally delays the issuance of a patent, or drafts broad claims in order to extract favorable license terms from those who have already adopted and invested in the technology. The NAM asserted that the written description requirement, as applied in this case, may be the only defense available to manufacturers accused of infringement.

     


    Preemption -- 2000



    Crosby v. National Foreign Trade Council   (U.S. Supreme Court)

    State limitations on international commerce

    The NAM filed an amicus brief on 2/14/00 in this case. In a unanimous decision, the Supreme Court held 6/19/00 that federal law preempts a Massachusetts law that bars state entities from purchasing goods and services from companies doing business with Burma. The Court held that the Massachusetts law stands "as an obstacle to the accomplishment of Congress’s full objectives" as expressed in federal legislation concerning Burma in three ways: (i) it "compromise[d]" the President’s "authority not merely to make a political statement but to achieve a political result" in the Nation’s dealings with Burma by lessening the President’s "diplomatic leverage"; (ii) it "penaliz[ed] individuals and conduct that Congress has explicitly exempted or excluded from sanctions"; and (iii) it was "at odds with the President’s intended authority to speak for the United States among the world’s nations." The Court did not "pass on the First Circuit’s rulings addressing the foreign affairs power or the dormant Foreign Commerce Clause," but nonetheless sent strong signals that sub-federal sanctions against foreign nations would be unconstitutional even in the absence of a conflicting federal statute; it noted that "invocation of exclusively national power belies any suggestion that Congress intended the President’s effective voice to be obscured by state or local action" and that "the President’s maximum power to persuade rests on his capacity to bargain for the benefits of access to the entire national economy without exception for enclaves fenced off willy-nilly by inconsistent political tactics."

     

    Geier v. American Honda Motor Company, Inc.   (U.S. Supreme Court)

    Preemption of airbag design defect litigation

    In an important case for manufacturers, the Supreme Court held 5/22/2000 that Federal Motor Vehicle Safety Standard 208, promulgated under the National Traffic and Motor Vehicle Safety Act of 1966, preempts state tort claims based upon a manufacturer's failure to install airbags in a 1987 model automobile. The Court held that the Safety Act's "savings" provision excludes common-law tort claims from express preemption. But the Court also held that the Safety Act's savings provision neither "bar[red] the ordinary working of conflict pre-emption principles" nor imposed a "'special burden' beyond that inherent in ordinary pre-emption principles." Applying those principles, the Court held that common-law airbag claims, which effectively seek to require airbag installation, would stand "as an obstacle to the accomplishment and execution of" Standard 208's objective to "provid[e] the manufacturer with a range of choices among different passive restraint devices." Accordingly, such claims are preempted.

    Justice Stevens, joined by Justices Souter, Thomas, and Ginsburg, dissented, arguing that the presumption against preemption of state law militated against finding any implied conflict preemption in this case.

     


    Product Liability -- 2000



    Cooper Tire Co. v. Crosby   (Georgia Supreme Court)

    Whether tire return information is probative of defect in product

    On 1/14/00, the NAM filed an amicus brief in this case, urging the Georgia Supreme Court to reverse a lower court ruling that allowed evidence of warranty returns for automobile tires to be used as evidence that the tires were defectively manufactured. Manufacturers allow warranty returns for a variety of procompetitive reasons that have no relation to whether the tires were defectively manufactured, and it is unfair to infer that a product is defectively manufactured simply because companies provide money-back guarantees.

    Although the Georgia Supreme Court initially denied review on 4/28/00, Cooper Tire, supported by another NAM amicus brief, asked for reconsideration. On 2/16/01, the court reversed the lower court, holding that evidence of consumer claims honored by the manufacturer is inadmissible at trial unless there is proof of a "substantial similarity between the purported tire defect that caused the injuries in this case and the basis for the consumer claims that were honored by the manufacturer . . . ." Thus, a trial court has the discretion to exclude evidence that has no "substantial similarity" to the actual claims in the case. This is an important victory for manufacturers, as it helps to ensure that only relevant evidence is considered when assessing tort liability against a company. 6/16/00

     

    Simon v. American Crescent Elevator Co.   (Louisiana Ct. App.)

    Post-sale duty to warn case

    The NAM joined with the American Tort Reform Association and the Louisiana Association of Business and Industry in an amicus brief 4/7/2000 urging reversal of a trial court ruling that held a tool company legally obligated to issue a post-sale warning about its product even though (1) the product was not being used in its originally intended use, (2) the product had been subjected to substantial and repeated abuse, (3) there had never been a similar accident or complaint since 1958, (4) there was no proof the company knew of the risk alleged, and (5) there was no evidence that a warning would have prevented the injury.

    Our brief warned that the trial court's vague and open-ended new duty theory would subject products to liability long after they were sold, without notice, and without regard to how the product was used. We urged the court to adopt a mainstream standard as set forth in the Restatement (Third) of Torts: Product Liability. This standard considers 4 critical guideposts to determine whether a reasonable seller would provide a post-sale warning: (1) if the seller knows or reasonably should know that the product poses a substantial risk of harm, (2) buyers can be identified and are unaware of the risk, (3) a warning can be effectively communicated and acted upon, and (4) the risk of harm is sufficiently great to justify the burden of providing a warning. In this case, these factors would not impose a duty to warn on the manufacturer.

    The appellate court upheld the jury verdict because it thought there was enough evidence that the manufacturer should have reasonably expected the machine to be used the way it was, that it should have warned that only 3 set screws held the machine's components together, and that a warning would have helped the plaintiff evaluate the danger.

     

    Simon v. American Crescent Elevator Co.   (Louisiana Supreme Court)

    Post-sale duty to warn case

    The NAM joined with the American Tort Reform Association and the Louisiana Association of Business and Industry in an amicus brief 6/30/2000 urging the Louisiana Supreme Court to review lower court rulings and reverse decisions that held a tool company legally obligated to issue a post-sale warning about its product even though (1) the product was not being used in its originally intended use, (2) the product had been subjected to substantial and repeated abuse, (3) there had never been a similar accident or complaint since 1958, (4) there was no proof the company knew of the risk alleged, and (5) there was no evidence that a warning would have prevented the injury.

    Our brief warned that the lower courts' vague and open-ended new duty theory would subject products to liability long after they were sold, without notice, and without regard to how the product was used. We urged the court to adopt a mainstream standard as set forth in the Restatement (Third) of Torts: Product Liability. This standard considers 4 critical guideposts to determine whether a reasonable seller would provide a post-sale warning: (1) if the seller knows or reasonably should know that the product poses a substantial risk of harm, (2) buyers can be identified and are unaware of the risk, (3) a warning can be effectively communicated and acted upon, and (4) the risk of harm is sufficiently great to justify the burden of providing a warning. In this case, these factors would not impose a duty to warn on the manufacturer.

    On Nov. 13, 2000, the Louisiana Supreme Court declined to hear this appeal.

     

    Texas Carpenters Health Benefit Fund v. Philip Morris Inc.   (5th Circuit)

    Health plan suit against manufacturers

    The NAM and the Product Liability Advisory Council filed a joint amicus brief on 2/17/99 in this case seeking to affirm the district court's dismissal of a complaint by union health plans and others against tobacco manufacturers for health claims by their insureds.

    On 1/19/00, the court affirmed the dismissal of the suit. This case reaffirms the correctness of the NAM's support for fundamental subrogation remedies and limitations under the doctrine of remoteness.

     

    Tompkin v. American Brands   (6th Circuit)

    Common knowledge doctrine

    On 8/28/00, the NAM filed an amicus brief urging the Sixth Circuit Court of Appeals to reevaluate its initial ruling on the common knowledge doctrine with a rehearing en banc. The common knowledge doctrine shields manufacturers from liability when the risk of a harm associated with a product is a matter of ordinary knowledge common to the community. The Court’s decision holds that a risk is not a matter of common knowledge unless the public has a relatively precise understanding of the degree of risk. The NAM was concerned that this unprecedented requirement would subject manufacturers to liability even when the existence of a risk of injury is widely recognized. The court refused to rehear the case.

     

    Weisgram v. Marley Co.   (U.S. Supreme Court)

    Remediation of errors in admitting expert testimony in products liability case

    In this unanimous decision, the Court held that an appellate court may direct the entry of judgment as a matter of law when it determines that evidence was erroneously admitted at trial and that the remaining properly admitted evidence is insufficient to support the jury's verdict. The Court rejected the contention that the appellate court is required to remand for the district court to determine whether a new trial is warranted. The Court held that the appellate court did not abuse its discretion in directing entry of judgment for defendant in this case because plaintiff had notice of the alleged evidentiary deficiency before the close of evidence but made no attempt to add or substitute other evidence to prove his claim and did not, on appeal, offer specific grounds for a new trial.

    Lower court opinion: 169 F.3d 514 (8th Cir. 1999).

     


    RICO Act -- 2000



    Beck v. Prupis   (U.S. Supreme Court)

    Civil RICO conspiracy claim

    In an opinion that narrows the scope of a widely used federal racketeering statute, the Supreme Court on 4/26/00 held that a person injured by an overt act done in furtherance of a civil conspiracy under the Racketeer Influenced and Corrupt Organizations (RICO) Act does not have a civil cause of action under the RICO Act if the overt act itself is not an act of racketeering. Petitioner Beck claimed that he was wrongfully terminated from his position as president and CEO of an insurance holding company after he reported the company’s unlawful acts of racketeering. Beck sued the company’s senior officers and directors under RICO, alleging that his injury was proximately caused by an overt act—his termination as a whistleblower—done in furtherance of a RICO conspiracy and that he therefore had a cause of action under 18 U.S.C. § 1964(c). Resolving a split among the circuits, the Court held that a person injured by an overt act in furtherance of a conspiracy may not assert a civil RICO conspiracy claim under § 1964(c) if that overt act is not itself "racketeering activity," as defined in the statute. Justice Stevens, in an opinion joined by Justice Souter, dissented, asserting that nothing in the language of the statute required the overt act to be a racketeering activity to state a civil cause of action.

     


    Taxation and State Taxation -- 2000



    Hunt-Wesson, Inc. v. Franchise Tax Board   (U.S. Supreme Court)

    Taxation of nonunitary subsidiaries

    California’s unitary tax system allows a multistate corporation to deduct interest expense. However, it limits that deduction to the amount that the interest expense exceeds certain out-of-state income arising from the unrelated business activity of a discrete business enterprise. The Court has already held that income derived from the unrelated business activity cannot be taxed by the state consistent with the Due Process and Commerce Clauses, and today, it held that the California limit on interest-expense deduction is likewise unconstitutional: "Because California’s offset provision is not a reasonable allocation of expense deductions to the income that the expense generates, it constitutes impermissible taxation of income outside its jurisdictional reach." The decision, authored by Justice Breyer, was unanimous.

    Lower court opinion: Cal. Ct. App. (Dec. 11, 1998) (unpublished)

     

    MCI Communications Corp. v. United States   (U.S. Supreme Court)

    Deference to Revenue Rulings

    The NAM filed a brief 4/14/00 seeking a Supreme Court decision about the level of deference that courts should give to IRS revenue rulings. The Court refused to hear the appeal.

     

    PNC Bancorp, Inc. v. Commissioner   (3rd Circuit)

    Deductibility of salaries and benefits for loans

    The NAM urged reversal, 6/2/99, of a Tax Court decision that salaries and benefits are not currently deductible costs associated with the origination of loans. The Third Circuit found on 5/22/00 that these salaries and benefits are currently deductible.

     

    Wells Fargo & Co. v. Commissioner   (8th Circuit)

    Deductibility of wages for corporate acquisition

    On 8/29/00, the Eighth Circuit agreed with an NAM brief that employee wages are currently deductible for tax purposes, rather than capitalizable, when they’re not directly related to a corporate acquisition.

     


    Antitrust -- 1999



    Nynex Corp. v. Discon Inc.   (U.S. Supreme Court)

    Antitrust liability when buyer and seller agree on contract

    In this antitrust case, the Supreme Court ruled that the per se group boycott rule set forth in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212 (1959), does not apply to a buyer’s decision to buy from one seller rather than another, when that decision cannot be justified in terms of ordinary competitive objectives. Discon, a supplier of equipment removal services for telephone companies, alleged that a purchaser and a competing supplier conspired to drive it out of business and to defraud both state regulators and local telephone service customers. The Second Circuit held that respondent’s allegations stated claims for violations both of Section 1 of the Sherman Act (for an unlawful group boycott) and Section 2 of the Sherman Act (for conspiracy to monopolize). The Second Circuit did not, however, decide whether the group boycott allegations would constitute per se violations or should be judged under the rule of reason.

    The Supreme Court unanimously held that a per se rule of illegality does not apply to an agreement by a buyer to purchase goods and services from one supplier rather than another when, as here, there is no "horizontal" anti-competitive agreement among competitors. Rather, a plaintiff in these circumstances must allege and prove harm "not just to a single competitor, but to the competitive process, i.e., to competition itself;" otherwise, buyers would be discouraged from switching suppliers, a freedom that is "close to the heart of the competitive process."

     


    Attorney's Fees -- 1999



    Hecla Mining Co. v. Washington Wilderness Coalition   (U.S. Supreme Court)

    Third-party fee reimbursements

    On March 8, 1999 the Supreme Court refused to hear an appeal in a case involving attorneys fees. The NAM had filed an amicus brief urging the Court to end a double standard that benefits lawyers who sue manufacturers under various environmental laws.

    In this case, the Ninth Circuit ignored federal statutes by holding defendants to a much higher standard than applied to plaintiffs when ruling on a request for attorney’s fees. By giving plaintiffs such a strong incentive to sue, this interpretation undercuts the authority of the EPA and the Department of Justice to be the nation’s chief environmental enforcement agencies. In addition, the court’s ruling encourages litigation in any case that is arguably slightly better than a frivolous case.

     


    Class Actions -- 1999



    John Crane, Inc. v. Abate   (U.S. Supreme Court)

    Mass tort class action procedure

    On 2/22/99, the U.S. Supreme Court denied the petition for certiorari. The NAM, Lawyers for Civil Justice and the Illinois Manufacturers Association filed a joint brief supporting John Crane's petition for cert. in this case involving Maryland's mass tort class action procedure. The case affects all manufacturers subjected to class action litigation. The NAM argued that such litigation is unfair and violates due process.

     

    Ortiz v. Fiberboard Corp.   (U.S. Supreme Court)

    Class action settlements

    In this 6/23/99 decision, the Supreme Court restricted the use of "limited fund" settlement classes in mass tort cases. The Federal Rules of Civil Procedure authorize courts to certify mandatory classes of individuals with claims against a fund that is inadequate to pay them all.

    In this case, which involved the settlement of massive asbestos litigation, and in many other large tort class actions, the parties sought to certify a mandatory class (and avoid the problem of absent class members opting out of the settlement) on the theory that the defendant and its insurers could not satisfy all of the claimants. In reversing the certification of a mandatory limited fund class and entry of a multi-billion dollar settlement, the Court held that limited fund settlement classes may only be certified where (1) the funds available are inadequate to satisfy all the outstanding claims; (2) absent claimants are treated equitably; and (3) the whole of the inadequate fund is devoted to satisfying the claims of class members.

    The Court found the class certification in this case lacking because the extent of the funds available had not been established, because the settlement procedures did not meet the rigorous requirements of Amchem v. Windsor, 521 U.S. 591, and because most of the assets of one of the defendants were apparently not included in the limited fund.

    Chief Justice Rehnquist, joined by two other justices, concurred but urged Congress to pass legislation reducing the transactions costs in settling class actions. Justice Breyer, joined by Justice Stevens, dissented, arguing that the requirements for limited fund class actions should be applied with more flexibility in the a context of the asbestos litigation crisis.

     


    Environmental -- 1999



    American Trucking Associations, Inc. v. EPA   (D.C. Circuit)

    EPA air quality standards for ozone and particulate matter

    (consolidated with American Petroleum Institute & NAM v. EPA) -- The NAM filed a brief in March of 1998 calling on the court to review the final rules on the EPA's new air quality standards for ozone and particulate matter, as well as a final EPA rule relating to the "federal reference method" for National Ambient Air Quality Standards. On May 14, 1999, the U.S. Court of Appeals for the District of Columbia rejected these rules implemented by the EPA concerning ozone pollution. This ruling, a victory for manufacturers, was subsequently appealed to the Supreme Court, which reversed in 2001.

    The D.C. Circuit's ruling temporarily stopped the EPA from assuming arbitrary authority. Manufacturers have struggled with EPA standards that are unrealistically strict and not reasonably related to clear health benefits. The ruling required EPA to say why the ozone pollution levels it has set are reasonable in term of health effects

    The Court denied in part and granted in part the EPA’s petition for rehearing on Oct. 28, 1999.

    The Government petitioned for Supreme Court review, on 1/26/99. The EPA appealed three issues, including whether:

    1) the rulemaking process used by the EPA in revising the ozone and PM NAAQS "effects an unconstitutional delegation of authority";

    2) the D.C. Circuit erred in assuming it had authority to review as a final agency action EPA’s "preliminary preamble statements on the scope of the agency’s authority to implement the revised ‘eight-hour’ ozone NAAQS;" and

    3) subpart 2 of the Clean Air Act (which sets requirements for areas to come into attainment with the one-hour ozone standard) restricts EPA’s authority under other provisions "to implement a new and more protective ozone NAAQS" until the one-hour standard is attained.

    EPA did not appeal the D.C. Circuit’s finding that the Agency must consider all health effects, both negative and positive, in setting a standard.

    Background: When EPA issued its new air rule for ozone, the agency ignored the advice of its own scientific advisory panel and sidestepped a 1996 law designed to mitigate the costs of major rules on small businesses. These issues are the driving force behind an NAM lawsuit challenging EPA’s new ozone air quality standard. Two NAM briefs filed 3/23/98 ask the Court of Appeals to throw out the rule.

    The NAM briefs noted that EPA’s new standard lacks the scientific support called for under the Clean Air Act and could actually lower health protection. The new standard:

  • Supplants congressional intent with an unsubstantiated policy decision made by the EPA Administrator;
  • and
  • Ignores EPA’s own Clean Air Scientific Advisory Committee, which found no discernable health benefit in moving to a different standard.
  • Just as bad, EPA ignored its statutory duty to comply with the Small Business Regulatory Enforcement Fairness Act (P.L. 104-121), which requires agencies to study the potential impacts of major rules on small entities and find ways to mitigate their costs.

     

    Harmon Industries, Inc. v. Browner   (8th Circuit)

    EPA enforcement rights under RCRA

    On 9/16/99 the Eighth Circuit ruled that the Environmental Protection Agency can not bring its own enforcement action under the Resource Conservation and Recovery Act to secure additional penalties or impose other burdens on companies that generate wastes deemed hazardous under the Act. States currently administer their own RCRA-authorized programs that include settlements of violations. The court agreed with an NAM amicus brief asserting that the power of EPA to "overfile," or simultaneously enforce RCRA against companies being prosecuted under state RCRA programs would subject manufacturers to duplicative or inconsistent corrective measures and additional penalties. According to the court, the state enforcement authority is in lieu of and supplants the federal program.

    This is an important victory for manufacturers that have been subjected to multiple enforcement actions by the EPA and affected states.

     

    United States v. Smithfield Foods, Inc.   (4th Circuit)

    NPDES requirements

    In this case, the NAM supported Smithfield Foods seeking reversal of an EPA civil enforcement suit for violation of its National Pollutant Discharge Elimination System (NPDES) permit. Smithfield had an agreement with the Virginia State Water Control Board to meet new permit requirements, but the EPA sought to impose more than $12 million in fines despite an agreement Smithfield had reached with Virginia to connect to the local waste water treatment system.

    The Fourth Circuit ruled 9/14/99 that because Virginia had not formally modified the permit to allow certain discharges, its written statements that the phosphorous standard would not be enforced were irrelevant. It ruled that imposing both daily and monthly fines were not double counting. It also refused to allow Smithfield to offset its liability with payments being made to tie in to a municipal waste treatment facility.

    The bottom line: letters from state officials, without changes in the actual permits, will not eliminate federal EPA enforcement of NPDES requirements, and EPA can impose strict financial requirements.

     


    ERISA -- 1999



    American Manufacturers Mutual Insurance Co. v. Sullivan   (U.S. Supreme Court)

    Due process requirements for private workers' comp. carriers

    Pennsylvania’s Workers’ Compensation Act permits insurers and self-insured employers to withhold payment for medical treatment pending a review of whether the treatment is "reasonable" and "necessary." Several employees whose benefits had been withheld, along with organizations representing such employees, sued various state officials and private insurers on the grounds that withholding the benefits without first affording the employees notice and an opportunity to be heard violated the Due Process Clause. The Third Circuit upheld their claims, but the Supreme Court reversed. It held that (1) the insurers are not state actors because their decisions to withhold payment are not "fairly attributable" to the state and (2) given the terms of the Pennsylvania statute, employees have no property interest in payments for medical treatment until they have established that the treatment is "reasonable" and "necessary."

    The NAM filed an amicus brief supporting this appeal, and then a brief on the merits supporting the ultimate result. The Third Circuit's ruling threatened to tie up utilization review and medical care cost containment in workers' compensation cases, increasing costs.

     

    Hughes Aircraft Co. v. Jacobson   (U.S. Supreme Court)

    Power to amend pension plans

    On January 25, 1999, the Supreme Court unanimously ruled that an employer did not violate provisions of ERISA when it amended its employee-funded pension plan to provide for an early retirement program and noncontributory benefit structure.

    Hughes Aircraft Company maintains a retirement pension plan for its employees that, until 1991, required mandatory employee contributions. In 1991, Hughes Aircraft amended its plan to create a new benefit structure, under which existing employees could choose to continue contributing to the pension plan in return for higher benefits, or make no further contributions and receive a lower retirement benefit. New employees were limited to the new, non-contributory benefit structure. At the time Hughes Aircraft amended the plan, it had a large surplus in the pension fund.

    Five retired employees filed suit, alleging that Hughes Aircraft had violated ERISA in promulgating the new benefit structure. The district court dismissed the suit for failure to state a claim. The Ninth Circuit reversed, holding that an employer has fiduciary obligations to employees when it amends a pension plan to use an asset surplus that was generated in part by prior employee contributions. The court also held that employees have vested property rights in the surplus generated by the income earned from their contributions, even if that amount is higher than their defined benefits under the plan. The Supreme Court reversed, holding that the Act permitted the changes because changes to the value of the plan's assets did not affect the employees' benefits. Further, the Court held that the employer was not acting as a fiduciary when it amended the plan. Finally, the Court determined that this is not an enfeebled plan requiring termination.

    Our amicus brief successfully persuaded the Supreme Court that an adverse ruling in this case would have severely impacted employers and employees participating in defined benefit pension plans that have an employee contribution feature. The NAM convinced the Court that an employer's ability to provide pension benefits to current and future employees should not be compromised. Manufacturers are no longer deterred from amending their defined benefit plans to offer new or enhanced benefits to active employees.

     

    UNUM Life Insurance Co. v. Ward   (U.S. Supreme Court)

    ERISA preemption of state procedural protections

    On April 20, 1999, the Supreme Court held that California's notice-prejudice rule is a "law...which regulates insurance," and is therefore saved from preemption by ERISA. The Court also ruled, however, that ERISA does preempt California decisional law that any employer who participates in the administration of a group insurance policy could be deemed an agent of the insurer. The Court reasoned that deeming the employer an agent of the insurer would force the employer to assume a role with attendant legal duties and consequences that it has not undertaken voluntarily.

    UNUM issued a disability policy to Ward's employer that required proofs of claim to be furnished no later than one year and 180 days after the onset of the disability. Ward became permanently disabled and less than one year later, he became eligible for state disability benefits and informed his employer of his disability. When his employer informed him that the plan covered his condition, he filled out the application, gave it to his employer, who forwarded it to UNUM. UNUM denied the claim as untimely. Ward argued that the employer was an agent of the insurance company so notice to his employer sufficed to supply timely notice to UNUM.

    The Court's decision that an employer is not an agent of the insurance company may prevent a flood of new claims, but the employer remains exposed to liability for a denial of a claim if it delayed the submission of the claim and the insurance company can show that it was prejudiced by the delay. The decision in this case may lead to further ERISA litigation over the definition of regulating insurance.

    Oral argument was held on February 24, 1999.

     


    Expert Testimony -- 1999



    Kuhmo Tire Co. v. Carmichael   (U.S. Supreme Court)

    Admissibility of engineering expert's testimony

    The NAM urged the Supreme Court to reverse the Eleventh Circuit's judgment in a product liability case that would allow an expert to testify without a sound scientific foundation. The Supreme Court agreed on March 23, 1999, holding that federal district courts have the discretionary authority, reviewable for its abuse, to determine reliability of such testimony in light of the particular facts and circumstances of the particular case.

    In Daubert, the Supreme Court established several general criteria for the admissibility of scientific evidence under Rule 702 of the Federal Rules of Evidence. In the case below, the Eleventh Circuit held that the testimony of an expert on tire failure was not "scientific" and thus not subject to the Daubert inquiry for determining admissibility of scientific expert testimony. The Daubert criteria do not apply to the admissibility of all expert testimony. Instead, they are only applied to evaluate the "reliability of witnesses who claim scientific expertise." The Eleventh Circuit defined a scientific expert as one "who relied on the application of scientific principles, rather than on skill – or experience-based observation, for the basis of his opinion." Id. The expert on tire failure’s testimony was based on his utilization of personal experience and skill with failed tires, and not on the application of scientific principles or theories. Therefore, the court concluded that the expert’s testimony fell outside the scope of the Daubert analysis.

    The Supreme Court reversed, holding that the lower court must determine the reliability (and therefore the admissibility) not only of expert testimony based on "scientific" knowledge, but also of expert testimony based on "technical" and "other specialized" knowledge, such as the testimony of engineers and other experts who are not scientists. In doing so, a district court may consider one or more of the specific factors mentioned in Daubert to the extent that they are helpful in determining the reliability of the expert's testimony.

    This is a victory for manufacturers involved in product liability and other cases where experts testify. The Supreme Court has made it more difficult for plaintiffs to introduce testimony of experts whose theories have not been subject to scientific scrutiny.

    Lower court opinion: 131 F.3d 1433 (11th Cir.)

     


    Free Speech -- 1999



    Bernstein v. U.S. Dep't of Commerce   (9th Circuit)

    Government regulation of business communication

    On May 6, 1999, the Ninth Circuit ruled that Commerce Department restrictions on the export of encryption software in source code constitute a prior restraint on speech in violation of the First Amendment. The challenged regulations put an unconstitutional burden on scientific expression and vested "boundless discretion" in government officials, without adequate safeguards. On September 30, 1999, the full Ninth Circuit Court of Appeals agreed to rehear arguments in this case prior to any further appeals, but the government substantially relented on its regulations thereafter. The case has been sent back to the 3-judge panel of the Ninth Circuit to reconsider what to do.

    The NAM is the only major business group to support this challenge to export controls on encryption software. It is a major case affecting corporate secrecy, secure worldwide communications and the development of electronic commerce.

     

    Greater New Orleans Broadcasting, Inc. v. FCC   (U.S. Supreme Court)

    First Amendment protection of commercial speech

    This case involves regulation of commercial speech. GNOB represents broadcasters who want to broadcast advertisements for gambling activities that are licensed and legal in Louisiana and Mississippi. The broadcasters have refrained from doing so in fear of criminal prosecution and sanctions pursuant to 18 U.S.C. § 1304 and the corresponding FCC regulation. Section 1304 prohibits broadcast advertising of "any advertisement of, or information concerning any lottery, gift enterprise, or similar scheme, offering prizes dependent in whole or in part upon lot or chance."

    The Supreme Court held 6/14/99 this statute violates the First Amendment. Applying the four-part test of Central Hudson Gas & Electric Corporation v. Public Service Commission of New York, 447 U.S. 557 (1980), the Court held that § 1304 and the FCC regulations implementing it did not directly and materially advance the government’s asserted interest in alleviating the social costs of casino gambling. Nor had the government shown that the prohibition was narrowly tailored to serve this asserted interest.

    This case is extremely important to manufacturers because it continues to provide protection to speech relating to the sale of legal products and services.

     


    Government Contracting -- 1999



    U.S. Dep't of the Army v. Blue Fox, Inc.   (U.S. Supreme Court)

    Government immunity for subcontractor suits

    The Administrative Procedure Act (APA) waives the government’s sovereign immunity for suits against federal agencies that seek "relief other than money damages." 5 U.S.C. § 702. The respondent in this case, a subcontractor on a government construction project at an Army depot, sought an equitable lien against contract funds held by the Department of the Army and the Small Business Administration, which had already been distributed to the prime contractor, after the prime contractor on the project failed to pay the respondent in full. The district court granted the Army’s motion for summary judgment, finding that it did not have jurisdiction over the respondents’s claim because the APA did not constitute a waiver of sovereign immunity in this case.

    The Ninth Circuit reversed the district court, holding that sovereign immunity did not bar the respondent’s equitable lien claim against the Army. The district court had jurisdiction over the respondent’s claim because it sought the very thing to which the respondent was entitled under the contract, a form of specific relief, not compensatory damages for any consequential losses suffered beyond the contract price. Applying the Supreme Court’s holding in Bowen v. Massachusetts, 487 U.S. 879 (1988), the Ninth Circuit held that the APA’s waiver of immunity applied because a party does not need to seek specific relief derived from a statute in order to obtain federal jurisdiction under the APA. According to the Ninth Circuit, the respondent’s equitable lien claim was not barred under the APA simply because the respondent could not seek relief under the Miller Act, since the APA’s waiver of immunity is not limited to suits brought under another federal statute. Further, because the respondent’s equitable lien claim was not an action for money damages (since a subcontractor has equitable rights against the government when the subcontractor was not paid by the prime contractor), the claim was allowed by the APA’s waiver of immunity under 5 U.S.C. § 702. The fact that the Army had already paid out funds to the prime contractor before the respondent brought its claim was of no consequence to the court of appeals, since the Army had received notice that the respondent had not been fully paid before it paid the prime contractor.

    The Supreme Court unanimously reversed on 1/20/99. It ruled that sovereign immunity bars creditors from enforcing liens on Government property. Any waiver of the government’s immunity must be clear, and courts will strictly construe such waivers if they are not.

     


    Issue Advocacy -- 1999



    Elections Board of Wisconsin v. Wisconsin Manufacturers & Commerce   (Wisconsin Supreme Court)

    Issue advocacy

    The Supreme Court of Wisconsin 7/7/99 affirmed the dismissal of a complaint by the Elections Board of the State of Wisconsin charging various defendants with violations of state campaign finance laws relating to broadcast advertisements about the voting records of various candidates.

    The court ruled that the defendants, including Wisconsin Manufacturers & Commerce and two corporate contributors, did not have fair warning that theads could qualify as express advocacy. It threw out the complaint on due process grounds, and did not decide whether the ads actually were express advocacy.

    The Court did, however, go into great detail as to what "express advocacy" is, and encouraged the state legislature and the Elections Board to define a standard of express advocacy to apply to future cases. It is relatively clear that the court will allow Wisconsin authorities to limit these kinds of ads in the future, as long as a definition similar to that described in the opinion is used.

    The NAM filed a brief asking the court to dismiss the complaint because the ads did not constitute express advocacy.

     


    Labor Law -- 1999



    Albertsons, Inc. v. Kirkinburg   (U.S. Supreme Court)

    Disabilities under ADA

    On January 8, 1999, the Supreme Court granted certiorari to determine whether a monocular driver of a commercial vehicle, who fails to meet the minimum federal vision requirements, is "disabled" and "otherwise qualified" under the ADA. In addition, the Court will decide if an employer must adopt an experimental vision waiver program as a means of "reasonable accommodation.”

    This case involves a truck driver who claimed that the Albertson’s supermarket chain violated the ADA when it fired him after he failed a vision test. Kirkingburg, who has monocular vision, has been a commercial truck driver since 1979 with a good driving record when he was hired in 1990 by Albertson's supermarket. Prior to being hired, Kirkingburg performed well on a 16-mile road test administered by the company and was certified by a company physician that he met federal Department of Transportation vision standards. He was recertified after several months on the job.

    In 1991, Kirkingburg suffered a non-driving injury and was off the job for almost a year. When he returned to work and took a new vision test, a company physician refused to certify that he met the DOT vision standard. Kirkingburg told the company that he applied for a waiver of the regular vision requirement under the Federal Highway Administration's vision waiver program established to bring DOT standards in compliance with the ADA. Albertson's told him that it would not accept the waiver and fired him in 1992 for failing to meet the vision standard. Albertson's refused to reconsider hiring Kirkingburg after he received the waiver.

    The trial court ruled for the employer. The Ninth Circuit Court of Appeals reversed, stating that Kirkingburg suffers from a disability and he is therefore protected under the ADA. The court further held that the company cannot selectively adopt and reject federal safety regulations when the effect of its policy is to discriminate against otherwise qualified drivers with disabilities.

    The Supreme Court reversed, ruling on 6/22/99 that an employer is entitled to require as a job qualification that an employee meet the standards of an applicable federal safety regulation that tends to exclude the disabled. The ADA does not require an employer to defend itself against participating in an experimental federal waiver program.

    The Court ruled that an ADA plaintiff must show that he or she was "substantially impaired" in a major life activity, not just that there was a significant difference. In addition, mitigating factors must be taken into account.

     

    Associated Builders & Contractors v. Southern Nevada Water Authority   (Nevada Supreme Court)

    Project labor agreements

    The Nevada Supreme Court ruled 6/7/99 that a project labor agreement requirement in bid specifications for a reservoir project outside Las Vegas did not violate state competitive bidding law. The NAM filed an amicus brief supporting ABC's argument, since such agreements force companies to impose unwanted union agreements on their employees if they want to work on state public works projects. This reduces the number of companies that bid on government contracts, and raises costs to the state.

     

    Associated Builders & Contractors v. Metropolitan Water District   (California Supreme Court)

    Project labor agreements

    The NAM supported this challenge to California project labor agreements for state construction projects. Project labor agreements promote favoritism and undermine competitive bidding laws to the detriment of taxpayers and non-union companies that want to bid on state government contracts. The appeal was dismissed and remanded on 11/20/99.

     

    Cleveland v. Policy Management Systems Corp.   (U.S. Supreme Court)

    Effect of disability under Social Security Act on ADA claim

    The U.S. Supreme Court unanimously ruled that receipt of Social Security Disability Insurance (SSDI) benefits does not automatically estop the recipient from pursuing an ADA claim. The Court further stated that in order to survive a defendant's motion for summary judgment, the plaintiff must explain why her SSDI contention is consistent with her ADA claim that she can "perform the essential functions" of her previous job.

    The Fifth Circuit ruled that an employee will find rough sailing in court when she claims she is a "qualified individual with a disability" under the Americans With Disabilities Act (ADA) after she has applied for and received social security disability benefits based on a total disability and inability to work. The court ruled that such a plaintiff must overcome a presumption that her total disability disqualifies her from suing under the ADA. The Supreme Court decided that this presumption is inappropriate.

    Many ADA suits are dismissed because plaintiffs make claims under social security and workers' compensation laws, and then try to claim an ability to work under the ADA requirements. Consequently, this case will have a substantial impact on such cases in the future.

     

    Connecticut Associated Builders & Contractors v. Anson   (Connecticut Supreme Court)

    Project labor agreements

    On November 4, 1999, the Connecticut Supreme Court affirmed a Superior Court ruling that greatly impairs the ability of injured parties to challenge unlawful government action in the competitive bidding process. The NAM had filed an amicus brief on February 11, 1999, urging the court to reverse the holding.

    Both the State Department of Public Works and the City of Hartford imposed new bid specifications on public works projects that would require all successful bidders to sign a labor agreement with a designated union as a condition of performing work on the projects. The Superior Court dismissed challenges filed by general contractors, subcontractors, and an association of contractors who have been deterred from bidding by the union-only requirements. The Superior Court held that notwithstanding the injury suffered by the plaintiffs as a result of the alleged unlawful favoritism in the competitive bid process, they have no standing to sue.

    The NAM believes that government agencies should not dictate the labor relations of contractors as a condition of awarding government contracts under competitive bidding laws.

     

    Haddle v. Garrison   (U.S. Supreme Court)

    Employer liability for deterring employees from testifying in court

    In this civil rights case, the Supreme Court ruled 12/14/98 that the loss of "at will" employment is a compensable injury under 42 U.S.C. § 1985(2), which provides a private cause of action for injuries arising from attempts to deter a witness from testifying in court. Haddle, a former at-will employee of a home health care company, claimed that Garrison and others had conspired to have him fired from his job to keep him from testifying as a witness in a Medicaid-fraud trial. The Eleventh Circuit, like the district court, held that the loss of at-will employment is not a compensable injury under § 1985(2) since an at-will employee has no constitutionally protected property interest in continued employment. The Supreme Court reversed and held that a constitutionally protected interest in continued employment is not a prerequisite to a claim for damages under § 1985(2).

     

    In re Vizcaino   (9th Circuit)

    Temporary leased employees

    The NAM on 6/2/99 urged the Ninth Circuit to rehear a panel decision calling temporary leased workers "employees" for purposes of eligibility for Microsoft’s stock option plan. The panel decision allows a dual employer situation, potentially allowing duplicative benefits and creating confusion and disrupting temporary staffing services, especially in high tech industries. On June 24, the Ninth Circuit rejected the appeal and sent the case back for further proceedings.

     

    Kolstad v. American Dental Association   (U.S. Supreme Court)

    Punitive damages under Title VII

    In one of the most awaited decisions of the Term, the Supreme Court considered the standard for awarding punitive damages in Title VII actions. The Civil Rights Act of 1991 authorizes punitive damages whenever a defendant is found to have engaged in intentional discrimination with "malice or reckless indifference to [the plaintiff’s] federally protected rights." 28 U.S.C. § 1981a.

    The Court 6/22/99 rejected the requirement suggested by the D.C. Circuit in the decision below that there be egregious misconduct. Finding the common-law basis for this requirement uncertain, the Supreme Court held that a culpable mental state is the only special requirement for imposing punitive damages under Title VII in cases where intentional discrimination is found.

    The majority went out of its way, however, to stress that the culpable mental state of even high-level employees will not always be imputable to their employers, who alone are suable under Title VII. Instead, the Court held that for purposes of punitive damages the mental state of employees may only be imputed to their employers under the relatively restrictive common-law agency principles. Furthermore, noting Title VII’s policy in favor of promoting voluntary compliance programs and polices, the Court interpreted the common-law rule to protect employers that make good-faith efforts to comply with Title VII.

    As a consequence, even though the Court’s opinion in Kolstad rejected the egregious conduct requirement, it provides ample protection against punitive damages for employers who act in good faith, especially when they adopt bona fide compliance programs and policies.

     

    Marquez v. Screen Actors Guild, Inc.   (U.S. Supreme Court)

    Union security clauses

    The Supreme Court held 11/3/1999 that a union does not breach its duty of fair representation by negotiating a union security clause that tracks the language of section 8(a)(3) of the National Labor Relations Act (NLRA) without explaining in the agreement the Supreme Court's interpretations of section 8(a)(3). The petitioner had complained that a union security clause in a collective bargaining agreement negotiated by the Screen Actors Guild (SAG) should have explained that the Court's decisions in NLRB v. General Motors Corp., 373 U.S. 734 (1963), and Communications Workers v. Beck, 487 U.S. 735 (1988), permit "unions and employers to require only that employees pay the fees and dues necessary to support the union's activities as the employees' bargaining representative." The Court held that the SAG's conduct was neither arbitrary nor in bad faith since the language of section 8(a)(3) contains "terms of art" that "encompass the rights that we announced in General Motors and Beck." It opined that requiring unions to spell out all of the "intricate rights and duties associated with a legal term of art" in these clauses would convert contracts into "massive and unwieldy treatises" with "no discernible benefit." Justices Kennedy and Thomas concurred to express their view that the Court's opinion does not immunize agreements where the section 8(a)(3) shorthand is inserted with the intent or effect of deceiving employees.

     

    Murphy v. United Parcel Service, Inc.   (U.S. Supreme Court)

    Disabilities under ADA

    On March 24, 1999, the NAM filed an amicus brief urging the Supreme Court to maintain the fair standards of the ADA and to prevent the expansion of the term "disabled" to cover individuals with controllable medical conditions. The NAM argued that employees may not claim the special protections of the ADA when their medication allows them to live normal lives.

    In this case, Murphy has had high blood pressure most of his life but medication controls his condition. In August 1994, Murphy applied for a position as a mechanic for UPS. All mechanic applicants must obtain a Department of Transportation health card. At the time of his medical exam, Murphy's blood pressure met the DOT standards. He was issued a health card, and UPS hired him. In September 1994, a company nurse reviewed his file and determined that his blood pressure did not meet DOT requirements for commercial drivers. UPS decided that the card was issued in error and Murphy was fired.

    The trial court ruled in favor of UPS, holding that Murphy is not an individual with a disability. The court stated that the determination of whether an individual's impairment substantially limits a major life activity should take into consideration mitigating or corrective measures utilized by the individual. The Tenth Circuit affirmed, and so did the Supreme Court.

    On 6/22/99, it held that the determination of whether a person with a physical or mental impairment is "disabled" under the Americans with Disabilities Act (ADA) must be made with reference to measures — such as medication, medical devices, or assistive devices — that mitigate the person’s impairment. The Court also held that a person is "regarded as" disabled under the ADA only if the employer mistakenly believes that the person’s actual, nonlimiting impairment substantially limits one or more major life activities. Therefore, ADA plaintiffs who claim that an employer regards them as substantially limited in the major life activity of working must, at a minimum, allege an inability to work in a broad class of jobs. The Court’s decision is a tremendous victory for employers facing the specter of ADA liability.

     

    Sutton v. United Airlines, Inc.   (U.S. Supreme Court)

    Disabilities under ADA

    On January 8, 1999, the Supreme Court granted certiorari in this case to determine whether a person with a physical or mental impairment under the Americans with Disabilities Act can be excluded from protection under the Act if her impairment can be corrected. In June it ruled that she could be excluded.

    Plaintiffs are twin sisters who are commercial airline pilots for regional commuter airlines. The twin sisters applied to be pilots for United Airlines but were told by the airline that their uncorrected vision disqualified them from pilot positions. United refused to hire the twins because they failed to meet the requirement that all pilot applicants have uncorrected vision of 20/100. Their uncorrected vision in the right eye is 20/200 and 20/400 in the left eye.

    The trial court ruled that the twins are not protected under the ADA because their poor vision is 20/20 in both eyes when they wear glasses or contact lenses. The Tenth Circuit affirmed, holding that the plaintiffs cannot present any set of facts showing that their vision, when viewed with mitigation or corrective measures, substantially limits a major life activity.

    The Supreme Court ruled that the plaintiffs had failed to allege that they were actually disabled, since their vision was 20/20 or better with corrective lenses. The Court also held that a person is "regarded as" disabled under the ADA only if the employer mistakenly believes that the person’s actual, nonlimiting impairment substantially limits one or more major life activities. Therefore, ADA plaintiffs who claim that an employer regards them as substantially limited in the major life activity of working must, at a minimum, allege an inability to work in a broad class of jobs.

     

    TNS, Inc. v. Oil, Chemical and Atomic Workers International Union   (NLRB)

    Recusal

    The NAM urged that NLRB Chairman Gould be recused from participating in this case because of his public pronouncements in opposition to legal precedents permitting employers to hire permanent replacements for economic strikers. A decision in this case on 9/30/99 made the recusal motion moot, since Chairman Gould was no longer on the Board

     

    United States v. Haggar Apparel Co.   (U.S. Supreme Court)

    Deference to Treasury Dept. regulations under Tariff Act

    The Supreme Court ruled 4/21/99 that Treasury Department regulations interpreting the Tarriff Act are entitled to deference under Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984). The Court reversed the ruling and rejected the reasoning of the Federal Circuit which had found that Chevron deference was inappropriate because the governing statute, 28 U.S.C. § 2643(b), instructs the Court of International Trade to "reach the correct decision." The Court remanded to the Federal Circuit for a determination whether, under Chevron, 19 C.F.R. 10.16(c) reasonably interprets the statutory phrase "operations incidental to the assembly process" in Subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States to exclude the "permapressing" of items of clothing assembled abroad.

     

    Wright v. Universal Maritime Service Corp.   (U.S. Supreme Court)

    Arbitration not required before litigation of ADA claims

    This case involves the enforcement of the ADA. The Supreme Court ruled 11/16/98 that an arbitration provision in a collective bargaining agreement does not require employees to arbitrate claims arising under federal anti-discrimination statutes where the arbitration provision does not clearly and unmistakably waive the employees' right to litigate such claims in federal court.

    In this case, Wright sued his employer under the ADA in federal district court. The employer successfully moved to dismiss the case on the grounds that Wright had failed to exhaust his remedies (arbitration) under the collective bargaining agreement. However, the Supreme Court held that Wright was not required to arbitrate his ADA claim, because the collective bargaining agreement did not clearly require arbitration of claims arising under federal anti-discrimination statutes. The Court further noted that even a sufficiently clear waiver might not be enforceable, but declined to resolve that issue.

    NAM Comment: The NAM filed an amicus brief on June 29, 1998, supporting Universal Maritime. We argued that arbitration is a well-established, vital aspect of a broad range of legal relationships, and that arbitration provisions in collective bargaining agreements should be enforced. While this decision is a temporary setback for having these issues resolved through arbitration, companies can include more express language in collective bargaining agreements that clearly encompass the resolution of statutory claims, and we will await another Supreme Court case to resolve whether such provisions will be enforced by the courts.

     


    OSHA -- 1999



    Chamber of Commerce v. U.S. Dep't of Labor   (D.C. Circuit)

    OSHA enforcement

    On April 9, 1999, the D.C. Circuit ruled that OSHA violated the law by not following proper rulemaking procedures in its implementation of the controversial Cooperative Compliance Program. Many manufacturers felt that OSHA's plan to offer the option of signing up for the CCP or face wall-to-wall inspections effectively forced them into the CCP. The case immediately affected more than 12,000 companies targeted by OSHA for inspection. OSHA's tactic was considered to be back-door rulemaking and could be a way to impose regulatory requirements without going through the legally required rulemaking procedures.

     


    Patents, Copyrights and Trademarks -- 1999



    Pfaff v. Wells Electronics, Inc.   (U.S. Supreme Court)

    On-sale doctrine for patents

    In this unanimous decision on 11/10/1999, the Supreme Court clarified the legal standard for the "on-sale bar" of the patent laws. Under 35 U.S.C. § 102(b), a patent is invalid if the patent application was made more than one year after the "invention" was first offered for sale. Pfaff, the inventor, designed a new computer chip socket and, even though he had not yet produced a socket, he sent detailed sketches of the socket to Texas Instruments Inc., which placed an order for the new sockets based on the drawing over a year before Pfaff filed his patent application. The Court held that this action was sufficient to constitute placing the "invention" on sale. In reaching this holding, the Court set forth a two-factor test for determining when the on-sale bar applies: One, the product must be the subject of a commercial offer for sale more than one year prior to the patent application. Two, the invention must be "ready for patenting" more than a year prior to application — a standard that can be satisfied by showing either that the invention had been reduced to practice or that the inventor had prepared drawings or other descriptions that would enable a reasonably skilled artisan to practice the invention.

    This decision should be of great interest to any company with holdings or interests in intellectual property, and of particular importance to companies that file patent applications.

     


    Preemption -- 1999



    National Foreign Trade Council v. Natsios (Laskey)   (1st Circuit)

    State limitations on foreign commerce

    The issue before the First Circuit was whether Massachusetts can prohibit companies that do business in Burma from contracting with the state.

    The NAM filed an amicus brief on 3/8/99 asserting that this state action imposes a secondary boycott on companies engaged in commerce with Burma that disrupts the flow of interstate and foreign commerce. Companies should not be forced to forfeit either international markets or state and local government procurement opportunities.

    On 6/22/99, the court agreed. It ruled that the Massachusetts law interferes with the foreign affairs power of the federal government and violates the Foreign Commerce Clause and the Supremacy Clause. The court noted that Massachusetts law has more than an incidental or indirect effect on foreign relations, since it was designed to affect foreign relations, the state’s $2 billion in purchasing power gives it the power to have an effect, its decision could be copied by other states, and other countries have protested. The state also "crossed over the line from market participant to market regulator," and could not justify its restrictions simply by saying it could choose who to do business with.

    This is an important precedent to prevent states and local governments from imposing restrictions that affect the ability of companies to do business in foreign countries. It will go a long way toward preventing this kind of regulation in the future. To see the opinion, click here. This case was appealed to the Supreme Court of the United States, where the NAM filed another amicus brief. Read the Supreme Court of the United States summary here.

     


    Product Liability -- 1999



    Comas v. Ashland Chemical Company   (California Supreme Court)

    Class action issues

    On 2/26/99, the NAM filed an amicus letter supporting five companies appealing class action rulings. The California Supreme Court will determine the burden of proof with respect to causation, whether collateral estoppel objections are waived when using a "pilot" trial procedure, and whether collateral estoppel applies to jury findings relating to product warnings in a previous trial. Appeal denied 4/99.

     

    Ohio v. Sheward   (Ohio Supreme Court)

    Constitutionality of tort reform

    On August 16, 1999, the Ohio Supreme Court ruled 4-3 to overturn Ohio’s tort reform act of 1996. It ruled that citizens can file suit challenging the constitutionality of virtually any legislation that may affect them, and that the statute violated the "one-subject rule" of Ohio because it bundled unrelated subjects into a single bill. It also found a few key provisions unconstitutional, and struck down the whole statute as a result.

    The NAM filed a brief 4/15/98 asking the court not to nullify reform law. The brief argued that courts should not impose their own economic policy views on the people of Ohio at the expense of the studied reforms enacted by the General Assembly. Ohio now joins many other states that have overturned efforts by state legislatures to reform product liability law and procedure.

     

    Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris Inc.   (9th Circuit)

    Medical benefit plan suit for damages

    The NAM and the Product Liability Advisory Council filed a joint amicus brief on 4/12/99 in this case seeking to affirm the district court's dismissal of a complaint that seeks to create a right for union health plans and other insurers to sue manufacturers whose products allegedly necessitate an insurance payout.

    On 7/14/99, the court agreed, holding that the RICO and antitrust claims are too remote, since there is no direct link between the alleged actions taken by tobacco companies and their public relations firms and the alleged damage to the plaintiffs. Just because individuals who are more directly affected by the alleged wrongdoing cannot bring suit under RICO or the antitrust laws for injury to "business or property" doesn’t mean that the plaintiff health and welfare funds have standing. Instead, smokers themselves can be counted on to bring suit.

    In addition, the court ruled that damages in this case would be speculative and very difficult to determine, and the courts would have to come up with very complicated rules to apportion liability at different levels of injury. It refused to do so, throwing out the case.

    This case affects manufacturers sued for health claims from food or drug consumption and injuries from cars, home builders and suppliers, appliances, recreational products and others. The NAM supports fundamental subrogation remedies and limitations under the doctrine of remoteness. This is the third such case in which the NAM filed a successful amicus brief supporting manufacturers against suits by union benefit plans.

     

    Steamfitters Local No. 420 v. Philip Morris Inc.   (3rd Circuit)

    Medical benefit plan suit for damages

    The NAM and the Product Liability Advisory Council filed a joint amicus brief on 11/16/98 urging dismissal of a medical benefit plan's suit against tobacco companies for injuries to beneficiaries of the plan.

    On March 29, 1999, the Third Circuit affirmed the lower court's dismissal of the case in favor of the tobacco companies. "[W]e conclude that the District Court correctly dismissed all of plaintiffs' primary claims as being too remote from any alleged wrongdoing of defendants, and the other claims as concomitantly lacking in merit; hence, we affirm the dismissal of the complaint in its entirety."

    This case affects all manufacturers whose products may injure employees covered by health or disability insurance (such as food, recreational products, medical devices, pharmaceuticals, automobiles and home appliances). The NAM supports fundamental subrogation remedies and limitations under the doctrine of remoteness.

     

    Wightman v. Consolidated Rail Corp.   (Ohio Supreme Court)

    Limitations on punitive damages

    The Ohio Supreme Court on 9/15/99 affirmed a jury’s punitive damages award of $15,000,000 against Conrail for negligence in not preventing automobiles from driving around the flashing lights and lowered gates at a railroad grade crossing. One car, whose driver had a blood alcohol level of .039, was struck by a passing train, killing the driver and her passenger.

    The Ohio court rejected NAM arguments that the punitive damages were far in excess of a constitutionally acceptable limit. Ohio does not allow punitive damages for wrongful death, so the size of the award was related to the property damage (the car). The Ohio court saw "the ratio between the compensatory and punitive damages as less relevant here because of the egregiousness of the act." Thus, if an injury to property can be expected to be "catastrophic," an Ohio court will not find a multiplier of 6,250 times actual damages to be excessive.

    The court used these factors to judge such cases: "[a] substantial harm, a continuing risk, a deterrent effect, and an economically viable company . . . ."

     


    RICO Act -- 1999



    Neder v. United States   (U.S. Supreme Court)

    Materiality as an element of the federal mail, wire, bank fraud statutes

    The NAM, the American Council of Life Insurance and the Health Insurance Association of America filed a joint brief supporting the petitioner’s view that materiality is an element of the federal mail fraud, wire fraud, and bank fraud statutes. Materiality plays a critical role in curbing frivolous civil litigation for fraud. Mail and wire fraud are the two most commonly alleged predicate acts for civil RICO claims that often arise in business tort litigation.

    On June 10, 1999 the Supreme Court ruled unanimously that materiality is an element of these statutes.

     


    Securities Regulation -- 1999



    California Public Employees' Retirement System v. Felzen   (U.S. Supreme Court)

    Right of non-party shareholder to appeal in derivative suit

    This case presented the question whether a non-party shareholder is entitled to appeal an adverse decision in a shareholders' derivative suit under Fed. R. Civ. P. 23.1 without first having formally intervened as a party in the suit below. The Seventh Circuit held that, just as a classmember must intervene as a party in district court in order to appeal in a class action under Fed. R. Civ. P. 23, so too a shareholder must intervene as a party in district court in order to appeal in a shareholders' derivative action under Fed. R. Civ. P. 23.1. This decision will affect the ability of non-parties to upset corporate decision to dismiss or settle derivative actions.

    Certiorari is limited to

    Whether a nonparty shareholder who appears, in response to notice provided under Federal Rule of Civil Procedure 23.1, to present objections to a proposed dismissal or settlement of a derivative action may appeal an adverse decision even though the shareholder has not been formally made a party to the action.

    On 1/20/99, the Supreme Court affirmed by an equally divided Court, without opinion.

     


    Takings -- 1999



    City of Monterey v. Del Monte Dunes   (U.S. Supreme Court)

    Taking of property by inverse condemnation

    This case raises several questions concerning the treatment of takings claims. A real estate developer requested permission from a California municipality to develop some ocean front property. When the municipality denied the request, the developer brought an "inverse condemnation" action alleging that the denial constituted a regulatory taking and seeking the compensation that would have been due for the property had the municipality actually condemned it. Siding with the developer, the jury awarded nearly $1.5 million in damages, and the Ninth Circuit affirmed. On May 24, 1999, the Supreme Court did likewise.

    It ruled that, in a regulatory taking action challenging a local land use decision, 42 U.S.C. § 1983 liability issues may be determined by a jury. This is an important right for property owners whose property is "taken" by government regulations.

     


    Taxation and State Taxation -- 1999



    South Central Bell Telephone Co. v. Alabama   (U.S. Supreme Court)

    Unconstitutional state franchise tax

    In this case, the Supreme Court struck down, under the Commerce Clause, Alabama’s franchise tax on foreign corporations. Under Alabama law, domestic corporations were required to pay tax equal to 1% of the par value of their stock, while foreign corporations were required to pay 0.3% of the value of "the actual amount of capital employed in Alabama."

    As Alabama admitted, domestic corporations could set par value at whatever level they choose, thereby minimizing their tax liability, while foreign corporations were unable to do so because "the actual amount of capital employed in Alabama" included the value of various accounting items, such as long-term debt surplus, that had to be valued in accordance with generally accepted accounting principles. Consequently, it was undisputed that the average domestic corporation paid only one-fifth the franchise tax that would be assessed against a similarly situated foreign corporation.

    Alabama argued that domestic corporations were also required to pay a property tax on shares of domestic stock, but the Court found that this tax was very different in nature from the franchise tax and that even with the addition of this tax, foreign corporations were still required to pay far more than domestic corporations. Consequently, the franchise tax discriminated against interstate commerce and was unconstitutional.

     


    Administrative Procedure -- 1998



    Hoechst Celanese Corp. v. United States   (U.S. Supreme Court)

    Court deference to administrative agency interpretations

    The Supreme Court declined to review this appeal. It was a fundamental challenge to the general principle that courts substantially defer to the interpretations of administrative agencies in enforcement proceedings. The Fourth Circuit ruled that it must defer to the EPA's interpretation of its benzene standard so long as the interpretation was not "nonsensical." It also ruled that the company must begin to comply with the new interpretation within 90 days after it learned of the interpretation, even though the rule allowed two years for companies to come into compliance.

    The interpretation at issue involved the minimum threshold for application of the national emission standard for benzene. The standard exempts plants that "use" less than 1,000 megagrams of benzene, and the conflict arises from EPA's interpretation of the word "use." Its interpretation counts as a use each time the material passes a certain point in the process, even if it is recycled. This is like saying that an automobile engine, recycling engine oil, "uses" thousands of gallons of oil a year, since the oil is recycled through the engine so frequently.

    Different regional offices within EPA disagreed over this interpretation. Nor is such an interpretation obvious from the language of the standard. Thus, Hoechst Celanese and the NAM and other organizations as amici argued that courts should not automatically defer to the EPA's pronouncements.

     


    Antitrust -- 1998



    State Oil Co. v. Khan   (U.S. Supreme Court)

    Maximum price ceilings not per se illegal

    In this antitrust case, the Supreme Court finally took an action at which it had long hinted: it overruled Albrecht v. Herald Co., 390 U.S. 145 (1968). Albrecht had held vertical maximum price fixing illegal per se under the Sherman Act. Vertical maximum price fixing will now be judged under the "rule of reason," which requires antitrust plaintiffs to prove harm to competition. Minimum price fixing remains illegal per se.

    Barkat U. Khan leased a gasoline station from State Oil and agreed to market its products. Under the agreement, State Oil set a suggested retail price for the gasoline and Kahn paid State Oil 3.25 cents per gallon less than that price. Kahn could sell gasoline for more than the suggested retail price, but was required to pay State Oil any excess. Because the agreement eliminated any profits from charging above the suggested retail price, the agreement in effect fixed the maximum price Kahn would charge. Ultimately, Kahn failed to make lease payments, State Oil terminated the lease, and Kahn sued for antitrust violations. The district court held that the arrangement was not a per se violation of the Sherman Act and granted summary judgment for State Oil because Kahn had not presented sufficient evidence that the arrangement actually reduced competition. The Seventh Circuit, while sharply critical of the Albrecht rule, nevertheless felt obliged to reverse because under Albrecht any contract to fix maximum prices was illegal per se, regardless of the demonstrated effect on competition.

    The Supreme Court, in an opinion by Justice O'Connor, unanimously overruled Albrecht. Although the Court does not lightly reverse its precedent, it noted that in the antitrust area especially it must "adapt[] to . . . the lessons of accumulated experience." This experience, the Court found, undermined each of the economic justifications for the Albrecht rule. In the Court's view, Albrecht did not protect dealer freedom, but actually substantially reduced it by prompting some suppliers to integrate forward into distribution. Maximum price fixing would not force dealers to cut back on essential or desired services because such conduct would drive away customers and ultimately harm the suppliers. The Court also found it unlikely that maximum price fixing could be used to mask minimum price fixing, which remains illegal per se. On the other hand, the Court noted that the Albrecht rule, far from protecting consumers, harmed them in some situations by allowing unfettered exercise of market power by monopolist-dealers. The Court therefore concluded that "rule of reason" analysis, rather than per se invalidity, should apply to vertical maximum price-fixing arrangements.

    The NAM filed an amicus brief in this case, urging the rule ultimately adopted.

     


    Attorney's Fees -- 1998



    National Association of Manufacturers v. U.S. Dep't of Labor   (D.C. Circuit)

    Attorneys' fees for suing the government

    The Government lost its appeal of an award of attorneys' fees to the NAM in this case in which several of the Department of Labor's regulations relating to the H-1B temporary visa program were substantially rejected. On 11/3/98, the court ruled that an association that substantially prevails in a civil action against the United States can collect attorneys' fees under the Equal Access to Justice Act as long as its net worth does not exceed $7,000,000 and it has no more than 500 employees. The net worth or number of employees of individual members of the association is not counted in this calculation. The Court also ruled that the law firm is eligible for fees even though it handled the case on a pro bono (free) basis. (The firm is also entitled to additional fees for winning the appeal on the fee issue.)

    The ruling will encourage trade associations and their outside counsel to litigate important and legitimate challenges to government regulations. The Sixth Circuit, however, takes a contrary position on this issue.

     


    Civil Procedure -- 1998



    Steel Co. v. Citizens for a Better Environment   (U.S. Supreme Court)

    EPCRA suits after paperwork requirements satisfied

    In this case, the Supreme Court held 3/4/98 that a citizen lacked standing to bring a private enforcement action under the citizen-suit provision of the Emergency Planning and Community Right-to-Know Act of 1986 ("EPCRA"), 42 U.S.C. § 11001 et seq. In its decision, the Court reaffirmed that questions regarding the existence of a cause of action are not "jurisdictional" and may not be decided prior to resolving the question of whether a plaintiff has standing under Article III of the U.S. Constitution. The Court specifically declined to endorse the "hypothetical jurisdiction" doctrine adopted by several courts of appeals, which found that it was proper to adjudicate the merits of a claim despite jurisdictional objections when the merits question is more readily resolved and the prevailing party on the merits question would be the same as the prevailing party if jurisdiction was denied.

    In this case, citizens brought a private enforcement action for declaratory and injunctive relief under EPCRA, alleging that a manufacturer failed to file timely toxic- and hazardous-chemical storage and emissions reports. The manufacturer moved to dismiss for lack of subject-matter jurisdiction and for failure to state a claim. The district court ruled that it lacked jurisdiction to hear the claim because the manufacturer cured the violations before the lawsuit was filed, and it could not grant the requested relief because the statute did not authorize private suits for historical violations. The Seventh Circuit reversed, holding that EPRCA allowed citizen enforcement actions for past violations.

    The Supreme Court vacated the court of appeals’ decision and remanded the case with instructions to dismiss it. The Court held that the merits question — whether a cause of action exists under EPCRA to permit a citizen to sue for purely past violations — and the question of whether the plaintiff has standing to sue under Article III were separate questions, and the latter must be resolved first. The question of whether EPCRA may be construed to permit the plaintiff’s cause of action is not a jurisdictional issue and cannot be decided before determining whether the plaintiff meets the Article III standing requirements, because a federal court’s subject matter jurisdiction would not be defeated by the absence of a valid cause of action under the statute (whereas a court lacks jurisdiction to entertain a lawsuit if the standing requirements are not satisfied). The "doctrine of hypothetical jurisdiction" adopted by several lower courts goes beyond the constitutional bounds of authorized judicial action, for it would allow a federal court to determine the construction or constitutionality of a statute without first determining whether the court has jurisdiction to even consider the question.

    Here, the plaintiff lacked standing to sue because it failed to meet the third requirement for a justiciable "case" or "controversy" under Article III — the likelihood that the requested relief would redress the alleged injury. While the plaintiff sought a declaratory judgment that the manufacturer violated EPCRA, injunctive relief authorizing the plaintiff to make periodic inspections of the manufacturer’s facility and records, and orders requiring the manufacturer to pay civil penalties under EPCRA and to reimburse the plaintiff for its litigation expenses, none of this requested relief could reimburse the plaintiff for any losses caused by the manufacturer’s late reporting or otherwise eliminate any effects of the late reporting on the plaintiff.

    The NAM filed an amicus brief supporting the ultimate result in this case.

     


    Class Actions -- 1998



    Greene County Newspaper Association v. Federal Express Corp.   (Alabama Supreme Court)

    Class action certification

    The NAM filed a brief supporting a constitutional challenge to the "conditional certification" procedures for certifying class actions against manufacturers and others. Alabama's implementation of the procedures allows such certification without giving the defendant an opportunity to defend itself in court. Such procedures affect stock prices, public disclosures and legal rights. Companies joining the NAM on the brief include Amoco Oil Co., Champion International Corp., Chevron U.S.A. Inc., Exxon Corp., Georgia-Pacific Corp., International Paper Co., Masonite Corp., Solutia, Inc., Star Enterprise and Witco Corporation. Brief filed 11/7/97. The Alabama Supreme Court on 5/29/98 granted Federal Express's motion and vacated the trial court's class certification until after preliminary discovery and an evidentiary hearing.

     


    Environmental -- 1998



    American Forest & Paper Ass'n v. EPA   (5th Circuit)

    Water Discharge Permits

    The NAM and other associations filed challenges to purported state authority under the National Pollution Discharge Elimination System (NPDES) to implement Endangered Species Act requirements. Filed 5/20 and 5/27/97. This case could affect all discharge permits as EPA tries to impose Endangered Species Act requirements through NPDES programs under the Clean Water Act (CWA). On 3/30/98, the Fifth Circuit ruled that EPA cannot condition CWA permit decision on Endangered Species Act consultations. The Tenth Circuit case was dismissed on 9/1/98 with a decision holding that the plaintiffs did not have standing.

    A 1996 EPA rule tried to delegate CWA enforcement and permitting decisions to Louisiana, but added new requirements that the state consult with the U.S. Fish and Wildlife Service and National Marine Fisheries about the possible effects of discharges on certain species. The 5th Circuit ruled that the CWA does not allow such consideration of factors outside the nine concrete criteria specified for the issuance of a permit.

    The Court also ruled that an association need not have commented on a proposed rule during the rulemaking process to bring suit after the rule is issued. It also found that the association had "injury in fact," not speculative injury, because its members must comply with the provisions as their permits come up for renewal every five years, and because the EPA has already identified the circumstances under which it will veto a proposed permit.

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    EPA Credible Evidence Rule

    (Also known as Clean Air Implementation Project vs. EPA). The NAM filed this petition 4/18/97 to review a final EPA rule relating to credible evidence. The case affects manufacturers subject to new source performance standards (NSPS) and national emission standards for hazardous air pollutants (NESHAPs) under the Clean Air Act. The case was dismissed on 8/14/98 as unripe.

     

    National Association of Manufacturers v. U.S. Dep't of the Interior   (D.C. Circuit)

    Natural Resource Damage Assessments

    The NAM petitioned the D.C. Circuit to review final regulations establishing simplified "Type A" procedures for natural resource damage assessments under the Comprehensive Environmental Response, Compensation and Liability Act. The procedures rely on complex computer modeling with very little site-specific input, and create a rebuttable presumption against potentially responsible parties, including many NAM members. The NAM argued that the regulations were invalid because (1) liability might be imposed without a showing of actual injury, (2) an assessment includes restoration without considering feasibility or cost-effectiveness, and (3) a restoration model assumes losses that are speculative and hypothetical. The D.C. Circuit court on 1/16/98 rejected the NAM arguments, concluding that the Department of the Interior's interpretation of the relevant CERCLA provisions were entitled to deference and that its damage submodels "suffice."

     

    United States v. Bestfoods (CPC International, Inc.)   (U.S. District Court for the District of Columbia)

    CERCLA liability for parent corporation is limited

    Vacating the decision of the Sixth Circuit, a unanimous Supreme Court specified when a parent corporation may be held liable, under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), as an operator of a polluting facility that is owned and operated by its subsidiary. The mere fact that the parent corporation actively participated in and exercised control over the operations of the subsidiary will not, in itself, make the parent corporation derivatively liable unless, under applicable law (which the Court declined to identify), the subsidiary has been controlled to such an extent that it should not be regarded as a separate entity (a doctrine known as "piercing the corporate veil"). However, if the parent corporation actively participated in and exercised control over the operations of the facility itself, then it may be held directly liable as an operator of the facility.

    The NAM filed an amicus brief 2/20/98 arguing that state corporate law clearly limits the liability of shareholders of corporations (including shareholders that are themselves corporations), even when they actively participate in running the corporation. The brief argued that the courts should not create a new body of federal common law in place of the well-established body of state common law in this area.

     


    ERISA -- 1998



    Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp.   (U.S. Supreme Court)

    ERISA statute of limitations

    The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") ordinarily requires employers who withdraw from multi-employer pension plans to pay "withdrawal liability" if the plan from which the employer withdraws is underfunded. Employers can satisfy their obligation to pay for their withdrawal liability by making installment payments pursuant to a schedule set up by the plan trustees. Upon an employer's failure to pay pursuant to that schedule, the trustees may invoke a statutory acceleration procedure. Moreover, plan fiduciaries may sue to collect the unpaid debt within the longer of "6 years after the date on which the cause of action arose" or "3 years after the earliest date on which the plaintiff acquired or should have acquired actual knowledge of the existence of such cause of action."

    Bay Area Laundry and Dry Cleaning Pension Trust Fund, a multiemployer pension fund, sued Ferbar Corporation to recover withdrawal liability payments. Ferbar withdrew from the Fund in March, 1985. The Fund demanded payment on December 12, 1986, and set a monthly payment schedule to commence on February 1, 1987. Ferbar never made any payments pursuant to the schedule. Accordingly, the Fund filed suit to recover the full amount of Ferbar's withdrawal liability on February 9, 1993 more than eight years after Ferbar withdrew from the Fund, more than six years after the Fund first demanded payment, more than six years after the first payment was due, but less than six years after each subsequent payment came due.

    The District Court granted Ferbar's Motion For Summary Judgment, holding that, under the MPPAA's six-year statute of limitations, the Fund had commenced suit eight days too late, because its cause of action accrued when Ferbar missed its first payment on February 1, 1987. The Ninth Circuit affirmed, but held that the cause of action accrued in March 1985, when Ferbar withdrew from the Fund.

    A unanimous Supreme Court reversed, holding that (1) the six-year statute of limitations did not begin to run until Ferbar missed its first payment pursuant to the schedule set by the Fund; and (2) each missed payment gave rise to a separate cause of action, with its own, separate limitations period, and therefore the Fund's action was time-barred only as to the first payment. The Court rejected the Ninth Circuit's holding that the statute of limitations began to run when the employer withdraws from the Fund because, although it is designed to discourage employer withdrawal, the MPPAA does not prohibit it. Therefore, the Fund had no cause of action against Ferbar when it withdrew from the Fund; its cause of action arose only when Ferbar failed to make required withdrawal liability payments. The Court's decision also resolved a conflict between the Third and Seventh Circuits as to whether the statute of limitations runs as to all payments when the employer fails to make the first required payment: the Court held that the MPPAA statutory scheme creates an installment obligation, and that each failure to pay creates a separate cause of action with its own, independent statute of limitations period.

     

    Bragdon v. Abbottf   (U.S. Supreme Court)

    ADA protection for persons that are HIV-positive

    In this case, the Court determined that a person who is infected with the human immuno-deficiency virus (HIV) is covered by the American with Disabilities Act of 1990 (ADA), even though she had not manifested its most serious symptoms at the time of the incident at issue. The respondent-plaintiff had disclosed her HIV status to her dentist who then refused to fill her cavity at his office, though he said he would do so at a hospital. Respondent refused and sued under the ADA, which prohibits discrimination "on the basis of disability in the . . . enjoyment of the . . . services . . . of any place of public accommodation by any person who . . . operates [such] a place." The Act also provides, however, that entities are not required to allow an individual to "participate in or benefit from the . . . accommodations of such entity where such individual poses a direct threat to the health or safety of others." The dentist argued that respondent was not covered by the ADA because her HIV status was not a covered disability, and that even if it was such a disability, he was justified in taking his action by Act’s "direct threat" exception. The trial court granted summary judgment for the patient, and the First Circuit affirmed.

    The Supreme Court agreed that the HIV infection, though only in its early stages, was a "disability" which the Act defines as "a physical . . . impairment that substantially limits one or more of [an individual’s] major life activities." First, the Court found that the HIV infection, from its inception, fell within the disability regulations under the Rehabilitation Act of 1973. In the Court’s view, the scope of the Rehabilitation Act is significant because the ADA’s definition of disability was drawn from the Rehabilitation Act and Congress expressly mandated that the ADA provide at least as much protection as the Rehabilitation Act. Next, the Court found that from the moment of infection HIV limits an individual’s ability to reproduce and bear children, which is the "major life activity" under the ADA’s definition of "disability." In so doing, the Court rejected the suggestion that only activities that have a public, economic or daily character are "major" under the ADA. Finally, the Court noted that its holding is in accord with the uniform body of administrative and judicial precedent interpreting the Rehabilitation Act, and with guidance issued by the Justice Department and other agencies who administer the ADA.

    With respect to the "direct threat" defense, the Court found that the First Circuit had cited insufficient record material in order to determine, as a matter of law, that the HIV infection posed no direct threat to the health and safety of others. As a result, the Court vacated the First Circuit’s ruling and remanded for further consideration of the "direct threat" defense.

     

    Eastern Enterprises v. Apfel   (U.S. Supreme Court)

    Federal power to impose retroactive health benefits funding liability

    The Coal Industry Retiree Health Benefits Act of 1992, 26 U.S.C. § 9701, et seq., requires all present or former signatories to a National Bituminous Coal Wage Agreement ("NBCWA") to provide employees with lifetime health benefits. In this case, a sharply divided Supreme Court held that the Coal Act as applied to petitioner Eastern Enterprises is unconstitutional.

    Eastern had signed various NBCWAs between 1946 and 1965 and had satisfied all of its contractual obligations under those agreements. It then transferred its mining operations to a subsidiary, later sold, and left the coal mining industry entirely. The Coal Act, however, retroactively required Eastern to provide lifetime health benefits to miners who had worked for it in the past, for as little as several months. The district court and the Court of Appeals for the First Circuit rejected Eastern’s constitutional challenges to the Coal Act under substantive due process principles and the Takings Clause.

    A divided Court reversed and remanded. Justice O’Connor, writing for a plurality of herself, Chief Justice Rehnquist, and Justices Scalia and Thomas, held that the Coal Act as applied to Eastern constituted an unconstitutional "taking" of Eastern’s property, using the same type of analysis traditionally applied to regulatory takings. The plurality explained first that Eastern faced substantial liability which, though not a permanent physical occupation of Eastern’s property, was nonetheless out of proportion with Eastern’s experience in the benefit plans. The plurality also emphasized that the Coal Act substantially interfered with Eastern’s reasonable investment-backed expectations by imposing liability based on Eastern’s activities decades in the past, and long after Eastern believed its liabilities under the benefit plans had been settled. The plurality rejected respondents’ argument that the retroactivity was justified by an implicit promise to pay lifetime benefits. It determined that no agreement signed by Eastern had promised such benefits.

    Justice Kennedy disagreed that the Takings Clause was applicable, but concurred in the judgment on the ground that the Coal Act violated the Due Process Clause. He reasoned that the Coal Act bore no legitimate relation to the Government’s interest, based largely on its unprecedented degree of retroactivity, the fact that any promises of lifetime benefits were made long after Eastern left the coal industry, and the fact that Eastern was not responsible for the financial problems that jeopardized the benefits.

    Justice Stevens, joined by Justices Souter, Ginsburg and Breyer, and Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, filed dissenting opinions.

     

    Geissal v. Moore Medical Corp.   (U.S. Supreme Court)

    Continuation of COBRA benefits

    The Supreme Court unanimously decided on 6/8/98 that, under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), employees may not be denied continuation health care coverage where they are already covered under another other group health care plan. Under COBRA, the employer may cancel continuation coverage when an employee "first becomes, after the date of the election [of continuation coverage], . . . covered under any group health plan (as an employee or otherwise), which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary."

    In this case, the plaintiff, James Geissal, was employed by the defendant Moore Medical Corporation and covered under its group health plan. Geissal was also covered by a group health plan provided by his wife's employer. After Moore fired Geissal, he exercised his right under COBRA to receive continuation coverage, but Moore canceled that coverage when it learned of Geissal's pre-existing coverage through his wife's employer.

    The Supreme Court, in an opinion by Justice Souter, ruled that Moore could not deny coverage to Geissal. The Court held that COBRA denies continuation coverage only if the employee acquires coverage from another plan – i.e., the employee "first becomes" covered – after "the date of the election." Since Geissal was already covered by his wife's plan before he chose to receive continuation coverage, Moore could not cancel his continuation coverage on that basis.

    In so ruling, the Court rejected Moore's position that COBRA coverage may be terminated unless there is a "significant gap" between the coverage offered by the employer’s plan and the other health plan. The Court found no statutory basis for such an argument and ruled that decisions about whether there were "significant gaps" between health care plans would be a difficult and policy-bound determination that Congress could not have intended.

     


    Labor Law -- 1998



    Air Line Pilots Association v. Miller   (U.S. Supreme Court)

    Exhaustion of administrative remedies not required when challenging union dues assessments for political purposes

    Over the last two decades, the Supreme Court has twice considered the legal implications of "agency shops," that is, a workplace in which all employees, whether union members or not, are required to pay union dues. First, in Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977), the Court held that, while non-union employees in an agency shop may be required to bear their share of a union's collective bargaining costs, the First Amendment prohibits the use of their dues on political advertisements and other speech with which the non-union employees may disagree. Second, in Chicago Teachers Unions Local No. 1 v. Hudson, 475 U.S. 292 (1986), the Supreme Court developed concrete guidelines for implementing this prohibition on forced speech including the requirement that unions enjoying an agency shop arrangement offer a neutral decision maker to resolve any disputes over the calculation of collective bargaining expenses.

    In this case, the Supreme Court will consider whether non-union employees can be forced to exhaust their remedies under procedures adopted in compliance with Hudson. The union here adopted an arbitrator as its neutral decision maker, and, when non-union employees refused to submit a challenge to the union's calculation of its collective bargaining costs before filing suit in federal court, the union claimed that the employees' challenge was barred by their failure to exhaust administrative remedies. Noting that the employees had never agreed to the arbitration procedure, the D.C. Circuit rejected the union's claim. The four other courts of appeals to consider this question were split evenly over its resolution.

    The Supreme Court affirmed the D.C. Circuit on May 26, 1998, by a vote of 7-2. Justice Ginsburg's opinion held that, unless they agree to the procedure, agency-fee objectors may not be required to exhaust an arbitration remedy before bringing their claims in federal court."

     

    Allentown Mack Sales and Service, Inc. v. NLRB   (U.S. Supreme Court)

    Polling when union majority status is in doubt

    The Supreme Court, in a 5-4 decision on 1/26/98, held that an NLRB standard, under which an employer must have a "good faith reasonable doubt" about a union’s majority support before conducting an internal polling of employee support for that union, is rational and consistent with the National Labor Relations Act. An employer who believes that an incumbent union no longer enjoys the support of a majority of its employees has three options: (i) to request a formal, Board-supervised election; (ii) to withdraw recognition from the union and to refuse to bargain; (iii) or to conduct an internal poll of employee support for the union. The Board has held that the latter two options constitute unfair labor practices, unless the employer can show that it had a "good faith reasonable doubt" about the union's majority support.

    The employer in this case argued that it is irrational to require the "good faith reasonable doubt" showing to justify a poll because that same showing would justify an outright withdrawal of recognition. According to the employer, this would leave the employer with no legal incentive to poll. The Court rejected this argument, concluding that it falsely assumed that every employer would want to withdraw recognition once presented with enough evidence of lack of union support to defend against an unfair-labor-practice. On the specific facts, however, the Court reversed the Board's finding that Allentown lacked the required reasonable doubt as not supported by substantial evidence on the record as a whole.

     

    Board of Education of the Township of Piscataway v. Taxman   (U.S. Supreme Court)

    Racial discrimination to promote diversity

    This case was settled on November 21, 1998. The issues that were not resolved by the Supreme Court are described below.

    In this case, which received widespread publicity because the Department of Justice changed its position during the litigation, the United States and Sharon Taxman initially sued her former employer, the Board of Education, under Title VII. They alleged that the Board's use of race as a factor in selecting which of two equally qualified employees to lay off violated federal law prohibiting an employer from discriminating against an individual with respect to her employment conditions on the basis of her race.

    In 1989 because of budgetary constraints, the Board of Education was forced to lay off one teacher in the Business Department at Piscataway High School. Under New Jersey law, teachers were to be released in reverse order of their tenure with the Board deciding which of two equally tenured teachers to release. Forced to choose between two equally tenured, qualified, and able business teachers, the Board of Education retained a minority faculty member instead of Ms. Taxman, who is white. The Board admittedly made this choice solely to maintain a diversity among the faculty of the High School's Business Department.

    A divided Third Circuit held that the Board's decision violated Title VII. Relying on the Supreme Court's decision in United Steel Workers v. Weber, the court of appeals concluded that the Board's decision violated Title VII because it did not further the purposes of the civil rights legislation and unnecessarily trammeled the interests of a white employee. With respect to Title VII's purpose, the Third Circuit noted that the Act was designed to "end discrimination" and to "remedy the segregation and under representation of minorities that discrimination has caused" in the workplace. Consequently, the Board's decision to use race as a factor to promote diversity rather than remedy prior discrimination was inconsistent with the remedial nature of this legislation. Further, the court of appeals noted that even if the Board's goal of racial diversity was appropriate under Title VII, that goal could not be pursued at the expense of a person's job.

    Questions presented:

    1. Does Title VII of the Civil Rights Act of 1964, as amended, permit employers to take race into account for purposes other than remedying past discrimination?
    2. If so, is fostering diversity among a high school faculty a lawful purpose?
    3. Assuming a lawful purpose, does consideration of race in a layoff decision invariably violate the rights of affected non-minority employees?
    4. May a district court award full backpay to a Title VII plaintiff who stands no more than an even chance of securing, or retaining, employment?

    Lower court opinion: 91 F.3d 1547 (3d Cir.)

     

    Burlington Industries, Inc. v. Ellerth   (U.S. Supreme Court)

    Liability for quid pro quo sexual harassment without effect on job

    In this case, the Supreme Court addressed the circumstances under which an employer could be held liable for sexual harassment where an employee refused unwelcome sexual advances from her supervisor, suffered no adverse job consequences, and where the employer was not negligent or otherwise at fault for the supervisor’s actions. The plaintiff alleged that her supervisor made repeated sexually offensive comments and had intimated that she would not do well at the company unless she submitted to his advances. Although the plaintiff did not submit, she was nonetheless promoted, and she resigned without ever attempting to invoke the company’s policies against sexual harassment.

    The Court noted that under Title VII, an individual can claim sexual harassment based either upon a hostile work environment, or "quid pro quo" harassment. Because this case involved unfulfilled job threats, the Court accepted the trial court’s finding that it was a hostile work environment claim. The Court then turned to basic agency principles to formulate a rule to govern when employers may be held vicariously liable for hostile work environment sexual harassment.

    The Court concluded that employers will be liable for actionable hostile environments created by any supervisor with immediate authority over the employee. In cases where no tangible employment action is taken, the defending employer may raise an affirmative defense to liability or damages, consisting of two elements: (1) that the employer exercised reasonable care to prevent and promptly correct any sexually harassing behavior; and (2) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. No affirmative defense is available if the supervisor’s harassment culminated in a tangible employment action.

     

    Caterpillar, Inc. v. UAW   (U.S. Supreme Court)

    Paying union grievance official when he no longer works for the company

    This case involves the interpretation of § 302 of the Labor Management Relations Act ("LMRA"), which forbids an employer to pay union officials who represent its employees, but exempts such payments where the union representative is a current or former employee and is being compensated "for, or by reason of," that employment. 29 U.S.C. § 186(c).

    Caterpillar is a manufacturer and distributor of heavy equipment. Under a collective bargaining agreement with the United Auto Workers ("UAW"), union grievance chairpersons could devote their entire work week to union business without losing company-paid wages or benefits. Once the collective bargaining agreement expired, however, Caterpillar informed the union that the company questioned the legality of these payments under the LMRA and therefore would cease paying the grievance chairmen. Thereafter, the UAW filed an unfair labor charge with the NLRB, prompting Caterpillar to file a federal suit seeking a declaratory judgment that such payments violate § 302 of the LMRA.

    The district court held that Caterpillar's payments to the union's grievance chairmen violated § 302, and the union appealed. A divided Third Circuit, sitting en banc, overruled its own precedent and became the first court of appeals to extend § 302's exemption to union officials who no longer perform any work for the employer. The court observed that although such payments were not compensation for hours worked in the past, they were — by virtue of their inclusion in the collective bargaining agreement — compensation "by reason of" that service and were, thus, consistent with § 302.

    Question presented:

    …Whether section 302(c)(1) permits an employer to pay or agree to pay the current wages of full-time union officials who are former employees of the employer but who no longer perform any work for the employer.

    Lower court opinion: 107 F.3d 1052 (3d Cir.)

    Status: Oral argument January 20, 1998. The case was dismissed on March 23, 1998 without a decision.

     

    Faragher v. City of Boca Raton   (U.S. Supreme Court)

    Employer liability for sexually harassing acts of supervisor

    When is an employer liable for the acts of supervisory employees in a hostile work environment sexual harassment claim? In a 7-2 decision on 6/26/98, the Supreme Court held that an employer may be held liable for discrimination caused by a supervisor, subject to an affirmative defense that would look to the reasonableness of the employer’s and the victim’s conduct.

    Plaintiff, a lifeguard employed by the City, sued her supervisors and the City for hostile work environment sexual harassment. The district court found for the plaintiff, holding the City liable because it had constructive knowledge of the harassment and because the supervisor was the City’s agent. In an en banc opinion, the Court of Appeals for the Eleventh Circuit reversed the district court's judgment for the plaintiff.

    The Supreme Court reversed the decision of the Court of Appeals, and ordered judgment for the lifeguard.

    Speaking through Justice Souter, the Court ruled that an employer is subject to vicarious liability for hostile work environment sexual harassment perpetrated by a supervisor. Where no tangible employment action has been taken, the employer may assert an affirmative defense consisting of two elements: (1) that the employer exercised reasonable care to prevent and promptly correct sexual harassment in the workplace, and (2) that the employee unreasonably failed to avoid the harm by taking advantage of preventive measures established by the employer. The employer may not avail itself of this defense where the supervisory harassment resulted in an adverse employment decision.

    The NAM filed an amicus brief 1/28/98 in support of Boca Raton, arguing that an employer should not be liable for a hostile workplace environment unless it should have known about or failed to respond reasonably to incidents of sexual harassment. The Court has now held that the employer may be held liable for the acts of a supervisor regardless of whether the employer should have known about them. The new affirmative defense for companies thus becomes crucial to defending these cases.

     

    Oncale v. Sundowner Offshore Service, Inc.   (U.S. Supreme Court)

    Same-sex discrimination

    In this case, the Supreme Court held that same-sex sexual harassment may constitute illegal sexual discrimination.

    Joseph Oncale brought suit against his former employer, Sundowner Offshore Services, Inc., and several male employees of Sundowner under Title VII of the Civil Right Act of 1964. Oncale alleged that while employed for Sundowner he was on several occasions subjected to sex-related humiliating actions, including a physical sexual assault and the threat of homosexual rape. The United States District Court for the Eastern District of Louisiana rejected Oncale's claims, holding that as a matter of law a male had no cause of action for harassment by other males. The Fifth Circuit affirmed.

    A unanimous Supreme Court reversed. Speaking through Justice Scalia, the Court stated that "same-sex harassment claims" can be covered by Title VII. Earlier decisions that illegal discrimination "includes sexual harassment must extend to sexual harassment of any kind that meets the statutory requirements." In reaching this conclusion, the Court stressed two significant limitations upon Title VII. First, while Title VII expressly prohibits "discrimination . . . because of sex," not all sexual harassment constitutes discrimination. "The critical issue . . . is whether members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed." Discrimination may be inferred from a variety of evidentiary routes, including evidence of motivation and direct comparative evidence of how the alleged harasser treated members of both sexes in a mixed-sex workplace.

    Second, Title VII "does not reach genuine but innocuous differences in the ways men and women routinely interact with members of the same sex and of the opposite sex." While Title VII prohibits the creation of "an objectively hostile or abusive work environment," there is no statutory prohibition against ordinary "horseplay," "flirtation," "teasing," or "roughhousing." The question of whether a particular act could be considered "severely hostile or abusive" from the perspective of a reasonable person in the plaintiff’s perspective could vary from one situation to the next. Answering this key question requires examination of the social context, including the "surrounding circumstances, expectations, and relationships."

    Justice Thomas wrote a brief concurring opinion to stress that in every sexual harassment case, Title VII requires proof of "discrimination ‘because of … sex.’"

     

    Oubre v. Entergy Operations, Inc.   (U.S. Supreme Court)

    Keeping severance payment does not constitute valid release of ADEA claims

    The Older Workers Benefit Protection Act (OWBPA), 29 U.S.C. § 621 et seq., imposes specific requirements for releases of age discrimination claims that are often executed when an older employer is terminated. Among other things, the Act requires that older workers signing such releases be given enough time to consider their options, that they have seven days after execution to change their minds, and that the releases specifically mention the Age Discrimination in Employment Act. See 29 U.S.C. § 626(f). In this case, the release signed by the plaintiff admittedly did not comply with these requirements. The defendant claimed, however, that the plaintiff was nonetheless bound by it because she had ratified the release by retaining the monies received in exchange for the release.

    By a six-to-three vote, the Supreme Court ruled 1/26/98 that the OWBPA permits the employees suit. Writing for the majority, Justice Kennedy noted that there was some authority suggesting that at common law a plaintiff's failure to return money received in exchange for a defective release ratified the release or equitably estopped the plaintiff from repudiating it. The majority found, however, that the common law was irrelevant because the OWBPA "sets up its own regime for assessing the effect of ADEA waivers, separate and apart from contract law." The majority also found that the common law rule, deeming a release ratified by the failure to return monies received, would frustrate the operation of the OWBPA because many discharged employees lack the means to return the monies received by them.

    Justice Breyer and O'Connor concurred to point out that, in their view, a release that fails to satisfy the strictures of the OWBPA is voidable, rather than void. Under this view, an employee might choose to accept a release that fails to satisfy the OWBPA. The two justices also observed that nothing in the statute prevented an employer from seeking restitution, recoupment or set-off against an employee retaining monies received in exchange for a release. Three members of the Court – Chief Justice Rehnquist and Justices Scalia and Thomas – dissented on the ground that the OWBPA should be interpreted to comply with the common law.

     

    Textron Lycoming Reciprocating Engine Division, Avco Corp. v. UAW   (U.S. Supreme Court)

    Validity of suits to void labor contracts prior to breach

    In a unanimous decision, the Supreme Court held that federal courts generally do not have jurisdiction over suits seeking to invalidate collective bargaining agreements. Section 301 of the National Labor Relations Act grants federal courts jurisdiction over "[s]uits for violation of contracts between an employer and a labor organization." 29 U.S.C. § 185(a). Although several federal courts of appeals had found that Section 301confers jurisdiction over all contract-related claims, the Court unequivocally held that Section 301 confers jurisdiction only over suits claiming that a contract has been violated. The Supreme Court also rejected the suggestion that federal jurisdiction could be based upon the Declaratory Judgment Act. This part of the Court's decision, however, was more equivocal: while the decision left open the possibility that suits anticipating violations of labor contracts might be brought, it also raised questions concerning the appropriateness of anticipatory suits in general.

    In this case, the UAW alleged that it had been induced to enter into a collective bargaining agreement by fraudulent representations, and it sought a declaration that the agreement was voidable at the UAW's option as well as both punitive and actual damages. In an opinion written by Justice Scalia, the Court held that a suit such as this one seeking to invalidate a labor contract was not "for violation" of a labor contract within the meaning of Section 301. "Suits for violation" of labor contracts, the Court reasoned, are "suits filed because a contract has been violated." The validity of a contract may, of course, be adjudicated in federal court in the course of deciding whether the contract has been violated. This power is, however, ancillary to, and not independent of, the power to adjudicate "[s]uits for violation of contracts."

    The Supreme Court also held that the UAW's claim was not saved by the fact that it sought a declaratory judgment. The UAW argued that its request for declaratory relief was in anticipation of a suit by the petitioner Textron Lycoming seeking to enforce the collective bargaining agreement, that Section 301 would confer jurisdiction over such a suit, and that jurisdiction could therefore be premised upon the anticipated coercive suit. Although the Supreme Court had previously stated that jurisdiction over declaratory judgment actions may be based upon the coercive suit that might have been brought by the declaratory judgment defendant, it questioned whether federal jurisdiction over a nonfederal defense may be based upon an anticipated claim, particularly under Section 301. The Court found, however, that there was no need to resolve this issue because there was no actual case or controversy over the voidability of the agreement. In a concurrence, Justice Breyer suggested that the federal courts could consider a declaratory judgment suit seeking to invalidate a contract would be proper so long as there was an imminent threat of a suit to enforce the contract.

     


    OSHA -- 1998



    IBP, Inc. v. Herman   (D.C. Circuit)

    Third-party contractors

    The D.C. Circuit ruled on June 2, 1998, that IBP did not have enough control over a third-party contractor's work at its meat processing plant to subject IBP to fines under the Occupational Safety and Health Act. The NAM filed an amicus brief supporting IBP's argument that OSHA should not cite the company when the contractor's employees engage in activities that violate the OSH Act. Oral argument was held May 1, 1998, and the NAM provided 5 minutes of oral argument as the amicus (this is quite unusual).

     

    National Association of Manufacturers v. U.S. Dep't of Labor   (D.C. Circuit)

    Respiratory Protection

    The NAM filed a petition for review on 3/6/98 of OSHA's final regulation on respiratory protection. These are new rules, issued 1/8/98, that govern the use of respirators on the job around hazardous materials. NAM member companies met with OSHA 3/16/98 to try to resolve various concerns about language in the final regulation that is either unclear, inconsistent, or violative of privacy protections in other laws. We were also concerned about a new requirement that companies must implement engineering controls as far as feasible to prevent atmospheric contamination. OSHA has approved an enforcement directive that addresses several of the NAM concerns. The case was transferred to the 11th Circuit and consolidated with three other petitions for review, filed by the American Iron and Steel Institute, the American College of Occupational and Environmental Medicine, and the Battery Council International. The Battery Council withdrew its challenge, and, after OSHA approved its new enforcement directive addressing several NAM concerns, the NAM did likewise. The AISI and ACOEM litigation was rejected.

     


    Patents, Copyrights and Trademarks -- 1998



    Quality King Distributors v. L'anza Research International   (U.S. Supreme Court)

    Copyrights and first-sale doctrine for imports

    In this case, the Supreme Court considered the ability of domestic copyright owners to prevent importation of copyrighted materials legally sold abroad, resolving a conflict between the Third and Ninth Circuits. The Court unanimously held that the first sale doctrine of § 109(a) of the Copyright Act of 1976 (Act), 17 U.S.C. § 101 et seq., applies to imported copies, reversing the Ninth Circuit decision below. More broadly, the Court affirmed the proposition that § 602(a) of the Act, which makes the unauthorized importation of copies an infringement of the copyright owner’s exclusive distribution right, remains subject to those limitations that restrict § 106(3) of the Act. This section gives the owner of a copyrighted work the exclusive right to distribute copies of that work.

    L’Anza Research International manufactures and sells a variety of hair care products, and owns copyrights on the product labels. Domestically, L’Anza sells exclusively to distributors who have agreed to resell the product only within specific geographic areas and to authorized retailers. Internationally, however, L’Anza does not require its distributors to abide by these limitations. After an international distributor resold L’Anza products to the petitioner, who subsequently resold them to an unauthorized domestic retailer, L’Anza brought suit, alleging that this sale violated its exclusive rights to reproduce and distribute this material in the United States under 17 U.S.C. §§ 105, 501, and 602. The District Court entered summary judgment for L’Anza, rejecting petitioner’s application of the § 109(a) "first sale" defense. The Court of Appeals for the Ninth Circuit affirmed.

    A unanimous Supreme Court reversed. Speaking through Justice Stevens, the Court held that the first sale doctrine of § 109(a) does apply to imported copies. In reaching this conclusion, the Court addressed the statutory language of § 602(a), the provision relied on by respondent for the proposition that the first sale doctrine should not apply to imported copies. While § 602(a) does state that importation without the authority of the copyright owner infringes the exclusive right to distribute, the section speaks of the "exclusive right to distribute under section 106." The language of § 106 thus limits the exclusive right granted under § 602(a). According to the language of § 106, any exclusive right granted by this section is subject to §§ 107 through 120. Section 109(a), therefore, which "expressly permits the owner of a lawfully made copy to sell that copy ‘[n]otwithstanding the provisions of section 106(3),’" limits the scope of § 602(a).

    Similarly, the Court rejected respondent’s additional arguments that § 602(a) and its three exceptions would be rendered superfluous if limited by the first sale doctrine, and that § 501, which defines a copyright "infringer," refers separately to violations of § 106 and § 602. The Court rejected these arguments because they failed to adequately explain the placement of the phrase "under section 106" in § 602(a). The Court also rejected the Solicitor General's textual argument that § 602(a)'s reference to "importation" describes an act left unprotected by the first sale doctrine of § 109(a).

    Justice Ginsburg wrote a brief concurring opinion recognizing that the opinion of the Court does not resolve cases in which the "allegedly infringing imports were manufactured abroad."

     


    Preemption -- 1998



    AT&T Corp. v. Central Office Telephone, Inc.   (U.S. Supreme Court)

    Filed rate doctrine

    The Communications Act of 1934 requires long-distance carriers to file with the Federal Communications Commission (FCC) a "schedule," known as a "tariff," that contains the charges for their interstate services and all "classifications, practices and regulations affecting such charges." the legal doctrine known as the "filed-rate doctrine" forbids long-distance carriers from offering rates different from those in its filed tariff. This doctrine prevents common carriers from discriminating either for or against certain customers and has the legal effect of preempting all state-law claims based on the rates a common carrier charges.

    This case raised the issue of whether the Communication Act preempts state-law claims based on the services a common carrier provides, as well as claims based on the rates it charges. Plaintiff, Central Office Telephone, Inc., brought several state law breach-of-contract and tort claims, alleging that AT&T Corp., a common carrier, failed to provide certain services and billing procedures that it had voluntarily agreed to furnish. AT&T responded that because these services were different than those called for by its tariffs filed with the FCC, the filed-rate doctrine preempted Central Office Telephone's claims.

    Reversing the Ninth Circuit, the Supreme Court ruled for AT&T. The Court rejected the argument, accepted by the Ninth Circuit, that the filed-rate doctrine applies only to the rates charged by common carriers but not to the provision of services and billing procedures. Instead, the Court reasoned that "[r]ates . . . Do not exist in isolation" and ruled that because any claim for excessive rates could be expressed as a claim for inadequate servcies and vice-versa, the filed-rate doctrine applies to both rates and services. Therefore, the Court ruled that the Communication Act preempted Central Office Telephone, Inc.'s state-law claims for failure to provide the services that AT&T allegedly promised to furnish, as well as the derivative state-law tort claims.

     

    Lewis v. Brunswick Corp.   (U.S. Supreme Court)

    Federal preemption of state tort claims

    The Supreme Court dismissed this case on May 15, 1998. The lower court decision stands.

    The case arose out of a boating accident and concerns whether plaintiffs’ common law fraud and products liability claims are preempted by the Federal Boat Safety Act, 46 U.S.C. §§ 4301-4311 ("Act"). The specific question was whether a boat manufacturer, Brunswick, could be held liable for failing to equip a recreational boat with a propeller guard. The Act requires the Coast Guard to promulgate regulations to contribute to the safety of recreational vessels. The Coast Guard had explicitly considered and rejected a propeller guard requirement following hearings on the subject. Thus, the Eleventh Circuit held that plaintiffs’ claims in this case were preempted.

    The Act contains an express preemption clause, which the Eleventh Circuit held preempted common law as well as statutory claims. The Act also contains a savings clause that appears to preserve state common law claims. As a result of this confusion, the Eleventh Circuit held that the plaintiffs’ claims were not expressly preempted.

    Nevertheless, the court held that the claims were impliedly preempted. The court found that in light of the Act’s intention to create a uniform system of regulation, the Coast Guard’s explicit rejection of the propeller guard requirement mandated the absence of any similar federal or state requirement. The court determined that the savings clause preserved common law product liability claims for defective or negligent design of components already required by the Coast Guard, but could not preserve claims that would impose additional manufacturing requirements.

    Finally, the court found that plaintiffs’ fraud claim was preempted. The court stated that allowing such a "regulatory fraud" claim would permit juries to second-guess the actions of virtually any federal agency in state courts.

    Questions presented:

    1. The Federal Boat Safety Act of 1971, 46 U.S.C. § 4301-4311 (‘Boat Safety Act’) has both an express preemption clause and an express ‘savings clause’ in respect to state authority. In light of recent Supreme Court holdings on pre-emption, is it constitutionally permissible to imply the federal pre-emption of state common law claims into the Boat Safety Act when that act expressly provides a reliable indicium of congressional intent with respect to state authority, and when no federal agency has issued an applicable pre-emptive ‘regulation’ as expressly required by the Act?
    2. The Boat Safety Act provides that ‘[c]ompliance with [the Act] does not relieve a person from liability at common law or under state law.’ 46 U.S.C. § 4311(g). Was it error to hold that torts of omission are impliedly pre-empted under the [Act] while torts of commission are simultaneously expressly saved from pre-emption, when such a differentiation between types of torts is not made in the [Act’s] pre-emption or ‘savings’ clauses?"

    Lower court opinion: 107 F.3d 1494 (11th Cir.)

     


    Procedure -- 1998



    Emerson Electric Co. v. California Superior Court   (California Supreme Court)

    Performance of non-verbal acts at a deposition

    The NAM and the Product Liability Advisory Council filed a joint amicus brief 4/23/97 in this case seeking to require witnesses to perform non-verbal acts at videotaped depositions. The court held that "answer" as used in the Code of Civil Procedure includes nonverbal responses at a videotaped deposition. The trial court may impose a sanction, including evidence preclusion, if a deponent refuses to comply with an order compelling that a nonverbal answer be given. The case affects all businesses and product manufacturers who become involved in litigation in California.

     


    Product Liability -- 1998



    Baker v. General Motors Corp.   (U.S. Supreme Court)

    Validity of confidentiality agreement

    The administrator of an estate brought a products liability action against GM, alleging that a defective fuel pump caused an automobile engine fire that, in turn, led to the death of a motorist. At trial, plaintiffs called a former GM employee to testify. The employee had entered into an earlier agreement with GM in which he consented to a Michigan injunction barring him from testifying against GM in products liability cases. The settlement did allow, however, for the employee to testify if he were ordered to do so by a court or other tribunal.

    In this case, GM argued before the trial court that the former employee's testimony was barred by the Michigan injunction. The plaintiffs contended that the Michigan injunction was not entitled to full faith and credit by the district court, principally under a "public policy" exception to the full faith and credit clause. The district court agreed with plaintiffs and allowed both the deposition of the employee and the employee's testimony at trial. In part, the trial court held that "public policy" exception to full faith and credit allowed the employee's testimony. The plaintiffs obtained an $11.3 million verdict against GM.

    On appeal, the Eighth Circuit reversed the judgment and remanded for a new trial. That court held that plaintiffs court not obtain the former employee's testimony, concluding that no "public policy" or other exception applied and that the Michigan injunction was entitled to full faith and credit.

    A unanimous Supreme Court reversed on January 13, 1998. The majority ruled that the courts of one state do not violate the Full Faith and Credit Clause by compelling testimony from a witness enjoined from testifying by the courts of another state.

    At the outset, the Court stressed that a court cannot refuse to afford full faith and credit to a judgment, whether legal or equitable, based on the "public policy" of its own jurisdiction. Nonetheless, the Court concluded that the Missouri court was not constitutionally compelled to apply the Michigan injunction. The Court stressed two considerations: first, that the Michigan Court had no authority to prescribe procedural rules for litigation in Missouri; and second, that the Michigan court had no jurisdiction over petitioners. Justice Scalia concurred in the result on the ground that a court may apply its own rules for enforcing judgments. Justice Kennedy concurred in the result on the ground that Michigan itself would not preclude re-litigation of an issue by non-parties such as petitioners.

    The NAM filed an amicus brief urging the Court to rule that Ohio must give the same full faith and credit to the Michigan judgment that a Michigan court would, and that there is no due process interest in particular evidence. Even if there were such an interest, the plaintiffs can still go to the Michigan court to modify its order.

     

    General Electric Co. v. Joiner   (U.S. Supreme Court)

    Admissibility-of-evidence rulings subject to abuse-of-discretion review standard

    The Supreme Court determined 12/15/97 that an appellate court should use the "abuse-of-discretion" standard to review a trial court's decision to admit or exclude expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). In so doing, the Court reversed an Eleventh Circuit opinion applying a particularly stringent standard when reviewing the exclusion of expert testimony. Applying the proper standard of review here, the Court held that the District Court did not abuse its discretion in excluding scientific evidence when it determined that the studies upon which the experts relied were insufficient to support the experts' conclusions.

    The NAM filed an amicus brief in this case, arguing that trial courts are best situated and fully capable of fulfilling their roles as gatekeepers with respect to the admission of evidence in trials, and that it is an unnecessary waste of time and resources for appellate courts to revisit these determinations as if taking a first look at the matter.

     

    Laborers Local 17 Health & Benefit Fund v. Philip Morris Inc.   (2nd Circuit)

    Health plan tobacco suit

    The NAM and the Product Liability Advisory Council filed a joint amicus brief 10/1/98 in this case seeking to halt a suit by a union health and welfare benefit plan against the tobacco industry for injuries to beneficiaries of the plan.

    On April 9, the Second Circuit ordered the case dismissed. It held that "the economic injuries alleged in plaintiffs' complaint are purely derivative of the physical injuries suffered by plan participants and therefore too remote as a matter of law for them to have standing to sue defendants." We were particularly heartened to see a major federal court of appeals find these kind of claims "precisely the type of large, complicated damages claims that [prior decisions] sought to avoid." It continued, "for us to rule otherwise could lead to potential explosion in the scope of tort liability, which, while perhaps well-intentioned, is a subject best left to the legislature."

    This case affects all manufacturers whose products may injure employees covered by health or disability insurance (such as food, recreational products, medical devices, pharmaceuticals, automobiles and home appliances). The NAM supports fundamental subrogation remedies and limitations under the doctrine of remoteness.

    This is the second such case in which the NAM filed a successful amicus brief supporting manufacturers against suits by union benefit plans. The Third Circuit ruled in favor of the tobacco companies on 3/29/98 in Steamfitters Local No. 420 Welfare Fund v. Philip Morris, Inc.

     


    Taxation and State Taxation -- 1998



    Bowater, Inc. v. Commissioner of Internal Revenue   (U.S. Supreme Court)

    Taxation of interest income from foreign sources

    The NAM supported Bowater's petition for Supreme Court review of a Second Circuit decision involving the allocation of expenses relating to interest income from foreign sources. The case affects multinationals with interest-generating investments abroad. An NAM survey shows that half of those responding consider this an important issue, with half of those claiming that the case will have an impact on an average of more than $17.5 million in tax liability per company. On January 12, 1998, the Supreme Court declined to hear this appeal.

     

    United States v. United States Shoe Corp.   (U.S. Supreme Court)

    Harbor maintenance tax unconstitutional

    In this case, the Supreme Court gave an expansive interpretation to the Constitution's Export Clause, which provides: "No Tax or Duty shall be laid on Articles exported from any State." U.S. Const., Art. I, § 9, cl. 5. The Court held that the Harbor Maintenance Tax (HMT), 26 U.S.C. § 4461, which levied an ad valorem charge on shipments at the nation's ports, violated this clause as applied to exports. As the Court noted, this decision will impact thousands of currently pending cases.

    The HMT, which applies uniformly to exporters, importers and domestic shippers, imposes a charge set at a percentage of the cargo's value. United States Shoe challenged the statute under the Export Clause and won both in the Court of International Trade and the Federal Circuit. The United States argued before the Supreme Court that, despite its name and its placement in the Internal Revenue Code, the HMT was not a "tax" under the Export Clause, but instead a permissible user fee.

    The Supreme Court rejected this argument, affirming the lower court in a unanimous opinion authored by Justice Ginsburg. The Court found that the HMT was a tax, not a user fee, because it was based on the value of the shipments rather than of the services that the government rendered. The Court distinguished "user fee" cases under other constitutional provisions, holding that those constitutional mandates are less exacting than the Export Clause.

     


    Uniform Commercial Code -- 1998



    Minnesota Mining & Manufacturing Co. v. NISHIKA, LTD.   (Minnesota Supreme Court)

    Warranty losses under the Uniform Commercial Code

    The NAM asked the court to interpret Minnesota's version of the Uniform Commercial Code to preclude a buyer of defective goods from suing in tort for economic losses outside of the normal remedies for breach of warranty under the U.C.C. Joint brief with the Manufacturers Alliance filed 2/97. The Minnesota Supreme Court ruled that third parties who only lose profits, but whose property or persons are not physically injured, cannot sue a manufacturer under warranty law in Minnesota.

     


    Class Actions -- 1997



    Adams v. Robertson   (U.S. Supreme Court)

    No-Opt-Out Rule

    Class action suits against manufacturers present the difficult choice of litigating and facing tremendous potential liability or settling with some, but not all, of the plaintiffs. The NAM is taking a more active role in helping to resolve class action problems. In this case, the Alabama Supreme Court ruled that a court may resolve a class action by providing non-monetary relief without letting plaintiffs "opt out," or withdraw from the case to file their own suits later. The Supreme Court took the case to decide whether the parties may settle such a class action and bind all the parties even though the plaintiffs do not receive part of what they sued for: money damages.

    However, on March 3, 1997, the Court dismissed the case as improvidently granted.

    The NAM filed a brief supporting Alabama's no-opt-out rule, because allowing certain plaintiffs to opt out where they claim speculative money damages would subject manufacturers to open-ended liability and to cases that would be difficult and complicated to resolve.

     

    Amchem Products, Inc. v. Windsor   (U.S. Supreme Court)

    Settlement class actions

    The Supreme Court ruled that the standard for certifying "settlement only" classes is no lower -- and may even be higher -- than for certifying classes for trial. Several lower courts had held that settlement obviates or reduces the need to measure a proposed class against the Rule 23 requirements, but the Supreme Court made it clear that, while settlement is relevant to the certification issue, Rule 23's requirements are not reduced in the settlement context.

    For example, the Court held that, since a settlement-only case would never be tried, a district court need not inquire whether the case, if tried, would present intractable management problems. But other Rule 23 requirements -- such as those designed to block unwarranted or overbroad class definitions -- "demand undiluted, even heightened, attention in the settlement context." In most class-action cases, courts can adjust the class as litigation unfolds, but in settlement cases, courts lack that option, making it even more important to scrutinize proposed classes for overbreadth.

    In the case at hand, the Court held that the sprawling class of all persons who had been exposed to asbestos but had not previously sued an asbestos manufacturer did not meet Rule 23's requirements for certification. Since the class included those who had already developed asbestos-related diseases as well as those who had not, common issues did not predominate over individual issues. Moreover, the named representatives did not adequately represent the class, given that the settlement was geared more toward compensating currently-injured class members than assuring future compensation for the others.

    Finally, the Court questioned whether adequate notice could ever be given to such a class, particularly since many class members might not even know of their exposure to asbestos. Given its disposition on the other issues, however, the Court declined to rule on the notice issue.

    The NAM urged the Supreme Court to take this case, to provide manufacturers with a clear rule regarding acceptable procedures to resolve class action claims.

     


    Criminal Liability -- 1997



    Hudson v. United States   (U.S. Supreme Court)

    Civil penalties usually don't conflict with Double Jeopardy Clause

    The Supreme Court ruled 12/10/97 that the Double Jeopardy Clause does not necessarily bar criminal prosecution for the same conduct for which civil sanc tions have already been imposed even where those sanctions could be considered "punishment." In doing so, the Court disavowed its prior decision in United States v. Halper, 490 U.S. 435 (1989), and reaffirmed the previously established rule from United States v. Ward, 448 U.S. 242 (1980).

    After the government imposed monetary fines and occupational debarment on petitioners for banking violations, it indicted them on criminal charges for essentially the same conduct. Under Halper, the Double Jeopardy Clause would preclude the criminal charges if the civil sanction was so "overwhelmingly disproportionate" to the injury caused that it could not be described as "solely remedial," but must be seen instead as a punishment designed to serve a retributive ore deterrent purpose.

    Since all civil penalties have some deterrent effect, the Court held that the Harper test has proved unworkable, for "[i]f sanction must be solely' remedial (i.e., entirely nondeterrent) to avoid implications the Double Jeopardy Clause, then no civil penalties [would be] beyond the scope of the Clause." Rejecting this conclusion, the Court returned to its previously established rule, which required courts to first determine whether the legislature intended to create a civil or criminal penalty. If the legislature intended to create a civil penalty, the Double Jeopardy Clause could be invoked only if the claimant could show by the "clearest proof " that the statutory scheme was so punitive as to "transform what was clearly intended as a civil remedy into a criminal penalty." Applying that rule here, the court held that the statute providing for sanctions for banking violations was clearly intended to be civil, and that there was little evidence, much less clear proof, that the civil sanctions were so punitive as to render them criminal in the face of Congress's contrary intent. Accordingly, the Court held that the Double Jeopardy Clause did not preclude criminal charges for the same conduct.

     


    Environmental -- 1997



    Bennett v. Spear   (U.S. Supreme Court)

    Can only environmentalists bring citizen suits?

    In this case, the Court unanimously held that the petitioners had standing to seek judicial review of a "Biological Opinion" issued by the Fish and Wildlife Service, under the citizen-suit provision of the Endangered Species Act (ESA) and the Administrative Procedure Act (APA).

    The Biological Opinion concluded that the long-term operation of the Klamath Project, a series of lakes, rivers, dams, and irrigation canals administered by the Bureau of Reclamation, was likely to jeopardize the continued existence of two endangered species of fish. The Opinion recommended that the Bureau protect these fish by maintaining minimum water levels on certain bodies of water. The Bureau agreed to follow this suggestion. Petitioners, who have competing economic and other interests in Klamath Project water, alleged that the Service's determination that the endangered fish were in jeopardy violated Section 7 of the ESA, that the minimum water level recommendation violated Section 4 of the ESA, and that each action was arbitrary and capricious under the APA. They further claimed that they had standing to bring these claims because the minimum water levels threatened to reduce their irrigation water supply.

    The Court first considered whether petitioners' standing under the ESA's citizen-suit provision was to be evaluated under the prudential principle that a "grievance must arguably fall within a zone of interests protected or regulated by the statutory provision . . . invoked in the suit." The Ninth Circuit had ruled that the zone-of-interests standard applied to claims brought under this provision and that the petitioners' claims fell outside the zone of interests protected by the ESA. The Supreme Court, however, held that the breadth of this citizen-suit provision (authorizing "any person" to "commence[e] a civil suit") indicated that Congress had determined that the zone of interests test was not to be the measure of standing under the ESA.

    The Court also concluded that the petitioners had standing under Article III. The Court held that at the pleading stage, an alleged reduction in irrigation water supply constituted an "injury-in-fact." Under the "relatively modest" causation standard in place at this stage of litigation, the Court further found that this injury was "fairly traceable" to the issance of the Biological Opinion and was likely to be "redressed" if the Opinion was set aside. The Court noted that judicial review of the petitioners' claims was authorized under two different federal statutes: while the petitioners' Section 4 claim was reviewable under the citizen-suit provision contained in the ES, their Section 7 claim was reviewable only under the APA.

     

    United States v. Hoechst Celanese Corp.   (4th Circuit)

    Court deference to EPA enforcement decisions

    This case involves an enforcement action for alleged violations of the federal regulations pertaining to equipment in facilities that produce or use benzene. The NAM filed a brief supporting arguments concerning the government's refusal to comply with Administrative Procedures Act and Clear Air Act provisions mandating that prior notice be given of agency regulatory requirements, thus, attempting to make a significant change in the meaning of a rule without first going through notice and comment. The Court deferred to EPA’s interpretation of "use," and found HCC had notice as of 1989. The case affects companies that recycle benzene at their facilities. Decided 10/27/97. This case was appealed to the Supreme Court, but the Court declined to review it.

     


    ERISA -- 1997



    Boggs v. Boggs   (U.S. Supreme Court)

    State community property law

    This case presented the question whether ERISA preempts state laws allowing non-participating spouses to acquire and transfer interests in undistributed pension plan benefits. Respondents are the sons of Isaac and Dorothy Boggs. Under Louisiana law, Dorothy acquired, and then bequeathed to her sons, a community-property interest in Isaac's undistributed pension benefits. Isaac bequeathed all of his property to his second wife, petitioner Sandra Boggs. Sandra argued that ERISA preempted Dorothy's purported acquisition and testamentary transfer of Isaac's undistributed pension benefits, and that she (Sandra) was therefore entitled to all of those benefits. The Supreme Court agreed.

    Seven Justices concluded that ERISA preempted Louisiana law to the extent that it purported to give respondents a portion of the "qualified joint and survivor annuity" defined in Section 1055 of ERISA. Section 1055(a) states that a pension plan "shall provide" for such an annuity payable to a non-participating surviving spouse; Sec.1055(d)(1) specifies the minimum amount of the survivor's annuity; and Sec. 1055©(2) prohibits the participant from waiving the survivor's annuity (except in limited circumstances not present in this case). The Court held that Louisiana law conflicted with, and was thus preempted by, Sec. 1055.

    Five Justices also concluded that ERISA preempted Louisiana law even with respect to pension funds not covered by the survivor's annuity. The Court relied both on the text of Section 1056(d)(1) of ERISA, which states that a pension plan "shall provide that benefits provided under the plan may not be assigned or alienated," and on the overall structure of ERISA, which confers beneficiary status on non-participating spouses only in "narrow circumstances" not present in this case.

     

    DeBuono v. NYSA-ILA Medical and Clinical Services Fund   (U.S. Supreme Court)

    Hospital surcharges

    "This is another Employee Retirement Income Security Act (ERISA) pre-emption case," Justice Stevens wrote for a 7-2 majority. Respondent NYSA-ILA is an ERISA plan that operates three medical centers. The issue in the case was whether New York could apply a tax, the Health Facility Assessment ("HFA"), to patient services at those centers. The Second Circuit held that the HFA was pre-empted by ERISA because it directly depleted the assets of the ERISA plan.

    The Supreme Court reversed, applying its earlier decision in New York State Conference v. Travelers Insurance Co., 514 U.S. 645 (1995). Travelers held that ERISA did not preempt a New York surcharge imposed on care for patients covered by commercial insurers, but not imposed on care for patients covered by Blue Cross/Blue Shield. While that surcharge did favor Blue Cross over the ERISA-governed commercial plans, the Court in Travelers held that it was not pre-empted because the impact on ERISA plans was indirect, and because the surcharge operated in a field generally regulated by the states.

    Though the impact of the HFA on facilities owned by ERISA plans was more direct than the Travelers surcharge, the Supreme Court did not find that dispositive, or even significant. Instead, the Court said, because the HFA is a form of traditional state regulation, it enjoys a presumption against pre-emption. That presumption was not overcome, given that the HFA is a generally applicable tax on all hospitals, most of which are not operated by ERISA plans. The Court did acknowledge, as it had in Travelers, that some generally applicable state laws might have economic effects so acute as to forced ERISA plans to alter their coverage scheme, but that was not the case for New York's HFA.

    In dissent, Justices Scalia and Thomas argued that the case should be set for reargument on a question not addressed by the parties: whether the ERISA plan's lawsuit was barred by the Tax Injunction Act.

     

    Inter-Modal Rail Employees Association v. Atchison, Topeka and Santa Fe Railway   (U.S. Supreme Court)

    Whether ERISA covers health benefits

    Defendant railroad transferred work from a wholly-owned subsidiary to an independent corporation. Several affected employees and their union sued, claiming, among other things, that the purpose of the transfer was to deprive them of pension and welfare benefits provided by collective bargaining agreements.

    The Ninth Circuit held that the plaintiffs had stated a claim for lost pension benefits under Sec. 510 of the Employee Retirement Income Security Act (ERISA), which prohibits employers from discharging or otherwise disciplining benefits plan participants "for the purpose of interfering with the attainment of any right to which [the] participant may become entitled under the plan." 29 U.S.C. Sec. 1140 (1994). The Ninth Circuit held, however, that plaintiffs had not stated a claim for lost welfare benefits. In the Ninth Circuit's view, since welfare benefits do not "vest," they are not protected by Sec. 510. This latter holding conflicts with decisions of the Seventh and Eleventh Circuits.

    Question presented:

    Certiorari was limited to: "Do allegations by employee-beneficiaries of a health and welfare benefit plan that their employer's parent company forced their employer to discharge them and to contract out their jobs to another employer in furtherance of a conspiracy to interfere with their right to receive health and welfare benefits, state a congnizable cause of action under Sec. 510 of ERISA?"

    The Supreme Court unanimously held that § 510 applies to claims for lost welfare benefits as well as those for lost pension benefits. The Court relied heavily on ERISA's definition of a plan, which includes both an employee welfare benefit plan [and] an employee pension benefit plan, 29 U.S.C. § 1002(3). The Court also reasoned that the right of an employer in some circumstances to amend unilaterally or eliminate its welfare benefit plan does not justify a departure from the plain language of §§ 510 and 1002(3).

    The NAM filed an amicus brief arguing that employers should not be prevented from making structural or organizational changes in their companies if such changes are based on consideration of the normal costs of maintaining employee benefit plans as contrasted to targeting of particular employees because of their benefit rights. Congress never intended to prohibit general cost concerns from affecting employment actions. Our brief was filed jointly with the California Employers Group and the Association of American Railroads.

     


    False Claims Act -- 1997



    Hughes Aircraft Co. v. United States ex rel. Schumer   (U.S. Supreme Court)

    Qui tam suits

    In a unanimous decision, the Supreme Court applied its retroactivity decision in Landgraf v. USI Film Products to bar the retroactive application of a 1986 amendment to the qui tam provisions of the False Claims Act. The qui tam provisions authorize private individuals to bring actions in the name of the United States government against federal contractors who knowingly submit fraudulent claims to the government. Prior to 1986, the False Claims Act required courts to dismiss qui tam actions based on evidence or information that the government already had when the action was brought. Congress amended the Act in 1986 to permit, with certain exceptions, suits based on information in the government's possession.

    Schumer's suit against Hughes Aircraft was based on some 1982 accounting practices that the government had already investigated and cleared; the suit was thus barred under the version of the False Claims Act in effect at the time of the alleged misconduct. The district court, however, denied Hughes Aircraft's motion to dismiss, and the Ninth Circuit affirmed, holding that the 1986 amendment applied. The Supreme Court reversed.

    Under , courts presume that a law will not apply to conduct which occurred prior to its effective date unless Congress clearly indicates otherwise. Schumer argued that Landgraf applied only to laws having certain retroactive effects that the 1986 amendment lacked -- such as impairing vested rights under existing laws, imposing new duties, or attaching new disabilities in respect to transactions already past. The Court first noted that such effects are merely sufficient, not necessary, conditions for invoking the presumption against retroactivity. In any event, the Court held that the 1986 amendment had precisely the type of retroactive effect Schumer disclaimed, because it changed the substance of an existing law by eliminating a previously available defense. Since the Landgraf presumption against retroactivity applied, the Court held that the 1986 amendment was inapplicable to the conduct at issue and that the case should have been dismissed pursuant to the pre-1986 version of the Act.

     


    Labor Law -- 1997



    Auer v. Robbins   (U.S. Supreme Court)

    Pay docking

    In this case, a group of St. Louis police sergeants sued their police commissioenrs for overtime pay under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. Sec. 207, which requires employers to pay overtime to employees who work more than forty hours per week. The police commissioners argued that the sergeants were "bona fide executive, administrative, or professional" employees exempted from FLSA overtime pay requirements by 29 U.S.C. Sec. 213(a)(1). Under the Secretary of Labor's regulations implementing this exemption, employees who were paid a specified minimum amount ($250.00 per week) on a "salary basis" fall within this exemption as long as their compensation is not "subject to" being reduced "because of variations in the quality or quantity of the work performed." The police sergeants claimed that they did not meet these requirements because, under the terms of a Police Department Manual that applied to all employees, their compensation theoretically could be reduced for a variety of disciplinary infractions, some of which related to the "quality or quantity" of their work. Both the District Court and the Eighth Circuit agreed with the police commissioners, holding that the Secretary's salary-basis test was satisfied.

    The Supreme Court affirmed on 2/19/97. Justice Scalia, writing for a unanimous court, held as follows:

    First, the Secretary's "salary-basis" test, with its exception for disciplinary deductions, reflects a permissible reading of the FLSA as it applies to public employees. Neither the absence of other, non-salary reduction means of discipline, nor the peculiar needs of law enforcement organizations, rendered the Secretary's interpretation obviously unreasonable as applied to public sector employees. In light of the Secretary's broad authority to "defin[e] and delimi[t]" the exemption's scope, the Secretary's salary-basis test and exemption for disciplinary deductions are clearly permissible.

    Second, the Secretary's interpretation that the salary-basis test is met whenever an employee's compensation cannot "as a practical matter" be adjusted in ways that are inconsistent with the test is reasonable. Since the Secretary's interpretation of the salary-basis test fits well within the key language of the exemption -- that the employee's compensation not be "subject to" disciplinary reduction -- the Secretary's interpretation is not "plainly erroneous," and is thus entitled to deference.

    Third, relying on the plain language of the Secretary's implementing regulations, the Court held that employers may preserve the exempt status of employees whose pay has been improperly deducted as long as the employer reimburses those employees, and so long as the deductions were either inadvertent or made for reasons other than lack of work.

    Manufacturers that consider certain executive, administrative or professional employees exempt from the FLSA should make sure that those employees' salaries are not subject to disciplinary reduction relating to the quality or quantity of their work.

     

    California v. Dillingham Construction, N.A. Inc.   (U.S. Supreme Court)

    State apprenticeship law

    The Employee Retirement Income Security Act of 1974 (ERISA) preempts any state law that "relate[s] to" a benefits plan covered by the Act. 29 U.S.C. Sec. 1002(1). In a host of cases beginning shortly after the enactment of ERISA, the Supreme Court construed this pre-emption provision expansively. Two years ago, however, in New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Ins., 115 S. Ct. 1671 (1995), the Court appeared to rein in the preemption clause, suggesting that in areas of traditional state regulation the pre-emption clause applies only where its application would further the purposes of ERISA. In Dillingham, a unanimous court confirmed this change in direction.

    At issue in Dillingham was a California prevailing wage law. Under that law, state public contractors are required to pay their workers prevailing local wages unless those workers are enrolled in a state-approved apprenticeship program. Arguing that such apprenticeship programs are ERISA-covered benefits plans, a contractor asserted that the prevailing wage law "relate[s] to" ERISA-covered plans and is therefore pre-empted by the Act. The Ninth Circuit agreed, and in Dillingham the Supreme Court reversed.

    The Court began by noting that a law relates to a covered benefit plan under ERISA's pre-emption clause if it has a "connection with or a reference to such a plan." The Court then found that California's prevailing wage law does not make reference to an ERISA plan under the clause because the effect of the law is not limited to ERISA-covered benefit plans. Specifically, the prevailing wage law applies to apprenticeship plans funded out of an employer's general assets and therefore not subject to ERISA. The Court also found that the prevailing wage law lacks a sufficient connection with ERISA-covered plans to trigger pre-emption because the law simply provides employers with an economic incentive to obtain state approval for their apprenticeship plans. Relying on Travelers, the Court held that a law which only "alters the incentives, but does not dictate the choices, facing ERISA plans" is not sufficiently connected to an ERISA plan to trigger pre-emption. Consequently, as Justice Scalia observed in his concurrence, it appears that at least in areas of traditional state regulation pre-emption under ERISA will be no broader than in other areas of the law.

    The NAM filed an amicus brief opposing the ultimate result in this case.

     

    Robinson v. Shell Oil Co.   (U.S. Supreme Court)

    Legal protection for former employees

    This employment discrimination case turned on whether the term "employees" specified in Section 704(a) of Title VII of the Civil Rights Act of 1964 includes former employees. The majority of circuits had broadly interpreted "employee" to include former employees "as long as the alleged discrimination is related to or arises out of the employment relationship." The en banc Fourth Circuit, however held that the plain language of the provision excluded former employees and upheld the district court's determination that former employees may not bring suit under Section 704(a) for retaliation occurring after termination of their employment.

    The Supreme Court reversed on 2/18/97, holding that former employees are included with Section 704(a)'s protection. In an opinion delivered by Justice Thomas, a unanimous Court held that "employees" as used in Section 704(a) was ambiguous as to whether it included former employees. The Court reasoned that the broader context and purpose of Title VII supported an expansive interpretation of "employees" and that exclusion of former employees would undermine the effectiveness of the statute by allowing the threat of post employment retaliation to deter employees from filing complaints with the EEOC.

     

    Walters v. Metropolitan Education Enterprises Inc.   (U.S. Supreme Court)

    Definition of "employer"

    These cases involved the determination of the term "employer" under Title VII of the Civil Rights Act of 1964. Title VII defines an employer as someone who "has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." If the employer has fewer than 15 employees, Title VII does not apply to the employer's actions. The question presented by this case was, in essence, how to count employees.

    The petitioners (the EEOC and an individual plaintiff) claimed that an employer "has" an employee whenever the employer has an employment relationship with that employee in a particular week. Because this method focuses on whether the employer had 15 or more persons on the payroll in a given week, this was referred to in the courts as the "payroll method" of counting employees. The respondent advocated a narrower interpretation, focusing on whether the employee was actually performing work for the employer on a given day, a standard that would exclude part-time employees. The Court unanimously held on 1/14/97 that the ordinary meaning of this provision of Title VII was more consistent with the "payroll method." The Court concluded that the phrase "for each working day" was intended to make clear that employees who leave employment in the middle of the calendar week are not counted toward the statutory minimum number of employees. Thus, the Act applies to any employer who has an employment relationship with 15 or more employees in each of twenty or more calendar weeks in the current or preceding calendar year.

     


    Patents, Copyrights and Trademarks -- 1997



    Warner-Jenkinson v. Hilton Davis Chemical Co.   (U.S. Supreme Court)

    Patent Doctrine of Equivalents

    In a case that has been closely followed by businesses with an interest in patents, a unanimous Supreme Court held 3/3/97 that there continues to be a "doctrine of equivalents" in patent law, under which a product or process that does not quite literally infringe the claims of a patent may nonetheless be found to infringe if "the accused product or process contain[s] elements identical or equivalent to each element of the patented invention." The Court's opinion also discussed the critical role of patent prosecution history, and the less-critical role played by the intent of the infringer, in determining infringement by equivalents.

     


    Product Liability -- 1997



    Metro-North Commuter R.R. v. Buckley   (U.S. Supreme Court)

    Is Fear of Contracting Disease Actionable?

    Respondent Buckley was exposed during a three-year period to insulation dust containing asbestos while employed as a pipefitter by the railroad. In 1987, Buckley attended an "asbestos awareness" class, at which he learned of the health risks posed by contact with asbestos, which included cancer. Since then, Buckley claims he has feared that he will develop cancer, even though he has received a clean bill of health on his periodic medical check-ups for cancer and asbestosis since 1989. Buckley sued Metro-North under the Federal Employers' Liability Act ("FELA") which permits a railroad worker to recover for an "injury . . . resulting . . . from" his employer's "negligence." He sought damages for emotional distress and to cover the cost of future medical check-ups. Metro-North conceded negligence, but argued (1) that there was insufficient evidence for the claim of emotional distress, and (2) that Buckley should not be able to recover costs of medical check-ups without evidence of physical harm.

    The district court dismissed the action, finding no sufficient evidence to allow a jury to find that Buckley had suffered a real emotional injury. It did not address the issue of costs for medical monitoring. The Second Circuit reversed. Relying on the Supreme Court's recent decision in Consolidated Rail Corporation v. Gottshall, 512 U.S. 532 (1994), the court of appeals held that Buckley had suffered a "physical impact" (contact with the insulation dust), and that such contact permitted a FELA plaintiff to recover for accompanying emotional distress. Further, it held that Buckley could recover for the costs of medical monitoring.

    In an opinion delivered by Justice Breyer, the Supreme Court held that, under the FELA, a railworker may not recover such damages unless, and until, he manifests symptoms of a disease. The Court unanimously held that Gottshall's "physical impact" does not include physical contact with a substance that might cause a disease at a substantially later time. While Gottshall adopted a "zone of danger" test, which allows for recovery of emotional injury by plaintiffs who are placed in immediate risk of physical harm by negligent conduct, the Court noted that Buckley's risk of injury was not immediate but potential and distant.

    On the medical monitoring issue, the Court, with Justices Ginsburg and Stevens in dissent, held that FELA does not permit a plaintiff without symptoms or disease to recover the costs of medical monitoring.

    The NAM filed an amicus brief asking the Court to limit the application of the zone of danger rule. Although this case involves an interpretation of FELA, its impact will be felt throughout the country as states interpret their own liability laws.

     

    Saratoga Fishing Co. v. J.M. Martinac & Co.   (U.S. Supreme Court)

    Contract Damages vs. Strict Liability

    In Saratoga Fishing Co., the Supreme Court exercised its authority over admiralty law to render what may become an influential decision in an obscure but important area of products liability law. As a general rule, tort law does not permit plaintiffs to recover economic losses. Finding no meaningful distinction between a product that damages itself and a product that simply fails to work, courts have generally held that losses due to a product damaging itself are economic in nature and therefore not recoverable in tort actions. Damages due to personal injury and injury to other property are, however, not considered economic in nature and are therefore generally recoverable in tort.

    In Saratoga Fishing Co., the Supreme Court considered what constitutes other property for purposes of the "economic loss" rule. The case arose out of an engine room fire and flood that led to the sinking of a fishing vessel. The owner of the vessel sued the builder of the boat and the manufacturer of the hydraulic system installed by the builder to recover, among other things, for the loss of certain smaller boats, nets and other objects added to the boat by its first owner. Reasoning that original manufacturers can anticipate and spread the risk of harm to components added to their products after sale better than user/resellers adding those components, the majority held that components added to a product after its initial sale are "other property" for purposes of the economic loss rule and that plaintiffs may therefore recover in tort harm suffered as a result of damage to such components.

    In dissent, Justice Scalia and two other Justices adopted a slightly different standard. Under this standard, plaintiffs would not be permitted to recover damages to components added by a reseller who is actively engaged in the sale of the product in question. Finding that the defendant in this case was actively engaged in the sale of the boats, the dissent found the harm to the components added by the defendant to be economic in nature. In so doing, however, Justice Scalia noted that his rule was quite similar to the majority's and would in most cases produce the same result. Thus, all nine Justices agreed that, in most cases, damages to components added to a product after its initial sale are recoverable in product liability actions.

    The NAM filed an amicus brief urging the Court to rule that the "economic loss rule" applies in maritime product liability cases to cut off tort liability for damage to "other property" on the ship, since that property was part of the benefit of the bargain when the ship was bought. The only remedy for loss should be a contract claim negotiated with the seller. Joint brief with Raychem Corp. filed 12/30/96.

     


    RICO Act -- 1997



    Klehr v. A.O. Smith Corp.   (U.S. Supreme Court)

    RICO statute of limitations

    In this case, the Supreme Court clarified when a civil RICO claim accrues for statute of limitations purposes and held that acts of "fraudulent concealment" by a defendant will not toll (stop the running of) the statute of limitations unless a plaintiff was "reasonably diligent" in attempting to discover a defendant's unlawful activity.

    The petitioners in this case were dairy farmers who brought their civil RICO suit in 1993. In 1991, they discovered longstanding defects in a silo that they had purchased from respondents in 1974. To bring their RICO claim within the applicable four-year statute of limitations, petitioners argued that respondents' fraudulent conduct in connection with this sale continued into 1989 and that it concealed their injuries. The Eighth Circuit rejected these arguments and held that the RICO claim accrued sometime before 1989 -- when the petitioners should have discovered their injuries and respondents' pattern of conduct.

    The Supreme Court affirmed. First, the Court rejected petitioners' assertion that their claim was timely because the last predicate act of fraud had occurred within four years of their filing date. The Court first noted that this position created a limitations period "longer than Congress could have contemplated" and that it was "inconsistent with the ordinary Clayton Act rule," which the Court had previously held to be " the most appropriate limitations period for RICO actions." In rejecting the last-predicate-act standard of accrual, the Court expressly reserved the question whether a claim accrues when a plaintiff discovers both an injury and a pattern or when the plaintiff simply discovers an injury.

    Second, the Court held that a defendant's fraudulent concealment of the underlying injury does not toll the civil RICO statute of limitations unless a plaintiff was "reasonably diligent" in trying to discover this injury. Again drawing heavily on antitrust decisions, the Court reasoned that a civil RICO action exists "to encourage those victims themselves diligently to investigate and thereby to uncover unlawful activity."

    The NAM filed an amicus brief urging the Court to reject the "last predicate act" rule in determining when the statute of limitations period begins to run. Instead, a four-year period should begin to run when the alleged injuries and legal violations are readily apparent and there have been no affirmative acts of fraudulent concealment.

     


    Takings -- 1997



    Suitum v. Tahoe Regional Planning Agency   (U.S. Supreme Court)

    Just compensation for regulatory taking

    In this case, the Supreme Court held that a landowner's regulatory taking claim was ripe for adjudication after a regional planning agency refused to permit any development on the landowner's parcel, even though the landowner made no attempt to sell the Transfer Development Rights ("TDRs," allegedly valuable rights that can be sold to other landowners) that the agency determined that she was entitled to. The lower courts had agreed with the agency that the landowner's taking claim was not ripe because she did not seek the agency's approval to transfer her development rights before bringing suit for an unconstitutional taking under Section 1983. The Supreme Court, however, reversed, unanimously holding that the resolution of the landowner's TDRs is not the type of "final decision" that must be made before a case becomes ripe for review. The finality requirement applies to decisions about how a landowner's property may be used, and the agency had already determined that the landowner's property could not be used at all. Since the agency had no further discretion to exercise over the landowner's right to use her land, the landowner's regulatory taking claim was ripe for adjudication.

    A majority of the Justices went on to suggest that the "final decision" doctrine might still come into play if there were any question over whether the agency would grant the landowner a discretionary award of saleable TDRs, but that no such question was presented here since the agency agreed that the landowner was entitled to the TDRs. Justices Scalia, O'Connor, and Thomas dissented from this portion of the opinion, arguing that the TDRs, while potentially relevant to the issue of whether the landowner had been justly compensated, were not relevant to the issue of whether the landowner's claim was ripe, or even whether there had been a taking in the first place.

    The NAM joined with the Defenders of Property Rights in an amicus brief in support of the plaintiff's "ripeness" argument and calling for prompt payment of just compensation.

     


    Taxation and State Taxation -- 1997



    Camps Newfound/Owatonna, Inc. v. Town of Harrison   (U.S. Supreme Court)

    Taxation of Interstate Commerce

    In a 5-4 decision, the Supreme Court held that a Maine statute violated the Commerce Clause by denying otherwise available tax exemptions to charitable institutions that principally served non-residents of Maine.

    The statute at issue exempted "benevolent and charitable institutions incorporated" in Maine from real estate and personal property taxes. However, the exemption was limited or in some cases wholly eliminated with respect to institutions that were "in fact conducted or operated principally for the benefit of persons who are not residents of Maine." The petitioner, a Maine non-profit corporation that operated a summer camp for Christian Scientists, was denied the exemption because about 95% of its campers were not residents of Maine. It sued in state court, challenging the constitutionality of the exemption statute, but lost in the Maine Supreme Court.

    Justice Stevens' majority opinion, which reversed the decision of the Maine Supreme Court, first held that the statute discriminated on its face against interstate commerce and would clearly be unconstitutional if it were aimed at profit-making enterprises. The Court next addressed "the novel question" of whether a different standard should apply to the regulation of non-profit entities and concluded that the answer was "no." Finally, the Court rejected respondent's arguments that the tax exemption was tantamount to a direct subsidy of those non-profit corporations that served primarily Maine residents and that Maine had been a market participant acting merely as a purchaser of the charitable services provided by such corporations. Both Justice Scalia (joined by Chief Justice Rehnquist, Justice Thomas, and Justice Ginsberg) and Justice Thomas (joined by Chief Justice Rehnquist and Justice Scalia) filed vigorous dissents.

    Cases interpreting the limits of state powers to tax and interfere with interstate commerce are important to manufacturers around the country. They can be important factors in determining where to locate facilities, but can also restrict the ability of out-of-state companies to fully compete both in the state and with international competitors.

     

    General Motors Corp. v. Tracy   (U.S. Supreme Court)

    Taxation of Interstate Commerce

    General Motors challenged an Ohio sales and use tax which applied generally to purchases of natural gas, but exempted purchases when they were made from a "natural gas company" defined by the Ohio Supreme Court as limited to local public utilities (also known as "local distribution companies," or LDCs). GM, however, purchased its supplies of natural gas from out-of-state natural gas marketers, which are not considered "natural gas companies" under Ohio law; therefore, GM's purchases were not exempted from the tax. The Ohio Supreme Court rejected GM's Commerce Clause and Equal Protection Clause challenges to the tax. The Supreme Court affirmed.

    Justice Souter, writing for the majority on 2/18/97, reasoned that Ohio's tax scheme worked no unconstitutional discrimination between in state LDCs and natural gas marketers, because the two types of entities are not "similarly situated." LDCs, the Court explained, principally sell "bundled gas" (gas plus transportation services) to a "captive market" composed principally of residential consumers and small companies. By contrast, gas marketers sell "unbundled gas" (gas without transportation services), principally to a "noncaptive market" of larger consumers like GM, who themselves arrange for the necessary transportation services. Even though LDCs do compete with marketers in the so-called "noncaptive market," the Court nonetheless held that it was appropriate, and nondiscriminatory, for Ohio generally to exempt purchases from LDCs from tax, so to maintain the LDCs' customer base, and therefore to preserve the LDCs' ability to serve the "captive market."

    Justice Stevens dissented on the ground that the clear favoritism of LDC purchases in the "noncaptive" (competitive) market could not be sustained under the Commerce Clause.

    The NAM filed an amicus brief in support of GM.

     


    Environmental --



    American Forest & Paper Ass'n v. EPA   (N.D. Cal.)

    Water Discharge Permits

    The NAM and other associations filed challenges to purported state authority under the National Pollution Discharge Elimination System (NPDES) to implement Endangered Species Act requirements. Filed 5/20 and 5/27/97. This case could affect all discharge permits as EPA tries to imy pose Endangered Species Act requirements through NPDES programs under the Clean Water Act (CWA). On 3/30/98, the Fifth Circuit ruled that EPA cannot condition CWA permit decision on Endangered Species Act consultations. The Tenth Circuit case was dismissed on 9/1/98 with a decision holding that the plaintiffs did not have standing.

    A 1996 EPA rule tried to delegate CWA enforcement and permitting decisions to Louisiana, but added new requirements that the state consult with the U.S. Fish and Wildlife Service and National Marine Fisheries about the possible effects of discharges on certain species. The 5th Circuit ruled that the CWA does not allow such consideration of factors outside the nine concrete criteria specified for the issuance of a permit.

    The Court also ruled that an association need not have commented on a proposed rule during the rulemaking process to bring suit after the rule is issued. It also found that the association had "injury in fact," not speculative injury, because its members must comply with the provisions as their permits come up for renewal every five years, and because the EPA has already identified the circumstances under which it will veto a proposed permit.

     

    Bennett v. Spear   (U.S. Supreme Court)

    Can only environmentalists bring citizen suits?

    In this case, the Court unanimously held that the petitioners had standing to seek judicial review of a "Biological Opinion" issued by the Fish and Wildlife Service, under the citizen-suit provision of the Endangered Species Act (ESA) and the Administrative Procedure Act (APA).

    The Biological Opinion concluded that the long-term operation of the Klamath Project, a series of lakes, rivers, dams, and irrigation canals administered by the Bureau of Reclamation, was likely to jeopardize the continued existence of two endangered species of fish. The Opinion recommended that the Bureau protect these fish by maintaining minimum water levels on certain bodies of water. The Bureau agreed to follow this suggestion. Petitioners, who have competing economic and other interests in Klamath Project water, alleged that the Service's determination that the endangered fish were in jeopardy violated Section 7 of the ESA, that the minimum water level recommendation violated Section 4 of the ESA, and that each action was arbitrary and capricious under the APA. They further claimed that they had standing to bring these claims because the minimum water levels threatened to reduce their irrigation water supply.

    The Court first considered whether petitioners' standing under the ESA's citizen-suit provision was to be evaluated under the prudential principle that a "grievance must arguably fall within a zone of interests protected or regulated by the statutory provision . . . invoked in the suit." The Ninth Circuit had ruled that the zone-of-interests standard applied to claims brought under this provision and that the petitioners' claims fell outside the zone of interests protected by the ESA. The Supreme Court, however, held that the breadth of this citizen-suit provision (authorizing "any person" to "commence[e] a civil suit") indicated that Congress had determined that the zone of interests test was not to be the measure of standing under the ESA.

    The Court also concluded that the petitioners had standing under Article III. The Court held that at the pleading stage, an alleged reduction in irrigation water supply constituted an "injury-in-fact." Under the "relatively modest" causation standard in place at this stage of litigation, the Court further found that this injury was "fairly traceable" to the issance of the Biological Opinion and was likely to be "redressed" if the Opinion was set aside. The Court noted that judicial review of the petitioners' claims was authorized under two different federal statutes: while the petitioners' Section 4 claim was reviewable under the citizen-suit provision contained in the ES, their Section 7 claim was reviewable only under the APA.

     

    United States v. Hoechst Celanese Corp.   (4th Circuit)

    Court deference to EPA enforcement decisions

    This case involves an enforcement action for alleged violations of the federal regulations pertaining to equipment in facilities that produce or use benzene. The NAM filed a brief supporting arguments concerning the government's refusal to comply with Administrative Procedures Act and Clear Air Act provisions mandating that prior notice be given of agency regulatory requirements, thus, attempting to make a significant change in the meaning of a rule without first going through notice and comment. The Court deferred to EPA’s interpretation of "use," and found HCC had notice as of 1989. The case affects companies that recycle benzene at their facilities. Decided 10/27/97. This case was appealed to the Supreme Court, but the Court declined to review it.

     

    American Forest & Paper Ass'n v. EPA   (5th Circuit)

    Water Discharge Permits

    The NAM and other associations filed challenges to purported state authority under the National Pollution Discharge Elimination System (NPDES) to implement Endangered Species Act requirements. Filed 5/20 and 5/27/97. This case could affect all discharge permits as EPA tries to impose Endangered Species Act requirements through NPDES programs under the Clean Water Act (CWA). On 3/30/98, the Fifth Circuit ruled that EPA cannot condition CWA permit decision on Endangered Species Act consultations. The Tenth Circuit case was dismissed on 9/1/98 with a decision holding that the plaintiffs did not have standing.

    A 1996 EPA rule tried to delegate CWA enforcement and permitting decisions to Louisiana, but added new requirements that the state consult with the U.S. Fish and Wildlife Service and National Marine Fisheries about the possible effects of discharges on certain species. The 5th Circuit ruled that the CWA does not allow such consideration of factors outside the nine concrete criteria specified for the issuance of a permit.

    The Court also ruled that an association need not have commented on a proposed rule during the rulemaking process to bring suit after the rule is issued. It also found that the association had "injury in fact," not speculative injury, because its members must comply with the provisions as their permits come up for renewal every five years, and because the EPA has already identified the circumstances under which it will veto a proposed permit.

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    EPA Credible Evidence Rule

    (Also known as Clean Air Implementation Project vs. EPA). The NAM filed this petition 4/18/97 to review a final EPA rule relating to credible evidence. The case affects manufacturers subject to new source performance standards (NSPS) and national emission standards for hazardous air pollutants (NESHAPs) under the Clean Air Act. The case was dismissed on 8/14/98 as unripe.

     

    National Association of Manufacturers v. U.S. Dep't of the Interior   (D.C. Circuit)

    Natural Resource Damage Assessments

    The NAM petitioned the D.C. Circuit to review final regulations establishing simplified "Type A" procedures for natural resource damage assessments under the Comprehensive Environmental Response, Compensation and Liability Act. The procedures rely on complex computer modeling with very little site-specific input, and create a rebuttable presumption against potentially responsible parties, including many NAM members. The NAM argued that the regulations were invalid because (1) liability might be imposed without a showing of actual injury, (2) an assessment includes restoration without considering feasibility or cost-effectiveness, and (3) a restoration model assumes losses that are speculative and hypothetical. The D.C. Circuit court on 1/16/98 rejected the NAM arguments, concluding that the Department of the Interior's interpretation of the relevant CERCLA provisions were entitled to deference and that its damage submodels "suffice."

     

    United States v. Bestfoods (CPC International, Inc.)   (U.S. District Court for the District of Columbia)

    CERCLA liability for parent corporation is limited

    Vacating the decision of the Sixth Circuit, a unanimous Supreme Court specified when a parent corporation may be held liable, under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), as an operator of a polluting facility that is owned and operated by its subsidiary. The mere fact that the parent corporation actively participated in and exercised control over the operations of the subsidiary will not, in itself, make the parent corporation derivatively liable unless, under applicable law (which the Court declined to identify), the subsidiary has been controlled to such an extent that it should not be regarded as a separate entity (a doctrine known as "piercing the corporate veil"). However, if the parent corporation actively participated in and exercised control over the operations of the facility itself, then it may be held directly liable as an operator of the facility.

    The NAM filed an amicus brief 2/20/98 arguing that state corporate law clearly limits the liability of shareholders of corporations (including shareholders that are themselves corporations), even when they actively participate in running the corporation. The brief argued that the courts should not create a new body of federal common law in place of the well-established body of state common law in this area.

     

    American Trucking Associations, Inc. v. EPA   (D.C. Circuit)

    EPA air quality standards for ozone and particulate matter

    (consolidated with American Petroleum Institute & NAM v. EPA) -- The NAM filed a brief in March of 1998 calling on the court to review the final rules on the EPA's new air quality standards for ozone and particulate matter, as well as a final EPA rule relating to the "federal reference method" for National Ambient Air Quality Standards. On May 14, 1999, the U.S. Court of Appeals for the District of Columbia rejected these rules implemented by the EPA concerning ozone pollution. This ruling, a victory for manufacturers, was subsequently appealed to the Supreme Court, which reversed in 2001.

    The D.C. Circuit's ruling temporarily stopped the EPA from assuming arbitrary authority. Manufacturers have struggled with EPA standards that are unrealistically strict and not reasonably related to clear health benefits. The ruling required EPA to say why the ozone pollution levels it has set are reasonable in term of health effects

    The Court denied in part and granted in part the EPA’s petition for rehearing on Oct. 28, 1999.

    The Government petitioned for Supreme Court review, on 1/26/99. The EPA appealed three issues, including whether:

    1) the rulemaking process used by the EPA in revising the ozone and PM NAAQS "effects an unconstitutional delegation of authority";

    2) the D.C. Circuit erred in assuming it had authority to review as a final agency action EPA’s "preliminary preamble statements on the scope of the agency’s authority to implement the revised ‘eight-hour’ ozone NAAQS;" and

    3) subpart 2 of the Clean Air Act (which sets requirements for areas to come into attainment with the one-hour ozone standard) restricts EPA’s authority under other provisions "to implement a new and more protective ozone NAAQS" until the one-hour standard is attained.

    EPA did not appeal the D.C. Circuit’s finding that the Agency must consider all health effects, both negative and positive, in setting a standard.

    Background: When EPA issued its new air rule for ozone, the agency ignored the advice of its own scientific advisory panel and sidestepped a 1996 law designed to mitigate the costs of major rules on small businesses. These issues are the driving force behind an NAM lawsuit challenging EPA’s new ozone air quality standard. Two NAM briefs filed 3/23/98 ask the Court of Appeals to throw out the rule.

    The NAM briefs noted that EPA’s new standard lacks the scientific support called for under the Clean Air Act and could actually lower health protection. The new standard:

  • Supplants congressional intent with an unsubstantiated policy decision made by the EPA Administrator;
  • and
  • Ignores EPA’s own Clean Air Scientific Advisory Committee, which found no discernable health benefit in moving to a different standard.
  • Just as bad, EPA ignored its statutory duty to comply with the Small Business Regulatory Enforcement Fairness Act (P.L. 104-121), which requires agencies to study the potential impacts of major rules on small entities and find ways to mitigate their costs.

     

    Harmon Industries, Inc. v. Browner   (8th Circuit)

    EPA enforcement rights under RCRA

    On 9/16/99 the Eighth Circuit ruled that the Environmental Protection Agency can not bring its own enforcement action under the Resource Conservation and Recovery Act to secure additional penalties or impose other burdens on companies that generate wastes deemed hazardous under the Act. States currently administer their own RCRA-authorized programs that include settlements of violations. The court agreed with an NAM amicus brief asserting that the power of EPA to "overfile," or simultaneously enforce RCRA against companies being prosecuted under state RCRA programs would subject manufacturers to duplicative or inconsistent corrective measures and additional penalties. According to the court, the state enforcement authority is in lieu of and supplants the federal program.

    This is an important victory for manufacturers that have been subjected to multiple enforcement actions by the EPA and affected states.

     

    United States v. Smithfield Foods, Inc.   (4th Circuit)

    NPDES requirements

    In this case, the NAM supported Smithfield Foods seeking reversal of an EPA civil enforcement suit for violation of its National Pollutant Discharge Elimination System (NPDES) permit. Smithfield had an agreement with the Virginia State Water Control Board to meet new permit requirements, but the EPA sought to impose more than $12 million in fines despite an agreement Smithfield had reached with Virginia to connect to the local waste water treatment system.

    The Fourth Circuit ruled 9/14/99 that because Virginia had not formally modified the permit to allow certain discharges, its written statements that the phosphorous standard would not be enforced were irrelevant. It ruled that imposing both daily and monthly fines were not double counting. It also refused to allow Smithfield to offset its liability with payments being made to tie in to a municipal waste treatment facility.

    The bottom line: letters from state officials, without changes in the actual permits, will not eliminate federal EPA enforcement of NPDES requirements, and EPA can impose strict financial requirements.

     

    Arizona Public Service Co. v. EPA   (D.C. Circuit)

    Indian tribal authority under the Clean Air Act

    The NAM filed suit against the EPA 4/10/98 arguing that an EPA rule improperly granted Indian tribes authority to act under the Clean Air Act. On 5/5/00, the D.C. Circuit upheld EPA’s 2/2/98 Final Air Quality Planning and Management Rule for Indian Tribes ("Rule"). In April, 2001, the Supreme Court declined to hear the appeal.

    The Rule provides that the EPA will delegate to any federally recognized Indian Tribe, upon receipt of a properly completed tribal application, authority to implement federal Clean Air Act ("CAA") programs over lands located within the exterior boundaries of what EPA refers to as "Indian Country", as that term relates to a tribe. "Indian Country" thus includes all lands within the boundaries of a traditionally federally recognized Indian reservation (including privately owned, non-Indian lands), lands within the boundaries of off-reservation areas held in trust for a tribe by the federal government, and other lands over which a tribe can demonstrate that it has jurisdiction. Under the Rule, off-reservation "trust lands" include those lands purchased or acquired by a tribe or tribal member and placed into trust--including lands acquired for commercial and gaming casino purposes. The EPA’s definition of Indian Country conflicts with the far more restrictive definition of "reservation" used by Congress, the federal courts and even the EPA in other federal laws, cases and regulations governing tribal affairs.

    Pursuant to the Rule, tribes may also "redesignate", as "Class I" areas for air quality management purposes, lands located outside of traditional reservation boundaries. Under current federal law, only lands within such boundaries may be redesignated as Class I. Redesignation to Class I status invokes the most stringent federal air quality protection standards relating to the siting of new or modified manufacturing facilities in areas sometimes located several hundred miles away from the Class I area.

    Other features of the Rule include the elimination of the Title V requirement for review in state court of adverse tribal operating permit decisions and permitting delays and the insulation of tribes from citizen suits for asserted violations of the law. Moreover, upon approval of a tribal authority application under the Rule, state air permitting agencies will be stripped of their own authority to issue or renew installation, operation and other air permits to industrial sources located or seeking to locate within Indian Country, and existing state air permits issued to such sources will be invalidated.

    Prior to issuance of the Rule, tribes, like states, were required to affirmatively demonstrate the public health, welfare and environmental bases for their assertion of environmental authority over lands that are clearly otherwise within their jurisdiction. That is no longer the case. The Court’s decision now allows the EPA (an administrative agency), in conjunction with tribes, to redraw state boundaries for regulatory purposes and to dispossess state permit holders of substantial rights. The EPA asserts that other federal environmental laws similarly allow EPA to delegate to a tribe authority to regulate other environmental media within "Indian Country".

    The Petitioners in the case included, among others, the State of Michigan, several Arizona and New Mexico utility companies, the National Association of Manufacturers, the American Forest and Paper Association, the Michigan Chemical Council, the Rhinelander Area Chamber of Commerce and the Timber Producers Association of Michigan and Wisconsin, Inc. It is their position, among others, that decisions to redraw state boundaries for regulatory purposes must be made within the framework of established federal law and the United States Constitution, with full public participation, and not at the whim of federal administrative agencies. For more information regarding the Rule, contact Brian J. Renaud of Howard & Howard Attorneys, P.C., at (248) 723-0356, counsel in the case for NAM, AF&PA, the Michigan Chemical Council, the Rhinelander Area Chamber of Commerce, Inc. and the Timber Producers Association of Michigan and Wisconsin, Inc. Case decided on 5/5/00.

     

    Friends of the Earth v. Laidlaw Environmental Services, Inc.   (U.S. Supreme Court)

    Ability of individuals bringing citizen-suits to seek civil penalties

    Friends of the Earth brought an enforcement action against Laidlaw pursuant to the citizen-suit provision of the Federal Water Pollution Control Act (Clean Water Act). They alleged ongoing violations by Laidlaw of certain permits and sought monetary penalties, declaratory judgment, injunctive relief, attorneys’ fees and costs.

    The district court found that Laidlaw had committed several permit violations and imposed a penalty of $405,800. The court did, however, deny plaintiffs’ request for declaratory judgment and injunctive relief because Laidlaw’s violations had not harmed the environment and Laidlaw had been in substantial compliance for several years at the time the court issued its final order.

    The plaintiffs appealed the size of the penalty to the Fourth Circuit Court of Appeals, but did not challenge the denial of injunctive relief. Laidlaw argued that plaintiffs lacked standing. Applying Steel Co. v. Citizens for a Better Environment, the court concluded that "this action is moot because the only remedy currently available to Plaintiffs—civil penalties payable to the government—would not redress any injury Plaintiffs have suffered." It vacated the order of the district court and remanded the case with instructions to dismiss the action.

    On January 12, 2000, the Supreme Court reversed by a vote of 7 to 2. It held that the case is not moot even where the company has come into compliance with its permit, since it was in violation at the time of the complaint, and its violations could continue into the future if undeterred. It sent the case back to the lower courts to determine whether there was any chance that the company might still violate its permit in the future. The ruling is a step back from the Steel Company decision, where it found that citizen suits could not be filed for wholly past permit violations.

     

    Gulf Metals Inds., Inc. v. Delta Lloyds Ins. Co.   (Texas Supreme Court)

    Insurance policy pollution coverage

    The NAM filed an amicus brief with Halliburton Co. and Dresser Industries, Inc. on March 13, 2000 in a case involving how a standard insurance policy will be interpreted with respect to pollution. States have developed different interpretations of the standard language, and the NAM supports an interpretation that would allow coverage for unexpected and unintended discharges or emissions, even though they may not occur quickly. The Texas Supreme Court declined to hear this appeal on April 13.

     

    Pacific Lumber Co. v. Marbled Murrelet   (U.S. Supreme Court)

    Attorney’s fees under Endangered Species Act

    The NAM filed an amicus brief supporting a request for attorneys' fees where the lumber company won a citizen suit brought against it under the Endangered Species Act. (S. Ct., cert. denied 1/21/00).

     

    United States v. van Loben Sels   (9th Circuit)

    Criminal liability for waste water

    On February 28, 2000, the NAM filed an amicus brief opposing the criminal prosecution of a manufacturing CEO for the company's pollution release into a local waste treatment plant. The Ninth Circuit denied the petition for rehearing on 4/14/00. The issue involved whether a public sewer system should be considered part of the "environment" for purposes of the sentencing guidelines.

     

    Piney Run Preservation Association v. County Commissioners   (4th Circuit)

    Discharge permit provisions

    The NAM applauded the Fourth Circuit's 10/10/01 ruling in this case giving public and private permit holders under the Clean Water Act a margin of protection for discharges that would be reasonably contemplated in their permits. The Court held that there is a "protective shield" within which limited deviations in the properties of the permitted discharges are allowed, as long as the permit holder complies with the terms of the permit and the challenged discharges are within the "reasonable contemplation" of the permitting authority at the time the permit was granted.

    The NAM had filed an industry amicus brief with the Fourth Circuit in April on behalf of the defendants in the case. Plaintiffs sued when it was learned that a county-run wastewater treatment facility was discharging warm water into a local stream, even though its environmental permit did not expressly allow for heated discharges.

    NAM general counsel Jan Amundson said, "Although this ruling would suggest that future permit applicants need to be diligent and comprehensive with specific language during the application process, it should also send a signal to those contemplating nit-picking nuisance suits. The courts may be losing their patience for them."

     

    South Camden Citizens in Action v. NJ Dept. of Environmental Protection   (3rd Circuit)

    Disparate impact of environmental permits

    The NAM filed an amicus brief with the American Chemistry Council and the Chemical Industry of New Jersey on 6/29/01 opposing a citizen suit alleging that state environmental permits discriminate against racial or ethnic groups. This case involves the proposed development of a "brownfield," an area of abandoned, inactive or underutilized industrial sites that are located in urban areas that are disproportionately populated by minority and/or low-income citizens. Development of these sites attracts new industrial facilities, providing net benefits to their communities.

    The Third Circuit had wisely granted a stay of the district court’s decision, thus allowing St. Lawrence Cement Co. to start operations and remain open until a Merits Panel could hear the case. The district court 5/10 ignored the U.S. Supreme Court’s 4/24 Sandoval decision, which said private individuals may not sue states under Civil Right Act Title VI over unintended consequences of state agency decisions, including permits for manufacturing facilities.

    The NAM's brief argued that EPA's "disparate impact" regulations cannot be enforced by private plaintiffs under 42 U.S.C. § 1983, nor can they be enforced by private plaintiffs under section 602 of Title VI of the Civil Rights Act of 1964. Such claims are "so vague and amorphous -- so subjective and standardless-- that they strain judicial competence." The NAM brief said the district court ruling "opens up state environmental permits to collateral attacks in federal court . . . based on criteria that are not clearly delineated, understood or agreed upon." In addition, it "will result in federal courts throughout the nation sitting as local zoning boards reviewing environmental permit decisions."

    On 12/17/01, the Third Circuit agreed, ruling that there is no private right of action under Section 602 of the Civil Rights Act to enforce the "disparate impact" rules of the EPA.

     

    Whitman v. American Trucking Associations, Inc.   (U.S. Supreme Court)

    Clean Air Act regulations

    On 2/27/01, the Supreme Court rejected two main arguments in a challenge by the NAM and other industry groups of the Environmental Protection Agency’s power to set national air-quality standards under the federal Clean Air Act.

    EPA concedes that these basic air-quality standards drive regulatory and compliance expenditures that run into the hundreds of billions of dollars per year. Nevertheless, the legal test applied by EPA, and approved by the Court, permits EPA to ignore the tools that have proven most effective in shaping and implementing effective regulatory programs.

    These tools include, among others, consideration of indirect as well as direct effects; identification of significant risks of public heath; assessment of the costs and benefits of alternative margins of safety in preventing health risks; and a keen awareness of the practical and real-world effects of regulatory choices. These very tools are now at work shaping the regulatory policies of other federal agencies, including the Occupational Safety and Health Administration, and there is no reason that they could not be effectively applied to EPA as well.

    The Supreme Court ruled that costs may not be taken into consideration when EPA sets clean air quality standards. It also ruled that the Clean Air Act is not an unconstitutional delegation of legislative power from Congress, since it includes language that "fits comfortably within the scope of discretion" previously permitted under prior Supreme Court precedents.

    The Court did, however, remand the case for the lower court and the EPA to determine other issues and to reconsider how to reconcile conflicting interpretations of the implementation schedule for compliance. The NAM will actively pursue its remaining complaints about the ozone and particulate matter regulations.

     

    American Trucking Associations, Inc. v. EPA   (D.C. Circuit)

    Ozone and particulate matter regulation

    This litigation by the NAM and other business groups against the EPA went all the way to the U.S. Supreme Court in 2001 (see Whitman v. American Trucking Associations, Inc.) . The Court remanded it to the D.C. Circuit for further proceedings regarding the validity of EPA's standard for ozone and particulate matter. On 3/26/02, the D.C. Circuit found that the EPA's 1997 NAAQS rules for PM2.5 and ozone are neither arbitrary nor capricious. The Court denied petitions for review except to the extent the Supreme Court’s 2001 decision and the D.C .Circuit’s 1999 decisions require further action by the EPA.

    The D.C. Circuit began by pointing out that its earlier decisions addressed only whether the Clean Air Act (or the EPA’s reading of the CAA) adequately limits the EPA’s discretion. However, the 3/26 decision involves whether the EPA reasonably exercised its discretion under the CAA. The Court found that the agency was not arbitrary and capricious in promulgating either rule.

    With respect to PM2.5, the Court said that the EPA need not “identify perfectly safe levels of pollutants” and need not “definitively identify pollutant levels below which risks to public health are negligible.” Importantly, the Court also rejected environmental groups’ challenges to the PM2.5 standard as insufficiently stringent.

    On ozone, the Court found that the EPA had a basis for its conclusion that the existing one-hour standard was inadequate. Based on the rulemaking docket, the Court concluded that the EPA’s choice of the 0.08 parts per million level was not arbitrary and capricious. Earlier holdings that the 8-hour ozone implementation policy is unlawful and that the EPA must consider evidence of ground-level ozone’s beneficial effects are left undisturbed by this ruling.

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Interim Guidance on federally permitted releases suspended

    The NAM and 12 other organizations sued the EPA on March 17, 2000. Its petition for review challenged the EPA's interim guidance on the definition of federally permitted releases for air emissions. As a result of the suit, the EPA suspended the Interim Guidance on 5/19/00 in a motion to the court.

    On 4/17/02 the Environmental Protection Agency (EPA) published its "Guidance on the CERCLA Section 101(10)(H) Federally Permitted Release Definition for Certain Air Emissions." This guidance supersedes the December 17, 1999 Interim Guidance, which is now deemed to be withdrawn. The NAM praised the new guidance in a press release.

    The new guidance clarifies the discussion of volatile organic compounds (VOCs) and particulate matter (PM) limits and controls and when releases of hazardous substances which are constituents of these pollutants could qualify for the FPR exemption under CERCLA [Comprehensive Environmental Response, Compensation, and Liability Act] and EPCRA [Emergency Planning and Community Right-to-Know Act]. The Guidance also adds a section addressing nitrogen oxide (NO) and nitrogen dioxide (NO2). The guidance also discusses certain releases from minor sources and announces a forthcoming guidance document that addresses grandfathered sources.

    The lawsuit was dismissed voluntarily.

     

    National Electrical Manufacturers Association v. Sorrell   (U.S. Supreme Court)

    Vermont light bulb labeling law

    The NAM joined with the Electronic Industries Alliance in an amicus brief 11/20/01 urging the Second Circuit to rehear a case in which Vermont's light-bulb labeling law was upheld. Our concern is that state laws must be narrowly tailored not to unduly interfere with the free flow of goods nationwide, and Vermont's law relating to light bulbs containing mercury could seriously disrupt the distribution system of these products. The court denied the petition for rehearing on 1/8/02.

    The NAM filed an amicus brief supporting Supreme Court review of this issue, since there are many situations where states may enact laws that purport to affect both in-state and interstate commerce equally, but that as a practical matter make it extremely expensive for manufacturers and distributors to comply with conflicting, or simply different, labeling requirements at the end-user level. The Supreme Court declined to hear this appeal on 6/10/02.

     

    New York v. Federal Energy Regulatory Commission   (U.S. Supreme Court)

    FERC regulation of access to electricity

    The Supreme Court held 3/4/02 that the Federal Energy Regulatory Commission (FERC) may require that a public utility transmit competitors' electricity over its lines on the same terms that it applies to its own energy transmissions if the utility has unbundled the cost of transmission from the cost of energy when billing its retail customers. The Court also held that FERC's decision not to impose the same requirement on utilities that continue to offer only bundled retail sales was a permissible policy choice. This case is important to all businesses engaged in the transmission or sale of energy.

     

    United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority   (U.S. Supreme Court)

    Waste flow-control regulation

    The NAM supported an appeal to the Supreme Court of an adverse ruling by the Second Circuit that would allow a municipality, country or state to impose flow-control restrictions on the interstate transportation of solid waste. Flow-control laws allow local jurisdictions to prop up their disposal facilities by preventing waste generated in the locality from being taken anywhere else. The 1994 Supreme Court decision in the Carbone case ruled that a town's law flow-control ordinance discriminated against interstate commerce. The Second Circuit in this case provided a blueprint for local governments to avoid the Carbone decision by vesting part of the ownership of private waste disposal facilities in a public entity. The NAM filed a joint brief arguing that this ruling will seriously disrupt the interstate market in solid waste disposal services, including recyclables, and is based on a myopic focus on who owns the facility. On 1/7/02, the Supreme Court declined to review this case.

     

    United States v. Power Engineering Company   (10th Circuit)

    Overfiling

    The NAM supported a challenge to a district court ruling that allowed the EPA to "overfile," or bring a separate enforcement action under the Resource Conservation and Recovery Act (RCRA) against a company already being prosecuted by the Colorado Dept. of Public Health and the Environment. Other courts of appeals have taken the NAM’s position that such overfiling is illegal. The NAM's brief was filed on 9/17/01 with the American Iron and Steel Institute, the American Petroleum Institute, the Chamber of Commerce of the United States, the Environmental Federal of Oklahoma, the Michigan Manufacturers Association and the Western States Petroleum Association. On 9/4/02, the court affirmed, ruling that EPA's interpretation of RCRA is "not unreasonable."

     

    Bonnette v. Conoco, Inc.   (Louisiana Supreme Court)

    Speculative damages

    The Louisiana Supreme Court emitted a glimmer of sanity 1/28/03 when it overturned lower court rulings that made a company liable for speculative injuries and unproven damages from materials in soil taken from company property. We challenged the use of the “linear no-threshold” model of causation in tort litigation. This model essentially states that any level of exposure to a toxic agent is sufficient to cause injury.

    This is an important asbestos contamination case because the trial court and the appellate court awarded damages without any actual injuries: the claims arose from a slightly increased chance of contracting cancer and the fear of getting cancer, along with property damage. 143 plaintiffs filed suit, and then sought class action status. The trial court awarded from about $18,000 to $48,000 to individuals in 4 families.

    In its ruling, the Louisiana Supreme Court rejected 6 to 1 the trial court's awards for a "slightly" increased risk of contracting an asbestos-related disease, emotional distress and punitive damages. It allowed an award for property damage.

    The NAM supports the bedrock principle that proof that the defendant’s behavior actually caused harm should be a prerequisite to redress in our tort system lest our courts become flooded with lawyer-driven claims brought on behalf of persons who merely fear, but do not yet have and may never have, an injury.

     

    National Services Industries, Inc. v. New York   (2nd Circuit)

    Successor liability under CERCLA

    The NAM, Allied Waste Industries, Inc. and the National Solid Wastes Management Association filed an amicus brief 2/7/03 urging the court to reverse a district court ruling that holds an innocent business asset purchaser liable under CERCLA as a “successor” for Superfund damages caused by the selling company. Brief. (CERCLA is the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, which governs the clean-up of Superfund sites.)

    On 12/17/03, the court ruled, as most other federal courts have, that CERCLA does not include the "substantial continuity" doctrine. Courts must look to traditional common law rules of successor liability, instead of more liberal rules designed to expand the net of CERCLA liability. The court agreed that imposing an onerous "substantial continuity" standard would deter economically beneficial transactions and impose unpredictable liability of purchasers, depressing the price they would be willing to pay for a company's assets.

    This is a big win for NSI and other companies that want to buy the assets of other companies without assuming unknown Superfund liabilities. The case was sent back to the trial court for further proceedings, but the ruling overturned a judgment of $12,449,479.51 against NSI.

     

    United States v. Alcan Aluminum Corp.   (2nd Circuit)

    Joint CERCLA liability

    The NAM filed an amicus brief 6/5/01 with other organizations challenging a district court ruling that Alcan has joint and several liability under CERCLA for processing waste that is commingled with other wastes, without regard to its benign nature. The brief also argued that CERCLA should not be applied retroactively.

    In January, the Second Circuit ruled that Alcan could not avoid joint and several liability because its waste was not merely at background levels (since it contained PCBs that are not naturally occurring), and that the harmed caused could not be separated from the overall damage at the cleanup site. The court also ruled that CERCLA may be applied retroactively. The decision makes it harder for companies that contribute only small amounts of materials to a hazardous waste cleanup site to limit their liability for a much larger share of the cleanup costs.

     

    Alaska, Department of Environmental Conservation v. EPA   (U.S. Supreme Court)

    EPA authority over state CAA permitting

    The Supreme Court held 1/21/04, in a 5-4 decision, that the Environmental Protection Agency (“EPA”) may override a state’s exercise of authority under Section 169(3) of the Clean Air Act (“CAA”), 42 U.S.C. § 7479(3). Under the CAA, a new facility in an “attainment,” or already-clean, area must use the “best available control technology” (“BACT”) to control the emission of certain regulated pollutants. Section 169(3) provides that a “permitting authority” (ordinarily a state environmental agency) may determine the BACT for a proposed facility in an attainment area on a case-by-case basis taking into account several enumerated factors. The Supreme Court held that the BACT requirement constrains a state’s exercise of discretion under Section 169(3). It further held that the EPA had authority, under Sections 113(a)(5) and 167 of the CAA, to verify whether a state had complied with the BACT requirement and issue a stop-construction order if a state’s BACT selection is unreasonable. This case is important to any business engaging in activities that implicate the CAA or other federal statutes delegating authority to the States.

     

    Engine Manufacturers Association v. South Coast Air Quality Management District   (U.S. Supreme Court)

    Preemption of state motor vehicle emission requirements

    The Supreme Court held 4/27/04 that Section 209(a) of the Clean Air Act, 42 U.S.C. § 7543(a), preempts California air-quality-management district regulations that require certain motor vehicle fleet operators to purchase vehicles that the State has classified as “low emission” or that operate on an alternative fuel. Section 209(a) provides that no “State or political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines covered by this part.” The Court rejected arguments that the word “standard” in Section 209(a) reaches only production mandates imposed on manufacturers, and does not encompass purchase restrictions. The Court held that this argument was inconsistent with the plain meaning of “standard” and would create a nonsensical regulatory regime in which a manufacturer could not sell federally approved vehicles because state law would abrogate a purchaser’s right to buy them. The outcome of this case is important to the entire transportation industry.

    The NAM and 7 other business organizations filed an amicus brief 8/29/03 arguing that the fleet rules conflict with the Clean Air Act and are preempted.

     

    Aviall Services, Inc. v. Cooper Industries, Inc.   (U.S. Supreme Court)

    Voluntary cleanup

    The Supreme Court held 12/13/04 that a private party who has not been sued under Section 106 or 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. §§ 9606 or 9607, may not obtain contribution under CERCLA Section 113(f)(1), 42 U.S.C. § 9613(f)(1), to recover amounts spent voluntarily remediating contaminated properties. The Court reasoned that Section 113(f)(1) limits a private party to seeking contribution “during or following any civil action” and that reading this provision to allow for contribution in the absence of a civil action to determine liability would render this limitation superfluous. Justice Ginsburg, joined by Justice Stevens, dissented on the ground that Section 107, which provides that persons responsible for cleanup costs under CERCLA “shall be liable for . . . necessary costs of response incurred by any other person,” should be read to create an implied right of action for contribution which is not limited by Section 113(f)(1) .

    This case is important for any business that owns properties containing hazardous substances, or that has sold properties in the past to companies that might voluntarily undertake remediation.

    Decision below: 312 F.3d 677 (5th Cir. 2002) (en banc).

     

    Bates v. Dow Agrosciences LLC   (U.S. Supreme Court)

    FIFRA preemption

    The Supreme Court 4/27/05 clarified the extent of federal preemption stemming from the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. § 136. FIFRA, which regulates the use, sale and labeling of pesticides, provides that States "shall not impose or continue in effect any requirements for labeling of packaging in addition to or different from those required under this [Act]." The Court held that "[r]ules that require manufacturers to design reasonably safe products, to use due care in conducting appropriate testing of their products, to market products free of manufacturing defects, and to honor their express warranties or other contractual commitments plainly do not qualify as requirements for "labeling or packaging," even if those rules might induce manufacturers to alter product lables. Thus, FIFRA does not pre-empt a group of Texas peanut farmers' state law claims against a pesticide manufacturer for defective design, defective manufacture, negligent testing, and breach of express warranty. In contrast, the Court also concluded that "petitioners' fraud and negligent failure-to-warn claims are premised on common-law rules that qualify as "requirements for labeling or packaging." FIFRA therefore pre-empts those claims unless the corresponding requirements are equivalent to, and fully consistent with, FIFRA's labeling standards - a question to be resolved on remand. This decision is important to any business that is subject to FIFRA.

    Decision Below: 332 F.3d 323 (5th Cir. 2003).

     

    Massachusetts v. EPA   (D.C. Circuit)

    EPA upheld in not regulating greenhouse gases as a pollutant

    These cases were filed in 2003 by 12 states and various environmental and other organizations to force the Environmental Protection Agency to regulate greenhouse gases (carbon dioxide, methane, nitrous oxide and hydrofluorocarbons) from new motor vehicles as pollutants. The EPA and 10 other states opposed the suits, and the CO2 Litigation Group, of which the NAM is a member, intervened. On 7/15/05, the D.C. Circuit issued a splintered decision allowing the EPA to continue to decline to regulate greenhouse gases. Judge Randolph ruled that the EPA had discretion and a scientific justification not to regulate greenhouse gases, and, although Judge Sentelle refused to reach this issue, he ruled that the petitioners did not have standing to bring the case. Thus, the EPA’s decision stands. Judge Tatel dissented, arguing that the EPA does have the authority and has failed to give an adequate explanation for not regulating greenhouse gases. Whether the EPA is mandated by statute to regulate greenhouse gases is unresolved. It has declined to do so at this point. The NAM does not believe the EPA has this authority, nor is there sufficient evidence that emissions of greenhouse gases from domestic automobiles endanger public health or welfare.

     

    New York v. EPA   (D.C. Circuit)

    New Source Review regulations

    The NAM is one member of a coalition of associations known as the NSR Manufacturers Roundtable which filed a motion 1/15/03 to intervene in a suit brought by NY, CT, ME, MD, MA, NH, NJ, RI and VT against the EPA's final regulation governing the procedures for companies to install stringent emission controls at their facilities under the Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR) provisions of the Clean Air Act. These states challenged the legality of EPA's rule, and the NSR Manufacturers Roundtable intervened to insure that the court considers the views of manufacturers and the effects of the rule on industry. The Roundtable includes the Alliance of Automobile Mfrs., the American Chemistry Council, the American Forest & Paper Assn., the American Iron and Steel Institute, American Petroleum Institute, the Council of Industrial Boiler Owners, National Mining Assn., the National Petrochemical & Refiners Assn., the Portland Cement Assn. and the NAM.

    The NSR Manufacturers Roundtable’s first brief (filed 5/11/04) challenged EPA language in the rule’s preamble and argued that the statutory language, as well as the history of its enforcement, makes clear that the first step of the analysis of whether there is a change to an existing emissions unit at a stationary source is the requirement that the emitting capacity of the existing unit must be increased (i.e., that “new pollution” be created) by the change.

    An 8/30/04 brief supported the EPA’s methodology for determining whether annual emissions have significantly increased.

    The D.C. Circuit issued a mixed ruling on 6/24/05. It upheld some of the EPA’s decisions, vacated others, and rejected as not ripe industry’s challenge to the rule’s preamble language on the “actual-to-potential” methodology. The court’s main rulings are:

  • EPA may use past emissions and projected future actual emissions, rather than potential emissions, in measuring emissions increases;
  • EPA may use a 10-year lookback period in selecting the 2-year baseline period for measuring past actual emissions from sources other than utilities;
  • EPA may use a 5-year lookback period in certain circumstances for electric utilities;
  • EPA may abandon a provision authorizing states to use source-specific allowable emissions in measuring baseline emissions;
  • EPA may exclude increases due to unrelated demand growth from the measurement of projected future actual emissions;
  • EPA may implement the Plantwide Applicability Limitations (“PAL”) program;
  • EPA may not use the Clean Unit applicability test, which measures emissions increases by looking to whether “emissions limitations” have changed;
  • EPA may not exempt certain pollution control projects that decrease emissions of some pollutants but that cause collateral increases of others;
  • EPA may not waive recordkeeping requirements for sources making changes. EPA will have to justify or revise this waiver.
  •  

    United States v. Duke Energy Corp.   (4th Circuit)

    Permits for power plant repairs

    This case is about whether permits are required when power plant repairs are made to allow boilers to continue in service and operate for more hours than before the renovations. The EPA argued that these repairs were modifications that allowed the boilers to produce more emissions (albeit at the same rate per hour) than authorized by existing permits. Duke Energy argued that the definition of a modification that would necessitate a new permit includes only changes that increase the hourly emission rate, since that is the definition the EPA uses under its New Source Performance Standards (NSPS). The Fourth Circuit ruled 6/15/05 that the EPA cannot interpret the word “modification” two different ways when the statutes in which the word appears define it identically. Consequently, since the definition of modification under the NSPS only applies to changes that increase the hourly emission rate, no permit is required.

    This is a significant victory for any business that generates emissions regulated by the Clean Air Act. American industry would grind to a halt if it were required to scrutinize for potential permits thousands of renovation activities each year. For instance, if the activity is a necessary repair or replacement project, the result could be an extended shutdown of the facility until it could be undertaken.

    The NAM and other business organizations filed a brief 10/15/04 supporting this result. The joint brief argued that New Source Review permit requirements are only triggered when facilities are physically changed or modified to create an increase in emissions over the level approved in the original permit process.

    This case on appeal to the Supreme Court is Environmental Defense v. Duke Energy Corp.

     

    United States v. E.I. DuPont de Nemours and Co.   (3rd Circuit)

    EPA’s power to recover oversight costs at Superfund sites (en banc)

    The Environmental Protection Agency charges companies for remedial planning and remedial action monitoring costs that the EPA incurs, either themselves or through government contractors, while monitoring clean-up activities at Superfund hazardous waste sites. Since its 1993 Rohm and Haas decision, the U.S. Court of Appeals for the Third Circuit (covering Pennsylvania, New Jersey and Delaware) has not allowed such cost shifting from the EPA to manufacturers. That favorable ruling has now been overruled. It held that Congress conferred power on the EPA with an intelligible principle governing the exercise of such power, namely, that the remedial action be “not inconsistent” with the National Contingency Plan, which sets forth methods and criteria for determining the appropriate extent of removal, remedy and other measures. Other provisions also guide and constrain the EPA in its ability to impose oversight costs on responsible parties.

    The NAM joined with the American Chemistry Council, the American Petroleum Institute, the Chamber of Commerce, the Corporate Environmental Enforcement Council, the National Petrochemical and Refiners Association and the Superfund Settlements Project in an amicus brief 7/13/05 in support of DuPont. We argued that Congress never intended for EPA to finance its oversight activities by assessing the costs against those whom it regulates. Such a scheme must be authorized by a “clear statement” from Congress, particularly to avoid the many serious problems with the administration of the program. Our brief provided a detailed look at the history of (1) EPA performing more oversight than necessary, (2) EPA relying too heavily on contractors, (3) EPA not managing its contractors effectively, (4) EPA not negotiating effectively with its contractors, (5) contractors charging for excessive support costs, (6) and contractors having incentives to operate inefficiently.

    In addition, we warned that (1) EPA’s poor documentation and billing practices further reduce accountability, (2) the money collected is placed into special accounts with little accountability to Congress, and (3) an adverse ruling in this case could allow the EPA to assess similar costs under the Clean Air Act and the Clean Water Act. The EPA has been able to reduce its program support costs on an aggregate basis recently.

     

    Air-Conditioning, Heating & Refrigeration Institute v. Energy Resources Conservation and Development Commission   (U.S. Supreme Court)

    Preemption of California energy regulations

    The NAM and five other associations filed an amicus brief 10/14/05 supporting an appeal of a Ninth Circuit ruling that allows California to demand detailed information from manufacturers about energy efficiency.  We argue that the California regulations are preempted by the Energy Policy and Conservation Act of 1975, which sets energy and water-use efficiency standards for appliances and expressly preempts any state regulation that “provides at any time for the disclosure of information with respect to any measure of energy consumption or water use” that differ from federal requirements.  California argues that the law only applies to disclosure of information to consumers and not to the state government itself.  Our brief argues that there is a split in the circuit courts, that there should be no presumption against preemption here, and that the issue is an important and recurring one appropriate for the Supreme Court to resolve.

    On 6/19/06, the Court declined to hear this appeal.

     

    American Lung Ass'n v. EPA   (D.C. Circuit)

    8-hour ozone Phase I Implementation Rule

    The NAM, the American Chemistry Council, the American Forest and Paper Association and the American Petroleum Institute filed joint motions to intervene to help defend the EPA against two suits brought by the ALA and 3 environmental groups over some of its Clean Air Act rules. The rules relate to issues that were reconsidered by the EPA as a result of earlier litigation, and are entitled, “Nonattainment Major New Source Review Implementation Under 8-Hour Ozone National Ambient Air Quality Standard: Reconsideration,” and “Implementation of the 8-Hour Ozone National Ambient Air Quality Standard – Phase 1: Reconsideration.”

    Industry supports the new rules because they provide reasonable answers to questions relating to the implementation of tougher clean air requirements. First, since the old system of measuring emissions has been revoked, the new rules do not mandate certain contingency measures if an area of the country does not meet those old standards. Second, even though the old standard has been revoked, portions of it remain in place and there are new ways to demonstrate compliance with the standard. Third, new source review permitting requirements will be triggered based on the new 8-hour standard, which generally will apply to fewer facilities.

    For further details, see South Coast Air Quality Management District v. EPA.

     

    Carabell v. U.S. Army Corps. of Engineers   (U.S. Supreme Court)

    Clean Water Act jurisdiction

    A divided Supreme Court ruled 6/19/06 that the Army Corps of Engineers may have impermissibly exercised jurisdiction under the Clean Water Act over wetlands connected to tributaries of “navigable waters” only by man-made drains and ditches. To constitute a “navigable water” under the Act, a water or wetland must have a “significant nexus” to waters that are or were navigable in fact or that could reasonably be made so. The Sixth Circuit ruled that even a transitory “hydrological connection” to a tributary of a “navigable water” constituted a “significant nexus,” a test satisfied by the drains and ditches. The Supreme Court reversed and remanded, but no opinion garnered a majority “on precisely how to read Congress’ limits on the reach of the Clean Water Act.”

    In the plurality opinion joined by Chief Justice Roberts and Justices Thomas and Alito, Justice Scalia set forth a two-part test for whether wetlands are subject to the Act: “First, that the adjacent channel contains a ‘water of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The plurality concluded that “ecological considerations” warrant treating a wetland as part of an adjacent navigable water only where there is a continuous surface connection—and, thus, a “boundary-drawing problem”—between the wetland and the adjacent navigable water. The plurality remanded the case for consideration of whether the drains and ditches contained a permanent flow of water, and whether they possessed a surface connection sufficient to sustain the Corps’ jurisdiction.

    Justice Kennedy, concurring only in the judgment, took issue primarily with the plurality’s rejection of “ecological considerations.” Noting that the “absence of an interchange of waters [may make] protection of the wetlands critical to the statutory scheme,” Justice Kennedy concluded that “wetlands possess the requisite nexus … if the wetlands … significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’” The concurrence also contested the plurality’s permanence requirement. Justice Kennedy did recognize, however, that the wetlands’ proximity to navigable-in-fact waters should be considered “on a case-by-case basis” to avoid “the potential overbreadth of the Corps’ regulations[.]” Justice Kennedy concurred in the remand because the lower courts had not adequately considered “whether the specific wetlands at issue possess a significant nexus with navigable waters.”

    This decision is significant to any business involved in the development of property in or around wetlands.

     

    In re Final Rule to Implement the 8-Hour Ozone NAAQS -- Phase 1   (EPA)

    Ozone regulations

    The National Petrochemical & Refiners Association (NPRA) and the NAM 6/29/04 submitted to the EPA a Petition for Reconsideration of the final rule to implement the 8-hour ozone national ambient air quality standard (NAAQS) and the designations and classifications for the ozone standard. Industry is concerned that the timetable for certain facilities in nonattainment areas to come into compliance is too short. At least 15 regions of the country will need more time to come into compliance than is provided by the EPA.

    Due in part to our efforts, the EPA reconsidered the issues before publishing its final rule. Industry supports the new rule because it provides reasonable answers to questions relating to the implementation of tougher clean air requirements.

    For further details, see American Lung Association v. EPA.

     

    New Mexico v. General Electric Co.   (10th Circuit)

    Money damages; double recovery

    The NAM joined with the American Chemistry Council, American Petroleum Institute, National Mining Association, the U.S. Chamber of Commerce, the U.S. Council for International Business and 5 other associations in an amicus brief 5/27/05 in the U.S. Court of Appeals for the 10th Circuit. We argued that the state of New Mexico may not seek money damages from companies involved in the clean-up of hazardous materials in the South Valley Superfund Site. The lower court had ruled that New Mexico did not prove that it would have used the water under the Superfund site, and therefore could not prove damages.

    The NAM brief informed the court that New Mexico’s claim seeks double recovery. The companies worked together for nearly 15 years with the U.S. Environmental Protection Agency and the New Mexico Environmental Department to return water at the site to drinking water standards, yet were being sued to replace the resource that they cleaned up. Allowing such double recovery is a direct threat to the federal and state cleanup programs. To be successful, such cleanup efforts must have the maximum voluntary participation by the companies involved. It is unfair to allow the state with one hand agree to the clean-up plan and implementation at the site, and then have it turn around and sue for damages because it thinks the clean-up should have done more.

    In addition, CERCLA (the Superfund law) provides a limited number of ways in which an EPA remediation remedy may be challenged in court. This is to help prevent time-consuming litigation that would hinder the prompt clean-up of Superfund sites. Furthermore, we argued that the state cannot claim damages for the lost use of the water if no one in fact ever suffered damages from not having the water available. Now that the water has been cleaned, it is available for future use. The state admits that the more than $1 billion in damages it seeks will not be used for water quality remediation.

    The industrial community and natural resource trustees have been working toward increased cooperation and trust in the resolution of natural resource damage cases at individual sites, as well as to increase mutual understanding and certainty in the process as a whole. Claims like the one brought by the State of New Mexico have the potential to gravely set back this progress.

    Attorneys general from 13 other states filed an amicus brief in support of New Mexico.

    On October 31, 2006, the Tenth Circuit rejected New Mexico's challenge. It ruled that the state could not challenge CERCLA remediation efforts until they are completed, and seeking money damages does just that. It ruled that CERCLA preempts "any state remedy designed to achieve something other than the restoration, replacement or acquisition of the equivalent of a contaminated natural resource."

    The state also has no claim for damages from the loss of water, since New Mexico is part of the Middle Rio Grande Administrative Area, which controls the use of water and substituted another well's water for the water temporarily lost to the clean-up effort. Thus, there was no net loss of water to Albuquerque.

     

    New York v. EPA   (D.C. Circuit)

    Equipment Replacement Rule case

    The NAM is a member of the Equipment Replacement Rule Coalition, which filed a brief 12/9/05 in a suit brought by the State of New York against the EPA over the agency's 10/27/03 final rule titled "Prevention of Significant Deterioration (PSD) and Non-Attainment New Source Review (NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion." This rule governs the factors that determine whether companies must obtain EPA permits before replacing broken or deteriorating equipment at their industrial facilities. New York challenged the rule as too lenient. The Equipment Replacement Rule Coalition, comprising various trade associations, manufacturers and utilities, generally support the EPA's new rule.

    Our brief on the merits argued that EPA has discretion under the Clean Air Act to issue the rule, and that major modifications are not any physical plant changes, but only those that increase an existing unit’s design capacity to emit.

    On 3/17/06, the Court vacated the rule. It decided that the Clean Air Act’s permit requirements for “any physical change” do not allow the EPA to expand the category of projects that it views as “routine replacement.” The only exceptions are projects that do not result in emissions increases or that are de minimis. The decision leaves the existing Routine Maintenance, Repair and Replacement Exclusion in place.

     

    Pakootas v. Teck Cominco Metals, Ltd.   (9th Circuit)

    CERCLA

    After the Environmental Protection Agency issued a Unilateral Administrative Order to a Canadian company to conduct a study on contamination of the Columbia River in this country from its smelter in Canada, an Indian tribe sued to enforce the order. The company argued that the EPA does not have jurisdiction under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the U.S. federal district court ruled otherwise. The company appealed, and the Ninth Circuit affirmed, ruling 7/3/06 that the EPA’s order only applied to a “facility,” as it’s defined in CERCLA, within the territorial boundaries of the United States. Even though the smelter was located in Canada, the definition of a facility under CERCLA is an area where a hazardous substance has been deposited or otherwise comes to be located. This is a very broad definition of facility that subjects foreign companies to liability for pollution in the United States.

    The court also ruled that the slag located in the United States was leaching hazardous substances, thus satisfying the legal requirement for liability that there be a “release” from the facility into the environment. EPA’s jurisdiction did not extend to the smelter across the border, but does cover the underwater facility and hazardous releases in the United States.

    The NAM joined with the National Mining Association supporting Teck Cominco’s appeal. In an amicus brief filed 6/13/05, we argued that CERCLA applies only within this country unless Congress clearly expresses an intent to apply it extraterritorially, which it did not. These kinds of disputes are quintessentially an international concern, not for unilateral action by one country's EPA. Private litigation upsets the resolution of such disputes through diplomatic means, or through the long-standing model of an arbitration group that was specifically established for the smelter in the 1930s. Allowing such litigation in U.S. courts opens them up to worldwide claims, particularly as environmental science improves, and could subject U.S. firms to retaliatory litigation abroad, imposing multiple and conflicting standards on environmental behavior.

    Teck Cominco appealed for rehearing. On 7/24/2006, the NAM and the National Mining Association filed a brief in support of this appeal, arguing that the site of the release is irrelevant for resolving the question whether the United States is improperly applying its law to an entity based in another country. The decision ignores the history of negotiated international disputes and transforms CERCLA into a global environmental statute. Rehearing was denied on Oct. 30, 2006.

     

    Rapanos v. United States   (U.S. Supreme Court)

    Clean Water Act jurisdiction

    A divided Supreme Court ruled 6/19/06 that the Army Corps of Engineers may have impermissibly exercised jurisdiction under the Clean Water Act over wetlands connected to tributaries of “navigable waters” only by man-made drains and ditches. To constitute a “navigable water” under the Act, a water or wetland must have a “significant nexus” to waters that are or were navigable in fact or that could reasonably be made so. The Sixth Circuit ruled that even a transitory “hydrological connection” to a tributary of a “navigable water” constituted a “significant nexus,” a test satisfied by the drains and ditches. The Supreme Court reversed and remanded, but no opinion garnered a majority “on precisely how to read Congress’ limits on the reach of the Clean Water Act.”

    In the plurality opinion joined by Chief Justice Roberts and Justices Thomas and Alito, Justice Scalia set forth a two-part test for whether wetlands are subject to the Act: “First, that the adjacent channel contains a ‘water of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The plurality concluded that “ecological considerations” warrant treating a wetland as part of an adjacent navigable water only where there is a continuous surface connection—and, thus, a “boundary-drawing problem”—between the wetland and the adjacent navigable water. The plurality remanded the case for consideration of whether the drains and ditches contained a permanent flow of water, and whether they possessed a surface connection sufficient to sustain the Corps’ jurisdiction.

    Justice Kennedy, concurring only in the judgment, took issue primarily with the plurality’s rejection of “ecological considerations.” Noting that the “absence of an interchange of waters [may make] protection of the wetlands critical to the statutory scheme,” Justice Kennedy concluded that “wetlands possess the requisite nexus … if the wetlands … significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’” The concurrence also contested the plurality’s permanence requirement. Justice Kennedy did recognize, however, that the wetlands’ proximity to navigable-in-fact waters should be considered “on a case-by-case basis” to avoid “the potential overbreadth of the Corps’ regulations[.]” Justice Kennedy concurred in the remand because the lower courts had not adequately considered “whether the specific wetlands at issue possess a significant nexus with navigable waters.” This decision is significant to any business involved in the development of property in or around wetlands.

     

    S.D. Warren Co. v. Maine Board of Environmental Protection   (U.S. Supreme Court)

    Clean Water Act jurisdiction

    The Supreme Court 5/15/06 decided that river water utilized by private dams is “discharge” within the meaning of Section 401 of the Clean Water Act, 33 U.S.C. § 1341 (a)(1), after the water’s hydroelectric use in the dam. Section 401 requires that if an activity “may result in any discharge into the [Nation’s] navigable water[s],” an applicant for a federal license or permit must obtain a certification that the activity will not violate state water quality standards. The Act does not define the term “discharge,” apart from providing that “[t]he term ‘discharge’ when used without qualification includes a discharge of a pollutant, and a discharge of pollutants.” 33 U.S.C. § 1362(16). The Court unanimously concluded that because the term is not further defined in the statute and is not a term of art, it is to be construed “in accordance with its ordinary and natural meaning”—a “flowing or issuing out.” The Court rejected arguments that a different meaning is dictated by the surrounding language of Section 401, by the meaning of Section 402 of the Act, or by legislative history. This decision is important to any business that may be subject to regulation under the Clean Water Act.

    Decision Below: 868 A.2d 210 (Me. 2005)

     

    South Coast Air Quality Management District v. EPA   (D.C. Circuit)

    8-hour ozone Phase I Implementation Rule (Consolidated with American Lung Assn. v. EPA)

    The NAM is part of a joint industry effort to support the Environmental Protection Agency’s 8-Hour Ozone Phase I Implementation Rule. Since enactment of the Clean Air Act in 1990, EPA has been working to implement provisions that establish ozone control requirements and deadlines for compliance. First it established a standard based on a 1-hour measurement system, with 5 classifications of violations (marginal, moderate, serious, severe or extreme). In 1997, EPA replaced the 1-hour standard with a more stringent standard with an 8-hour averaging time, and, after court challenges that went to the Supreme Court, again modified the regulation to provide different compliance timetables depending on the levels of ozone in a particular area.

    The State of Ohio sued to delay the 8-hour standard and to force EPA to adopt more reasonable deadlines. It feared that implementation will require the “depopulation strategy,” whereby all local industry must shut down and all local vehicle traffic must be stopped in the Cleveland-Akron area. The Baton Rouge Chamber of Commerce sued to eliminate enforcement under the old 1-hour standard. The American Lung Association, the Natural Resources Defense Council and others, sued to force the use of specific timetables for implementation and to prevent companies from backsliding from the old standard. The NAM and other industry groups intervened in these suits to generally support the EPA’s latest efforts.

    Our brief argued that the EPA’s balance of compliance requirements involving either the old 1-hour standard or the tougher 8-hour standard is valid. Nothing in the Clean Air Act requires old standards to remain in effect in perpetuity. Since the old standard was revoked, penalties should not continue to be assessed under that system. We supported EPA’s determination that an area subject to the 8-hour measuring standard should be subject only that the new classification system that goes with it.

    On December 22, 2006, the D.C. Circuit vacated the rule and remanded the matter to EPA for further proceedings. The court upheld EPA's decision to revoke the 1-hour ozone standard, but imposed substantial restraints. It struck down EPA's decision classifying nonattainment areas under the generally less demanding Subpart 1 (of Part D of Title I), instead ruling that areas with 8-hour "design values" (the measured concentration of ground-level ozone) above .09 ppm must be classified under Subpart 2. It called EPA's decision to apply only Subpart 1 requirements to areas with 8-hour design values between .08 ppm and .09 ppm unreasonable. In addition, EPA's rules were designed to prevent "backsliding" by regulated industries, and the D.C. Circuit ruled that several requirements continue to apply (such as New Source Review requirements, section 185 emission fees, contingency plans for failure to improve, and local transportation planning restraints).

    Until further word from EPA, the new 8-hour designation/classification system was vacated, but the designations/classifications themselves were in a separate rule that was not vacated. Thus, those designations and classifications apparently remain in effect, with State Implementation Plans due in June. In addition, the anti-backsliding provisions under the 1-hour rule are still in effect.

    On March 22, 2007, the NAM joined with other organizations in a petition for rehearing. We argued that the court's decision expands EPA's Section 172(e) authority to prevent companies from backsliding on ozone pollution limits. We argued that the backsliding provision applies only if air quality standards are relaxed, and the EPA in fact issued revised standards that are more stringent. In addition, existing case precedent requires that courts defer to EPA interpretations that are reasonable. The court's decision second-guessed the EPA's interpretation, and conflicts with that of another federal appeals court. The petition for rehearing was denied 6/8/2007.

     

    E.I. DuPont de Nemours and Co. v. United States   (U.S. Supreme Court)

    Contribution in Superfund cleanup cases

    The NAM joined other groups 12/27/06 in an amicus brief urging the Supreme Court to hear an appeal by DuPont involving the costs of cleaning up contaminated Superfund sites. The right to collect a fair share of the cleanup costs from other parties, including governments, who are responsible for contributing to the hazardous wastes in Superfund sites, is critically important to manufacturers and to the cleanup process. Our brief urges the Court to review a Third Circuit decision that denied the right of a manufacturer to seek contributions from other parties that helped create the problem.

    We argue that CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, was enacted to facilitate prompt and effective cleanup of contaminated sites, and a right of contribution is integral to achieving this goal. The Third Circuit's decision will impede the national effort to clean up sites, will unfairly burden a few private parties, and will discourage or delay the redevelopment of many of our nation's cities. The court's decision is also in direct conflict with decisions by unanimous panels of the Second and Eighth Circuits.

    The brief describes four important categories of cleanups that will be discouraged and/or delayed by the Third Circuit's ruling: (1) thousands of sites polluted by the federal government, (2) thousands of sites subject to corrective action under Subtitle C of the Resource Conservation and Recovery Act (RCRA), (3) Superfund sites, and (4) thousands of brownfields sites whose only realistic potential for cleanup is voluntary action by responsible parties.

    The NAM joined with the Superfund Settlements Project, the American Chemistry Council, the American Petroleum Institute and the United States Conference of Mayors in the brief.

    On 6/18/07, the Court granted the petition, vacated the lower court's decision and sent the case back for reconsideration in light of its recent decision in United States v. Atlantic Research Corp. The lower court is expected to rule in favor of Dupont.

     

    Environmental Defense v. Duke Energy Corp.   (U.S. Supreme Court)

    New Source Review permit requirements

    On April 2, 2007, the Supreme Court ruled unanimously that the definition of the word “modification” can be interpreted in different ways by the EPA under separate Clean Air Act enforcement regulations with different ways of implementation. It overturned a Fourth Circuit ruling that required EPA to conform the interpretation of “modification” in regulations for the Prevention of Significant Deterioration (PSD) to the interpretation of that word under the New Source Performance Standards (NSPS) regulations.

    The NSPS regulations apply when a stationary source is modified so that its hourly emissions rate increases. The PSD regulations require a permit when a modification of a stationary source is a major one and only when it would increase the actual annual emission of a pollutant above the actual average for the two prior years.

    The Supreme Court upheld EPA’s decision to impose permit requirements under the 1980 PSD regulations that may apply even though a change to a major stationary source does not increase an emitting unit's hourly emissions rate. It ruled that an enforcement court may not implicitly invalidate the 1980 PSD regulations unless it is shown that review of the underlying issue could not have been obtained in accordance with the normal Clean Air Act judicial review procedures.

    In terms of impact, this ruling is limited to an interpretation of the 1980 PSD rules, which have since been amended in 2002. In the rule amendments, EPA clearly indicated that it would use for the future an annual emissions test for PSD and provided specific standards that govern application of that test. Thus, the potential scope of impact for this ruling is limited to enforcement for actions that may have occurred under the prior version of EPA's rules.

    The NSR Manufacturers Roundtable, including the NAM, participated in this case in the Fourth Circuit and in the Supreme Court.

     

    Massachusetts v. EPA   (U.S. Supreme Court)

    Whether EPA must regulate greenhouse gases as pollutants

    In a major 5-4 ruling, the Supreme Court decided 4/2/2007 that the EPA must reconsider its decision not to issue new motor vehicle emission standards under its authority under section 202(a)(1) of the Clean Air Act, relating to the regulation of air pollutants associated with global climate change. Under that section, the EPA Administrator must regulate air pollutants when, “in his judgment,” such pollutants “may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7521(a)(1). Several parties petitioned the EPA to set regulatory standards for air pollutants associated with climate change. The EPA denied the petition, concluding that it lacked authority to do so, and that, even if it had authority, it would deny the petition based on various policy considerations not expressly addressed in the statute, including scientific uncertainties, the inefficiency of piecemeal approaches to the climate change issue, and foreign policy concerns.

    The D.C. Circuit upheld the EPA’s decision, but the Supreme Court reversed. The majority ruled that the 11 states that filed suit had standing to sue because the standing requirements for challenging agency action unlawfully withheld are not as strict as regular standing requirements. The states need only show that they have suffered a "concrete and particularized injury," but not that the injury is immediate or that a favorable decision will redress that injury. Because the states have a procedural right to protect their interests, they have standing "if there is some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant." It also ruled that states are entitled to special treatment because they have given up some of their sovereign powers to the federal government.

    It ruled that Massachusetts will suffer injury to coastal land that it owns, and since EPA did not dispute the existence of a causal connection between man-made greenhouse gas emissions and global warming, EPA's refusal to regulate such emissions contributes to that state's injuries. EPA cannot refuse to regulate just because auto emissions are such a small part of overall greenhouse gas emissions, since many regulations legitimately take incremental steps in addressing massive problems.

    The Court held that an agency's denial of a petition for rulemaking is susceptible to "extremely limited" and "highly deferential" judicial review. It found that the plain language of the Clean Air Act defines "air pollutant" to include all airborne compounds of any kind, and regulating the quality of the air does not conflict with the Department of Transportation's authority to regulate automobile efficiency.

    Finally, the Court ruled that the Clean Air Act requires EPA to form a judgment on whether greenhouse gases contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. Once it has found such endangerment, it has "significant latitude as to the manner, timing, content, and coordination of its regulations with those of other agencies." To avoid having to impose some regulations, it must either determine that greenhouse gases do not contribute to climate change, or provide some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do. Thus, the Court left open the possibility that EPA could withhold regulation, but only if it grounds its reasons for inaction in the Clean Air Act.

    Justices Roberts, Scalia, Thomas and Alito dissented in part because they felt the states did not have standing, and that the Court's new rule giving states preferential treatment has no basis in existing case law. The majority cited a 1907 case that did not involve standing and that neither the states nor any of the supporting briefs mentioned. The dissent argues that a particularized injury to Massachusetts has not been shown, since the affidavits in support of that claim suggest that land subsidence, a non-global-warming cause, is affecting Boston's rising sea level. Injury is not imminent or certainly impending, and a computer model's conceded average error rate is greater than or equal to the projected sea level rise. The alleged connection between the fractional amount of global emissions that might be limited with EPA standards and the loss of Massachusetts coastal land is far too speculative to establish causation. Furthermore, a regulation is not likely to redress Massachusetts' injury, since it will have no proven effect on the voluminous amount of greenhouse gases emitted elsewhere in the world. Referring to a 1973 decision in United States v. Students Challenging Regulatory Agency Procedures (SCRAP), Chief Justice Roberts wrote, "Today's decision is SCRAP for a new generation."

    A separate dissent written by Justice Scalia says there is no language in the Clean Air Act that requires EPA to make a judgment on greenhouse gases, and that the Act governs only air pollution, which EPA reasonably decided does not include carbon dioxide high in the atmosphere.

    The NAM is part of the CO2 Coalition, which participated in this case in the D.C. Circuit and the Supreme Court. The decision granting standing to states to challenge federal agency action, or inaction, without the same restrictions as other plaintiffs could lead to increased litigation by the states against a variety of federal agency decisions.

     

    National Association of Home Builders v. Defenders of Wildlife   (U.S. Supreme Court)

    Application of Endangered Species Act to Clean Water Act permits

    On June 25, 2007, the Supreme Court ruled 5-4 that the Endangered Species Act does not prevent the EPA from transferring its authority to issue Clean Water Act permits to a state pollution control agency. Transferring such authority is non-discretionary, and the Clean Water Act does not require consideration of statutes not specifically mentioned in that Act when doing so.

    Had the Clean Air Act been read to include requirements from other statutes, EPA might have been similarly required to incorporate various other statutory requirements into a variety of laws. This could have affected Section 404 permits, federal flood insurance issued by FEMA, and permits for federal projects that might be required to consider terrorism risk during environmental impact studies under the National Environmental Policy Act.

     

    National Parks Conserv. Assn. v. Tennessee Valley Auth.   (6th Circuit)

    Statute of limitations for challenging Clean Air Act preconstruction permit compliance

    The NAM joined with 4 other business groups in support of a petition for rehearing of an adverse decision by the Sixth Circuit involving how far into the future the EPA or a citizen may challenge in court alleged violations of preconstruction permits under the Clean Air Act. On 8/14/07, the petition was denied.

    The statute of limitations for CAA enforcement is 5 years. However, the appeals court ruled that every day a facility operates without the best available control technology constitutes a discrete violation. It also ruled that TVA has an obligation to get a construction permit even after the construction has been completed. A dissenting judge felt that the obligation to get a permit can only be violated once, like a carpenter's contract to repair a roof. Even though there may be aftereffects in each case from the failure to do the original work properly, the violation occurred at one point in time, and only the harms occur later.

    Our brief argues that the lawsuit involves factual inquiries that depend on substantial amounts of data, witness testimony and other documentary evidence that becomes stale if not litigated in a reasonable amount of time. An initial inquiry into whether a change made at a facility is a modification covered by the permit requirements involves a complex multi-step analysis, made on a case-by-case basis, based on data existing at the time of the modification. The purpose of a statute of limitations is to prevent vexatious litigation years after acts giving rise to the litigation occur. In any event, companies are still subject to ongoing regulatory requirements, because they are subject to operating permits. There is no allegation that an operating permit was violated in this case.

     

    San Francisco BayKeeper v. Cargill Salt Division   (9th Circuit)

    Waste containment

    The NAM joined with the American Forest & Paper Association, American Petroleum Institute, Chamber of Commerce of the United States, Corn Refiners Association, Grocer Manufacturers of America and the Western States Petroleum Association in an environmental case involving waste containment ponds. The issue is whether a citizen's group can sue a company under the Clean Water Act for damages because the company did not have a permit to use a containment pond for salt processing residues at its salt-making facility in California. The Clean Water Act's jurisdiction extends only to "navigable waters" of the United States, and we argued that there is no jurisdiction over a containment pond that is not hydrologically connected to -- and has no impact on -- any navigable waterway. It is not enough that a pond simply be adjacent to or in proximity to waters of the United States -- there must be a more direct connection.

    The Supreme Court's 2006 ruling in the Rapanos case was expected to offer some guidance, but it was a splintered decision.

    On March 8, 2007, the Ninth Circuit overruled the lower court's decision. It deferred to the EPA's regulatory definition of "waters of the United States", which does not include waters that are simply adjacent to navigable waters. While wetlands that are adjacent to navigable waters are subject to Clean Water Act jurisdiction, other bodies of water, such as the waste collection pond in this case, are not. The court distinguished the Rapanos decision because it applies only to wetlands. Even if a party were permitted to show that there was some hydrological connection between the pond and navigable waters, the evidence was speculative or insubstantial in this case.

     

    Starrh and Starrh Cotton Growers v. Aera Energy LLC   (California Supreme Court)

    Waste containment damages

    On Sept. 26, the NAM filed an amicus letter urging the California Supreme Court to review two issues in a case of subsurface trespass resulting from migration of wastewater and the subsequent alleged reduction of water quality in an aquifer. First, even though California has a three-year statute of limitations for actions against permanent trespass, the lower court ruled that this trespass was not permanent, but continuing. Our brief argues that such an interpretation improperly eliminates the statute of limitations defense in cases where subsurface water has been migrating for many years.

    Second, even though California law is very clear on the measure of damages for a continuing trespass, providing that a plaintiff may recover “the value of the use of the property” that the defendant gained and the “reasonable cost of repair or restoration of the property to its original condition,” the court of appeals nonetheless allowed additional damages that may include profits enjoyed by the defendant that are directly linked to the trespass. Our brief argues that including profits in the calculation of damages overstates the benefit that a company obtains, with the proper measure of damages for “benefits obtained” being the costs that the company avoided by engaging in the challenged activity. That, combined with the actual damages resulting from the trespass, takes away all incentive for the trespass and provides more than full compensation to the plaintiff. Guidance from the California Supreme Court on both of these issues would substantially aid California landowners and businesses by verifying settled principles, eliminating uncertainty and a jackpot-justice approach to litigation, and satisfying the demands of due process to provide fair notice of the law of damages for trespass.

    On Oct. 24, the California Supreme Court denied the petition for review.

     

    United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority   (U.S. Supreme Court)

    Waste flow-control regulation

    This is the second time this case has been appealed to the Supreme Court. This time around, the NAM joined with the National Solid Waste Management Association and the American Trucking Associations to urge the Court to review an adverse ruling by the Second Circuit that would allow a municipality, county or state to impose flow-control restrictions on the interstate transportation of solid waste. Flow-control laws allow local jurisdictions to prop up their disposal facilities by preventing waste generated in the locality from being taken anywhere else. The 1994 Supreme Court decision in the Carbone case held that a town's law flow-control ordinance discriminated against interstate commerce. The Second Circuit in this case provided a blueprint for local governments to avoid the Carbone decision by vesting part of the ownership of private waste disposal facilities in a public entity.

    Our amicus brief argued that this ruling would seriously disrupt the interstate market in solid waste disposal services, including recyclables, and it ignored the practical economic effect of the ordinance, which is the key determinant when analyzing issues of discrimination against interstate commerce.

    On April 30, 2007, the Court affirmed the Second Circuit's ruling, 6 to 3. It held that the county's restrictions treat in-state and out-of-state private business interests equally, and the government has an interest different from and superior to that of private businesses, since government is responsible for protecting the health, safety and welfare of its citizens. The Court was reluctant to interfere with numerous state and local government initiatives undertaken in furtherance of their police power. In addition, most of the burden of the regulation falls on those who voted for the laws, and they can change them through the normal political process.

    The decision gives state and local governments vast power to control the disposal of all wastes within their jurisdictions, even though it may be more expensive.

     

    United States v. Atlantic Research Corp.   (U.S. Supreme Court)

    Contribution in Superfund cleanup cases

    The Supreme Court considered 3 cases in 2007 about whether parties that voluntarily undertake to clean up Superfund hazardous waste sites can sue, under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) other parties that contributed to the wastes. On June 11, 2007, the Court ruled unanimously in Atlantic Research that they can. The NAM filed an amicus brief in another, DuPont v. United States, which was sent back to the lower court for reconsideration in light of the decision in this case.

    The Court ruled that § 107(a) makes potentially responsible parties (PRPs) liable for any costs of response incurred by any person consistent with the national contingency plan. It reaffirmed that a private party may bring suit under § 113(f) to obtain contribution from other liable parties only after having been sued themselves. It concluded that a private party may sue under § 107(a) even if it has not been sued by some one else.

    The right to collect a fair share of the cleanup costs from other parties, including governments, who are responsible for contributing to the hazardous wastes in Superfund sites, is critically important to manufacturers and to the cleanup process. CERCLA was enacted to facilitate prompt and effective cleanup of contaminated sites, and a right to sue for cleanup costs is integral to achieving this goal.

     

    In re Deseret Power Electric Cooperative   (EPA Environmental Appeals Board)

    EPA preconstruction permits for facilities with CO2 emissions

    On March 21, the NAM joined with six other organizations in an amicus brief supporting EPA’s 2007 approval of a preconstruction permit for a new power plant in Utah. The Sierra Club appealed the approval, arguing that the EPA must limit carbon dioxide (CO2) emissions in the permit.

    Our brief argued that the EPA’s permitting process should not be turned into a regulatory tool to control CO2 emissions. The EPA had already determined that CO2 was not a regulated pollutant and thus did not need to be addressed within a preconstruction permit.

    On June 16, the EAB issued an order requesting further briefing on whether carbon dioxide monitoring requirements are enforceable under the Clean Air Act, and on the effect of the Supreme Court's decision in Massachusetts v. EPA.

    On September 12, the NAM and five other organizations filed a supplemental brief. First, we argued that CO2 is not currently regulated under the Clean Air Act, as there is only monitoring of, not restrictions on emissions of, CO2. Second, we argued that that the issues the EAB seems to be focusing on go beyond its authority, and that any expansion of the preconstruction permit program to greenhouse gases is a determination that should be made by the EPA Administrator, via rulemaking, or by Congress.

    On Nov. 13, 2008, the Environmental Appeals Board rejected the Sierra Club's contention that permits must include "best available control technology" for carbon dioxide, but sent the case back to the EPA to reconsider whether to impose the requirement under its discretionary authority, and to develop an adequate record for its decision. It encouraged the EPA to consider whether the issue in this case should be resolved "in the context of an action of nationwide scope, rather than through this specific permitting proceeding."

    Former EPA Administrator Stephen Johnson issued an interpretative guidance memorandum on Dec. 18 that concluded that PSD permits do not need to include BACT limits for greenhouse gases. The Sierra Club is challenging that guidance. If they succeed, the number and type of facilities (e.g., any which emit certain levels of CO2) requiring EPA permits would explode, resulting in an impassable regulatory gridlock that would overwhelm permitting authorities and bring new permits to a halt. Under such a scenario, even large department stores, schools, and medium-size office buildings would require Clean Air Act preconstruction permits in order to be built or expanded.


    Related Documents:
    NAM supplemental brief  (September 12, 2008)
    NAM brief  (March 21, 2008)

     

    Massachusetts v. EPA   (D.C. Circuit)

    Whether to compel EPA to determine that carbon dioxide endangers public health or welfare

    The NAM is a member of the CO2 Litigation Group, which was an intervenor helping to defend EPA in this case. Massachusetts sought a court mandate to force EPA to determine that carbon dioxide is an air pollutant that contributes to air pollution "which may reasonably be anticipated to endanger public health or welfare."

    We filed a brief 5/15/08 arguing that no such finding is required by the statute unless EPA decides to establish emission standards for new motor vehicles, nor is there any deadline for making such a determination. No clear statutory rights are being harmed by any delay by EPA, and EPA has announced an intention to begin a rulemaking later this spring anyway.

    We argued that EPA must be able to consider this proposed rulemaking in the larger context of other regulatory obligations with respect to fuels used in motor vehicles and nonroad engines, as well as new or modified major stationary sources of emissions, comprising perhaps thousands of new facilities not currently subject to stringent Clean Air Act permit requirements.

    Climate change from carbon dioxide must be addressed in a comprehensive way with input from the public through the legislative and regulatory processes, not through a judicial directive that truncates public debate.

    On June 26, the court denied Massachusetts' petition without opinion, except for a statement by Judge Tatel concurring in part and dissenting in part. He would hold on to the case until EPA gives greater indication that it is moving forward with the regulation. The EPA announced in March that it would issue an Advance Notice of Proposed Rulemaking sometime in the future.


    Related Documents:
    CO2 Litigation Group brief  (May 15, 2008)

     

    Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1   (U.S. Supreme Court)

    FERC regulatory power

    During an energy crisis in the Western U.S. in late 2000 and early 2001, several utility companies who had decided they could no longer afford to buy electricity from their normal suppliers and had an immediate need to secure power for their customers negotiated long-term contracts to buy electricity from alternate suppliers. After the energy crisis passed and energy prices dropped, the utility companies asked FERC to allow them to modify their contracts to enable them to pay lower prices for wholesale energy and subsequently lower their customer rates. In refusing their request, FERC explained that the Supreme Court’s Mobile-Sierra doctrine establishes a presumption that contracts negotiated by sophisticated parties like public utilities are “just and reasonable” in accord with the Federal Power Act and thus cannot be revised. The Court carved out an exception for cases where the contracts are against the “public interest” (for example, when not permitting modification would jeopardize the supply of power to retail users).

    The Ninth Circuit reversed FERC’s decision, holding that the Mobile-Sierra doctrine only applies in “limited circumstances” and that, by failing to consider the market conditions in which the contracts at issue were formed, FERC had failed to determine whether such “limited circumstances” were present here. The Ninth Circuit also held that even if the Mobile-Sierra doctrine applied, its public interest exception would permit contract modification because the high electricity rates excessively burdened consumers.

    The Supreme Court ruled 6/26/08 that FERC was required to follow the Mobile-Sierra presumption of reasonableness, and the validity of a contract is not affected by an environment of electric power market "dysfunction." The Court rejected the Ninth Circuit's "zone of reasonableness" test, and underscored the need to honor contracts unless they seriously harm the public interest. There must be "unequivocal public necessity" to set aside a contract rate. However, the Court affirmed the Ninth Circuit's ruling on other grounds: FERC's defective analysis of the market effects needs to consider longer-term burdens, and FERC needs to more carefully consider whether there was unlawful market manipulation that disrupted fair, arms-length contract negotiations.

     

    National Association of Manufacturers v. EPA   (EPA)

    Information Quality Act request

    The National Association of Manufacturers submitted a formal request 10/9/07 to the U.S. Environmental Protection Agency asking that it correct scientific errors in a package of documents related to its proposed revision of the National Ambient Air Quality Standard for ozone. By law, these errors must be corrected to ensure and maximize the quality of scientific information disseminated by EPA and used for making regulatory decisions. Once these errors are corrected, the NAM is confident that EPA will have a much stronger scientific foundation for the final decision the agency will make on the ozone standard in March 2008.

    The NAM’s petition identified several important information quality errors, such as:

    • EPA’s risk assessment isn’t transparent.

    EPA did not fully disclose analyses it recently performed and inserted at the last minute into the administrative record for the proposed revised standard. The Agency is obligated by law to ”show its work.”

    • EPA’s risk estimates are purposefully exaggerated.

    EPA misreported or exaggerated the results of the studies it relied on, and ignored studies that had found no health effects from ozone levels below the current standard. EPA knowingly used assumptions and models that give inflated estimates of health risks. These practices are prohibited under federal information quality standards that EPA has adopted.

    • EPA’s risk assessment did not follow technical recommendations made by the National Academy of Sciences.

    Since the Clean Air Act was last amended in 1990, the Academy has issued a series of reports providing technical advice concerning how to estimate and portray the risks posed by air pollution. Among other things, the Academy has pressed EPA to be more candid about the uncertainties in its estimates and predictions. EPA has ignored most of these recommendations.

    The practical effect of these errors is that the public is not accurately informed about what the science says about ozone air pollution, nor is it aware just how uncertain EPA’s risk estimates really are. Through our petition, the NAM expects that EPA will correct these errors as the law requires, and provide the public scientific information that is accurate, reliable, and unbiased, and presented in an accurate, clear, complete, and unbiased manner.

    In March, 2008, the EPA indirectly responded to our criticisms as part of its general response to significant public comments. We were dissapointed that the EPA did not adhere to the substantive elements in its Information Quality Guidelines, especially in not acknowledging the validity of any of our complaints related to the covered information contained in its proposal and supporting documents.

    Consequently, we filed a Request for Reconsideration of the EPA's denial of our Information Quality Act petition. See link below for further developments.


    Related Documents:
    Summary of NAM's Request for Reconsideration  (October 14, 2008)
    NAM's Petition for Correction of Record  (October 9, 2007)

     

    Teck Cominco Metals, Ltd. v. Pakootas   (U.S. Supreme Court)

    CERCLA

    After the Environmental Protection Agency issued a Unilateral Administrative Order to a Canadian company to conduct a study on contamination of the Columbia River in this country from its smelter in Canada, an Indian tribe sued to enforce the order. The company argued that the EPA does not have jurisdiction under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the U.S. federal district court ruled otherwise. The company appealed, and the Ninth Circuit affirmed, ruling 7/3/06 that the EPA’s order only applied to a “facility,” as it’s defined in CERCLA, within the territorial boundaries of the United States. Even though the smelter was located in Canada, the definition of a facility under CERCLA is an area where a hazardous substance has been deposited or otherwise comes to be located. This is a very broad definition of facility that subjects foreign companies to liability for pollution in the United States.

    The court also ruled that the slag located in the United States was leaching hazardous substances, thus satisfying the legal requirement for liability that there be a “release” from the facility into the environment. EPA’s jurisdiction did not extend to the smelter across the border, but does cover the underwater facility and hazardous releases in the United States.

    The NAM joined with the National Mining Association in 2 briefs supporting Teck Cominco’s appeal and petition for rehearing in 2005 and 2006. We argued that CERCLA applies only within this country unless Congress clearly expresses an intent to apply it extraterritorially, which it did not. These kinds of disputes are quintessentially an international concern, not for unilateral action by one country's EPA. Private litigation upsets the resolution of such disputes through diplomatic means, or through the long-standing model of an arbitration group that was specifically established for the smelter in the 1930s. Allowing such litigation in U.S. courts opens them up to worldwide claims, particularly as environmental science improves, and could subject U.S. firms to retaliatory litigation abroad, imposing multiple and conflicting standards on environmental behavior.

    The case was appealed to the Supreme Court. On May 2, 2007, the NAM and the National Mining Association filed an amicus brief urging the Court to take the case. We argued that the lower court's decision invites retaliation against American businesses and fosters uncertainty and discord for many industries with respect to the definition of "arranger liability." We argued that arranger liability under CERCLA applies when a company owns hazardous material and arranges with a third party for its disposal or treatment, not when the company does it itself.

    On Jan. 7, 2008, the Supreme Court declined to review this appeal. The United States Government had earlier filed a brief opposing the appeal.

     

    Alaska Wilderness League v. Kempthorne   (9th Circuit)

    Standards for assessing NEPA requirements for offshore drilling

    Two judges in the Ninth Circuit issued an overly strict interpretation that requires companies wanting to drill for oil in the waters off the north coast of Alaska to perform studies under NEPA, the National Environmental Policy Act, that examine very detailed effects of the drilling configuration sought to be installed. Such studies cannot be performed without conducting the kind of full-scale test that would require a permit, a Catch-22.

    The NAM joined with the Mountain States Legal Foundation and the Chamber of Commerce in an amicus brief urging further review of this decision by a larger group of Ninth Circuit judges. We argued that there should be a "full and fair discussion" of environmental impacts, which is enough to constitute a "hard look" to satisfy NEPA, and that the new, tougher standard adopted by 2 of the 3 judges in this case went too far.

    Facilitating oil exploration and development in Alaska is needed to increase America's access to domestic sources of reliable energy. It is part of the NAM's comprehensive energy strategy to adequately address our nation’s energy needs.

    In an order dated March 6, 2009, the Ninth Circuit withdrew the 3-judge opinion and planned to issue a new one. However, Shell withdrew its drilling plan in May, 2009, and submitted a new scaled-back proposal for the 2010 season. The court dismissed the case as moot.


    Related Documents:
    NAM brief  (February 17, 2009)

     

    American Farm Bureau Federation v. EPA   (D.C. Circuit)

    Particulate matter air quality regulations

    The NAM is part of the Fine Particulate Matter Petitioners Group, which filed a petition for review in the D.C. Circuit of a final EPA regulation published in October, 2006, entitled "National Ambient Air Quality Standards for Particulate Matter." This case involves stringent new EPA air quality standards, which industry and agricultural groups say go too far and environmental groups and states say are not strict enough.

    The regulation applies both to fine particles (generally smaller than 2.5 micrometers in diameter) and to larger particles (less than 10 micrometers). It retains an annual fine particle standard of 15 micrograms per cubic meter, and ratchets down the daily standard from 65 to 35 micrograms per cubic meter. It retains the 150 micrograms level for daily exposure to larger particles. The agriculture and mining industries are not exempt.

    The new standard is expected to increase the number of nonattainment areas around the country significantly. Our challenge focused primarily on the fine particle portion of the rule.

    Also included in the Fine Particulate Matter Petitioners Group are the American Coke & Coal Chemicals Institute, the American Forest & Paper Association, the American Iron & Steel Institute, the Chamber of Commerce, the Corn Refiners Association, the National Cotton Council of America, the National Oilseed Processors Association and the Portland Cement Association. Our petition was consolidated with others from the American Lung Association and other environmental groups, the National Mining Association, the National Cattlemen's Beef Association, 13 states, the Agricultural Retailers Association, the Utility Air Regulatory Group and others.

    On Jan. 29, 2008, we filed a brief supporting EPA's decision to keep the fine particulate matter standard at 15 micrograms per cubic meter. It properly kept the limit at 15 because the risk attributed to that level of ambient exposure has stayed the same or decreased since EPA established that standard in 1997. EPA also properly set the secondary fine particulate matter standard at a level identical to the primary standards, providing increased visibility protection and providing the requisite level of public welfare protection.

    We opposed a challenge to the standard that argued the EPA should have adopted recommendations of the Clean Air Scientific Advisory Committee (CASAC), because the Clean Air Act only allows that group to recommend revisions and the ultimate decision is in the discretion of the EPA Administrator.

    On Feb. 24, 2009, the D.C. Circuit remanded the fine particulate standard to the EPA, as well as the EPA's decision to equate the primary and secondary fine particle standards, but upheld the coarse particulate standard. The court ruled that "the EPA did not adequately explain why an annual level of 15 μg/m3 is sufficient to protect the public health while providing an adequate margin of safety from short-term exposures and from morbidity affecting vulnerable subpopulations." It noted in particular three short-term studies that the EPA did not adequately explain away. During the remand, EPA's rule will remain in effect. It also found that EPA acted unlawfully when it failed to determine what level of visibility protection was needed to protect the public welfare. EPA's failure to set a target level of visibility was fatal to the standard it set.

    With respect to an industry challenge to the regulation of coarse particulate matter, the court said that EPA need not wait for conclusive evidence of adverse health effects before regulating. It rejected the challenge and upheld this portion of EPA's regulation.

     

    American Petroleum Institute v. Salazar   (U.S. District Court for the District of Columbia)

    Whether polar bear regulation should deny Alaskan industry greenhouse gas emissions exemption that applies to other states

    On May 15, 2008, the Department of the Interior issued an Interim Final Special Rule designating the polar bear as threatened under the Endangered Species Act, based on its determination that global climate change, resulting from increased concentrations of greenhouse gases in the atmosphere, threatened to injure the bears' habitat by reducing polar ice. As part of this rule, the Department provided an exemption for greenhouse gas emissions, since they are part of a worldwide phenomenon that cannot be traced to particular activities in particular locations affecting the bears.

    This exemption applied to greenhouse gas emissions in all states except Alaska. On August 27, the NAM joined with the American Petroleum Institute, the U.S. Chamber of Commerce, the National Mining Association and the American Iron and Steel Institute in filing a complaint challenging the Department's omission of Alaska from the exemption. Manufacturing and other business operations in Alaska that may produce greenhouse gases should not be treated differently than those of companies in the other 49 states. This "Alaska Gap" exposed Alaskan operations to increased permitting burdens and/or the risk of enforcement by government authorities and citizen suits.

    Our lawsuit challenged the Alaska Gap as arbitrary and capricious, since the best scientific data in the rulemaking record do not demonstrate enough of a connection between specific actions resulting in emissions and an effect on the polar bear.

    The NAM supported the exemption for all states from permitting for greenhouse gas emissions that might affect polar bear habitat, not just every one but Alaska. The NAM was not challenging the decision to designate the polar bear as a threatened species.

    On December 16, 2008, the Department of the Interior amended the rule to eliminate the "Alaska gap" carve-out provision, but implemented a more narrow carve-out. The business groups decided not to challenge the more narrow carve-out, and on April 6, 2009, stipulated that our complaint could be dismissed. In the stipulation order, the court recognized that the business groups were Defendant-Intervenors in both the Center for Biological Diversity case and the Defenders of Wildlife case, which involve other issues affecting polar bears. See the Center for Biological Diversitysummary for details on these combined cases.


    Related Documents:
    NAM complaint  (August 27, 2008)

     

    Burlington N. and Santa Fe R.R. Co. v. United States   (U.S. Supreme Court)

    Apportionment of liability under CERCLA

    This case was consolidated on appeal with Shell Oil Co. v. United States. Click here for a summary of the two cases. The NAM filed two amicus briefs in these cases.


    Related Documents:
    NAM brief  (November 24, 2008)
    NAM brief  (July 25, 2008)

     

    Connecticut v. American Electric Power Co.   (2nd Circuit)

    Public nuisance from electric utilities

    The NAM joined with 10 other major business groups to urge the Second Circuit to reject lawsuits brought by 8 states against 6 major electric power utility companies over global warming. The states claim that the utilities, by emitting carbon dioxide from the process of burning fuel to produce electricity, contribute to global warming and create a public nuisance in their states. Our brief argued, and the lower court judge found, that this issue is a political question unsuitable for resolution in the courts. We warned that this suit, if allowed, would open the door to nuisance suits targeting any activity that uses fossil fuel for energy, such as companies using a fleet of cars or trucks, and that global warming and energy usage are international and national issues that are not amenable to solution through the case-by-case, patchwork approach of nuisance suits.

    This suit basically seeks to have the judiciary decide how fossil fuel energy should be used in this country. This issue is a political question that should be decided only after the kind of full debate and public participation that the political, legislative and administrative processes of government can provide. Energy-intensive industries include aluminum, chemicals, forest products, glass, metal casting, mining, petroleum refining and steel. Even farming and road building could be subject to nuisance suits. A second brief filed in the Open Space Institute case is virtually identical. See also: Open Space Institute, Inc. v. American Electric Power Co.

    On Sept. 21, 2009, two judges of the Second Circuit issued an opinion reversing the trial court and sending the case back for trial. They ruled that the claims are not political questions, that the plaintiffs have standing, and that they have stated claims under the federal common law of nuisance. The court found that a decision by a single federal court concerning a common law nuisance action brought by domestic plaintiffs against domestic companies for domestic conduct does not establish a national or international emissions policy. The court said that the relief sought in this case "applies in only the most tangential and attenuated way to the expansive domestic and foreign policy issues raised by Defendants." It said that well-settled principles of tort and public nuisance law provide guidance on how to handle the case. Until Congress steps in to preempt the field of the federal common law of nuisance, courts can decide cases involving such claims. The court found that there is no unified U.S. policy on greenhouse gas emissions, and that a court case would not interfere.

    With respect to standing, the court said that at this point in the litigation the plaintiffs "need not present scientific evidence to prove that they face injury or increased risk of injury, that Defendants' emissions cause their injuries, or that the remedy they seek will redress those injuries." It is enough that the states have an interest in safeguarding the public health and their own resources. The court found that the plaintiffs sufficiently alleged that their claimed injuries (global warming) are "fairly traceable" to the defendants' emissions.

    The judges also ruled that private parties are allowed to bring federal common law public nuisance suits, although the case precedent for this is limited. In addition, federal environmental law does not displace this common law nuisance action, since neither Congress nor the EPA has yet regulated greenhouse gases "in any real way."

    This litigation will now continue, but the case is being appealed to the Supreme Court. Major producers of electricity must go through lengthy and expensive governmental emission permitting procedures, and even when fully approved, plants will still be subject to suits challenging their emissions. This is an untenable situation that will lead to increased costs, conflicting court judgments and more expensive energy for manufacturers and the American public.

     

    Entergy Corp. v. EPA   (U.S. Supreme Court)

    Use of cost-benefit analysis in cooling water intake regulation


    Related Documents:
    Summarized in PSEG Fossil LLC v. Riverkeeper, Inc.  (April 1, 2009)
    NAM brief  (July 21, 2008)

     

    National Association of Manufacturers v. EPA   (EPA)

    Request for Reconsideration of Information Quality Act request regarding ozone

    The NAM filed a Request for Correction under the Information Quality Act asking that EPA correct scientific errors in a package of documents related to its proposed revision of the National Ambient Air Quality Standard for ozone. See summary linked below.

    EPA rejected, disagreed with, or otherwise denied every information quality error described in the NAM's request for correction. Consequently, on Oct. 14, 2008, the NAM submitted a 160-page Request for Reconsideration detailing a variety of problems with the EPA's studies and processes. Many of the epidemiological studies EPA staff found persuasive used research designs that were known at the time to be demonstrably substandard. Staff relied on complex statistical methods to coax data into revealing effects from ozone so small that humans cannot even recognize experiencing them. Finally, EPA staff insisted that certain studies provide valid and reliable evidence of respiratory health effects from ozone even though they rejected these same studies in their July 2007 draft Integrated Science Assessment for Oxides of Nitrogen.

    The appeal seeks more cogent answers than EPA provided in its response to the Request for Correction. The document also identifies a number of process changes that are necessary to ensure that future NAAQS reviews fully and consistently adhere to the Agency's Information Quality Guidelines and the Information Quality Act.

    On Jan. 15, 2009, EPA responded by "deferring consideration" of our request, pending resolution of the challenge to the ozone NAAQS rule in the U.S. Court of Appeals for the D.C. Circuit (see link below). NAM may resubmit this request after the conclusion of that litigation.


    Related Documents:
    NAM Request for Reconsideration  (October 14, 2008)

     

    Open Space Institute, Inc. v. American Electric Power Co.   (2nd Circuit)

    Public nuisance from electric utilities

    This is a consolidated case with Connecticut v. American Electric Power Co. Click here for the full summary.

     

    PSEG Fossil LLC v. Riverkeeper, Inc.   (U.S. Supreme Court)

    Use of cost-benefit analysis in cooling water intake regulation

    The Second Circuit ruled that EPA could not use cost-benefit analysis when implementing certain provisions of the Clean Water Act. The regulations at issue address existing power plants, but the court's ruling directly jeopardized favorable regulations governing all other users of cooling water, such as in the steel, chemical, paper and petroleum industries. Indeed, all consumers of electric power are likely to be impacted by an increase in the cost of electricity.

    The NAM joined with four other organizations in an amicus brief urging the Supreme Court to hear this appeal. The issue involves Section 316(b) of the Clean Water Act, which establishes requirements for cooling water intake structures at electric power plants, in order to minimize the impact of such structures on fish. The Second Circuit ruled that EPA choose the most effective technologies for minimizing the impact of these structures that the affected companies as a whole "can reasonably bear," without any consideration of the costs and benefits of that technology, unless two different technologies "produce essentially the same benefits."

    The Second Circuit's ruling conflicted with that of another federal circuit as well as EPA's own interpretation of the statute. Our brief argued that this interpretation may affect thousands of industrial, commercial and institutional facilities that use cooling water. We also argued that the EPA acted within its authority to take into account "restoration measures" that enhance the numbers and conditions of the affected fish, but the Second Circuit rejected that as an acceptable method of minimizing the adverse impact of water intake structures on aquatic life. The operative statutory language is unclear and the EPA's interpretation is entitled to judicial deference.

    Third, we argued that the Second Circuit's decision was based in part on its interpretation of Section 301 of the Clean Water Act, which governs wastewater treatment requirements. This erroneous interpretation had the potential to affect many more facilities than just the electric generating plants that were the subject of this case, and even many more than plants that have cooling water intake structures.

    After the Supreme Court agreed to hear this appeal, along with Entergy Corp. v. EPA (No. 07-588) and Utility Water Act Group v. Riverkeeper (No. 07-597). We filed a brief on the merits of the legal issues on appeal on July 21, 2008.

    On April 1 in a 6-3 decision, the Supreme Court held that EPA permissibly relied on cost-benefit analysis in setting the national performance standards and in providing for cost-benefit variances from those standards. Even though the legislation did not expressly provide for consideration of costs, it was within the EPA’s discretionary authority to do so, and the courts will uphold a reasonable exercise of that discretion.

     

    Shell Oil Co. v. United States   (U.S. Supreme Court)

    Arranger liability under CERCLA for sale of useful goods

    The Ninth Circuit decided that a manufacturer of a hazardous substance is jointly and severally liable under CERCLA for any spill or misuse of the product by a third party after the substance has left the custody and control of the manufacturer. However, the product in question was sold as a useful commercial product to a third party, and not as hazardous waste. The seller relinquished control at the point of delivery, and the material subsequently leaked and contaminated some soil. The Ninth Circuit’s ruling means that a seller of a useful product that may be hazardous has actually “arranged for the disposal” of the product within the meaning of CERCLA, and is thus liable for the cleanup costs.

    The Supreme Court reversed, on May 4, 2009. The plain meaning of the statute requires that a company should have had an intent to arrange for the disposal of a hazardous material to be found liable as an "arranger." The NAM's amicus brief urging the Court to review the case had made this same argument, as opposed to the Ninth Circuit's much looser test that imposed liability if disposal was merely a foreseeable byproduct of the transaction.

    The Shell case was consolidated with Burlington N. & Santa Fe R.R. Co. v. United States, which raised an issue relating to the apportionment of responsibility to various parties under CERCLA. The Ninth Circuit ruled that it is possible to divide liability among various parties that may have contributed to the contamination, but that there was insufficient evidence to do so here; thus, both the railroad and Shell were held to be jointly and severally liable. The Supreme Court reversed this ruling as well, saying that the trial court correctly found that liability could be apportioned, and that the railroad was liable for 9% of the cleanup costs. It ruled that apportionment is appropriate when the evidence is sufficient to provide a reasonable basis to do so.

    The NAM argued that the heightened evidentiary standards established by the Ninth Circuit for demonstrating that there is a basis for apportioning harm are inconsistent with the standards set forth in the Restatement (Second) of Torts and with the approach adopted by other circuit courts, which have applied the Restatement approach in the CERCLA context. Additionally, we contended that apportionment in this case would be consistent with the policies underlying CERCLA, especially when one considers that concerns about the potentially harsh impacts of joint and several liability led Congress to delete any specific reference to joint and several liability in the statute.


    Related Documents:
    NAM brief  (November 24, 2008)
    NAM brief  (July 25, 2008)

     

    Summers v. Earth Island Institute   (U.S. Supreme Court)

    Whether plaintiffs have standing to directly challenge agency regulations

    In 2002, as part of President Bush’s Healthy Forest Initiative, the U.S. Forest Service issued regulations that excluded small timber-clearing projects from the requirements of public notice, comment, and administrative appeal under both the National Environmental Policy Act (NEPA) and the agency’s internal administrative appeal process. In September 2003, the Forest Service decided to allow salvage logging of 238 acres which had been destroyed in a fire the previous summer in California’s Sequoia National Forest. Under its new regulations, the Forest Service did not conduct a NEPA environmental review before making its decision and did not allow any administrative appeals of the decision.

    Several environmental groups brought suit under the Administrative Procedure Act (APA), arguing that the Forest Service’s new regulations were facially invalid and that the decision to allow salvage logging was improper. Shortly after the suit was filed, the Forest Service withdrew its decision to allow the salvage logging project. In July 2004, the parties entered into a partial settlement agreement in which the Forest Service agreed not to reauthorize the sale without first preparing a NEPA environmental review for the project. On their part, the environmental groups agreed to “dismiss with prejudice” their claims related to the salvage logging project, although they continued pursuing the suit as a direct facial challenge to the Forest Service regulations.

    In July 2005, a federal district court in California issued a nationwide injunction against the new Forest Service regulations, which the 9th Circuit upheld in August 2006.

    On March 3, 2009, a sharply divided Supreme Court reversed, holding that the environmental groups lacked standing to challenge the Forest Service regulations. The Court reasoned that after the controversy regarding the salvage logging project had been settled, there was no longer any concrete and particularized injury to the groups. An organization like this must show an “imminent and concrete harm” to its members’ interests at the time the suit is filed.

     

    Alaska Eskimo Whaling Comm'n v. Salazar   (9th Circuit)

    Validity of permit for exploratory oil and gas drilling in Alaska

    The Department of the Interior approved an exploratory oil and gas drilling permit in the Beaufort Sea north of Alaska that was then challenged by various groups. The Department conducts a 4-stage process: (1) preparing a five-year leasing program, (2) selling leases, (3) permitting exploration in the leased regions, and (4) allowing development and production in the leased region. This challenge involved the exploration phase, and came after the Department had prepared a 1,001-page environmental impact statement in the preparation phase, a 4-volume environmental impact statement in the sales phase, and a 109-page environmental assessement of the exploration plan. Finding that the exploration would cause no significant impact on the environment, it approved the plan.

    The NAM joined with other business groups in filing an amicus brief urging the federal court not to block the exploratory drilling. In light of the massive investments needed and already made in Outer Continental Shelf (OCS) development, and the shortness of time during the Alaskan summer, it was important that exploratory drilling not be disrupted by this litigation. Congress intended to promote the "swift, orderly and efficient exploration of our almost untapped domestic oil and gas resources in the Outer Continental Shelf," which is predicted to account for more than 40% of domestic oil production and 25% of natural gas production by 2012. Allowing exploratory drilling is an important step in the process of utilizing the OCS to move toward greater energy self-sufficiency, to provide economic stimulation, to improve national security, to maintain a favorable balance of payments in world trade, and to create jobs.

    We also argued that an environmental impact statement is not required for an exploration plan, based upon the fact that an EIS was completed at an earlier stage.

    On April 7, the NAM filed another amicus brief on the merits, making many of the same points previously made. On May 13, the court ruled that the Minerals Management Service met its obligations to take a "hard look at the consequences of its actions" and to provide a "convincing statement of reasons to explain why a project's impacts are insignificant." The court found that the agency's decision was supported by substantial evidence on the record and that it did not act arbitrarily.


    Related Documents:
    NAM brief  (April 7, 2010)
    NAM brief  (January 6, 2010)

     

    Comer v. Murphy Oil U.S.A.   (5th Circuit)

    Whether global warming lawsuit is a political question

    The NAM and other organizations supported an appeal of an adverse decision by the U.S. Court of Appeals for the Fifth Circuit in a global warming public nuisance case. The plaintiffs, Mississippi residents and property owners, alleged that the emissions from more than 150 energy and manufacturing companies increased global warming and contributed to the severity of damages resulting from Hurricane Katrina. Our brief in support of the appeal argued that the plaintiffs' theory of liability would dramatically expand tort law beyond anything ever recognized because of the tenuous link between the alleged conduct and the alleged harm. In addition, this case involves a complex regulatory matter requiring the balancing of economic, environmental and international interests, and is constitutionally the domain of the political branches of government, not the courts.

    The trial court had dismissed the case on these grounds, but a three-judge panel of the Fifth Circuit reversed, allowing the case to proceed. The NAM and the defendants wanted all the judges of the Fifth Circuit to review this ruling. That court did agree to review the 3-judge ruling, and arguments were scheduled for May 24, 2010.

    On May 10, the NAM filed an additional brief arguing to a larger group of judges that the goal of this lawsuit is less to obtain compensation than to achieve the regulation of greenhouse gas emissions through litigation. We described how plaintiffs have tried to define a "nuisance" broadly to encompass the kind of claims that have largely been rejected by other courts. In addition, these kinds of political questions should be handled as a public policy debate, not as an adversarial proceeding in court.

    Subsequently, the court announced that another judge had been recused from the case, destroying the quorum. On May 28, the court dismissed the appeal, and since it had previously vacated the 3-judge panel's ruling, the trial court's decision dismissing the lawsuit stands. This very unusual procedural development means that the appellate ruling that the NAM opposed was nullified without a formal opinion from a majority of the judges. The case was appealed to the Supreme Court, which declined to review it.

    The plaintiffs later filed a similar suit, but the district court dismissed it because the claims had already been dismissed in the first case. In addition, the judge found that the parties had no standing to sue, since they cannot show a sufficient connection between the defendants' emissions and the plaintiffs' property damage. The court also found the claims non-justiciable political questions that have no "judicially discoverable and manageable standards for resolving" them, and because these policy determinations are entrusted to the EPA.


    Related Documents:
    NAM brief  (May 7, 2010)
    NAM brief  (December 4, 2009)

     

    Consumer Electronics Association v. City of New York   (S.D.N.Y.)

    Validity of New York's oppressive e-waste law

    New York City adopted a very strict electronic waste collection law that mandates manufacturers of computers, monitors, televisions, laptops, portable digital music players and other equipment to set up door-to-door collection programs and collect a prescribed amount of discarded products every year, or pay a stiff fine. The law also imposed retroactive liability for products already sold, and requires manufacturers to pick up products made by other manufacturers. Only manufacturers are held liable; distributors, retailers, consumers, and the City of New York are not responsible for sharing in the cost of this waste collection program.

    The Consumer Electronics Association and the Information Technology Industry Council sued the city, and the NAM put together a coalition of business groups to file an amicus brief in support of a motion for a preliminary injunction against the law. Our brief warned that the proliferation of state and local laws such as New York City's E-Waste law would impose a severe burden on manufacturers in violation of the Commerce Clause of the Constitution, in part because it would shift costs that should properly be borne by the city's own residents and taxpayers to out-of-state manufacturers. The law could disrupt and discourage voluntary industry efforts, and penalizes companies that have no control over consumer decisions regarding the disposal of their products.

    In many ways New York's law is much different from other local and state laws, and the NAM is concerned that many products other than consumer electronic products are being targeted for similar treatment. This is a long-term issue that will be addressed in a variety of ways, and the NAM will be active in helping to develop reasonable solutions.

    Late in May, New York State passed a new electronics recycling law that preempts all local regulations like New York City's. On June 28, 2010, the court approved a settlement agreement dismissing the litigation. The parties agreed to work together to develop an accessible system to collect used electronics in New York City.


    Related Documents:
    NAM brief  (December 11, 2009)

     

    General Electric Co. v. Jackson   (D.C. Circuit)

    Constitutionality of EPA's Unilateral Administrative Orders

    When EPA determines that an environmental cleanup is required at a contaminated site, it has three options: (1) conduct the cleanup itself and file suit to recover the costs, (2) get a court order, or (3) issue a Unilateral Administrative Order (UAO) compelling a potentially responsible party to undertake a specified action. This case involves the constitutionality of UAOs, which are issued without any right to a hearing prior to their issuance.

    The NAM filed an amicus brief supporting GE in this case, arguing that such orders constitute immediate and substantial deprivations of property without any opportunity for a pre-deprivation hearing before a neutral decision-maker. The lower court improperly found that the cost to EPA of providing a hearing to be substantial (if all UAOs are challenged), but the court did not consider the cumulative effect of UAOs on business in the balance. We also questioned the court's ruling that constitutional rights are less where the company has not shown that EPA's administrative procedure result in an unacceptable rate of error. We argued that no case requires a company to show that an agency has erred on the merits of a case in order to establish a due process violation. Furthermore, many potential defendants do not have substantial resources to reallocate from job creation, product development or other productive uses in order to vindicate their constitutional rights.

    On June 29, 2010, the court affirmed the lower court's ruling, finding that manufacturers have the option of refusing to comply with a UAO, thus forcing the EPA to go to court to enforce the order. It also did not feel that the losses experienced by a company subjected to potentially improper UAOs (stock declines, loss of brand value or increasing costs of financing) were enough to constitute violations of due process.

    Specifically, it ruled that a company that refuses to comply with a UAO has several safeguards under the law: a court must find (1) that the UAO was proper, (2) that the company "willfully" failed to comply "without sufficient cause," and (3) that, in the court's discretion, fines and treble damages are appropriate. The company has protections if it reasonably believes the UAO is improper.


    Related Documents:
    NAM revised brief  (December 30, 2009)
    NAM brief  (September 22, 2009)

     

    In re Shell Gulf of Mexico, Inc.   (Environmental Appeals Bd.)

    Whether greenhouse gas considerations are proper in EPA permitting decisions

    On March 31 and April 9, 2010, the EPA issued permits for exploratory oil and gas drilling operations in the Chukchi and Beaufort Seas north of Alaska. Various environmental groups challenged the permits before EPA's Environmental Appeals Board, arguing that carbon dioxide that will be emitted during the exploration is currently subject to regulation, despite EPA's conclusion that greenhouse gases will not be subject to regulation until January 2, 2011, when the motor vehicle rule takes effect.

    The NAM, American Petroleum Institute and Independent Petroleum Association of America filed an amicus brief 6/25/2010 arguing that challenges to EPA's regulatory decisions regarding whether to regulate greenhouse gases should be directed to those notice-and-comment rulemakings, not raised in the context of permit decisions. The challengers should either petition EPA for reconsideration of its "subject to regulation" ruling, or go to court to litigate over that regulation. The Environmental Appeals Board does not have the legal authority to review EPA regulations, but may only determine a challenged permit's compliance with the Clean Air Act and applicable regulations.

    In December, 2010, the Appeals Board invalidated the permits and sent them back to the EPA, which granted them in September, 2011.


    Related Documents:
    NAM Reply Brief  (August 2, 2010)
    NAM brief  (June 25, 2010)

     

    Monsanto Co. v. Geertson Seed Farms   (U.S. Supreme Court)

    Standards for injunctions under NEPA

    Genetically engineered crops are subject to approval by the Animal and Plant Inspection Service of the U.S. Department of Agriculture, which must prepare an Environmental Assessment to be approved for commercial use. Environmental groups brought suit under the National Environmental Policy Act (NEPA) arguing that the assessment was inadequate, and the trial court issued a permanent injunction against the use of the genetically engineered product (alfalfa) until a more extensive environmental impact statement could be prepared.

    The Supreme Court decided that environmental plaintiffs are required to show irreparable harm to obtain the injunction. A permissive ruling would have made it much easier for environmental plaintiffs to stop the sale of certain products that are subject to government approval.

     

    Native Village of Point Hope v. Salazar   (9th Circuit)

    Validity of permit for exploratory oil and gas drilling in Alaska

    Please refer to the summary of the Alaska Eskimo Whaling Comm'n v. Salazar case.


    Related Documents:
    NAM brief  (April 7, 2010)

     

    North Carolina v. Tennessee Valley Auth.   (4th Circuit)

    Public nuisance from electric utility

    A federal judge imposed strict emissions controls on TVA power plants in Tennessee and Alabama based on a finding that the plants created a "public nuisance" in North Carolina under state law. The controls went far beyond state and federal emissions controls.

    On August 18, 2009, the NAM and other business groups supported TVA's appeal of this ruling to the Fourth Circuit, arguing that the state claims are preempted by the comprehensive interstate air pollution control scheme of the Clean Air Act, and that virtually any source of emissions in the country could be subjected to arbitrary case-by-case claims that they contribute to a public nuisance. The EPA established several major programs that already address interstate pollution, including the Clean Air Interstate Rule, the Nitrogen Oxide Budget Trading Program, the acid rain rules, the regional haze rules and the rules requiring permits for emissions. The lawsuit also amounts to a collateral attack on the national ambient air quality standards for particulate matter and ozone.

    This litigation is similar to that brought by various states against 5 major electric utilities and recently decided by the Second Circuit. See Connecticut v. American Electric Power. Such litigation is a dangerous threat because it not only interferes with the uniform regulation of emissions but it also expands the law of public nuisance in a way that could be used against many other industries.

    On July 26, 2010, the Fourth Circuit overturned the district court, ruling that Congress is the policymaking branch of government responsible for setting national standards, and that public nuisance law does not encompass an activity expressly permitted and extensively regulated by both federal and state government. It also ruled that one state is not able to apply its home state law to activities occurring in another state.

    The court's opinion highlights the chief problem created by this kind of litigation: "To replace duly promulgated ambient air quality standards with standards whose content must await the uncertain twists and turns of litigation will leave whole states and industries at sea and potentially expose them to a welter of conflicting court orders across the country." In addition, it ruled that, "An activity that is explicitly licensed and allowed by Tennessee law cannot be a public nuisance." This decision is an important milestone in our fight against the use of expansive and unwarranted legal theories by trial lawyers against manufacturers.


    Related Documents:
    NAM brief  (August 18, 2009)

     

    American Electric Power Co. v. Connecticut   (U.S. Supreme Court)

    Public nuisance litigation against 6 electric utilities

    The Supreme Court reversed a very troubling decision by the U.S. Court of Appeals for the 2nd Circuit that allowed 8 states to sue 6 major electric utility companies under a public nuisance theory. The theory is that each state is adversely affected by climate change caused in part by the utilities’ electricity-generating plants, and the courts should impose emissions limits.

    The NAM and other business groups filed an amicus brief urging review of the case. We argued that only the political branches of government are equipped to resolve the complex and dynamic issues relating to climate change regulation, that the plaintiffs’ legal claims exceed the boundaries of public nuisance litigation, and that judges and juries are not empowered or competent to exercise extraordinary regulatory powers without clear boundaries and guiding principles.

    Our brief argued that this case is far from the "ordinary tort suit" that the lower court thought it was. Instead, it is quite extraordinary, and the judiciary "has no experience dealing with public nuisance litigation created by a global phenomenon resulting from the release of greenhouse gases by millions, if not billions, of sources (including natural events) worldwide -- very few of which are subject to the jurisdiction of American courts or under the control of these defendants." It is inappropriate for courts to entertain standardless public nuisance litigation in an area that should be addressed by the political branches of government.

    Click here for a summary of the Second Circuit's decision and the NAM brief in that court.

    The Supreme Court's decision to review this case was announced on Dec. 6, 2010.

    On 2/7/11, we filed a brief on the merits, arguing that courts cannot resolve political questions like this because there are no judicially discoverable and manageable standards to handle them, and courts have neither the expertise nor the authority to make those judgments. Public nuisance claims have been limited by geographical boundaries and defined circumstances, and courts should not step into legislative and executive branch issues to try to address public nuisance cases of global dimensions. A public nuisance is "the right thing in the wrong place, like a pig in the parlor instead of the barnyard." But were courts to impose judicial limits on electricity generating plants, they would be removing the geographic limitation and would be acting without a standard. In addition, public nuisance cases involve defined circumstances where the controversy can actually be resolved by an abatement order. Such an order in this case cannot be designed with any standard that would project or evaluate its efficacy. This litigation is not an "ordinary tort suit," but rather involves wholly new claims that are unbounded by any rational constraints, and courts should leave their resolution to the legislative and executive branches.

    On June 20, 2011, the Court ruled that EPA action to regulate greenhouse gases displaces any federal common-law right to seek abatement of GHG emissions. There is no need for the courts to develop federal common law when Congress addresses a question of national concern, such as the regulation of air and water. It does not matter whether EPA actually exercises its authority to regulate GHGs; as long as the field of GHG regulation has been delegated to EPA, federal common law is displaced.

    The NAM had urged the Court to overturn the lower court’s extreme ruling, and the Court agreed, up to a point. While it rejected the federal common-law claims, it left open the possibility that such a suit could be brought under state nuisance law. It sent the case back for the lower court to consider whether the Clean Air Act preempts state-law suits as well.


    Related Documents:
    NAM brief on the merits  (February 7, 2011)
    NAM brief  (September 2, 2010)

     

    Center for Biological Diversity v. EPA   (D.C. Circuit)

    Environmental group challenge to greenhouse gas tailoring rule

    As part of our continuing efforts to make sure that EPA does not exceed its authority in the regulation of greenhouse gases from stationary sources of emissions, the NAM and 15 other business organizations in our coalition has moved to intervene in a lawsuit brought by an environmental group challenging EPA's power to focus on the largest emitters first. If the environmental group is successful, EPA and various states may be required to apply much more stringent criteria to permitting programs, which could impose enormous costs from foregoing operations or installing emission-control technology. Our motion to intervene does not concede that EPA's decision to regulate greenhouse gases is legally permissible.

    The Center for Biological Diversity (CBD) sought a court order holding this case in abeyance pending resolution of other challenges to the tailoring rule, but the court rejected that request on June 15, 2011. The next day, CBD voluntarily moved to dismiss this case.

    The NAM and other organizations have also filed a separate petition to review the EPA's tailoring rule. For a complete listing of NAM cases against EPA, click here.


    Related Documents:
    NAM motion to intervene  (June 28, 2010)

     

    Center for Biological Diversity v. Salazar   (U.S. District Court for the District of Columbia)

    Intervention in environmentalists' Challenge to Interior's polar bear rule

    The NAM and other business organizations moved to intervene in a case brought in California by three environmental organizations which challenged the Department of the Interior's rule relating to naming the polar bear a threatened species under the Endangered Species Act (ESA). Our involvement did not challenge or support that designation, but supported the Department's conclusion not to require special permits for companies that conduct greenhouse gas-emitting activities. Any activity that harms a threatened species may constitute an "incidental taking" and may require a special Fish & Wildlife Service (FWS) permit. Under the new rule, the government provided an exception for greenhouse gas emissions, since their effect on global warming cannot be traced to any particular activities in particular locations.

    In a separate case, we challenged a particular provision that did not exempt the state of Alaska from the greenhouse gas exception. See American Petroleum Institute v. Salazar. After we filed that case, EPA amended the rule to eliminate the "Alaska gap" carve-out provision, but left in greenhouse gas requirements for operations within the current range of the polar bear. We continued to challenge that limited ruling (see Amended Complaint below).

    On 12/3/08, our motions to transfer and consolidate this case with others filed in federal court in the District of Columbia were granted. This case was consolidated with Defenders of Wildlife v. Dep't of the Interior, which challenged the Department's Section 4(d) rule as having been promulgated without conducting an environmental impact analysis and as not providing for the conservation of the polar bear. Since these cases have been consolidated, our summary is consolidated here as well.

    In 2010, we filed a memorandum and reply brief supporting the decision not to extend liability for affecting polar bears to activity occurring outside the current range of the bear. This will allow energy and industrial activity permitted under the Clean Air Act, the application of pesticides allowed under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), and other economic activities. The Endangered Species Act is not the proper mechanism for controlling carbon emissions. The U.S. Fish and Wildlife Service's decision is reasonable and supported by the statute.

    On Nov. 4, 2010, the district court judge rejected the Service's view that only species that are in imminent danger of extinction are "endangered" under the law, and ordered the Service to reconsider its rule in light of the ambiguity of that term. The statute mandates consideration of 5 factors and the best available science to determine whether a species is endangered, and the agency should consider them and issue a new interpretation for court review. The existing rule will remain in effect while this new interpretation is under review.

    After a hearing on April 13, 2011, the judge ordered the parties to submit briefs asking whether it needs to decide all the issues in the case if it remands the case to the FWS to comply with NEPA or ESA. The NAM's brief, filed June 3, 2011, supported the Fish & Wildlife Service's view that the rule complies with all relevant statutes, but if not, the appropriate remedy is to send the case back to the agency for further action without throwing out the current version. Otherwise, thousands of otherwise lawful activities outside the polar bear's current range would be called into question and possibly generate lawsuits, unnecessary administrative actions and delays, and potential liability. There are many actions that FWS could take that would address judicial concerns about its actions, such as providing further reasons or further NEPA analysis.

    On June 30, District Judge Sullivan affirmed the legality of FWS's listing of the polar bear as a "threatened species" under the ESA.

    On Oct. 17 and Nov. 18, the judge upheld the final rule under the Endangered Species Act, vacated the final rule and reinstated the Interim Final 4(d) Rule. He remanded the rule to FWS to conduct its NEPA review and to publish a final Environmental Assessment by December 6, 2012. The court ruled that the ESA does not require FWS to regulate greenhouse gases, and that the Service had a rational basis for its decision, despite the fact that it may limit the ability of environmental groups to sue greenhouse gas emitters under the ESA.


    Related Documents:
    NAM Supplemental Brief  (June 3, 2011)
    NAM Reply Brief  (August 16, 2010)
    NAM Memorandum  (March 26, 2010)
    NAM Amended Complaint  (March 13, 2009)
    NAM Brief in Support of Motion to Transfer Polar Bear Litigation to Federal Court in D.C  (September 29, 2008)

     

    National Corn Growers Ass'n v. EPA   (U.S. Supreme Court)

    Right to EPA hearing prior to revoking pesticide tolerances

    When the EPA unilaterally revoked a pesticide tolerance under the Federal Food, Drug and Cosmetic Act (FFDCA), it arguably violated the right of pesticide manufacturers to an adjudicatory hearing. The action effectively banned the pesticide, and whether there is a right to a hearing in such circumstances has ramifications for pharmaceuticals, medical devices, food and beverages and certain consumer products as well.

    Hearings are required whenever there are material issues of fact that are disputed between the government and the manufacturer. Despite four decades of safe product use in this case, EPA made changes in its risk assessment assumptions without providing a hearing. The D.C. Circuit deferred to EPA's decision, and the case was appealed to the Supreme Court.

    The NAM and other groups filed an amicus brief 3/18/11 urging the Supreme Court to review this case. We argued that administrative agency hearings before a neutral factfinder are essential to due process, and that the lower court's ruling contravenes the FFDCA's hearing requirements. American industry relies on hearing rights, and the ruling in this case could affect not only rights under this statute, but also under statutes and regulations such as those covering packaging (Fair Packaging and Labeling Act), seabed mining (National Oceanic and Atmospheric Administration regulations), the importation or exportation of natural gas (Department of Energy regulations), tax levies on property (IRS regulations), and air carrier agreements (Department of Transportation rules).

    On May 31, 2011, the Court declined to hear the appeal, leaving the lower court's decision in place.


    Related Documents:
    NAM brief  (March 18, 2011)

     

    Natural Resources Defense Council v. EPA   (D.C. Circuit)

    Validity of EPA's guidance on ozone fee waivers

    On January 5, 2010, EPA published guidance to the states that allowed them to waive fees under Section 185 of the Clean Air Act relating to compliance with ozone emissions regulations. The guidance assisted states in preparing their own State Implementation Plans. It allowed states to either use the Section 185 fee program or "an equivalent alternative program" that is "consistent with the principles of section 172(e)" of the Clean Air Act.

    NRDC sued EPA in March to argue that EPA's action allowing an equivalent, alternative program was arbitrary and capricious, and that allowing fee waivers if an ozone nonattainment area meets an 8-hour testing standard instead of a 1-hour standard was also improper. An 8-hour standard is more protective of the environment than a 1-hour standard.

    In April, the NAM and 4 other business groups moved to intervene in this suit in support of EPA. That motion was granted. The case affects fees that were then set at $8,766 per ton of volatile organic compounds and nitrogen oxides emitted above a baseline amount from major stationary sources within areas of the country that are classified as severe or extreme nonattainment areas.

    The NAM and other intervenors filed a brief on Jan. 31, 2011, arguing that EPA's interpretation is reasonable and consistent with congressional intent. It is important that states have the flexibility to design equivalent alternative programs that do not unfairly and inappropriately penalize well-controlled major stationary sources of ozone. Companies that have already dramatically reduced ozone emissions are unable to make further reductions without a harmful drop in productivity, and states should be able to develop alternative programs that focus on sources that are better able to achieve further reductions.

    On July 1, the court rejected EPA's arguments that the plaintiffs lacked standing, that the Guidance did not qualify as final agency action, and the plaintiffs' claims were unripe for judicial review. It then ruled that the Guidance qualified as a legislative rule that EPA was required to issue through notice-and-comment rulemaking, and that one of its features -- the "attainment alternative" -- violated the plain language of the Clean Air Act. The court vacated the EPA's guidance and ruled that it could not offer an alternative that allows violations of the old 1-hour standard to continue. The law does not allow EPA to retreat from requirements it sets that prove to be too stringent and unnecessary to protect public health, and EPA must go back to Congress if it wants to do so.


    Related Documents:
    NAM brief  (January 31, 2011)
    NAM motion to intervene  (April 5, 2010)

     

    Portland Cement Ass'n v. EPA   (D.C. Circuit)

    Challenge to EPA's regulation of emissions during Startups, Shutdowns and Malfunctions

    The NAM is part of the SSM Coalition, named for EPA's new Clean Air Act regulations governing special circumstances often present during startup, shutdown or malfunction (SSM) of process equipment or pollution control equipment. On Jan. 4, 2011, the Coalition moved to file an amicus brief in litigation brought by the Portland Cement Association which challenges 2 EPA regulations governing Portland Cement plants. Our particular interest is the rule which establishes national emission standards for hazardous air pollutants (NESHAPs) under Section 112 of the Act.

    EPA's new approach to establishing NESHAPs and its novel interpretations of Section 112 apply not only to the portland cement case, but it plans to adopt similar requirements for a variety of other sectors, including chemical plants, pulp and paper mills, steel pickling operations and wood furniture manufacturing.

    The court granted permission to file an amicus brief, and we did so on May 23, 2011. The brief argued that EPA's MACT standard cannot be met by any existing facility and that EPA's standard does not satisfy the statutory requirement that it be achievable.

    We also argued that EPA did not justify its decision to no longer recognize the special circumstances that arise during equipment malfunctions. Reasonable performance standards should recognize that sudden, unexpected failures of a manufacturing process or pollution control technology are not part of a source's normal operating mode, and should not be subject to harsh EPA penalties when they occur. EPA could have considered alternatives, such as work practice standards, that would address deviations from normally achievable emissions standards that may occur during periods of malfunction.

    Finally, we argued that EPA should have recognized that differences in the source of raw materials makes compliance with a uniform national MACT standard difficult or impossible. It was arbitrary and capricious for EPA fail to make allowances for emissions based on the sources of supply.

    On Dec. 9, 2011, the court remanded the NESHAP rule to EPA for reconsideration, but rejected all other issues that challenged EPA's actions.


    Related Documents:
    NAM brief  (May 23, 2011)
    NAM Motion to File Amicus Brief  (January 4, 2011)

     

    Wilderness Society v. U.S. Forest Service   (9th Circuit)

    Intervention in environmental suits challenging federal NEPA compliance

    For many government projects involving manufacturers, the National Environmental Policy Act requires federal agencies to evaluate the environmental impact of their actions, and these evaluations are increasingly challenged in court by environmental groups. In such litigation, courts usually allow manufacturers to intervene in the suits to help defend the agency’s actions and to help the court understand the impact of the case on their business. If environmental analyses are deficient, the projects cannot proceed.

    This case involves a Ninth Circuit procedure that generally bars such intervention. The practice, informally known as the “federal defendant rule,” is based on the premise that only the federal government can be held liable for failing to perform environmental assessments, and that private parties do not have a significant protectable interest in the litigation.

    The NAM and other groups filed an amicus brief 10/21/2010 arguing that the rule should be abandoned. Private parties clearly have a substantial interest in defending agency actions under NEPA, and Federal Rules of Civil Procedure 24(a) allows such a party to intervene. We cited many examples where private parties have such interests, including development projects that involve work in wetlands, the construction of natural gas pipelines or nuclear power plants, and the development of genetically engineered crops.

    Our concern is not just about the application of the federal defendant rule to projects subject to NEPA, but also to the fact that it has been extended to other statutes, including the Endangered Species Act, the National Forest Management Act, and the Plant Protection Act. Intervention should be allowed to parties with significant interests in the outcome of such litigation. Often, private parties have massive investments at stake.

    On 1/14/2011, the Ninth Circuit rejected the federal defendant rule and said that lower courts should not automatically reject non-federal parties from intervening in litigation at the merits stage, or liability phase, of a law suit. Instead, courts should consider whether the party has a legally protectable interest in the litigation and a connection between that interest and the claims in the case. The decision was en banc, involving 11 of the judges in the Ninth Circuit, and provides great assurance that the federal defendant rule will no longer be used in that circuit. Thirty-seven amicus groups urged this result, and only one other federal circuit court of appeals hangs on to the federal defendant rule.


    Related Documents:
    NAM brief  (October 21, 2010)

     

    Alec L. v. Jackson   (D.D.C.)

    Litigation seeking to impose 6% annual reductions in greenhouse gases under "public trust" theory

    An environmental group in California spearheaded litigation and administrative proceedings in all fifty states, as well as this lawsuit in federal court against the EPA and the Departments of the Interior, Defense, Agriculture, Energy and Commerce, to try to force government to impose further greenhouse gas emissions reduction policies under a "public trust" theory. The federal suit was brought by WildEarth Guardians, Kids vs. Global Warming and five individuals who sought to preempt the federal legislative and regulatory processes by getting a federal judge to compel massive societal changes that they believe are necessary to address climate change.

    On Oct. 31, 2011, the NAM moved to intervene in this litigation, because the law suit, if successful, would have a dramatic effect on manufacturing processes and investments, increasing production and transportation costs, decreasing global competitiveness and driving jobs and businesses abroad. The litigation, which seeks a minimum 6% reduction in carbon dioxide emissions every year, would be devastating to the entire U.S. economy.

    Along with our motion to intervene, we asked the court to dismiss the law suit for various reasons: (1) the case presents political questions that the courts are not able to resolve, (2) the plaintiffs lack standing because their injuries are too speculative and not likely to be reduced by the relief sought, (3) the public trust doctrine does not exist under federal law and the claims have been displaced by federal regulation in this area, and (4) the doctrine does not apply to the atmosphere or require a duty to regulate greenhouse gas emissions.

    A hearing was held before Judge Edward Chen on November 30, 2011 to determine whether to grant the government's request that the case be transferred from a federal court in northern California to one in the District of Columbia. The NAM supported this request. On December 6, the court agreed, ordering the case transferred. A hearing was held on April 2, and the judge granted our motion to intervene. A hearing was held on May 11 to consider our motion to dismiss the case.

    On May 31, Judge Wilkins granted our motion to dismiss. He ruled that public trust claims are grounded in state, not federal, law, and the allegations in this suit represent "a significant departure" from the public trust doctrine as it has been traditionally applied to water-related activities. Federal courts may exercise jurisdiction in a case if it raises a federal question, but the public trust doctrine is a matter of state law. The judge also ruled that even if the doctrine had been a federal common law claim at one time, it has been displaced by federal regulation under the Clean Air Act. Citing the American Electric Power case from the Supreme Court, he found that federal judges may not set limits on greenhouse gas emissions "in the face of a law empowering EPA to set the same limits, subject to judicial review only to ensure against action arbitrary, capricious, . . . or otherwise not in accordance with the law."

    The court closed with a suggestion that the parties need not "stop talking to each other once this Order hits the docket. All of the parties seem to agree that protecting and preserving the environment is a more than laudable goal, and the Court urges everyone involved to seek (and perhaps even seize) as much common ground as courage, goodwill and wisdom might allow to be discovered."

    That is certainly a laudable suggestion, as the plaintiffs have filed administrative petitions in 39 states and the District of Columbia to seek similar relief at the state level, and 31 of those have already been denied. Suits were brought in 10 other states, and were dismissed in 9 of them, many with appeals or amended complaints in the works.

    However, the plaintiffs filed a motion for reconsideration of the court's ruling, and the NAM filed an opposition on 7/16/12. The motion was denied on 5/22/13.


    Related Documents:
    NAM Opposition to Motion for Reconsideration  (July 16, 2012)
    NAM Reply brief Supporting Motion to Dismiss  (April 23, 2012)
    NAM brief re Intervention  (March 26, 2012)
    NAM Opposition to Plaintiffs' Motion for Preliminary Injunction  (November 2, 2011)
    Declaration of NAM chief economist Dr. Chad Moutray in support of intervention  (October 31, 2011)
    NAM Motion to Dismiss  (October 31, 2011)
    NAM Motion to Intervene  (October 31, 2011)

     

    American Chemistry Council v. EPA   (D.C. Circuit)

    "Grounds arising after" challenge to EPA regulations relating to greenhouse gases

    The NAM and 16 other business associations filed 4 petitions for review in the U.S. Court of Appeals for the D.C. Circuit, challenging EPA regulations from 1978, 1980 and 2002 that are a part of EPA's effort to regulate greenhouse gases from stationary sources of emissions. No one anticipated that these previously issued rules would be used to mandate greenhouse gas permit requirements, but that is the interpretation EPA has adopted. Our legal challenge was consolidated under the case captioned American Chemistry Council v. EPA.

    We also filed an administrative petition for reconsideration with EPA on the same rules. Our lawsuits and the administrative petition challenged each of the four older rules to the extent that EPA considers them to allow the regulation of pollutants such as greenhouse gases that are not subject to a National Ambient Air Quality Standard (NAAQS). Our administrative petition went into great detail regarding the grounds for our request (see Related Documents below). The petitions below also contain the text of the regulations that were challenged.

    Our main brief on the merits was filed May 10, 2011, focusing primarily on the timeliness of the lawsuits and on the fact that EPA’s interpretation of the Clean Air Act is unreasonable and creates absurd results.

    Oral arguments were held Feb. 29, 2012.

    We argued that Congress intended for EPA to require PSD permits only for facilities that can financially bear the substantial regulatory costs and which, as a group, are primarily responsible for deleterious emissions. The number of permits needed by facilities that meet these criteria was about 280 per year, a number consistent with congressional intent to limit the permit program to a manageable number. The greenhouse gas regulations, however, would require more than 81,000 PSD permits per year, according to the EPA, crushing EPA, state agencies and the economy.

    EPA’s reading of the Clean Air Act is unlawful because it severs the link between the PSD permit program and the attainment of national ambient air quality standards (NAAQS). We argued that PSD permits are only required for emissions of a “criteria” pollutant, such as sulfur dioxide, nitrogen oxides or lead, and then only if the emissions occur in an area that has attained compliance with national standards.

    EPA’s interpretation also is flawed because it leads to requiring an absurd number of permits. Its interpretation was announced three decades ago, and this is the first time a court has been asked to scrutinize its lawfulness. Only now do sources emitting major amounts of GHGs have to get PSD permits, and now their complaints about EPA’s interpretation are ripe for judicial review.

    The purpose of the PSD permitting program is to maintain air quality in areas of the country that have attained satisfactory levels of quality, hence the name "Prevention of Significant Deterioration". EPA sets ceilings for each of a number of specific pollutants, and requires permits for new facilities that might emit more of those pollutants into areas in attainment. Our brief argued that EPA is now forcibly making the PSD permit program an all-purpose regulatory program. However, to do so, we argued that EPA must first define greenhouse gases as criteria pollutants, and specify the maximum levels at which they may be present in attainment areas. It has not done so, and it is arguably impossible to set meaningful NAAQS levels for greenhouse gases.

    On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.

    On August 10, 2012, the NAM coalition filed a petition for rehearing en banc, asking that all the judges on the D.C. Circuit review the 3-judge panel's ruling. We argued that the panel relied on an unreasonable interpretation of the Clean Air Act to approve "the most sweeping expansion of EPA authority in the agency's history, for the first time covering a broad swatch of mobile and stationary sources of greenhouse gases and granting itself discretion to determine and revise the scope of the statute’s coverage, previously fixed by the statute’s explicit terms, for the indefinite future." The panel's ruling conflicts with Supreme Court decisions, produces absurd results, and could lead to annual cost increases of more than $20 billion upon full implementation.

    On December 20, 2012, the D.C. Circuit denied our petition. Judges Brown and Kavanaugh filed separate dissenting opinions that supported our arguments. Such dissents are rare, sending a clear signal that significant legal issues remain to be addressed.

    On April 18, 2013, the NAM filed a Petition for Writ of Certiorari wth the U.S. Supreme Court and awaiting the Court's determination whether to hear the case. The NAM's involvement in thisw case is critical because no other petitioners have been found to have standing to challeng the PSD regulations and NAM members are adversely affected by EPA's overly burdensome requirements.


    Related Documents:
    NAM petiton for writ of certiorari  (April 18, 2013)
    NAM petition for rehearing en banc  (August 10, 2012)
    NAM reply brief  (August 5, 2011)
    NAM opening brief  (May 10, 2011)
    NAM petition re: 1980 PSD Rule  (July 6, 2010)
    NAM petition re: 2002 PSD & SIP Rule  (July 6, 2010)
    NAM petition re: Part 51 Rule (1978)  (July 6, 2010)
    NAM petition re: Part 52 Rule (1978)  (July 6, 2010)
    NAM petition to EPA to reconsider PSD rules  (July 6, 2010)

     

    American Lung Ass'n v. EPA   (D.C. Circuit)

    Environmental challenge to EPA's decision not to reconsider ozone regulation in 2011

    The EPA has been reconsidering whether to lower the limits on ozone emissions from stationary sources since early in 2010, and engaged in a lengthy reconsideration process. Finally, President Obama called on EPA to put aside their reconsideration of the existing standard. OIRA Administrator Cass Sunstein sent a letter to EPA explaining the reasons that he was sending the proposal back to EPA for reconsideration, including that "a new standard now is not mandatory" and new scientific work is underway and will be based on the best available science. EPA then withdrew its proposed regulation and terminated reconsideration of the March 2008 standards.

    The American Lung Association, Environmental Defense Fund, Natural Resources Defense Council and Appalachian Mountain Club sought court review of this decision. The Ozone NAAQS Litigation Group, of which the NAM is a member, moved to intervene in this litigation to support EPA's decision not to change the existing ozone limits at this time. Our participation is needed because EPA represents the "general public interest" and the agency may not adequately represent the interests of manufacturers in avoiding costly and burdensome emissions limitations. On Dec. 1, we filed an opposition to the ALA's motion to coordinate or consolidate this case with Mississippi v. EPA, involving the 2008 ozone standard. We argued that ALA's motion is premature, since EPA is considering filing a motion to dismiss, which, if granted, would moot other issues in the case.

    On Feb. 17, 2012, the Court dismissed ALA's petition for review, saying that it "lacks jurisdiction over the agency's non-final decision to defer action on the 2008 voluntary revision of the national ambient air quality standards for ozone." This decision mooted all the other issues in the case. The court also adopted a briefing schedule for separate litigation challenging the 2008 standard.

     

    Defenders of Wildlife v. Bureau of Ocean Energy Management   (11th Circuit)

    Environmental challenge to oil drilling exploration plan permit in Gulf of Mexico

    On October 12, 2010, the Secretary of the Interior lifted the moratorium on deepwater drilling in the Gulf of Mexico, after extensive consultations with the Bureau of Ocean Energy Management. When the Bureau approved Shell's exploration plan (EP), some environmental groups sued to halt the exploration. They sought to overturn the Bureau's "Finding of No Significant Impact," claiming that erroneous assumptions led the agency to understate the risk of an oil spill.

    The court reviewed the issues whether Shell’s EP violated the environmental assessment provisions of the National Environmental Policy Act (NEPA) or the interagency consultation provisions of the Endangered Species Act (ESA). On June 22, 2012, the court denied the petition for review, refusing to overturn the Bureau's approval of Shell’s EP to conduct deepwater drilling in the Gulf of Mexico because the environmental group petitioners failed to overcome the extremely deferential “arbitrary and capricious” standard of review for the Bureau's actions.

    On Nov. 23, 2011, the NAM joined with other business organizations in an amicus brief in support of the Bureau's decision. Reimposing a moratorium would do little to protect the environment and would stall America's economic recovery and compromise our energy security. The toll would be particularly high for communities in the Gulf States that have faced more than their fair share of disasters and are still recovering from losses caused by Hurricanes Katrina and Rita, the Macondo oil spill, the drilling moratorium and the current slowdown in regulatory approvals. Slow approvals also affect the overall U.S. economy, meaning fewer jobs, less oil and gas production, foregone tax revenue and royalties, and increased dependence on foreign oil.

    Our argument focused on the Bureau's statutory obligation to balance economic and energy-policy interests with environmental effects. Jobs and energy security must be taken into account under the law, and exploration of the Outer Continental Shelf involves billions of dollars in investments and hundreds of thousands of jobs. This lawsuit threatened to require extensive Environmental Impact Statements (EIS) for every exploration plan. However, the court explained that it is within the Bureau's discretion to not require a separate EIS for every exploration and that it could rely on prior EISs to approve future EPs. In addition, the court held that when interagency consultation is reinitiated, the prior consultations remain valid until the new process is completed.

    Ultimately, the court deferred to the Bureau's balancing of environmental concerns with the expeditious and orderly exploration of resources in the Gulf of Mexico and denied the environmental groups petition for review of the Bureau’s action.


    Related Documents:
    NAM brief  (November 23, 2011)

     

    Defenders of Wildlife v. U.S. Dep't of the Interior   (U.S. District Court for the District of Columbia)

    Challenge to portion of polar bear rule

    See Center for Biological Diversity v. Salazar for a summary of this case. All the challenges to the polar bear regulations were consolidated in one case.

     

    Mingo Logan Coal Co. v. EPA   (U.S. District Court for the District of Columbia)

    EPA interference with existing Clean Water Act permits

    Mingo Logan Coal Co. challenged an EPA decision that it argued retroactively changed a Clean Water Act permit issued by the U.S. Army Corps of Engineers four years earlier. This change withdrew certain creeks as disposal sites for dredged material, affecting the validity of a permit that EPA had previously reviewed and assented to, and even though the permit holder was in full compliance with it.

    The NAM and 11 other business groups filed an amicus brief urging the trial court judge to rule that EPA does not have the authority to modify previously issued permits under Section 404 of the Clean Water Act. The section 404 permitting program authorizes roughly 60,000 permits representing about $220 billion in economic investment every year, and EPA's assertion of authority to revise existing permits creates tremendous investment uncertainty for all permit holders and potential project proponents. Inevitably, that uncertainty will translate into higher risks in borrowing, less investment, lost jobs and slower growth throughout the U.S. economy.

    Our brief highlighted the dramatic change that EPA's action represents. Section 404 permits are required for the discharge of fill material into waters of the United States (including wetlands), and affects construction of utility infrastructure, housing and commercial development, renewable energy projects like wind farms or solar arrays, and transportation infrastructure projects such as highways and rail lines. While EPA has occasionally exercised its authority and often uses the threat of such action to obtain concessions during the permitting process, it has never before used Section 404(c) authority to review a previously permitted project.

    We also highlighted a study by Dr. David Sunding, a professor at UC Berkeley, showing that the threat that EPA may modify existing permits distorts the cost-benefit ratio of new investment projects. Existing permits are already subject to the Army Corps of Engineers' regulations governing suspension, revocation and modification, and now EPA's interference will delay or deter investment in new projects. For example, a 2% chance that EPA would act adversely decreases a project's cost-benefit ratio by an astounding 30%. Also detailed are effects on bank financing and interest rates, bond ratings, rationed credit, land prices, and other harms throughout the economy.

    On Sept. 23, the government moved to strike the Sunding report from consideration, as it was not part of the record considered by EPA. We opposed this motion, arguing that EPA was repackaging their efforts to exclude us from the case, efforts that were rejected by the court in August. We also argued that the report did not add to the administrative record, but provided context for the court to interpret Section 404(c) and to understand the broad consequences that flow from the government's theory of liability.

    On March 23, 2012, Judge Amy Berman Jackson ruled that EPA does not have the authority to render a permit invalid once it has been issued by the Army Corps of Engineers. The ruling found that Section 404(c) does not expressly give EPA that power, and even if it did have some power to interpret that section, its interpretation was unreasonable. The Corps is the only permitting agency identified in the statute, and the judge said, "This is a stunning power for an agency to arrogate to itself when there is absolutely no mention of it in the statute." It has the power to block the initial issuance of permits by refusing to allow the Corps to specify certain areas as disposal sites. But even if it had the power to subsequently remove the designation of certain sites, that does not affect the validity of the existing permit, which only the Corps can issue. Mingo Logan need only comply with the terms of the original permit.

    The court described as "magical thinking" EPA's position that withdrawing a specification of a disposal site revokes the permit that affects that site. "It posit[ed] a scenario involving the automatic self-destuction of a written permit issued by an entirely separate federal agency after years of study and consideration. Poof!" Thus, even if the agency were accorded some deference under administrative law procedures, the agency's interpretation was unreasonable and could not stand. The judge also cited the NAM's amicus brief to show that eliminating finality from the permitting process would have a significant economic impact on industry, in turn making EPA's assertion of power less reasonable.

    EPA appealed this ruling to the D.C. Circuit and won. Click here for details.


    Related Documents:
    NAM brief  (June 3, 2011)

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Challenging EPA's light-duty vehicle GHG emissions standards

    On July 6, 2010, the NAM and 15 other business associations filed a petition for review in the D.C. Circuit challenging the EPA's final regulation of light-duty motor vehicles, also known as the Section 202 motor vehicle rule or the tailpipe rule. EPA has announced that this rule, which regulates greenhouse gases from certain motor vehicles, was effective on January 2, 2011. The rule thus established the first EPA regulation of greenhouse gas emissions, and the agency previously announced that once a pollutant is regulated, the usual permit requirements of the PSD program (Prevention of Significant Deterioration) kick in. As a result of this combination of interpretations, EPA has begun to regulate stationary sources of greenhouse gas emissions such as manufacturing facilities around the country.

    Our lawsuit was the third in a series of suits challenging four EPA rules that together implement the greenhouse gas regulatory program. Our fundamental concern was over EPA's decision to automatically trigger PSD regulation of all stationary sources.

    On Sept. 15, 2010, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December.

    On June 3, 2011, the NAM and 66 other parties filed a combined brief, as required by court order, detailing all the key arguments arising from the motor vehicle rule. Section 202 of the Clean Air Act requires EPA to justify the level of emissions controls imposed by explaining why those controls represent a rational choice in light of the identified endangerment risk. However, EPA said that it had no obligation to show that its regulations would be effective or reduce harm. It failed to justify its interpretation that the light-duty motor vehicle rule triggers stationary source regulations, and failed to address the enormous burdens and costs imposed on stationary sources.

    The motor vehicle regulation arises under Title II of the Clean Air Act, while the regulation of stationary sources of emissions is governed by Title I, which focused on local emissions in defined geographical areas causing elevated ground-level exposures to a pollutant. EPA failed to exercise its discretion to limit the scope of the pollutants subject to the Title I, Part C PSD program, as it has done in another context -- the visibility program under the state part of the Clean Air Act.

    We also argued that EPA failed to address the “absurd consequences” that the motor vehicle rule produces for stationary sources of greenhouse gas emissions. Had it done so, EPA could have avoided those consequences by adopting a more reasonable interpretation of the Clean Air Act. Instead, it told the regulated community to address the stationary-source consequences of its regulation of greenhouse gases in the tailoring rule proceeding, but then refused to address the stationary source impacts in the tailoring rule, because that rule provided only relief and did not impose costs. This failure to consider the stationary-source impacts violates Section 202 of the Clean Air Act and is inconsistent with multiple mandates from Congress and the President.

    The brief itemized several statutes and orders mandating that EPA consider economic effects: (1) Section 317 of the Clean Air Act, which requires an economic impact assessment, (2) the Regulatory Flexibility Act, which requires an analysis of effects on small businesses, (3) the Unfunded Mandates Reform Act, which requires an assessment of the impact on state and local governments, (4) the Paperwork Reduction Act, which requires OMB approval for significant information-collection obligations, (5) Executive Order 12898, which requires addressing disproportionate effects on minority and low-income populations, and (6) Executive Order 13211, which requires an assessment of a rule’s impact on energy supply, distribution and use.

    The brief also argued that EPA has not demonstrated that the final rule will meaningfully and substantially reduce any endangerment to public health or welfare. It adds virtually no additional benefits to already existing fuel economy standards issued by the National Highway Transportation Safety Administration (NHTSA).

    Oral arguments were held on February 28, 2012.

    On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


    Related Documents:
    NAM/Industry brief  (June 3, 2011)
    NAM statement of issues  (August 20, 2010)
    NAM petition for review  (July 6, 2010)

     

    National Association of Manufacturers v. EPA   (5th Circuit)

    Challenging EPA's denial of Texas Flexible Permit program

    The NAM and 5 other business associations have asked the U.S. Court of Appeals for the Fifth Circuit to review EPA's decision published July 15 to disapprove revisions to a Texas Clean Air Act implementation plan that relates to the state’s Flexible Permits Program. The Texas plan was submitted to EPA for approval in 1994 and revised several times since then. After a recent notice-and-comment period, EPA decided that the Texas plan did not meet its requirements for a minor plan revision ("Minor NSR SIP revision") for various reasons described in its decision. Alternatively, it ruled that the plan did not meet its requirements for a substitute Major NSR SIP revision.

    This petition for review is the first step in a proceeding that will eventually present the court with detailed legal issues to be resolved. The Texas flexible permits program allows operators of facilities that generate air emissions flexibility in managing their operations. While one flexible permit is allowed per plant site or account, the applicant can choose which facilities and pollutants to include. The permits allow plants to exceed pollution limits from individual emission sources as long as the facility as a whole remains below an overall emissions cap. EPA's action highlights a serious struggle between national and state environmental authorities in regulating air emissions.

    Click here for further developments in this case, which has been consolidated with Texas v. EPA.


    Related Documents:
    NAM petition for review  (September 13, 2010)

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Challenging EPA's tailoring rule for greenhouse gas regulation

    On August 2, 2010, the NAM and 16 other business associations filed a petition for review in the D.C. Circuit challenging the EPA's final regulation that sets out its schedule for enforcing regulatory controls on greenhouse gas (GHG) emissions from stationary sources. The agency has previously announced that greenhouse gas emissions are subject to regulation beginning January 2, 2011, and the usual permit requirements of the PSD program (Prevention of Significant Deterioration) kick in. Because there are millions of facilities that fall under EPA's regulatory requirements, the agency has adopted the tailoring rule to focus its initial enforcement only on facilities with the largest amounts of GHG emissions.

    This is the last of eight petitions filed by the NAM coalition of business organizations challenging EPA's efforts to regulate stationary sources of greenhouse gases.

    Our lawsuit is the third in a series of suits challenging four EPA rules that together implement the greenhouse gas regulatory program. Our fundamental concern is over EPA's decision to automatically trigger PSD regulation of all stationary sources.

    On Sept. 15, 2010, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December.

    On June 20, 2011, the NAM and several other industry associations filed the fourth major legal brief challenging the EPA’s regulation of greenhouse gas emissions. This brief argued, in part, that the EPA’s tailoring rule essentially rewrote parts of the Clean Air Act by changing clear, congressionally established numerical thresholds for pollutants that are subject to regulation. The brief reiterated that the Clean Air Act was never meant to regulate GHGs. As a result, the rules should be vacated and remanded.

    Oral arguments in the case were held on Feb. 29, 2012.

    On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.

    On August 10, 2012, the NAM coalition filed a petition for rehearing en banc, asking that all the judges on the D.C. Circuit review the 3-judge panel's ruling. We argued that the panel relied on an unreasonable interpretation of the Clean Air Act to approve "the most sweeping expansion of EPA authority in the agency's history, for the first time covering a broad swatch of mobile and stationary sources of greenhouse gases and granting itself discretion to determine and revise the scope of the statute’s coverage, previously fixed by the statute’s explicit terms, for the indefinite future." The panel's ruling conflicts with Supreme Court decisions, produces absurd results, and could lead to annual cost increases of more than $20 billion upon full implementation.

    On December 20, 2012, the D.C. Circuit denied our petition. Judges Brown and Kavanaugh filed separate dissenting opinions that supported our arguments. Such dissents are rare, sending a clear signal that significant legal issues remain to be addressed.

    On April 18, 2013, the NAM filed a Petition for Writ of Certiorari with the U.S. Supreme Court and awaiting the Court's determination whether to hear the case.


    Related Documents:
    NAM petition for writ of certiorari  (April 18, 2013)
    NAM petition for rehearing en banc  (August 10, 2012)
    NAM reply brief  (November 16, 2011)
    NAM/Industry brief  (June 20, 2011)
    NAM reply in support of partial stay  (November 8, 2010)
    NAM statement of issues  (September 15, 2010)
    NAM motion for partial stay  (September 15, 2010)

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Challenging EPA's STR interpretation

    On June 1, 2010, the NAM and other business organizations filed suit against EPA's latest interpretation of the so-called “Johnson Memo,” where the Agency stated for the first time that it will apply controls on greenhouse gas emissions on a wide range of manufacturing and other stationary sources beginning on January 2, 2011. This is the second piece of litigation against the EPA, which has issued 4 rules and interpretations that all combine to set limits on stationary sources of greenhouse gas emissions. Manufacturing facilities are among many sources of such emissions, and legal challenges must be filed now even though enforcement against many of these sources will not occur immediately.

    This case is related to our challenge to EPA's endangerment finding. See our summary in NAM v. EPA described as "Challenging EPA's endangerment finding".

    On Sept. 15, the NAM coalition filed a motion for a partial stay of the regulation of greenhouse gases from stationary sources of emissions. The court denied this motion in December, 2010 and we spent 2011 filing briefs in all the greenhouse cases on the merits. Oral argument was held in the D.C. Circuit on February 29, 2012.

    On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


    Related Documents:
    NAM/Industry brief  (June 20, 2011)
    NAM's Non-Binding Statement of Issues  (August 30, 2010)
    NAM Petition to Review STR Rule  (June 1, 2010)

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Challenging EPA's endangerment finding

    In February, 2010, the NAM and other business groups filed a petition in federal appeals court challenging the U.S. Environmental Protection Agency’s (EPA) decision to regulate greenhouse gas (GHG) emissions from stationary sources through the Clean Air Act. Joining the NAM on the petition were the American Petroleum Institute, the National Petrochemical & Refiners Association, the National Association of Home Builders, the Corn Refiners Association, the Brick Industry Association, the Western States Petroleum Association and the National Oilseed Processors Association.

    On March 18, 2010, a group of 21 industry associations and chambers of commerce filed a motion to intervene in the NAM suit in support of our position. This group represents a wide cross-section of sectors around the country that will be severely affected by EPA's effort to regulate stationary sources of greenhouse gases under the Clean Air Act.

    A variety of other business groups and some states also challenged the endangerment finding. Some of these groups asked the EPA directly to reconsider its finding, but the agency turned down the request in July, 2010. In the endangerment case, industry's opening brief was filed on May 20, 2011. Because the court required that all non-state petitioners and intervenors file only one brief, the views of 80 parties were consolidated, and the resulting brief includes disparate arguments from a variety of interests.

    The brief explains that EPA does not say what constitutes a “safe climate,” acceptable global temperature ranges, or “safe” levels of GHGs in the atmosphere, nor will anyone be able to judge whether or when EPA has ever achieved a congressionally defined goal. EPA will not be able to say that its action will reduce global temperatures or that a temperature reduction will avoid an actual danger to public health and welfare.

    The brief focused on, among other things, key EPA errors relating to (1) construing its authority to produce absurd results, (2) failing to provide a rational basis for determining whether GHG regulations will mitigate a defined public health or welfare risk, (3) lumping together six pollutants without making separate determinations about the effects of each, (4) failing to consider future mitigation and adaptation steps that impact whether health and welfare are endangered, and (5) failing to follow statutory procedures, including consultation with its own Science Advisory Board.

    Congress did not intend for EPA’s endangerment finding to produce absurd results, yet that is the effect of EPA’s finding. The EPA should not have used the endangerment finding to cause PSD permitting requirements, since those requirements apply to emissions whose harm is concentrated in a particular geographic area. It should have adopted a more restricted reading of the statute, instead of a broad reading that would be narrowed by the absurd results doctrine.

    We also argued that EPA has no rational basis for treating all six GHGs from motor vehicle emissions as a single air pollutant. Automobiles do not emit 2 of the six pollutants, and each of the pollutants that are emitted has radically different heat-trapping properties. In addition, EPA’s use of a “CO2 equivalent” as a proxy for regulation of each gas individually unlawfully avoids having to make endangerment findings for five of the six GHG air pollutants it seeks to regulate.

    EPA also refused to consider “whether any harms from the regulated emissions will be independently averted or mitigated.” The agency also ignored emissions reductions that will occur from implementation of the Energy Independence and Security Act of 2007.

    EPA's response was filed on Aug. 18, 2011. The agency argued that the administrative record was sufficient, that it reasonably classified six gases on one pollutant, and that it did not need to consider costs, administrative burdens, benefits or mitigation when making its endangerment finding. It also argued that it was not required to submit the proposed finding to the Science Advisory Board for review, and that complaints that it did not do so came too late in the process.

    This litigation is one of many suits by the NAM and our coalition partners against EPA's attempt to regulate GHGs. In one, we challenged the agency’s interpretation of the so-called “Johnson Memo,” where EPA stated for the first time that it would apply controls on greenhouse gas emissions on a wide range of manufacturing and other stationary sources. See our summary in NAM v. EPA described as "Challenging EPA's STR interpretation". We subsequently filed additional suits challenging EPA's tailoring rule, tailpipe rule, and other rules being used to regulate stationary sources of greenhouse gases.

    On September 26, 2011, the EPA's Inspector General issued a report in part finding that EPA did not make an independent assessment of key scientific evidence that it relied on in issuing its endangerment finding. We then asked the court to take judicial notice of the report. Public documents that are not already in the record of a case may be considered by a court, and we brought this development to the court's attention because it is directly relevant to EPA's claim in court that it exercised independent judgment when reviewing the scientific evidence.

    Oral arguments were held on Feb. 28, 2012.

    On June 26, 2012, the 3-judge panel upheld all of the primary greenhouse gas regulations. It upheld the EPA’s endangerment finding as within its discretionary power and procedurally sufficient, it upheld the tailpipe rule as being required by law once the endangerment finding is made, it found that the business community lacked standing to challenge the timing and tailoring rules because those rules helped rather than hurt, and, while it found our challenge to earlier rules in 1978, 1980 and 2002 to be timely, it rejected our legal arguments and found EPA’s interpretation compelled by the statute.


    Related Documents:
    NAM Request for Judicial Notice of EPA Inspector General's Report  (September 30, 2011)
    Petitioners' Opening Brief  (May 20, 2011)
    NAM Joint Briefing Proposal  (January 10, 2011)
    NAM Docketing Statement  (April 15, 2010)
    NAM Nonbinding Statement of Issues  (April 15, 2010)
    NAM Petition for Review  (February 16, 2010)

     

    Native Village of Kivalina v. ExxonMobil Corp.   (9th Circuit)

    Public nuisance litigation over climate change is displaced by EPA regulation

    A native village in Alaska sued various energy companies, alleging that greenhouse gas emissions cause climate change and made them relocate their village because of flooding. The trial court dismissed the case because it involves political questions that are not for courts to decide. It also said the plaintiffs did not have standing because they were unable to establish that their injuries are fairly traceable to the named defendants.

    The issue was appealed to the Ninth Circuit. The NAM filed an amicus brief July 7, 2010, arguing that the case represents an unprecedented attempt by environmental lawyers to recast public nuisance as a "super tort", in an effort to bypass 4 time-honored elements of fundamental public nuisance law. Their theory is unfounded in federal or state law, and they cannot establish direct causation between the defendants' energy activities and the plaintiffs' injuries. In addition, to determine whether the elements of proving public nuisance were met, a court would have to address complex political questions and establish nationwide emissions standards.

    Even the plaintiffs admitted the case was born out of their frustration with the legislative process. Allowing this kind of suit would give rise to endless claims of liability in highly speculative mass tort cases after every harsh weather event.

    On September 21, 2012, the Ninth Circuit dismissed the case, finding that the plaintiffs' claims were displaced by federal law. Because EPA is regulating greenhouse gases, federal common law cannot be the basis for public nuisance claims in this area. This is another in a series of cases involving public nuisance claims arising from greenhouse gas emissions, including the Comer, American Electric Power, and Tennessee Valley Authority cases, all of which the NAM has participated by filing amicus briefs. The AEP case largely rejected this kind of wasteful litigation, but left open the possibility of nuisance claims under state law.


    Related Documents:
    NAM brief  (July 7, 2010)

     

    Native Village of Point Hope v. Salazar   (9th Circuit)

    Challenge to exploratory drilling permit in Alaska

    The development of Alaska offshore oil resources is the center of legal disputes involving exploration permits issued by the Department of the Interior. Environmental groups have filed multiple lawsuits to impair the permitting process, and this one alleged violations of the National Environmental Policy Act (NEPA) and the Outer Continental Shelf Lands Act (OCSLA). At issue was a revised exploration plan prepared by Shell following an extensive environmental assessment and approved by the Department. The Government’s latest estimates show that the Beaufort Sea contains a staggering 6.3 billion barrels of undiscovered oil that is economically recoverable at roughly current market prices, and a recent economic analysis estimates that the development of these resources, including the Chukchi Sea, will create an annual average of over 54,000 new jobs over the next 45 years, generating $145 billion in employee payroll.

    The NAM and other business groups filed an amicus brief Feb. 3, 2012, arguing that the OCSLA was adopted with the specific goal of encouraging the expeditious exploration and production of the Outer Continental Shelf. Thousands of exploration plans have already been approved under quick timetables, including 31 exploratory wells in the Beaufort Sea. The Department should be able to use its scientific and technical expertise to approve the exploration plans without undue court interference.

    The first lawsuit was filed challenging an offshore exploration plan in the Beaufort sea, and a second was filed challenging a similar plan in the Chukchi Sea. These cases were consolidated in March, and on April 3, the NAM and other business groups filed a supplemental amicus brief raising the same concerns we had expressed before.

    On May 25, the Ninth Circuit rejected the environmental challenges to the exploratory permits. It found that one part of the challenge was made moot by a subsequent filing of documentation, and that the agency was not arbitrary and capricious in issuing the company's plan with the documentation provided. Also, an agency can approve applications that have inconsistent statements, because the statements were not made by the agency and the statements reflected changing circumstances. Other evidence in the record need not be fully reconciled by the agency as long as the agency's conclusion is supported by substantial evidence on the record considered as a whole. The agency complied with the law's requirements to ensure that the exploration plan would not probably cause serious harm or damage to life, property or the environment, and its decision is entitle to deference when supported by the record.


    Related Documents:
    NAM Supplemental brief  (April 3, 2012)
    NAM brief  (February 3, 2012)

     

    PPL Montana, LLC v. Montana   (U.S. Supreme Court)

    Questions involving the definition of navigable waters to determine state ownership of riverbeds

    On 2/22/2012, the Supreme Court reversed a Montana decision that found that the state held title to riverbeds under various dams and reservoirs long being used for hydroelectric power, and that PPL Montana must pay $41 million in back rent and millions more in future rent. The Court ruled on the definition of navigability for purposes of determining ownership of the riverbed. Had the state owned the land, the case could have affected electric power rates for customers in many areas.

    The Court ruled unanimously that states could only assert ownership in land under rivers that were navigable at the time the state gained statehood. Current river conditions are not binding in this determination. Areas of rivers that could only be reached by portaging around obstacles are generally not navigable.

     

    Sackett v. EPA   (U.S. Supreme Court)

    Right to preenforcement review of EPA compliance order

    A couple who graded a small lot to build a house was ordered by EPA under the Clean Water Act to fill in the lot, replace vegetation and monitor the land for 3 years, or face a $32,500 penalty for each day of violation. They sought court review of the order, but were denied.

    On March 21, 2012, the Supreme Court decided that they have a right to go to court to get pre-enforcement review of the order. They do not have to wait for EPA to sue them for violating the order in order to raise their claims. The unanimous Court held that the Administrative Procedure Act allows aggrieved parties to sue an agency after it takes "final agency action," and EPA's order qualified. Although the majority did not limit the claims that could be raised in such a challenge, Justice Ginsburg's concurring opinion argued that a challenge could only involve EPA's jurisdiction over the land in question. It remains to be seen whether the Court's opinion is ultimately interpreted in such a limited manner.

    The NAM filed an amicus brief in 2011 supporting this result.

    The case has implications beyond the Clean Water Act to similar orders under the Solid Waste Disposal Act (Resource Conservation and Recovery Act) and the Safe Drinking Water Act. EPA orders such as this one essentially coerce alleged violators into compliance, denying due process. Pre-enforcement review by the courts is a critical check on agency abuse. Otherwise, persons subject to such orders risk substantial financial penalties for violating an order even if they did not violate the Clean Water Act itself.

    One of the claims the landowners hope to raise is whether their property is even subject to EPA jurisdiction in the first place. This question involves defining "waters of the United States," and, as Justice Alito mentioned in his concurring opinion, neither Congress nor EPA has provided a clear answer to this question. The NAM supports efforts to prevent EPA and the U.S. Army Corps of Engineers from expanding the federal government's regulation of private and public lands under the Clean Water Act, since such expansion would create significant regulatory barriers to economic growth in an already struggling economy. In 2011, we filed extensive comments on this proposed agency action.


    Related Documents:
    NAM brief  (October 3, 2011)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Environmental group's challenge of EPA's delay of the effective dates of its boiler rule and incinerator rule

    The NAM and other groups moved to intervene in a law suit brought by the Sierra Club against EPA over the agency's decision to delay the effective date of new regulations on boilers and incinerators. The rules, issued on March 21, 2011, concern major source industrial boilers and commercial and industrial solid waste incinerators. When it published the rules, EPA announced that it would initiate administrative reconsideration of them, and later delayed the effective dates during the reconsideration period. Our intervention in this case was intended to support the EPA's decision to delay implementation.

    At the same time, the NAM challenged the boiler MACT and incinerator rules themselves. The rules have the potential to dramatically impact the U.S. economy and impose enormous costs on key industrial sectors, and they force companies to make compliance investment decisions well in advance of their effective dates.

    This suit by the Sierra Club was voluntarily dismissed on March 29, 2012. A similar suit brought in federal district court ended when the court invalidated EPA's delay notice.


    Related Documents:
    NAM Motion to Intervene  (August 15, 2011)

     

    Texas v. EPA   (5th Circuit)

    Challenging EPA's denial of Texas Flexible Permit program

    On December 3, 2010, the NAM and others filed a joint brief arguing that states have substantial discretion under federal law to adopt flexible requirements the apply to minor changes in plant operations as long as air quality is protected. We also argued that the Texas program meets all the federal Clean Air Act (CAA) standards, is in some cases years ahead of schedule, and the EPA’s action more than 15 years after the adoption of the Texas program has no legal support. EPA has also failed to defer to Texas’ interpretation of its own regulatory laws, as required by federal law. This litigation is intended to eliminate the ambiguity of EPA’s latest actions and to restore predictable air pollution control regulation in Texas.

    On Aug. 13, 2012, the Fifth Circuit agreed, throwing out EPA's action. The court found that EPA's demands for language and program features in the state's implementation plan had no basis in the Clean Air Act or its implementing regulations. Instead, the Act sets goals and basic requirements, and gives the states broad authority to determine the methods and particular control strategies they will use to achieve the statutory goals. Environmental regulation is a shared responsibility of the federal and state governments, and EPA must approve state plans that meet the requirements of the Clean Air Act within 18 months of a state's submitting them for approval.

    The Court rejected an EPA effort to require the state to adopt express language prohibiting major sources from evading statutory major new source review regulations. It found no requirement in the statute compelling such a statement, and even EPA's prior views accepted wide variations in state enforcement program language. Thus, EPA's attempt to require specific language in a state's implementation plan violated principles of federalism embodied in the Clean Air Act, as well as the Administrative Procedure Act.

    The Court also rejected EPA's criticism of the flexible permit program's monitoring, recordkeeping and recording provisions. Texas allows its enforcement director discretion to write monitoring and recordkeeping requirements into each permit, based on the size, needs, and type of facility applying for a permit. The Court found that there was no authority in the law to allow EPA to limit the director's discretion, and EPA provided no evidence that the Texas program interferes with attaining Clean Air Act requirements. In fact, EPA approved similar director discretion in previous state plan amendments.

    Finally, the Court rejected similar EPA arguments about the methodology allowed for calculating each emissions cap at a permitted facility. The agency's objections "rely on standards not found in the CAA or its implementing regulations."


    Related Documents:
    NAM reply brief  (March 17, 2011)
    NAM brief  (December 3, 2010)

     

    Wilderness Society v. U.S. Dep't of the Interior   (N.D.Cal.)

    Defending expedited siting of transmission lines in the west

    The NAM and other major energy and business trade associations sought to intervene on the side of the Department of Interior, defending a lawsuit brought by 15 environmental groups against the agency’s expedited siting of transmission lines under the Energy Policy Act of 2005. Led by the Wilderness Society, the environmentalists sued in U.S. District Court, Northern District of California, to stop the designation of energy corridors in the western United States, specifically the West-wide Energy Corridors (WWEC). The groups had previously challenged the Department of Energy’s designation of corridors through the administrative process.

    On Dec. 17, 2009, the NAM filed a motion to intervene as an intervenor/defendant in the litigation, joined by the Edison Electric Institute, American Public Power Association, National Rural Electric Cooperative Association, American Gas Association, and U.S. Chamber of Commerce. The Environmental Protection Act includes many provisions necessary to expedite development of a modernized electricity grid to meet increased demand, and the NAM endorses policies that will expedite development of a "smart grid," which will save manufacturers money. The NAM supports the identification and designation of corridors across federal lands, and this lawsuit threatened to block or impose additional delays or regulatory constraints on the WWEC.

    Our motion to intervene was granted on March 9, 2011. A settlement was reached in this case, and a joint motion to dismiss was granted on 7/11/12. It called for periodic interagency reviews, agency guidance, training and a corridor study to assess whether the corridors are efficient and environmentally sensitive.


    Related Documents:
    NAM Motion to Intervene  (December 17, 2009)

     

    California Chamber of Commerce v. California Air Resources Board   (Superior Court of Sacramento County)

    Challenging CARB cap-and-trade auction allowance revenues

    In November, 2012, the California Chamber of Commerce filed a lawsuit challenging the legality of the fees charged by the California Air Resources Board (CARB) for the state’s cap-and-trade greenhouse gas program. The NAM moved to intervene in the litigation, focusing not on the legality of the cap-and-trade program itself or the merits of climate change science, but on the extraordinary revenues generated by the auction and reserve sale provisions adopted by CARB.

    The effectiveness of the cap-and-trade program comes from the state’s ability to ratchet down greenhouse gas emissions from year to year. CARB may not go beyond this authority to generate a huge income stream for the state. The first quarterly auction of greenhouse gas allowances in November, 2012, raised nearly $289 million for California, substantially more than the $62 million required to implement the law. Moreover, that revenue is projected to increase to as much as $70 billion over the life of the program. In 2015, more than $2 billion is expected to be generated by the program, and most of the funds already collected have been earmarked for housing and transportation projects.

    We argued that that income goes far beyond simply paying for the costs of administering the program, and thus exceeded the legal authority of CARB. Alternatively, even if the fees were authorized, they constitute a massive new tax that must have been approved by a 2/3 majority of the California legislature under the state constitution.

    On Nov. 12, 2013, the judge ruled that the Air Resources Board was given the discretion to raise revenues by auctioning and selling allowances. The fact that the Board may charge an administrative fee does not prevent it from also auctioning the allowances. The judge also ruled that the revenues were not an unconstitutional tax, although he called that a close question. He analyzed the difference between taxes and government regulatory fees, and found the charges more like traditional regulatory fees. The primary purpose is for regulation, not revenue, the total fees don't exceed the costs of the regulatory activities, and the fees collected are reasonably related to the burden imposed by the greenhouse gas emissions. The court was at a loss to know what the fees will actually be used for, but the law requires that they be used to further the emissions reduction goals of AB 32. It admitted that "since nearly every aspect of life has some impact on GHG emissions, it is difficult to conceive of a regulatory activity that will not have an least some impact on GHG emissions." Thus, the decision gives extremely broad power to the state government to use the funds collected and not have them be considered a tax.

    This income scheme will significantly raise energy costs in the state and further harm its competitiveness, without providing any additional environmental benefits, since it will still be affected by GHG emissions from elsewhere around the world.


    Related Documents:
    NAM Reply brief  (August 7, 2013)
    Motion to Intervene  (February 15, 2013)
    Points and Authorities in Support of Complaint  (February 15, 2013)

     

    Comer v. Murphy Oil U.S.A.   (5th Circuit)

    Whether effects of global warming give rise to public nuisance suits under state law

    This case alleges that the emissions of greenhouse gases from various energy and manufacturing companies led to a stronger Hurricane Katrina than might have otherwise occurred, and the companies should pay the damages. It was dismissed in litigation in 2010 summarized here.

    The plaintiffs filed a new suit, and the trial court dismissed it. On appeal to the Fifth Circuit, the NAM and other groups filed an amicus brief opposing any common law cause of action for harms caused by weather events allegedly caused by climate change. The courts are not the place to make policy judgments about emissions policies for individual defendants, becoming a kind of super EPA. All the most recent Supreme Court and appellate court decisions reject this kind of liability, since EPA is already regulating greenhouse gases.

    On May 14, 2013 the Fifth Circuit affirmed the district court’s rejection of plaintiffs’ claims based on the doctrine of res judicata, which holds that once a valid judgment decides a case, that decision shall stand. The case followed a complicated procedural history. The trial court decision rejecting the plaintiffs’ claims was up for an en banc rehearing by the Fifth Circuit. However, without a majority of the Circuit’s judges available to hear the case, quorum was not met and the case was not reheard. Plaintiffs then sought a writ of mandamus from the Supreme Court, which was denied. Then the plaintiffs asserted that there was not a final decision on the merits, and therefore that their claim was not barred by res judicata. The Fifth Circuit disagreed and upheld the trial court’s decision to bar the claims. At no point was the trial court’s final judgment disturbed nor was there was a decision on the merits.


    Related Documents:
    NAM brief  (September 28, 2012)

     

    Decker v. Northwest Envtl. Def. Ctr.   (U.S. Supreme Court)

    Citizen suits under the Clean Water Act

    An environmental group sued some logging companies alleging violations of the Clean Water Act arising from rainwater runoff in logging areas. A statute requires that suits challenging EPA actions be filed within 120 days of the action. On March 20, 2013, the Supreme Court decided that that limitation does not apply to citizen suits seeking to apply permit requirements to forest roads, since another statutory provision allows such suits. The NAM had filed an amicus brief challenging the citizen suit.

    Also at issue in the case is the Ninth Circuit’s decision that storm water from logging roads is industrial storm water, in spite of an EPA determination to the contrary. The Court ruled that it was reasonable for EPA to conclude that the water runoff was directly related only to the harvesting of raw materials, rather than to "manufacturing, processing, or raw materials storage areas at an idustrial plant" as defined in the regulation. Thus, the regulation extends only to traditional industrial buildings and not foresting operations.

    The decision means that citizen suits can continue to be filed well after regulations are finalized, as long as the suits challenge not the rules themselves, but seek to enforce them under a proper interpretation. The decision also means that EPA's interpretation of a regulation will continue to be given deference by the courts unless it is plainly erroneous or inconsistent with the regulation. This is particularly true where a federal regulation would be duplicative or counterproductive in light of state regulation of the practices at issue.


    Related Documents:
    NAM brief  (September 4, 2012)

     

    Los Angeles County Flood Control Dist. v. Natural Resources Defense Council   (U.S. Supreme Court)

    Definition of a "discharge" from an "outfall" under the CWA

    Two environmental groups sued a municipality for discharging water that allegedly exceeded water quality standards. However, the discharge was from a concrete flood control system used simply to reroute a river. The Supreme Court decided that water coming from such a source does not constitute a “discharge” under the Clean Water Act (CWA). Limiting the breadth of obligations that might be required of municipalities trying to control floods and stormwater helps keep down costs for everyone within their jurisdictions.

     

    Luminant Generation Co v. EPA   (U.S. Supreme Court)

    Whether EPA may disapprove SIP without finding that it conflicts with an applicable requirement of the Clean Air Act

    This case involves an effort by EPA to impose greater Clean Air Act requirements on manufacturers and fuel users. The NAM joined with other groups supporting an appeal by Luminant Generation Co. of an adverse decision from the Fifth Circuit.

    The case involves the balance of power between EPA and state environmental enforcement agencies when regulating emissions from industrial process or emission control equipment during startups, shutdowns or malfunctions. During these periods, states commonly allow more lenient treatment of excess emissions from such equipment, but EPA decided to disapprove part of a Texas State Implementation Plan (SIP) that potentially excuses excess emissions during planned equipment maintenance. Companies will not be able to argue affirmative defenses to citations, making them subject to civil penalties and fines.

    The dispute centers on whether Section 113 of the Clean Air Act articulates a requirement that provides a basis for EPA to disapprove the Texas plan. Our brief argued that another Section of the Act (Sec. 110) gives EPA the power to disapprove state plans that interfere with any applicable requirement of the Clean Air Act, and the lower court’s decision should be reversed on this point. We also argued that EPA’s action violates the Eighth Amendment by imposing a penalty grossly disproportionate to the offense, as well as the Fifth Amendment’s due process principles, since certain emissions during planned startups and shutdowns are unavoidable. The Texas SIP would have allowed a company to demonstrate that the offense was actually unavoidable, but the EPA action took away that defense.

    On 10/7/2013, the Supreme Court declined to review this appeal.


    Related Documents:
    NAM brief  (July 24, 2013)

     

    Mingo Logan Coal Co. v. EPA   (D.C. Circuit)

    EPA interference with Clean Water Act permits

    Mingo Logan Coal Co. challenged an EPA decision that it argued retroactively changed a Clean Water Act permit issued by the U.S. Army Corps of Engineers four years earlier. This change withdrew certain creeks as disposal sites for dredged material, affecting the validity of a permit that EPA had previously reviewed and assented to, and even though the permit holder was in full compliance with it.

    In March, 2012, a federal judge ruled that EPA did not have the power to revoke a valid permit -- only the U.S. Army Corps of Engineers, which issued the permit, has the authority to revoke it. The NAM filed an amicus brief in support of that result in the trial court, and that history is summarized here.

    EPA appealed to the D.C. Circuit, and the NAM and other business groups filed a second amicus brief raising concerns about the substantial uncertainty that would be generated were EPA to have the power it claimed. The power to revoke a valid permit by EPA will substantially raise the stakes for any project that requires a Section 404 permit. That will distort the cost-benefit ratio and discourage new investments in any such project. The uncertainty from this looming threat will lead to higher interest rates and fewer investments, affecting downstream benefits such as job creation, housing, commercial space, food, consumer products, libraries and schools.

    Unfortunately, the D.C. Circuit reversed the trial court on April 23, 2013. A 3-judge panel ruled that EPA has the final say on discharge site selection under Sec. 404(c) of the Clean Water Act. It can withdraw a specification of a stream as a suitable site for discharging dredged or fill material from a mountain-top mine at any time, including after a permit is issued. The withdrawal amends the terms and conditions specified in the permit. The court sent the case back to the trial court to resolve a remaining challenge -- whether EPA's decision was arbitrary and capricious in violation of the Administrative Procedure Act.


    Related Documents:
    NAM brief  (September 19, 2012)

     

    Mississippi v. EPA   (D.C. Circuit)

    Validity of EPA's ozone regulation

    The NAM is a member of the Ozone NAAQS Litigation Group, which in 2008 in the U.S. Court of Appeals for the D.C. Circuit challenged the validity of the EPA's final regulation lowering certain ozone limits under the Clean Air Act. The American Lung Association, the Natural Resources Defense Council, and others are also challenging the rule, arguing that the EPA did not follow the advice of their scientific advisers to issue a tougher standard. All the petitions were consolidated under the caption, Mississippi v. EPA.

    On 3/19/09, the D.C. Circuit ordered the cases held in abeyance while the new Administration considered whether to change the standards. EPA proposed revisions in January, 2010, for public comment. The NAM filed comments in March (see link below).

    On April 4, 2011, the court denied our motion to begin briefing those issues that were not the subject of reconsideration, and refused to order EPA to complete its reconsideration proceeding by the July 29, 2011 date by which EPA indicated it planned to take final action. EPA forwarded a final rule to the Office of Management and Budget in July. Five of the petitioners in this case moved 8/8/11 for a court order directing EPA to complete reconsideration immediately. The NAM coalition opposed this motion because the deadline for EPA to review the 2008 Ozone rule has not yet passed, and it need not act by any specific date. We also asked the court again to renew the briefing on this litigation.

    On Sept. 2, President Obama announced that he was requesting that Administrator Jackson withdraw the draft ozone standard at this time. OIRA Administrator Cass Sunstein sent a letter to EPA explaining the reasons that he was sending the proposal back to EPA for reconsideration, including that "a new standard now is not mandatory" and new scientific work is underway and will be based on the best available science. Later that day, EPA filed a notice with the D.C. Circuit saying it "no longer expects that it will take final action to complete its reconsideration of the 2008 ozone NAAQS in the near future." It filed a revised motion to govern further proceedings on Sept. 12, seeking to resume briefing, which the court did.

    The Ozone NAAQS Coalition filed its brief on April 17, 2012. Key arguments included: (1) the EPA's finding that increased protection results from a lower standard is insufficient, as a matter of law, to establish that the revision is "requisite" under the statute, (2) new health evidence in 2008 does not materially differ from earlier evidence and does not support revising the standard, (3) the risks now are no greater than they were under the earlier standard, and (4) EPA misrepresented and used selective results from the latest clinical and epidemiological studies.

    Our coalition filed a separate brief in July as intervenors in support of EPA defending challenges from environmental groups that the ozone standard is not stringent enough. The NAAQS standard for ozone is now at .075 ppm, and the studies EPA considered in setting this level did not support lowering it below .070 ppm, as demanded by the challengers. A clinical and some epidemiological studies did not produce any statistically significant results for levels below .080 ppm. We also supported EPA's decision regarding exposure and risk assessments.

    The NAM filed a reply brief on Aug. 13 reiterating our position that the EPA did not have sufficient evidence in the record to justify its conclusion that the public health risk from ozone was any different in 2008 than it was in 1997 when it set the last ozone standard. It failed to justify why the 1997 standard was no longer “requisite,” as required by the statute, to protect public health with an adequate margin of safety. The agency also failed to rely on air quality criteria that accurately reflect the latest scientific knowledge, and set secondary standards based on the defective primary standard.

    The Court issued its decision on July 23, 2013, upholding the primary ozone standard of .075 ppm, but ordering EPA to provide further explanation for its secondary ozone standard, which applies to effects of ozone on such things as animals, vegetation, visibility, property and personal comfort and well-being. With respect to the primary ozone standard, the court applied the usual highly deferential standard of review which courts apply to challenges of regulations. It found that EPA set a standard that is "requisite" to protect the public with an adequate margin of safety, holding that "requisite" protection may change over time with different policy judgments and scientific knowledge. As long as EPA reasonably and rationally explains its actions, the courts will defer to those judgments. The court likewise rejected challenges from environmental groups, saying EPA was in a situation reminiscent of Goldilocks. It upheld the agency's decision, found that it had built in a reasonable margin of safety, and allowed the agency to depart from recommendations of the Clean Air Scientific Advisory Committee because CASAC's opinion was a mix of scientific and policy considerations which EPA could decide differently.


    Related Documents:
    Ozone NAAQS Litigation Group reply brief  (August 13, 2012)
    Ozone NAAQS Litigation Group brief  (July 23, 2012)
    Ozone NAAQS Litigation Group brief  (April 17, 2012)
    NAM Opposition to Motion for Order Directing EPA to Complete Reconsideration  (August 10, 2011)
    NAM Cross-Motion to Resume Briefing  (January 10, 2011)
    Ozone NAAQS Litigation Group petition for review  (May 27, 2008)

     

    Sierra Club v. County of Solano   (Cal. Ct. App.)

    County restrictions on solid waste disposal

    Solano County, California, voters passed Measure E in 1984, which obstructed regional waste management by drastically limiting the volume of solid waste that could be brought into the county for disposal or recycling. It sets a low limit on waste from other counties in California, and the county stopped enforcing it after receiving legal opinions that it violated the Commerce Clause because it discriminates against and excludes waste by place of origin.

    The Sierra Club and other environmental groups sued to enforce Measure E as written. The trial judge rewrote the law to apply only to other California counties, but not to waste generated outside of the state. That ruling was appealed.

    The NAM and other organizations filed an amicus brief arguing that protectionist barriers like these have been struck down for decades because they interfere with interstate commerce. Simply limiting the reach of the measure to other California counties does not eliminate this problem. Solano County and thousands of others throughout the nation cannot "stand alone as economic islands around which the free flow of commerce may be diverted. Building a virtual wall around [the county] has a profound impact on the market for solid waste as an article of interstate commerce."

    We urged an appeals court in California to reject laws like this that can create a patchwork of discriminatory and protectionist solid waste bans from cities and counties across the country. Allowing bans like this could lead to similar restrictions against many other goods and services, not merely solid waste, and would allow local entities to achieve what the states are prohibited from doing. The impact would be to dramatically undermine a national market of solid waste management and disposal, and could expose billions of dollars of other economic activity to discrimination by thousands of local governments.

    On 7/31/2013, the court of appeal reversed the trial court's ruling and dismissed the case as moot, because California had enacted a new law (AB 845) that prohibits restrictions on the importation of solid waste based on the place of origin of the waste.


    Related Documents:
    NAM brief  (September 6, 2011)

     

    Sierra Club v. EPA   (N.D. Cal.)

    Intervention in suit that would force EPA to act on ozone

    The NAM and 12 other groups moved to intervene in this suit brought by the Sierra Club over EPA's regulation of ozone. The Sierra Club and other environmental groups filed the suit to force EPA to complete its review and revision of the national ambient air quality standards (NAAQS) for ozone. EPA lowered the standard to 75 ppb in March of 2008, and now the environmental groups are trying to force EPA to take steps to finalize an additional lowering of the standard by September, 2014. The Clean Air Act requires EPA to review NAAQS every 5 years and make revisions "as may be appropriate . . . ."

    The NAM group moved to intervene to help prevent the adoption of more stringent NAAQS demanded by the environmental groups. Any lowering of the standard will result in additional costly and burdensome control requirements, new emission reduction requirements, and fees, and manufacturers need to have adequate time to develop and present information to EPA concerning the present standard and a possible revision. Forcing EPA to act hurriedly "would frustrate the development of sound scientific support on the need for NAAQS revisions." The proposed timetable would make EPA "finalize its risk assessment and policy analysis, complete its consultation with CASAC [an advisory committee], publish a proposed rule in the Federal Register, solicit comments, review those comments and respond to them as necessary, send its final rule to the Office of Management and Budget for mandatory review, and publish the final rule in the Federal Register, all in the span of one year or less." This would require EPA to truncate the public comment period, to the detriment of the public and the regulated community.

    Joining the NAM in the motion to intervene were the American Forest & Paper Association (“AF&PA”), American Fuel and Petrochemical Manufacturers (“AFPM”), American Iron and Steel Institute (“AISI”), American Petroleum Institute (“API”), American Wood Council (“AWC”), Automotive Aftermarket Industry Association (“AAIA”), Brick Industry Association (“BIA”), Council of Industrial Boiler Owners (“CIBO”), Independent Petroleum Association of America (“IPAA”), National Mining Association (“NMA”), Treated Wood Council (“TWC”), and Utility Air Regulatory Group (“UARG”).

    On 8/20/13, the environmental groups and EPA jointly asked the court to delay further filings for 3 months while they engage in settlement discussions.

    On 10/9/13, the court denied our motion to intervene, concluding "that EPA will represent adequately any interests that Proposed Intervenors might have in setting a rulemaking schedule." The judge declined to recognize that we had a "significant protectable interest" in the litigation because the rulemaking deadlines are statutory and non-discretionary. We continue to be concerned that EPA will be forced to settle its way into a rushed timeline for this regulation.

    On April 29, 2014, the court ordered EPA to propose a new standard by December 1, 2014 and to finalize it by October 1, 2015. EPA had wanted an extra 45 days, but that request was denied.


    Related Documents:
    NAM Reply Motion  (September 6, 2013)
    NAM Motion to Intervene  (August 16, 2013)

     

    SIP/FIP Advocacy Group v. EPA   (D.C. Circuit)

    Challenging EPA's disapproval of Texas SIP because of greenhouse gases

    The NAM is part of the SIP/FIP Advocacy Group, which comprises various national trade associations challenging EPA's efforts to require states to implement its greenhouse gas stationary source regulatory requirements. This suit is in response to EPA's decision, published May 3, 2011, partially disapproving Texas' implementation plan for regulating pollution. EPA rejected part of the Texas plan because it did not address how it would apply to pollutants that become "subject to regulation" in the future, such as greenhouse gases. Because it rejected the Texas plan, EPA moved to implement federal regulation of greenhouse gas emissions in Texas.

    The State of Texas and other parties also filed suit against EPA, and our case has been consolidated with those. For further action in this case, click here.


    Related Documents:
    NAM Petition for Review  (July 5, 2011)

     

    SIP/FIP Advocacy Group v. EPA   (D.C. Circuit)

    Challenging EPA's SIP Call for regulation of greenhouse gases

    In December, 2010, EPA announced its Finding of Substantial Inadequacy and SIP Call Rule for greenhouse gas emissions. It found that the laws of 13 states do not authorize them to regulate GHG emissions as is required as of January 2, 2011, and EPA requires those states to change their laws and submit revised State Implementation Plans (SIPs) for review and approval. In the meantime, EPA will use its own Federal Implemenation Plan (FIP) to regulate GHGs. The affected states are Arkansas, Arizona, parts of California, Connecticut, Florida, Idaho, Kansas, Kentucky, Oregon, Nebraska, Nevada (Clark County), Texas, and Wyoming.

    The NAM and other associations that are part of the SIP/FIP Advocacy Group have petitioned two federal appeals courts to review EPA's action. This is another step in our overall challenge to EPA's efforts to regulate greenhouse gases under the Clean Air Act. We filed comments with EPA when this action was proposed, arguing that EPA's own regulations give the states 3 years to comply with the new greenhouse gas requirements, and that the state implementation plans are not "substantially inadequate" to enforce the new requirements.

    A similar case was filed in the U.S. Court of Appeals for the Fifth Circuit. It was transferred to the D.C. Circuit. On 7/6/11, the court consolidated the cases into one but denied EPA's request that it be held in abeyance pending resolution of the main challenges to their greenhouse gas regulations.

    On 2/8/2012, the SIP/FIP Advocacy Group filed its main brief, arguing that the Clean Air Act requires EPA to give the states 3 years to amend their SIPs to account for greenhouse gases. EPA sought, through unlawful intimidation, to coerce states to consent to GHG regulation immediately to avoid a threatened ban on new-source construction. EPA has never acted outside of these procedures, and it should be required to follow them. Until then, we ask the court to provide that no GHG-emitting sources be subject to any PSD (Prevention of Significant Deterioration) permitting requirements.

    On 5/14/2012, NAM filed a reply brief arguing that EPA’s refusal to accept State Implementation Plans is invalid. EPA thinks that states may not issue preconstruction permits addressing greenhouse gases, and that EPA must take over the state's power and issue federal implementation plans. We argued that the states continue to have permitting authority and may take the time allotted by EPA regulations to implement the new greenhouse gas requirements.

    On July 26, 2013, the D.C. Circuit ruled 2 to 1 that no party had standing to challenge EPA's actions because any harm was caused by the Clean Air Act and not by EPA's actions. It found that the Act's permitting requirements are self-executing and require permits for each pollutant subject to regulation under the Act even when the applicable SIP has not been updated to include requirements for newly regulated pollutants. The petitioners did not have standing, according to the majority, because a victory for them would leave them worse off than with the rules, because there would be a construction ban in those states without a SIP for greenhouse gases. The court's ruling applies to Texas v. EPA as well.


    Related Documents:
    NAM reply brief  (May 14, 2012)
    NAM brief  (February 8, 2012)
    NAM petition for review (5th Cir.)  (February 11, 2011)
    NAM petition for review (D.C. Cir.)  (February 11, 2011)

     

    SIP/FIP Advocacy Group v. EPA   (5th Circuit)

    Challenging EPA's SIP Call for regulation of greenhouse gases

    This petition challenges EPA's decision to take over 13 state Clean Air Act implementation plans governing the enforcement of greenhouse gas regulations. For details, see a similar petition in the D.C. Circuit, here.

     

    Texas v. EPA   (D.C. Circuit)

    Challenging EPA's partial takeover of PSD permit authority in Texas

    The NAM and four other business organizations filed an amicus brief supporting the State of Texas in its lawsuit seeking an emergency stay of EPA’s decision partially revoking the State’s permitting authority under its Clean Air Act implementation plan. EPA took over the Texas permitting authority without notice-and-comment rulemaking on the premise that without intervention many stationary sources of greenhouse gas emissions in Texas would have to forgo construction and modification in 2011. But there was no construction ban in Texas, and EPA's intervention was not needed to prevent one.

    EPA took the action in late December, 2010, after the Texas Clear Air Act implementation plan had been on the books for 18 years. EPA believes that its new greenhouse gas rules require large stationary sources of GHG emissions to obtain PSD (Prevention of Significant Deterioration) permits before beginning construction or undertaking modifications of their facilities. Most states automatically incorporate new EPA pollutants in their state plans, but Texas does not, and EPA believes Texas will not act promptly to do so. Our brief, however, argued that PSD permit requirements are not automatically incorporated into a state's implementation plan. Thus, a court may stay EPA's latest regulatory control tactic without interfering with the continuing process by which Texas issues construction and modification permits for stationary sources of emissions.

    On Jan. 12, 2011, the Court granted our motion to file an amicus brief, but denied the motion for a stay. EPA's regulatory action continued in force during the litigation.

    On June 18, 2012 the NAM, as part of the SIP/FIP Advocacy Group, filed its main brief to support Texas’ State Implementation Plan (SIP) against the EPA’s actions to deny it. Our brief argued that EPA cannot override the Texas SIP any time it finds fault or shifts its policy direction. EPA should not expand its powers by using legislation that was intended merely to correct clerical or technical errors in prior laws. In addition, the EPA should not have reviewed the SIP, as it was compliant with the Clean Air Act when it was implemented. Finally, we argued that EPA ignored the requirement to give notice and an opportunity to comment on rule changes.

    These steps by EPA are causing harm to Texas and manufacturers, as they require businesses to obtain permitting from both the state and the federal government, and have effectively destabilized investments in Texas businesses affected by the standards.

    On July 26, 2013, the D.C. Circuit ruled 2 to 1 that no party had standing to challenge EPA's actions because any harm was caused by the Clean Air Act and not by EPA's actions. It found that the Act's permitting requirements are self-executing and require permits for each pollutant subject to regulation under the Act even when the applicable SIP has not been updated to include requirements for newly regulated pollutants. The petitioners did not have standing, according to the majority, because a victory for them would leave them worse off than with the rules, because there would be a construction ban in those states without a SIP for greenhouse gases.

    On Sept. 22, 2014, we petitioned the court to rehear this case, arguing that its decision directly conflicted with the Supreme Court's recent decision in UARG v. EPA. The Supreme Court ruled that the Clean Air Act cannot be interpreted to automatically require a source to obtain a PSD permit on the sole basis of its potential greenhouse gas emissions when those emissions became regulated pollutants. Because the requirements are not self-executing, the D.C. Circuit's decision based on that finding are insupportable. EPA could not reject state implementation plans that did not regulate major sources of greenhouse gases because its own regulations were not authorized.

    The court ordered responses to the petition for rehearing, which were filed on November 4. On May 4, 2015, the court denied the petitions.


    Related Documents:
    SIP/FIP Advocacy Group petition for rehearing  (September 22, 2014)
    SIP/FIP Advocacy Group reply brief  (September 21, 2012)
    SIP/FIP Advocacy Group brief  (June 18, 2012)
    NAM amicus brief  (January 6, 2011)

     

    U.S. Forest Service v. Pacific Rivers Council   (U.S. Supreme Court)

    Challenge to EIS for EPA's forest plan revisions

    In March, 2013 the Supreme Court agreed to review a case in which an environmental group challenged the U.S. Forest Service analysis of the environmental impacts of a revision to its forest plan. The forest plan is a policy that by itself is not an agency action, but is used to inform project-specific decision making, which is agency action. The Forest Service prepared an Environmental Impact Statement (EIS) at the time of the revision as required by the National Environmental Policy Act (NEPA). The environmental group alleged that the EIS for the revised forest plan failed to consider the impact of the plan on fish and amphibians in affected aquatic habitat. The court of appeals rejected the environmental group’s allegation that the EIS analysis of effects on amphibians was inadequate, but held that the EIS ultimately did not satisfy NEPA because it contained no discussion of the effects on particular fish species. The court of appeals went on to explain that NEPA requires programmatic and project-specific EISs as soon as it is reasonably possible to do so.

    This case presented ripeness and standing issues for the Court to consider. The case may not be ripe because the forest plan by itself was not an agency action. If the Court ruled on the ripeness doctrine, it could have required that the environmental group challenge only project-specific agency actions that present a controversy ripe for judicial resolution, meaning that only the actions informed by the forest plan could be challenged, not the entire forest plan. Such individual project challenges would require significant additional litigation resources from the groups. As for standing, the Court could have considered whether the environmental groups make use of the resources sufficiently to have standing to challenge the forest plan, or alternatively the project-specific actions pursuant to the plan.

    The case also raised the question of whether it is possible to evaluate every potential environmental impact from the revision of the forest service plan at the time the amendments were adopted. The relevance of whether all such impacts are reasonably foreseeable at the time of the revision is lessened because any action pursuant to the plan is subject to an EIS before any individual project is allowed to go forward. However, environmental groups are likely to claim “death by a thousand cuts” to the environment if they cannot challenge programs or policies like the forest plan, on the grounds that individual actions may cumulatively have an impact outside of the scope of narrow challenges to project-specific actions.

    This case was important for manufacturers and other businesses that rely on permits or licenses from government agencies to pursue their endeavors efficiently and with legal certainty.

    On 6/17/13, the Court dismissed the case as moot. No decision on the merits of the appeal was issued.

     

    Alec L. v. McCarthy   (D.C. Circuit)

    Litigation seeking to impose 6% annual reductions in greenhouse gases under "public trust" theory

    This is an appeal of a decision dismissing claims by an environmental group that would force the government to impose further greenhouse gas emissions reduction policies under a "public trust" theory. The NAM intervened in the case in the trial court and helped obtain the favorable ruling there.

    For a full summary of our arguments in the district court, click here.

    In our appeals court brief, joined by various trucking and construction companies and associations, we argue that the public trust doctrine is a state law doctrine and does not implicate a federal question subject to jurisdiction in the federal courts. The case also presents a political question that is not for the courts to decide, putting the courts in the position of adopting air emission standards of general applicability and monitoring compliance. No court has ever used the public trust doctrine to compel a regulatory action by the federal government, much less a sweeping new regulatory agenda of the type sought here. In addition, the parties bringing suit do not have standing, because their alleged injuries are not imminent and particularized, nor are they fairly traceable to the defendants or likely to be lessened by any court order.

    The court decided not to hear oral arguments in the case, and on June 5, 2014, affirmed the district court's dismissal of the claims. It found that the plaintiffs did not present a federal question, and that the court therefore did not have jurisdiction to hear the case. There was no federal question because the claims were based on the legal theory of public trust, which is entirely a state law issue.

    The NAM intervened in this case to help block this attempt to use the courts to do an end run around the legislative and regulatory processes that govern regulation of emissions from manufacturing plants. This result is an important development in reining in these kinds of aggressive legal theories and litigation tactics.

    The plaintiffs appealed to the Supreme Court, which declined to hear the case on 12/8/2014.


    Related Documents:
    NAM Opening Brief  (December 23, 2013)

     

    American Chemistry Council v. EPA   (U.S. Supreme Court)

    Whether EPA greenhouse gas regulation for motor vehicles triggers limits on stationary sources of GHG emissions

    On April 18, 2013, the NAM and 23 other business organizations appealed to the Supreme Court to review an adverse decision on greenhouse gas regulation from the D.C. Circuit. We asked the Court to review EPA's first-ever regulations of greenhouse gases emitted by stationary sources, such as power plants and factories. The lower court rejected lawsuits from hundreds of organizations who question EPA's authority to issue the rules under the Clean Air Act, as well as the procedures it used in doing so. Our petition was granted and consolidated into Utility Air Regulatory Group v. EPA. On June 23, 2014, the Supreme Court agreed with the NAM and ruled that EPA's regulation went too far. Click here for a more detailed summary of this case.

     

    American Petroleum Institute v. EPA   (D.C. Circuit)

    Challenging EPA greenhouse gas regulation (light-duty vehicles and CAFÉ standards)

    The NAM and other organizations filed another petition to review an EPA action that is part of its suite of regulations of greenhouse gases from stationary sources. One of our initial suits in this series challenged the EPA's effort to regulate light-duty vehicles, because the agency used that rule as a predicate for further regulation of manufacturing facilities. We challenged this latest rule, published Oct. 15, 2012, as well. The case was consolidated with Plant Oil Powered Diesel Fuel Systems, Inc. v. EPA (No. 12-1428, D.C. Cir.), but that case was voluntarily dismissed, and our challenge was severed and held in abeyance pending a decision from the Supreme Court in UARG v. EPA. After that ruling, we stipulated a dismissal of this case.


    Related Documents:
    NAM Petition for Review  (December 14, 2012)

     

    Babb v. Lee County Landfill SC, LLC   (D.S. Car.)

    Whether common law nuisance claim is preempted by EPA regulation of air emissions

    Landowners near a county landfill in South Carolina sued the landfill claiming that odors from the area caused them damage. The landfill argued that the law suit should be dismissed, because emissions from waste disposal facilities are regulated by Clean Air Act permitting requirements.

    The NAM and the National Waste & Recycling Association filed an amicus brief supporting this argument. Congress adopted a comprehensive regulatory process that allows federal and state regulators to set emissions requirements for major stationary sources of pollutants, and the facility at issue in this case is so regulated. Court orders that set different emissions requirements would conflict with the Clean Air Act's system, but would also dramatically alter the cooperative federal-state framework established by Congress to address air quality issues. Different court rulings around the country would create a patchwork of standards under the common law of each state, and regulated entities would face a daunting challenge of predicting what standards their facilities must meet. Instead, we argued, the court should find that this kind of state nuisance claim is preempted by the Clean Air Act.

    This is another example of a law suit that attempts to use state common law claims to impose more and different air emission requirements on manufacturers or other facility operators already subject to state and federal regulation under the Clean Air Act. The NAM filed a brief in a similar case in 2013 involving emissions from a plant in Iowa.

    The case was


    Related Documents:
    NAM brief  (January 31, 2014)

     

    Center for Biological Diversity v. EPA   (D.C. Circuit)

    When greenhouse gases become subject to regulation under the Clean Air Act

    The NAM and 17 other business associations moved to intervene in a lawsuit brought by the Center for Biological Diversity (CBD) against the EPA over the agency's interpretation of when greenhouse gases become "subject to regulation" (STR) under the Clean Air Act. CBD is expected to argue that greenhouse gases were already subject to regulation before EPA issued the "Johnson memo" in 2008 and a subsequent STR rule in April, 2010. If such a claim is accepted by a federal court, thousands of members of the business associations could be forced to obtain permits for new or existing facilities and to install costly control technology to try to reduce greenhouse gas emissions.

    On July 18, 2014, after the Supreme Court's decision in Utility Air Regulatory Group v. EPA, this case was voluntarily dismissed.


    Related Documents:
    NAM motion to intervene  (June 28, 2010)

     

    CTS Corp. v. Waldburger   (U.S. Supreme Court)

    Whether CERCLA preempts state statutes of repose

    This case involves the deadline for filing damage suits under CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act. The Supreme Court agreed to review a decision from the Fourth Circuit involving a suit for alleged contamination of the ground and water near an old North Carolina manufacturing plant site once owned by CTS Corporation. The site is subject to clean-up obligations under CERCLA, but this case involves a private suit alleging nuisance under state law. CTS argued that the nuisance claim was barred by North Carolina’s 10-year statute of repose.

    CERCLA provides liberal deadlines for filing suit that supersede state statutes of limitations, but says nothing about statutes of repose.

    The NAM filed an amicus brief focusing on the history of statutes of repose and the beneficial purposes they serve—particularly in the efforts of states to create, enhance, and protect economic opportunities for their citizens through job growth. We stressed that states across the country have enacted statutes of repose as part of broader efforts to strengthen their economies—an effort that in the current economic environment is all the more important. These statutes simply put an end to perpetual liability that can remain unknown for years and years, after witnesses are gone and memories fade. They provide certainty and finality in commercial transactions, promote judicial economy, and help keep insurance rates down.

    On 6/9/2014, the Court ruled 7 to 2 that CERCLA does not preempt state statutes of repose. Such statutes differ from statutes of limitations in that they are designed to put an absolute time limit on a defendant's liability, while statutes of limitations are designed to require plaintiffs to file suit promptly when their claims accrue. Courts may grant exceptions when plaintiffs miss statute of limitations deadlines for various reasons, but not for statutes of repose. Because Congress knew of the differences and did not include statutes of repose in the law at issue, it did not intend to preempt them.

    The decision limits long-term liability under CERCLA for pollution that occurred many years ago.


    Related Documents:
    NAM brief  (March 3, 2014)

     

    Freeman v. Grain Processing Corp.   (Iowa Supreme Court)

    Whether public nuisance claim is preempted by EPA regulation of factory emissions

    Eight residents of Muscatine, Iowa, sued a local corn milling plant alleging trespass, nuisance and negligence from pollutants and odors from the plant. The trial court dismissed the claims as being preempted by the Clean Air Act (CAA), Iowa law, and the political question doctrine. That decision was appealed to the Iowa Supreme Court.

    The NAM, along with 5 other manufacturing associations, filed an amicus brief supporting the trial court's decision on preemption and political question. Manufacturers are already subject to a complex system of state and federal regulations, and adding common-law tort liability on top of that will further undermine the ability to create jobs and compete. We argued that courts are not equipped to properly handle cases like this, because they require clear and manageable standards for imposing liability, and such standards involve policy judgments that can only properly be developed by legislative and regulatory bodies with the investigative resources and technical and scientific expertise necessary. In addition, the executive and legislative branches of government are authorized to set and adjust standards and rules to guide the regulated community, and they are much better able to consider the views of many more affected parties, including a variety of scientific and economic experts, to revisit their policy choices on a regular basis, and to develop a consistent policy for everyone, not a piece-meal policy that depends on the court or state in which the case occurs.

    On June 13, 2014, the Iowa Supreme Court reversed the trial court decision and found that the CAA does not either expressly or impliedly preempt state emissions laws nor preclude a right of action brought under those laws. The Court also stated that several clauses in the CAA reserve for private citizens the power to bring public nuisance claims. Unless a state law or common law right of action is expressly preempted by federal statute, courts are reluctant to apply the preemption doctrine to state causes of action. The Court also found that the Iowa environmental statute did not preempt the plaintiffs’ claims because it too reserved the right to bring a public nuisance claim. Rejecting the political question argument, the court found that no constitutional controversy existed, tort claims are typically not precluded under the political question doctrine, and resolution of the controversy did not require a policy decision by another branch of government.

    Claims based on nuisance theories of liability continue to be somewhat of a wild card for the regulation of plant emissions. Manufacturers continue to seek a rational regulatory system where the rules are clear and the potential liabilities are predictable and manageable.


    Related Documents:
    NAM amicus brief  (October 10, 2013)

     

    GenOn Power Midwest, L.P. v. Bell   (U.S. Supreme Court)

    Validity of state tort suits for damages from permitted emissions under Clean Air Act

    This is a Clean Air Act preemption case. Some private property owners sued a power company under common law tort claiming damages for nuisance, trespass, negligence and strict liability arising from emissions and particulates from the operation of a coal-fired power plant in Allegheny County, Pennsylvania. The plant had permits from EPA for the emissions, and the lawsuit did not allege any violations of the Clean Air Act. The trial court threw the case out, finding it preempted by the Clean Air Act, but the Third Circuit Court of Appeals reversed, holding that a provision of the Act saves this kind of state lawsuit. The company sought Supreme Court review.

    The NAM led a group of 11 other industry associations in filing an amicus brief supporting review. We argued that state common law remedies such as those sought here are irreconcilably inconsistent with the comprehensive system of air pollution control provided by the Clean Air Act. Permits, which are subject to public notice and comment, specify clear emission and operating standards that guarantee certainty, predictability, and evenhandedness to the regulated community. They provide an informed assessment of competing interests. By contrast, common law suits view the issues from a narrower perspective, using vague standards of liability, uneven application between states or even within states, with no guarantee of consistent results even between similar facilities.

    Companies must be able to rely on permits for stable business operations, and these kinds of suits are a growing concern. Their effect is to add additional liability for activities that fully comply with federal permit obligations, raising the cost of doing business and threatening jobs and competitiveness.

    The Supreme Court denied our appeal on June 2, 2014.


    Related Documents:
    NAM brief  (March 26, 2014)

     

    Grain Processing Corp. v. Freeman   (U.S. Supreme Court)

    Whether public nuisance claim is preempted by EPA regulation of factory emissions

    The Iowa Supreme Court ruled that a group of Iowa residents could sue a local corn milling plant for trespass, nuisance and negligence from pollutants and odors emanating from the plant, in spite of the fact that the emissions are regulated by the EPA and the company is in full compliance with its permits. That decision was appealed to the U.S. Supreme Court. This case represents a serious emerging problem for manufacturers. The appeal in a similar case was declined by the Court earlier this year.

    Our brief, joined by 6 other national associations, urged the Supreme Court to hear this appeal. We argued that this case presents an ideal opportunity to resolve whether public nuisance claims under state law are preempted by the Clean Air Act. There are serious conflicts between the federal courts of appeals and within state courts concerning this preemption issue. The issue is important because public nuisance litigation threatens one of the Clean Air Act's most important methods of pollution control -- permitting. Permits specify clear standards that guarantee certainty, predictability, and evenhandedness to the regulated community, and allowing public nuisance litigation threatens to substitute ad hoc decisions for considered regulatory policy, a result completely at odds with the goals and purposes of the Clean Air Act.

    On December 1, 2014, the Court declined to review this appeal.


    Related Documents:
    NAM brief  (October 14, 2014)

     

    Mingo Logan Coal Co. v. EPA   (U.S. Supreme Court)

    EPA interference with Clean Water Act permits

    The NAM and a group of 18 other national business organizations filed an amicus brief urging the Supreme Court to review a ruling that would give EPA the power to revoke a valid discharge permit issued under the Clean Water Act. The ruling, reversing a trial judge's decision that struck down EPA's attempt to interfere with valid permits, prompted widespread concern in the business community that EPA was arrogating to itself the power to upset long-settled reliance on thousands of permits issued by the U.S. Army Corps of Engineers.

    The NAM hoped to convince the Supreme Court of the importance of this case. Our brief focused on the impact of the decision on investment expectations and infrastructure projects. About 60,000 discharge permits are issued every year, representing $220 billion of investment in the U.S. economy, and a 2% risk that EPA could revoke a permit decreases the benefit-cost ratio of a project by 30%. We highlighted a study by Professor David Sunding that even small changes in the possibility of such EPA action "can lead to dramatic redutions in private investment." EPA's move also threatens public sector projects for water, transportation, energy and public infrastructure.

    The issue is also critical to state governments, with 27 states filing their own amicus brief supporting Supreme Court review of the case.

    Here are links for our summaries of action in this case in the trial court and the appeals court.

    On March 25, 2014, the Court declined to hear this appeal.


    Related Documents:
    NAM brief  (December 16, 2013)

     

    National Association of Manufacturers v. EPA   (D.C. Circuit)

    Challenging EPA's NAAQS for particulate matter

    On March 15, 2013, the NAM filed a petition for the U.S. Court of Appeals to review the EPA's latest regulation of particulate matter. The regulation, published on Jan. 15, lowered the primary annual National Ambient Air Quality Standard for particulate matter from 15 to 12 micrograms per cubic meter. The NAM had urged EPA to retain the existing standard, but the agency opted to move forward with a more aggressive and damaging regulation.

    NAM's President and CEO Jay Timmons said that the "new standard will crush manufacturers' plans for growth by restricting counties' ability to issue permits for new facilities, which makes them less attractive for new business. Essentially, existing facilities will have to be shuttered for new facilities to be built in these areas. This is not a conducive way to create jobs."

    Our opening brief, filed 8/19/13, focused on whether EPA prejudged the need for the rule and the range of outcomes from the rulemaking process, whether it ignored a substantial body of contrary scientific evidence that does not support lowering the standard, whether its decision to require monitoring devices along roadways was unlawful because it will record maximum rather than ambient particulate matter concentrations, and whether the rule is invalid because EPA failed to provide implementation rules needed to address the legal consequences that flow from it.

    The brief recounts the history of EPA's regulation of particulate matter. It notes that promulgation of the rule triggered immediate implementation obligations and started the clock on numerous others, yet many key implementation issues are unresolved. First, EPA has not approved a computer model to demonstrate compliance with the standard, which is typically how companies demonstrate compliance. Second, there are technical problems with the two methods approved by EPA for testing particulate matter emissions that have led EPA to recognize their limitations, indicating that reliable test methods are several years away. Third, EPA has not provided full guidance to the states about how to designate the boundaries of nonattainment areas, which could lead to improper designations and further burdens on manufacturers. Other issues are also highlighted.

    On May 9, 2014, the Circuit Court denied NAM’s petitions. On each issue, the court deferred to EPA’s process and decisions. Although we challenged EPA’s lowering of the threshold for particulate matter, the court decided that EPA provided reasonable scientific explanations to justify making the standards more stringent. We also challenged EPA’s elimination of the “spatial averaging” test to determine particulate matter standards. Spatial averaging entails gathering data from several sites within a specified area and then averaging the results to determine the level of emissions in that area. EPA reasoned that spatial averaging would cause certain specific areas within a larger area to be out of compliance. Lastly, the court determined that EPA has the authority to protect air quality, and therefore it may place monitors in all areas, including along heavily traveled metropolitan roads, to accurately determine air quality.

    In sum, this decision shows that courts continue to be reluctant to second-guess EPA regulations. Lowering the particulate matter levels will increase costs and harm competitiveness. The court’s unilateral deference to EPA’s justifications for lowering the levels underscores the importance of participation in the rulemaking process to combat future EPA regulations.


    Related Documents:
    NAM brief  (August 19, 2013)
    NAM Statement of Issues  (April 17, 2013)

     

    National Mining Ass'n v. McCarthy   (D.C. Circuit)

    Whether EPA guidance document constitutes regulation that must go through notice-and-comment rulemaking

    There’s a law that prevents agencies from charging ahead with regulatory changes without seeking input from the public and the regulated community. It’s called the Administrative Procedure Act (APA), and it was designed to require agencies that want to make significant changes to their regulations to publish the proposed changes and answer criticisms on the record.

    In 2009, the Environmental Protection Agency announced -- through a series of memoranda and letters -- a new system of review for certain Clean Water Act permits. These permits, called Section 404 permits, are needed by anyone that wants to build or modify a facility or undertake some other construction project that might have an effect on waters subject to federal jurisdiction. EPA later issued lengthy guidance making substantive changes to the requirements for permits for surface coal mining, also without going through notice-and-comment rulemaking.

    The National Mining Association sued, and a federal district judge ruled that EPA had overstepped its authority and violated the APA. That ruling has been appealed to the D.C. Circuit, and the NAM and other business organizations filed an amicus brief supporting the trial judge’s decision. The brief described numerous instances where EPA and other regulatory agencies have issued regulatory requirements -- posing as guidance – that should be adopted by notice-and-comment procedures.

    On July 11, 2014, the D.C. Circuit reversed, finding that the "Enhanced Coordination Process" and Final Guidance were procedural, not legislative rules, and therefore not subject to the APA. It also ruled that a court challenge was premature because the Final Guidance was not actually final agency action subject to litigation, because it did not subject regulated parties or state enforcement agencies to any requirements or liabilities. The Guidance can be legally ignored. If it is actually used to grant or deny a permit in the future, a law suit might then be appropriate.

    The upshot of this ruling is that EPA can create guidance documents that regulated parties can legally ignore, but they do so at the risk of having to litigate over EPA's use of such guidance documents after a permit is denied. Changing regulatory requirements with guidance documents casts American businesses adrift in uncharted territory in terms of regulatory risk and stymies investment and economic growth. Agencies that fail to use proper rulemaking procedures make decisions without the insight, data and information of the regulated public, including the practical implications of alternative policy choices.


    Related Documents:
    NAM brief  (July 22, 2013)

     

    Natural Resources Defense Council v. EPA   (D.C. Circuit)

    Portland Cement NESHAP litigation

    Several environmental groups sued EPA over its emission standards for hazardous air pollutants from cement plants. They argued that amendments to the standards weaken and delay compliance with an earlier rule, and that the agency must not allow an affirmative defense for manufacturers when malfunctions of industrial equipment occur. The NAM is part of the SSM Coalition, which filed an amicus brief supporting the affirmative defense. The environmental groups wanted a standard that regulated sources, including the best-performing sources, will be unable to meet at times despite their proper design, operation, and maintenance. As a result, manufacturers will face civil penalties for events beyond their control.

    EPA took the position that malfunctions must be accounted for in standards which require maximum achievable control technology (MACT). To be achievable, MACT standards must be capable of being met on a regular basis, including under most adverse circumstances which can reasonably be expected to recur, including periods of startup, shutdown, and malfunction. EPA may set different requirements during malfunction events than apply to normal operations of plant equipment.

    Our brief argued that an affirmative defense to civil penalties that might arise from a malfunction is required by the Clean Air Act and was properly promulgated by EPA. Without the defense, companies would be subjected to citizen suits, as well as administrative penalties, for events beyond their control.

    We also argued that EPA has the authority to adjust the compliance deadline when it modifies a MACT standard. Not allowing this authority would be hugely unfair to regulated sources and would ignore the reality that it can take up to three years or more to design, acquire, install and start up pollution control equipment or modified processes.

    On April 18, 2014, the court unanimously ruled that EPA properly adopted the emissions-related provisions in the rule, but that it did not have the statutory authority to create an affirmative defense in civil suits against cement manufacturers where an unavoidable malfunction results in impermissible levels of emissions. It found that EPA reasonably read the statute to allow an increase in the emissions limits for particulate matter from cement-making kilns. It also found that EPA reasonably considered costs to industry with a comparative analysis of cost-effectiveness, rather than, as the environmental groups wanted, consider only whether a standard would be "too expensive for industry to achieve", that is, one that would essentially bankrupt the industry.

    The court rejected environmental arguments that the compliance date for emissions of mercury, hydrochloric acid and hydrocarbons should be 2013. Because the standard for particulate matter changed in the new regulation, the court found that it would be irrational and even absurd to have different compliance dates for the different pollutants because of the technology involved. The new compliance date is September 2015.

    Finally, it agreed with the environmental groups that EPA did not have the authority to establish an affirmative defense for companies whose emissions exceed the regulatory limits because of unavoidable malfunctions. Instead, private civil suits may be filed by those affected by the emissions, and it is up to the courts to decide whether to award damages. During court proceedings, EPA may seek to intervene, or file an amicus brief, stating its views about whether a company should be liable for such emissions. It is up to the courts to determine the scope of remedies available to plaintiffs, taking into consideration the company's compliance history and good faith efforts to comply, the duration of the violation, and other factors.


    Related Documents:
    SSM Coalition brief  (July 30, 2013)

     

    Oklahoma v. EPA   (U.S. Supreme Court)

    EPA power to take over state enforcement on regional haze

    The NAM and other groups asked the Supreme Court to review a lower court decision that allows the EPA to take over 14 state enforcement plans under the Clean Air Act with respect to regional haze, and impose Federal Implementation Plans (FIPs). Oklahoma and North Dakota objected to this EPA action, saying that the agency overstepped its statutory authority and the result will be billions of dollars in power plant upgrades that will needlessly boost electric rates by as much as 20 percent.

    Our amicus brief supports review, focusing on the fact that the Clean Air Act limits EPA's authority with respect to state implementation plans, instead giving the states primary responsibility for making air quality decisions and limiting EPA's role to the secondary function of determining whether those state plans are "based on a reasoned analysis." This is particularly important regarding state regional haze decisions, which involve aesthetic concerns such as visibility in parks. EPA wanted to impose a control technology that is too costly, and conducted a visibility analysis differently. However, Congress gave the states significant latitute by allowing them to choose the mix of sources that must install controls to attain the national standards.

    This litigation reflects a growing pattern of disregard by EPA for the statutory limits on its authority, undermining the balance in the Clean Air Act between federal and state enforcement. Allowing this will only make matters worse -- empowering EPA to take unilateral action without engaging with states to help craft workable standards.

    On May 27, 2014, the Court declined to hear this appeal.


    Related Documents:
    NAM brief  (March 5, 2014)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Whether carbon dioxide must be considered in EPA PSD permits

    In the Deseret Power decision in 2008, the EPA Environmental Appeals Board rejected the Sierra Club's contention that preconstruction permits for new power plants must include "best available control technology" (BACT) for carbon dioxide, but sent the case back to the EPA to reconsider whether to impose the requirement under its discretionary authority, and to develop an adequate record for its decision. It encouraged the EPA to consider whether the issue in this case should be resolved "in the context of an action of nationwide scope, rather than through this specific permitting proceeding."

    On Sept. 14, 2010, the court ordered the case held in abeyance pending the outcome of other greenhouse gas cases. Former EPA Administrator Stephen Johnson issued an interpretative guidance memorandum on Dec. 18, 2008, that concluded that PSD permits (for the Prevention of Significant Deterioration of air quality) do not need to include BACT limits for greenhouse gases. The Sierra Club challenged that guidance, while the NAM and other business organizations supported it.

    Our motion to intervene, filed 2/13/09, outlined why this case will have a substantial impact on many manufacturers, and why the EPA, which represents the general public interest, will not adequately represent the interests of the business community.

    On Feb. 17, 2009, EPA Administrator Lisa Jackson granted a Sierra Club petition for reconsideration of the Johnson memo, and permitted public comment on the matter. The D.C. Circuit stayed the litigation.

    On April 2, 2010, EPA completed its reconsideration of the Johnson memo and published a new "Subject to Regulation" notice that made January 2, 2011 the date on which greenhouse gas emissions were regulated. On June 9, EPA asked the court to hold the case in abeyance while other litigation over its GHG regulation was resolved. The NAM opposed this motion, saying that the issues in this case are being addressed in other greenhouse gas cases, and the environmental groups here should not be allowed to have a second chance to litigate should they lose in those other cases. We also opposed an effort to allow the Center for Biological Diversity to switch its challenge from those cases into this one, as that could create competing panels of judges reviewing the same issues. Ultimately, the case was held in abeyance and finally dismissed in 2014 after the Supreme Court ruled in Utility Air Regulatory Group v. EPA, partially upholding EPA regulation of greenhouse gases, but limited its scope under the PSD program.


    Related Documents:
    NAM Opposition to EPA's Procedural Motion  (June 22, 2010)
    NAM Motion to Intervene  (February 13, 2009)

     

    Utility Air Regulatory Group v. EPA   (U.S. Supreme Court)

    Whether EPA greenhouse gas regulation for motor vehicles triggers limits on stationary sources of GHG emissions

    On April 18, 2013, the NAM and 23 other business organizations appealed to the Supreme Court to review an adverse decision on greenhouse gas regulation from the D.C. Circuit. We asked the Supreme Court to review EPA's first-ever regulations of greenhouse gases emitted by stationary sources, such as power plants and factories. The lower court rejected lawsuits from hundreds of organizations who questioned EPA's authority to issue the rules under the Clean Air Act, as well as the procedures it used in doing so.

    Greenhouse gas regulation is one of the most costly, complex and encompassing energy regulatory issues facing manufacturers and damaging our global competitiveness. EPA’s regulations could eventually force new permitting requirements for more than 6 million stationary sources, including 200,000 manufacturing facilities, 37,000 farms and millions of other sources, such as universities, schools and hospitals – impacting every aspect of our economy.

    EPA’s regulatory decisions produced what it concedes were absurd results. We argued that this was not Congress’s intent when it enacted the Clean Air Act, and that courts must avoid agency interpretations that undermine the purpose of the law.

    Moreover, EPA tried to avoid these absurd results by modifying the express statutory thresholds defining who is regulated. Only Congress can make those kinds of changes, and had the agency properly interpreted the statutory requirements from the beginning, it would not be in the position of having to alter the statutory requirements.

    The effects of this regulation are immediate, concrete and massive, and will require the installation of “best available control technology”, with total costs estimated by EPA to increase to more than $50 billion per year. This case is of critical importance to manufacturers and our economy.

    The Supreme Court agreed to hear our appeal, along with petitions from 5 other groups, limited to the following question: "Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases."

    On June 23, 2014, the Court decided that EPA's regulation went too far. A majority concluded that, while greenhouse gases are within the class of emissions that are included within the broad reach of the Clean Air Act, specific sections of that law limit the EPA's regulatory power. Five Justices found that EPA neither was compelled nor permitted to require PSD (Prevention of Significant Deterioration) permits of companies solely because of their greenhouse gas emissions. They also ruled that EPA did not have the statutory authority to rewrite the unambiguous statutory thresholds, and even if EPA would not enforce its greenhouse gas requirements on smaller emitters, those companies would have remained subject to citizen suits to enjoin construction, modification or operation and to impose civil penalties of up to $37,500 per day of violation.

    Seven Justices agreed with the NAM's argument that only companies already subject to permitting under the PSD program will be subject to any permitting requirements relating to greenhouse gases. They agreed that the PSD program was intended for the largest emitters that are already subject to PSD permitting. By limiting EPA's authority in this way, the decision provides substantial regulatory relief for the owners of millions of buildings and plants across the country.


    Related Documents:
    NAM Reply Brief  (February 14, 2014)
    NAM Brief on the Merits  (December 9, 2013)
    NAM Petition  (April 18, 2013)

     

    White Stallion Energy Center, LLC v. EPA   (D.C. Circuit)

    Challenging EPA Maximum Achievable Control Technology regulation

    This case is about how the EPA establishes standards for maximum achievable control technology (MACT) which is used to minimize the emission of pollutants into the air. It arose in the context of a new regulation on emissions of hazardous air pollutants from electric utilities, as well as industrial-commercial-institutional steam generating units. The 2012 "Utility MACT" regulation adopts a methodology that has broad implications for industries subject to existing MACT standards that may be revised, or new standards yet to be developed.

    The NAM filed an amicus brief arguing that the EPA erred in adopting a "pollutant-by-pollutant" approach. Under that approach, the EPA cherry-picks emissions data from multiple sources and sets a MACT floor based on whatever source is deemed the "best" for each individual pollutant. This often means there is a different best performer for each pollutant, and no single source of emissions will be able to achieve the regulatory requirement. The NAM believes that these measurements need to be made from producers operating under practical conditions -- not individually measuring pollutants and not from sources ideally positioned to limit their pollution, as the EPA argues. The EPA's approach is like asking a decathlon champion to be able to win not only the overall decathlon, but all of the individual events as well.

    In addition, we argued that the EPA must give meaningful consideration to costs in determining whether a particular standard is achievable. The Clean Air Act requires that the level of pollution reduction that the EPA specifies be achievable, and its methodology will severely curtail or eliminate operations. Some vendors are unwilling to offer guarantees that their pollution control technology will meet the new standards, and financing of new projects is jeopardized.

    On 9/12/2012, the court ordered this case to be held in abeyance pending reconsideration of the new source standards now under way at the EPA. The agency stated that it intends to complete the reconsideration by March 2013. It said it would reconsider "measurement issues related to mercury and the data set to which the variability calculation was applied when establishing the new source standards for particulate matter and hydrochloric acid." See 77 Fed. Reg. 45968 (Aug. 2, 2012).

    The case was settled in 2014 by stipulated agreement.


    Related Documents:
    NAM brief  (August 3, 2012)

     

    Alabama v. EPA   (D.C. Circuit)

    State challenge to greenhouse gas tailoring rule

    Various states sued EPA over its tailoring rule, by which the agency rolled out enforcement of greenhouse gas regulations to the largest facilities first, followed by smaller ones later. States must comply with EPA's new regulations. The NAM and 14 other business associations in our coalition filed a motion to intervene in litigation filed by representatives of 8 states challenging EPA's authority. Their lawsuit sought judicial review of EPA's plan to retroactively limit its previous approval of pollution thresholds in State Implementation Plans (SIPs). The states are likely to argue that EPA violated the Clean Air Act by its reinterpretation of existing regulations, which would result in significant additional costs to manufacturers regulated under state programs.

    The NAM's intervention in this case is designed to assist the court in understanding the interaction between EPA's requirements, state implementation programs, and emissions permit requirements affecting manufacturers.

    The NAM and other organizations also filed a separate petition to review the EPA's tailoring rule. On March 10, 2015, the D.C. Circuit ruled that EPA's rules are vacated in part, consistent with the Supreme Court's ruling in Utility Air Regulatory Grop v. EPA.

     

    Anadarko Petroleum Corp. v. United States   (U.S. Supreme Court)

    Definition of "discharge" under Clean Water Act

    This case involves the allocation of responsibility under the Clean Water Act's civil penalties provision between various parties related to the Deepwater Horizon accident in the Gulf of Mexico in 2010. Two defendant companies have asked the Supreme Court to review the Fifth Circuit's interpretation of the term "discharge" in the context of interconnected vessels and facilities through which the discharged oil passed. They argue that the Supreme Court has interpreted the word as "flowing or issuing out," but that the Fifth Circuit adopted a new interpretation of discharge as a "loss" or "absence" of controlled confinement. A petition for rehearing by the full court was denied by a vote of 7 to 6.

    The NAM and other groups filed an amicus brief urging the Supreme Court to review this case. We argued that the appeals court ruling was confusing, overbroad, and internally inconsistent, and that ambiguous statutory terms should be interpreted leniently to defendants. Billions of dollars of potential penalties in this case depend on a proper interpretation of the statutory term.

    The NAM brief was filed in both the Anadarko case and a similar appeal by BP Exploration and Production Inc. On 6/29/15, the Court declined to hear these appeals.

     

    Coalition for Responsible Regulation, Inc. v. EPA   (D.C. Circuit)

    Greenhouse gas case after decision from Supreme Court

    The NAM's successful challenge to EPA's authority to regulate virtually all manufacturers that emit greenhouse gases was sent back from the Supreme Court to the U.S. Court of Appeals for the D.C. Circuit to determine what to do with regulations that are still printed in the Code of Federal Regulations, but that exceed EPA's regulatory authority. All of the parties that challenged EPA's authority, including state governments, industry associations, and public interest groups, filed a motion with the court, as has EPA, recommending what to do next.

    EPA's motion proposed that the court declare the "regulations under review are vacated to the extent they require a stationary source to obtain a PSD [or Title V] permit if greenhouse gases are the only pollutant [that would trigger construction or modification review." It also says the court should direct it to rescind or revise the regulations to reflect the Supreme Court's decision. The agency does not believe it should establish a de minimis threshold for greenhouse gas regulation, but instead wants to rely on the 75,000 tons per year threshold currently on the books.

    Industry's motion, by contrast, argued that the Court invalidated EPA's regulations to the extent they "treat greenhouse gases as a pollutant for purposes of defining" PSD and Title V applicability. As a result, EPA must vacate those rules, namely the Tailoring Rule, the Timing/Triggering Rule (to the extent EPA relied on it), and other challenged rules it relied on. EPA's interpretation of its authority was neither compelled nor allowed by law, so in effect it must start over. It should also decide on a de minimis threshold for regulation.

    Final briefs in response to each motion were filed November 21, 2014.

    On April 10, 2015, the court issued an amended order that:

    "(1) the regulations under review (including 40 C.F.R. §§ 51.166(b)(48)(v) and 52.21(b)(49)(v)) be vacated to the extent they require a stationary source to obtain a PSD permit if greenhouse gases are the only pollutant (i) that the source emits or has the potential to emit above the applicable major source thresholds, or (ii) for which there is a significant emissions increase from a modification; (2) the regulations under review be vacated to the extent they require a stationary source to obtain a title V permit solely because the source emits or has the potential to emit greenhouse gases above the applicable major source thresholds; and (3) the regulations under review (in particular 40 C.F.R. § 52.22 and 40 C.F.R. §§ 70.12, 71.13) be vacated to the extent they require EPA to consider further phasing-in the requirements identified in (1) and (2) above, at lower greenhouse gas emission thresholds."

    The court also ordered EPA to rescind or revise the applicable rules "as expeditiously as practicable," and to "consider whether any further revisions to its regulations are appropriate in light of UARG v. EPA . . . and if so, undertake to make such revisions."

     

    In re Deepwater Horizon   (Texas Supreme Court)

    Insurance coverage dispute for BP's pollution-related liability

    In an insurance coverage case, a federal court asked the Texas Supreme Court to tell it whether Texas law compels a finding that BP is covered for damages arising from the Deepwater Horizon accident in the Gulf of Mexico. The case involves whether language in an umbrella insurance policy alone determines the extent of BP's coverage as an additional insured.

    The NAM filed an amicus brief asking the court to apply traditional contract principles: (1) that the scope of insurance coverage should be determined by the contract and not from external documents unless they are clearly intended to be incorporated into the agreement, and (2) that ambiguous terms should be construed in favor of the insured. Courts should not create a subjective "sophisticated insured" exception to insurance law that has been recognized and applied for more than 125 years. Such an exception would make legal rules change depending on the identity of the party invoking them, would introduce the difficult question of determining who is a sophisticated insured, and would disincentivize insurance companies from making their policies as clear as possible.

    The court held in an 8-1 decision that BP was not entitled to this coverage, relying on terms from the drilling contract that were not explicitly incorporated into the insurance policy.

    The NAM filed an amicus brief on 4/22/15 supporting BP’s motion for rehearing by the Texas Supreme Court. The NAM’s brief supports BP’s argument that the court should revisit this issue as it has introduced tremendous uncertainty into state insurance law by departing from several long-held principles on insurance law. These principles include: 1) that external terms should only be incorporated into an insurance policy by explicit reference; 2) limitations on insurance coverage must be expressed in clear and unambiguous policy language; 3) the scope of additional insured coverage is determined by the policy and not the underlying contract; and 4) certificates of insurance are informational only and do not confer or abrogate rights.

    BP dropped its motion for rehearing on May 27, 2015 after reaching a confidential settlement.


    Related Documents:
    NAM brief  (April 22, 2015)
    NAM brief  (March 13, 2014)

     

    Little v. Louisville Gas & Elec. Co.   (6th Circuit)

    Whether common law air pollution claims are preempted by EPA regulation of power plant emissions

    Neighbors of a power plant in Louisville sued the company for emitting dust and coal ash from its power generating and sludge processing plants. The suit raised claims under the federal Clean Air Act and Resource Conservation and Recovery Act (RCRA), as well as state-law claims of nuisance, trespass and negligence. The trial judge dismissed most of the claims, but allowed the common-law tort claims to proceed. That decision was appealed.

    The NAM and other business groups filed an amicus brief supporting the utility, arguing that state common law air pollution claims are preempted by the Clean Air Act. Such claims directly conflict with the structure and purpose of the Act, and the Supreme Court has already held that similar claims under federal common law are displaced and unavailable. The purpose of the Clean Air Act is to ensure some level of uniformity, certainty and predictability in the application of air emissions standards throughout the United States. Piecemeal litigation that asks a judge to decide what is reasonable directly damages the interests of uniformity and predictability, subjecting companies in full compliance with their operating permits to significant and ongoing risk that they may be sued and held liable for their emissions. Moreover, nuisance law is notoriously vague and amorphous, leaving companies unable to predict whether their operations will be subject to potentially crushing damages liability.

    This is another in a series of cases in which plaintiffs are trying to expand legal remedies beyond what Congress has legislated. Regulatory agencies like EPA take into account statutory requirements and consider the views of all affected parties when they impose regulations and permit requirements, and allowing individual judges or juries around the country to come up with their own views of what is a nuisance would seriously interfere with the ability of manufacturers and utilities to provide goods and electricity to their customers.

    On November 2, 2015, the Sixth Circuit affirmed the district court’s order and held that such state common law air pollution claims are not preempted by the Clean Air Act. For more information, see the companion Sixth Circuit appeal in Merrick, et al. v. Diageo Americas Supply, Inc.

     

    Merrick v. Diageo Americas Supply, Inc.   (6th Circuit)

    Whether public nuisance claim is preempted by EPA regulation of factory emissions

    This case presents another opportunity for the courts to resolve whether public nuisance claims under state law are preempted by the Clean Air Act. There are serious conflicts between the federal courts of appeals and within state courts concerning this preemption issue.

    The case arose when private property owners brought claims of nuisance, negligence and trespass based on ethanol emissions from Diageo's whiskey production facilities in Louisville, Kentucky. They allege that ethanol emitted from the facilities cause a fungus to germinate and grow on their property, and they seek damages and emissions controls that exceed those required under the company's Clean Air Act operating permits.

    The issue is important because public nuisance litigation threatens one of the Clean Air Act's most important methods of pollution control -- permitting. Permits specify clear standards that guarantee certainty, predictability, and evenhandedness to the regulated community, and allowing public nuisance litigation threatens to substitute ad hoc decisions for considered regulatory policy, a result completely at odds with the goals and purposes of the Clean Air Act.

    The NAM and two other business groups filed an amicus brief urging the Sixth Circuit to reject the claims, arguing that they directly conflict with and are preempted by the Clean Air Act. In addition, a provision in the Clean Air Act that allows states to adopt standards for air pollution control allows such controls only when they are established through statute or regulation, not claims under state common law. The goals and policies of the Clean Air Act were intended to establish and enforce uniform standards for air quality, developed by EPA through an extensive regulatory scheme that is fundamentally inconsistent with common law adjudication that would allow for the imposition of liability based on standards developed by a judge or jury and retroactively applied against a facility.

    On November 2, 2015, the Sixth Circuit affirmed the district court’s order that such state common law air pollution claims are not preempted by the Clean Air Act. Though it acknowledged the suggestion that it is unduly burdensome for industries to be subject to both federal law and state common law, the court left that concern to Congress.


    Related Documents:
    NAM amicus brief  (December 3, 2014)

     

    Michigan v. EPA   (U.S. Supreme Court)

    Consideration of costs in Utility MATS rule

    The NAM filed an amicus brief in the Supreme Court supporting a challenge to EPA’s decision not to consider costs in determining whether regulation of hazardous air pollutant (HAP) emissions from electric generating units was appropriate and necessary under Sec. 112 of the Clean Air Act. EPA’s regulation, known as the Utility MATS Rule, will cost more than $9.6 billion annually, according to EPA’s own analysis, and is one of the most expensive regulations ever for power plants. (The NAM’s estimate is $12 billion annually). These costs are passed on to manufacturers and other consumers of electricity, and could endanger the reliability of electricity.

    We argued that the regulatory record compiled by EPA reflects little or no public health benefit from the reduction in HAP emissions. A federal appeals court ruled that EPA was allowed to refuse to consider the costs of the rule, despite a statutory requirement that the regulation be “appropriate.” Our brief argues that a rulemaking procedure that does not consider the rule’s substantial cost burden on the regulated community violates the express and intended meaning of this statute, particularly because energy regulation affects all sectors of society and the economy. “A determination of whether regulation is ‘appropriate’ inherently involves a balancing of costs and benefits,” we argued.

    We also argued that the regulation is not necessary because other EPA regulations already impose restrictions on hazardous air pollutants, and EPA improperly tried to justify its new HAP regulation by touting the potential for reduction in emissions not regulated under the HAP rules, namely further reductions in particulate matter emissions that EPA would be unable to require directly.

    On 6/29/15, by a vote of 5 to 4, the Court rejected EPA's failure to consider costs when determining whether the regulation was "appropriate and necessary." Even though EPA is entitled to considerable deference in its rulemaking powers under the Chevron case, the Court found that the agency's interpretation was not reasonable or even rational. According to the majority, "an agency may not 'entirely fai[l] to consider an important aspect of the problem' when deciding whether regulation is appropriate." The phrase is very broad, and a natural reading of it requires some attention to cost. Considering costs avoids the problem of spending too much on one problem and not having enough to spend on other -- perhaps more serious -- problems. The majority also rejected EPA's argument that it could consider costs when deciding how much to regulate power plants, rather than as a threshold issue in deciding whether to regulate them. The statute requires cost considerations at the first step. But it left it to EPA to decide how to account for cost in making its initial determination, without requiring "a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value." The Court did not address EPA's claim that the regulation provides ancillary benefits that make it cost-effective.

     

    Murray Energy Corp. v. EPA   (D.C. Circuit)

    Challenge to EPA's proposed existing power plant GHG regulation

    The NAM and 8 other business associations filed an amicus brief supporting Murray Energy's challenge to EPA's proposed rule to substantially regulate greenhouse gas emissions from existing power plants. According to the EPA, the rule's annual compliance costs will reach at least $7.3 billion by 2030, and manufacturers will see dramatic electricity cost increases and less reliable service as a result.

    The NAM amicus brief argued that Section 111(d)(1) of the Clean Air Act prohibits EPA from setting performance standards for sources that are already regulated under Section 112. EPA's interpretation would create double regulation, making power plant operation more expensive and conflicting with the purpose of Section 111(d). The statutory language is not ambiguous, and EPA's interpretation should not be given deference by the courts.

    On June 9, 2015, the Court dismissed the challenge because the EPA has not taken final agency action that would allow a court to review it. The criteria under the All Writs Act for issuing an order against EPA's plans are not met, and the fact that some companies may be incurring costs in anticipation of the final rule does not justify court intervention.

     

    National Association for Surface Finishing v. EPA   (D.C. Circuit)

    EPA recalculation of MACT standards

    This case involves the statutory obligations of the EPA to set maximum achievable control technology (MACT) standards for emissions under Clean Air Act Sec. 112(d)(6), specifically for chromium electroplating and anodizing operations. EPA is in the early stages of implementing that section, which applies when EPA reviews standards every 8 years. Because this review process applies to many other substances regulated by EPA, the decision in this case will extend far beyond chromium use.

    At issue is what the statute requires of EPA when determining whether to tighten an existing standard. The NAM filed an amicus brief arguing that the statute specifically requires EPA to revise a standard, when conducting a technology review, only when "necessary (taking into account developments in practices, processes, and control technologies)." In this case, EPA's approach did not square with the plain statutory requirements, because it identified no "development" in emissions control measures that necessitates the new, more stringent standards it adopted.

    We also oppose an effort by environmental groups to have EPA recalculate existing standards using procedures in Sec. 112(d)(2) and (3) for initial MACT standard-setting. Those procedures for new standards are not constrained in the same way that 8-year reviews are. As a result, EPA will lower emissions limits because companies complying with new standards try to build in a compliance margin when they buy new equipment, and that commendable over-performance raises the bar and leads EPA to lower the limits when the standard is reviewed. EPA's longstanding position is that it is not required to re-set the existing MACT standards each time it conducts a Sec. 112(d)(6) review, and that it is not required to use procedures under Sec. 112(d)(2) and (3) for periodic reviews, yet it did so in this case.

    On July 21, 2015, a 3-judge panel rejected both industry and environmental group challenges to the review. It declined to require EPA to determine a new MACT floor each time it reviews a MACT rule, as environmental groups had wanted. But it also rejected industry arguments challenging the extent of technological developments that have occurred since the first rule was issued. It found that developments include improvements in performance of some technologies, which EPA found.


    Related Documents:
    NAM brief  (June 9, 2014)

     

    National Association of Clean Water Agencies v. EPA   (D.C. Circuit)

    Challenging EPA's Non-Hazardous Secondary Materials Rule

    The NAM and other industry organizations filed a petition with a federal appeals court to review a final rule on non-hazardous secondary materials (NHSM) issued by the EPA on February 7, 2013, entitled “Commercial and Industrial Solid Waste Incineration Units: Reconsideration and Final Amendments; Non-Hazardous Secondary Materials That Are Solid Waste, Final Rule”. The rule was written to identify whether NHSMs are solid waste under the Resource Conservation and Recovery Act when used as fuels or ingredients in combustion units. Further details about the legal claims in this litigation will be filed with the court shortly.

    This case was consolidated on June 7, 2013. For more information click here.


    Related Documents:
    Petition for Review  (May 7, 2013)

     

    National Association of Manufacturers v. SEC   (D.C. Circuit)

    Appeal of NAM's challenge to SEC rule on Conflict Minerals

    This is the appeal of an adverse ruling from the district court judge in our suit challenging the SEC's conflict minerals rule. Click here for details on that ruling.

    Our appeal was expedited, and focused on largely the same issues that were before the trial judge. Review was de novo, which means that the appeals court looks at the case fresh, without any presumption that the trial court's ruling is binding on them.

    The NAM, joined by the Business Roundtable and the U.S. Chamber of Commerce, argued that the SEC incorrectly interpreted the statute, which requires reporting of certain minerals that "did originate" in and around the Democratic Republic of the Congo (DRC), to cover minerals that "may have originated" there. It also failed to recognize and use its power to establish a reasonable de minimis exception for small amounts of minerals, which could provide substantial relief from the burdensome requirements of the rule for thousands of manufacturers. We also raised an important First Amendment objection to the requirement that companies make misleading and stigmatizing public statements unfairly linking their products to terrible human rights abuses.

    We filed our main brief on the merits on Sept. 11, and our reply Nov. 13, 2013. Oral argument was held on Jan. 7, 2014, during which counsel for the SEC faced difficult questioning about the SEC's rule and the First Amendment objections.

    On April 14, the court deferred to the SEC on its interpretations of the substantive provisions included in the rule, but overturned the requirement that companies disclose that their products are not "DRC conflict free." The First Amendment prohibits the requirement that companies report to the SEC and post on company web sites the fact that certain manufactured products are not “conflict free”. This constitutes government-compelled speech. It is now up to the SEC to determine what reporting requirement to impose and what to do while it is making that decision, since the first reports under the regulation must be filed by June 2, 2014. If it tries to formulate alternative reporting requirements, it may need to revist the whole public reporting aspect of the rule through a new round of notice-and-comment rulemaking.

    On April 29, the NAM, Chamber and Roundtable filed a motion with the SEC to stay the rule or at least filing deadline. The whole point of the rule and the statute was to try to effect social change by shaming companies who cannot label their products as "DRC conflict free," and since the shaming mechanism has been struck down, the remainder of the rule has questionable benefits. Moreover, there are a host of questions without easy answers that must be considered before imposing enormous costs on industry. The SEC will have to determine what type of disclosure should replace the unconstitutional requirement, whether that would require changes to other provisions of the rule, re-analyze the costs and benefits of the rule, and provide for notice-and-comment rulemaking. Finally, requiring some type of truncated report is an approach that will not serve the law's intended purpose and will worsen the massive uncertainty and confusion among those who are subject to the rule.

    The same day, Keith Higgins, director of the SEC's Division of Corporation Finance, issued a statement saying that companies will still need to file their first reports by the due date and address those portion of the rule that the court upheld. He added that "No company is required to describe its products as 'DRC conflict free,' having 'not been found to be ‘DRC conflict free,’' or 'DRC conflict undeterminable.' If a company voluntarily elects to describe any of its products as 'DRC conflict free' in its Conflict Minerals Report, it would be permitted to do so provided it had obtained an independent private sector audit (IPSA) as required by the rule. Pending further action, an IPSA will not be required unless a company voluntarily elects to describe a product as 'DRC conflict free' in its Conflict Minerals Report.

    We also released a statement April 30 saying in part that "Congress and the SEC need time to evaluate how to amend the statute and/or the rule in light of the court's decision. Given the significant issues involved, we believe that it is in everyone's interest to stay the rule until these issues can be fully analyzed and addressed. Accordingly, we will ask the DC Circuit to grant a full stay of the rule until the implications of the decision are clear to all parties."

    On May 2, 2014, the SEC issued a partial stay of the portion of the rule that requires issuers to disclose that any of their products have "not been found to be “DRC conflict free.'" It denied our request that the entire rule be stayed. The Commission did not, however, stay the effective date (June 2) for complying with all the other requirements of the rule. Companies are struggling to determine the meaning of the SEC’s action and what to do. The D.C. Circuit’s decision in our challenge to the rule means that the case will be sent back to the trial judge to determine whether to vacate the rule in its entirety or provide some other remedy.

    Because this litigation was ongoing and the SEC had not voluntarily stayed the implementation of the rule, the NAM and other business organizations went back to the D.C. Circuit on May 5 and filed an emergency motion for stay of the rule in its entirety until the trial court has addressed the unresolved questions.

    We argued that the rule’s compelled confessions, which have been declared unconstitutional, constitute the entire basis for the rule, imposing astronomical costs on affected companies. It makes no sense to enforce a rule that no longer achieves its goals and that likely will be vacated, and a stay would avoid “forcing companies to implement interim procedures for filing truncated reports under unilateral staff guidance that is subject to change at any time.”

    On May 14, the court denied our motion for a stay. Companies must now comply with the modified filing requirements by June 2.

    On May 29, both the SEC and Amnesty International asked the D.C. Circuit to hold any further appeals until after it ruled in the American Meat Institute v. USDA case, which it did on July 29. On Aug. 15, Amnesty International supplemented its brief in support of a petition for rehearing en banc, and on Aug. 28, the Court ordered us to file a response. We filed it on Sept. 12, arguing that the standards for rehearing this case have not been met, and that the court's decision in the American Meat Institute case was limited to "purely factual and uncontroversial" disclosures, not disclosures like the ones required by the conflict minerals regulation. The disclosures in this case, according to the judges who ruled on them, require an issuer "to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups," or even if the issuer is merely unable to determine their origin.

    On Nov. 18, the 3-judge panel agreed to rehear this case, and asked for further briefing on the impact of the decision in American Meat Institute v. USDA, as well as the meaning of "purely factual and uncontroversial information" and whether that determination is a question of fact for the court. The SEC filed its brief on December 8, and ours was filed December 29. Oral arguments were not held.

    The 3-judge panel finally ruled on Aug. 18, 2015, that the compelled disclosures are unconstitutional. It ruled that the looser standard of review under the Zauderer case does not apply here, because that case involved only voluntary commercial advertising, not government-compelled statements about products. But even if this looser standard of review applied, the government must have a sufficient interest in mandating disclosures, and the rule must be effective in achieving its objectives. Instead, whether the law will decrease the revenue of armed groups in the DRC and diminish the humanitarian crisis there "is entirely unproven and rests on pure speculation." No hearings were held on the impact of the law prior to enactment, and later hearings were inconclusive. This is an insufficient justification to compel speech under the First Amendment.

    The majority also analyzed the part of the ruling in the American Meat Institute case and found that determining whether compelled speech is about "purely factual and uncontroversial information" is a puzzling exercise, but that the SEC's requirement to label products as "conflict free" or not is hardly factual and non-ideological. Instead, it ethically taints products and stigmatizes companies in violation of the First Amendment. The SEC and Amnesty International petitioned for rehearing before the full D.C. Circuit court, but that request was denied, and the case was not appealed to the Supreme Court.


    Related Documents:
    NAM's supplemental brief  (December 29, 2014)
    NAM Response to petition for rehearing en banc  (September 12, 2014)
    NAM Emergency Motion for D.C. Cir. stay  (May 5, 2014)
    NAM Motion to SEC for stay  (April 29, 2014)
    NAM Reply Brief  (November 13, 2013)
    NAM Opening Brief  (September 11, 2013)

     

    Solvay USA Inc. v. EPA   (D.C. Circuit)

    Challenging EPA's Non-Hazardous Secondary Materials rule

    On June 16, 2011, the NAM filed a petition for review of the EPA’s Non-Hazardous Secondary Materials (NHSM) rule under the suite of Boiler MACT rules. The NHSM rule will classify as solid waste certain “secondary” materials that are currently used as a source of energy, such as coal ash or biomass residues from lumber. Solid waste must be burned in boilers regulated under more onerous rules than apply to fuels. The NAM is concerned with several aspects of the rule, including its effect on the use of non-hazardous materials, its presumption that all non-hazardous secondary materials are solid waste, and other provisions.

    A list of legal issues in the case was filed, including challenging EPA's presumption that all non-hazardous secondary materials are solid waste, and its definition of "contaminants," "traditional fuels," and "contained gaseous material." Also at issue, among other things, is whether EPA violated the Regulatory Flexibility Act by failing to consider the economic impacts of the rule on small businesses.

    In 2013, National Ass'n of Clean Water Agencies v. EPA was consolidated with the NAM suit into Solvay USA Inc. v. EPA. Our main brief on the merits, filed 4/28/2014, raised 4 key challenges to EPA's rule: (1) that EPA improperly decided that transferring alternative fuels to third parties for combustion is a discard and therefore such fuels are solid wastes, (2) that EPA improperly classified as solid waste alternative fuels such as those made from construction and demolition wood, railroad ties, and other treated woods that have heating value, are managed as valuable fuel, and are processed to create new fuel products, (3) that EPA improperly classified as solid waste alternative fuels such as paper recycling residuals, even though the record demonstrates no discard has occurred and the combustion is an integral part of an industrial process or functionally equivalent to a traditional fuel, and (4) that EPA improperly classified as solid waste sewage sludge when combusted even though the Resource Conservation and Recovery Act (RCRA) prohibits such a classification.

    The practical effect of EPA's rule is that alternative fuel that could have been productively combusted will be managed as a waste and can only be combusted in a solid waste incinerator under much more expensive rules, leading to an enormous increase in landfill disposal, which has its own set of environmental harms.

    Our brief as intervenors was filed Aug. 29, 2014, and emphasized that EPA could find under RCRA that discarded material could be recovered and processed into a non-waste fuel product, and that it could properly classify as non-wastes scrap tires, used oil, pulp and paper residuals, construction and demolition debris and other traditional fuels.

    On June 3, 2015, the Court of Appeals denied Solvay’s petition for review as well as those of the environmental groups that challenged the rule. The court reasoned that the argument regarding sewage sludge is foreclosed by RCRA’s plain language and that EPA’s distinction between material burned by the generator and material transferred to a third party is consistent with RCRA and reasonable. It allowed EPA to place the burden on regulated entities to show that its material should not be regulated, because Congress wanted EPA "to err on the side of caution."

    The court also rejected an environmental challenge to EPA's treating materials that are indistinguishable from virgin materials as non-waste fuel.


    Related Documents:
    Joint Reply Brief of Industry Petitioners  (September 29, 2014)
    Joint Brief of Industry Intervenor-Respondents (incl. NAM)  (August 29, 2014)
    NAM brief on the merits  (April 28, 2014)

     

    West Virginia v. EPA   (D.C. Circuit)

    Challenging EPA's new round of greenhouse gas regulations for utilities

    The NAM and 9 other groups filed an amicus brief in a case brought by a coalition of 12 states seeking to hold unlawful a 2011 settlement agreement between the EPA and some environmental groups which committed the agency to propose rules to regulate greenhouse gases from power plants. EPA proposed the rules in 2014, and this challenge began in July. Although the agency has not finalized its rules, this suit challenges the underlying settlement agreement.

    The EPA rules impose new compliance costs on utilities that already must bear $9.6 billion per year in costs under the 2012 rule on hazardous air pollutants. Manufacturers of energy inputs will see sales decline precipitously as power plants cut costs or shut down. Manufacturers of all kinds, as purchasers of electricity, will see dramatic cost increases and electric service will become less reliable.

    In our amicus brief, we argued that EPA may not regulate power plants under Section 111(d) of the Clean Air Act because power plants are already regulated under Section 112, and the law specifically prohibits dual regulation under both sections. EPA tried to manufacture ambiguity by relying on an acknowledged congressional drafting error. EPA should not be entitled to judicial deference when the statutory language itself is clear.

    A similar case, Murray Energy Corp. v. EPA, is also pending in the D.C. Circuit, involving the same questions but challenging the proposed rules directly. We filed an amicus brief in that case on December 22. Oral arguments in both cases were held on April 16, 2015.

    On June 9, 2015, the D.C. Circuit rejected West Virginia’s argument concerning the underlying settlement agreement and ruled for the EPA. The court held that West Virginia lacked standing to sue because the settlement agreement only set a timeline for the EPA to decide whether or not to issue a final rule and therefore did not create an injury in fact. Additionally, a suit to challenge such a settlement agreement must be filed within 60 days of the agreement’s publication in the Federal Register rather than more than two years later, as was the case here.


    Related Documents:
    NAM brief  (December 10, 2014)

     

    Alaska Wilderness League v. Jewell   (9th Circuit)

    Validity of BOEM permit for exploratory drilling in Chukchi Sea

    The NAM filed an amicus brief supporting oil and gas exploratory drilling that complied with the National Environmental Policy Act (NEPA). Environmental groups challenged the issuance of a permit by the Bureau of Ocean Energy Management (BOEM) allowing exploratory drilling by Shell in Alaska. This case is important because attempts to prevent oil and gas exploration significantly impact access to energy sources and stifle job growth. The NAM’s brief argued that the Outer Continental Shelf (OCS) Lands Act was specifically designed to expedite OCS exploration and development and that BOEM properly approved Shell's revised exploration plan pursuant to NEPA. Shell terminated its exploratory efforts, and the court granted the parties' request to dismiss the case as moot.


    Related Documents:
    NAM brief  (September 25, 2015)

     

    American Chemistry Council v. EPA   (D.C. Circuit)

    Challenging EPA regulation of boilers for area sources (boiler GACT)

    The NAM challenged an Environmental Protection Agency (EPA) final rule on hazardous air pollutants, which imposes burdensome regulatory requirements on boilers, incinerators and process heaters. The rule requires “generally available control technologies” (GACT) or management practices to reduce emissions of hazardous air pollutants, taking into consideration the cost of achieving such reductions. This rule imposes costly compliance requirements on manufacturers subject to the rule. The NAM argued that 1) the EPA did not have sufficient data to property calculate an emissions standard based on the best performing 12% of combustions units as statutorily required but instead used the Upper Prediction Limit (UPL) methodology to estimate the emissions limits based on fewer data points; and 2) by requesting a voluntary remand, the EPA effectively conceded that the methodology used to calculate the UPL standards is flawed. While the court rejected the NAM’s arguments in 2016, it ordered the agency to provide further justification for some of its conclusions.


    Related Documents:
    Brief of Industry Intervenor-Respondents  (December 23, 2014)
    Opening Brief of Industry Petitioners (incl. NAM)  (August 26, 2014)
    NAM Reply Brief in support of motion for affirmative relief  (April 17, 2014)
    NAM motion for affirmative relief  (March 13, 2014)
    Petition for Reconsideration  (April 1, 2013)

     

    American Farm Bureau Federation v. EPA   (U.S. Supreme Court)

    EPA micromanagement of state water discharges

    The EPA has exerted control over land uses in the Chesapeake Bay watershed by dictating the minute details of what can be discharged into it and reserving to itself authority to approve any future changes necessary to allow for state and local adjustments to the mix of land uses within their jurisdictions. Congress neither envisioned nor authorized this expansion of EPA’s authority in the Clean Water Act.

    This micromanagement upends the model Congress intended for the Clean Water Act. Local businesses throughout the Chesapeake Bay watershed must now comply with a regulatory scheme that imposes new federal burdens on businesses and industry formerly regulated by the states, impedes state programs to address state water quality issues, and limits opportunities for growth and innovation. Allowing the EPA’s control to stand would provide the EPA nearly unchecked power over land use decisions affecting local businesses throughout the nation.

    The NAM filed an amicus brief urging the Supreme Court to review an adverse decision from the Third Circuit that allows such micromanagement by the EPA. Our brief argued that this overreach is not authorized by the Clean Water Act because it makes individual permit holders responsible for excess effluents from others. It severely constrains companies with discharge permits and delays revisions and approvals, disfavoring innovation and growth and curtailing development.

    On Feb. 29, the Court declined to review this appeal.


    Related Documents:
    NAM amicus brief  (December 9, 2015)

     

    American Forest & Paper Ass'n. v. EPA   (D.C. Circuit)

    Challenging EPA's CISWI regulations

    The NAM challenged the Environmental Protection Agency’s (EPA) new regulations on commercial and industrial solid waste incineration (CISWI) units that impose stricter emissions limits on industrial, commercial and institutional boilers. The new rule amended a rule previously issued in 2011 by placing further restrictions on materials used as fuels or ingredients in combustion units. The regulations will impose additional costs on manufacturers that will now require additional resources to remain compliant with the regulations. The NAM argued that 1) the EPA failed to account for variability in waste materials when classifying best-performing units; 2) the EPA should consider emissions occurring during startups, shutdowns and malfunctions when determining whether emissions limits are achievable; and 3) the EPA does not have legal authority to impose recordkeeping requirements through the CISWI rule on operators who combust non-hazardous secondary materials that are not waste. Although the court rejected the NAM’s arguments, it ordered the agency to provide further justification for some of its conclusions.


    Related Documents:
    NAM Reply Brief in support of motion for affirmative relief  (April 17, 2014)
    NAM motion for affirmative relief  (March 13, 2014)
    NAM Petition for Review  (April 29, 2011)

     

    American Petroleum Institute v. EPA   (D.C. Circuit)

    Challenging EPA greenhouse gas regulation (tailoring Step 3)

    The NAM challenged an Environmental Protection Agency (EPA) effort to interpret its authority with the “Tailoring Rule,” which attempts to regulate greenhouse gas emissions from stationary sources. After earlier interpretations of the rule caused absurd consequences, the EPA raised thresholds to impact only the largest emitters of greenhouse gases. The rule will impose significant administrative and cost burdens on manufacturers. The NAM argued that 1) the EPA could have adopted a more reasonable interpretation of its power so as to avoid the absurdities the rule attempts to mitigate; 2) although the EPA tried to avoid these absurd results by modifying the express statutory thresholds defining who is regulated, the action is outside of the EPA’s legal authority; and 3) as the rule is at odds with Congress’s intent when it enacted the Clean Air Act, the court must avoid agency interpretations that undermine the purpose of the law. The parties voluntarily dismissed this case in February 2016.

     

    BCCA Appeal Group, Inc. v. City of Houston   (Texas Supreme Court)

    Preemption of Houston's air regulation

    The NAM filed an amicus brief urging the Supreme Court of Texas to overturn a lower court ruling that allowed the City of Houston to run its own clean air enforcement office. BCCA Appeal Group, Inc. sued after the City of Houston issued an ordinance allowing criminal prosecutions, without following the procedures required by the Texas Water Code and mandating that all facilities be registered with the city. If upheld, the regulation would have subjected manufacturers to inconsistent enforcement requirements and multiple permit systems at the local level. The NAM’s brief argued that such local enforcement is preempted under provisions of the Texas Constitution by the Texas Clean Air Act. The court agreed with NAM’s arguments that Houston may not subject companies to criminal penalties that conflict with the requirements of the Texas Clean Air Act.

     

    In re Deepwater Horizon   (5th Circuit)

    Standard for punitive damages in Clean Water Act litigation

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting BP’s challenge to a district court’s improper findings of fact and conclusion of law. Under a procedure known as multidistrict litigation (MDL), most cases in federal courts involving the Deepwater Horizon accident were sent to a single district court in Louisiana for consolidated pretrial proceedings. The MDL district court correctly determined that under the Fifth Circuit’s standard BP was not liable for punitive damages but incorrectly opined that BP would be liable in other circuits where some of the cases consolidated in the MDL originated and may ultimately return for trial. That incorrect comment had the potential to undermine the efficiency and fairness established through the MDL procedure and create judicial inefficiencies. The NAM’s brief argued that the MDL judge wrongly opined on the availability of punitive damages under standards applied by other circuits and instead should have focused only on the law of the Fifth Circuit. The case was dismissed by stipulation of the parties.


    Related Documents:
    NAM brief  (June 8, 2015)

     

    JELD-WEN, Inc. v. EPA   (D.C. Circuit)

    Challenging EPA regulation of boilers and process heaters (boiler MACT)

    The NAM challenged an Environmental Protection Agency (EPA) final rule on hazardous air pollutants, which would impose burdensome regulatory requirements on boilers, incinerators and process heaters. Because the rule requires the “maximum degree of reduction” in emissions of hazardous air pollutants achievable, taking into consideration the cost of achieving such reductions, the rule also requires “maximum achievable control technology” (MACT) for such equipment. This rule is burdensome, will impose additional costs and require additional resources for industrial sectors subject to the rule. The NAM argued that 1) the startup work practices were incorporated into the new rules without giving key stakeholders adequate opportunity to comment; 2) important safety considerations for the regulated community were overlooked in the definitions; 3) the rule failed to take account of the importance of encouraging efficient and cost effective use of resources; 4) the fuel requirements in the rule do not incorporate national goals of safeguarding fuel diversity; and 5) the EPA does not have legal authority to impose the energy assessment requirement. This case was consolidated with U.S. Sugar Corp. v. EPA, a similar challenge to EPA’s boiler MACT regulations, and in 2016, that court rejected all industry arguments, finding that the EPA's approach was reasonable.


    Related Documents:
    Statement of Issues  (May 2, 2013)
    NAM Petition for Review  (April 1, 2013)

     

    Lennox Int'l, Inc. v. U.S. Dep't of Energy   (5th Circuit)

    Challenging Dept. of Energy efficiency standards for walk-in coolers and freezers

    The NAM filed an amicus brief in a challenge to a new Department of Energy (DOE), energy-efficiency standard for walk-in coolers and freezers. The new standard used a calculation of the “social cost of carbon” when aggregating purported benefits of the standard but was, however, not subjected to peer review, thus calling into question the quality and accuracy of the data used. This issue is important to manufacturers because DOE violated established requirements that influential information used by federal agencies to inform public policy decisions be developed through a transparent process. The NAM’s brief argued that the “social cost of carbon” estimates were developed by an ad-hoc interagency working group operating behind closed doors and outside the purview of notice-and-comment rulemaking or other meaningful public scrutiny. The case settled and was dismissed in 2016.

     

    National Association of Manufacturers v. EPA   (EPA)

    Petition for stay of EPA's Clean Power Plan Rule

    The NAM petitioned the Environmental Protection Agency (EPA) to issue an administrative stay to delay the effective date of the Clean Power Plan rule until a court rules on the rule’s legality. The rule, issued as a regulation of greenhouse gases from electric utility generating units, went much further than regulation of electric power plants. If the rule were to take effect, manufacturers would see their costs increase and some trade-exposed industries might be forced to relocate production overseas. The NAM’s petition argued that 1) the rule was already causing irreparable harm by forcing the closure of vast numbers of existing coal-fired generating units, constituting the backbone of the American electric grid; 2) that legal challenges to the rule are likely to prevail in court, since the Clean Air Act expressly forbids EPA from regulating existing fossil fuel-fired generating; and 3) the rule imposed standards of performance for the entire energy sector, rather than only for the individual sources of greenhouse gases from the power plants themselves. Although the EPA denied our petition, the U.S. Supreme Court issued a nationwide stay of the rule on Feb. 9, 2016, until the litigation over the rule is completed. Further developments in this case can be found .


    Related Documents:
    NAM Petition for Administrative Stay  (October 23, 2015)

     

    North Dakota v. Heydinger   (8th Circuit)

    Challenge to Minnesota's Next General Energy Act restricting out-of-state electricity

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Eight Circuit challenging a Minnesota regulation, the Next Generation Energy Act (NGEA), which would have placed significant burdens on coal-fueled facilities and unlawfully regulated out-of-state commerce. The NGEA, sought to regulate and impose energy and environmental policies on electricity generated in other states by prohibiting importing electricity into Minnesota from any new large energy facility that would contribute to statewide power sector carbon dioxide emissions. If upheld, this matter would have caused uncertainty to manufacturers in the energy sector and others impacted by the NGEA. The NAM’s brief argued that 1) the law would substantially impede the interstate market for electricity in violation of the Commerce Clause; 2) the law could spur other states to adopt similar laws, which could result in a web of inconsistent and clashing local regulations that would destroy the national common market and impose untold costs on manufacturers and other consumers; and 3) the law was unconstitutional because it purported to allow a state to ban imported products based solely on how they were produced in other states. In a win for manufactures, the Eighth Circuit struck down Minnesota's law.

     

    Pakootas v. Teck Cominco Metals, Ltd.   (9th Circuit)

    Expansive interpretation of CERCLA

    The NAM filed an amicus brief opposing the expansion of arranger liability under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). This is an appeal from a lower court holding that a Canadian company was liable as an “arranger” of the “disposal” of the hazardous materials under CERCLA after airborne particles from its mining operations landed on the earth and water of the United States. As emissions can travel long distances by air, expanding arranger liability will expose manufacturers to expensive litigation. The NAM’s brief argued that both the plain text of CERCLA and controlling precedent make it clear that the statutory definition of “disposal” is not satisfied by the mere emission of hazardous substances into the air, even if portions of the emissions later come to rest at a facility. In a win for manufacturers, the U.S. Court of Appeals for the Ninth Circuit reversed the trial court’s holding.


    Related Documents:
    NAM amicus brief  (August 11, 2015)

     

    Portland Cement Ass'n v. EPA   (D.C. Circuit)

    Challenging EPA regulation of CISWI

    The NAM challenged the Environmental Protection Agency’s (EPA) 2013 final rule on commercial and industrial solid waste incineration (CISWI) units, which imposes stricter emissions limits on industrial, commercial and institutional boilers. The rule follows a 2011 rule that also imposed restrictions on materials used as fuels or ingredients in combustion units. The rules will impose additional costs and require sectors impacted by the rule to provide additional resources to remain compliant. The court consolidated this case into , a challenge to the 2011 rule on CISWI units, where the NAM argued that 1) the EPA failed to account for variability in waste materials when classifying best-performing units; 2) the EPA should consider emissions occurring during startups, shutdowns and malfunctions when determining whether emissions limits are achievable; and 3) the EPA could not impose recordkeeping requirements through the CISWI rule on operators that combust non-hazardous secondary materials that are not waste. Although the court rejected the NAM’s arguments, it ordered the agency to provide further justification for some of its conclusions.


    Related Documents:
    NAM Petition for Review  (April 8, 2013)

     

    U.S. Army Corps of Engineers v. Hawkes Co.   (U.S. Supreme Court)

    When courts may review CWA jurisdictional decisions

    The NAM filed an amicus brief urging the U.S. Supreme Court to support manufacturers’ rights to respond to jurisdictional decisions that impose additional costs and reduce the feasibility of constructing infrastructure. Under the Clean Water Act (CWA), a manufacturer must obtain a permit from the U.S. Army Corps of Engineers before discharging any dredged or fill material into waters of the United States that are subject to federal regulatory jurisdiction; however, the Corps has broadly construed the CWA to prohibit any productive use, improvement, alteration or repair of property without first obtaining a permit. This case provided the opportunity for manufacturers to request judicial review of Army Corps or Environmental Protection Agency decisions that may exceed those agencies' jurisdiction. The NAM’s brief argued that the regulated community must be afforded an early opportunity to respond to overly aggressive jurisdictional determinations and requested that the court resolve uncertainty over the scope of the CWA. In a win for manufacturers, the Court agreed with the NAM.


    Related Documents:
    NAM brief  (March 1, 2016)

     

    U.S. Sugar Corp. v. EPA   (D.C. Circuit)

    Challenging EPA's boiler MACT regulations

    The NAM challenged the Environmental Protection Agency’s (EPA), Boiler Maximum Achievable Control Technology (MACT) standard used to regulate emissions of hazardous air pollutants generated by boilers. The challenge came after EPA issued the final MCAT rule; however, the EPA did not have enough data to properly calculate an emissions standard based on the statutory requirement. This decision will impose enormous costs on key industrial sectors. The NAM argued that the EPA exceeded its authority in imposing an energy assessment requirement on portions of the facility that are not part of the defined source category (boilers and process heaters); 2) the emissions limitations are unlawful because they have not been achieved in practice; 3) the standards are not achievable because they were set without accounting for malfunctions; 4) EPA improperly established a numeric emission limitation for organic pollutants rather than a work practice as it has done in a comparable rule; and 5) EPA failed to justify its reversal of previously established health-based limits for hydrogen chloride. In 2016, the court rejected all industry arguments, finding that the EPA's approach was reasonable.


    Related Documents:
    NAM Brief in Response to Environmental Petitioners  (December 17, 2014)
    Opening Brief of Industry Petitioners  (August 12, 2014)
    NAM Reply Brief in Support of Affirmative Relief  (April 17, 2014)
    NAM Petition for Review  (April 29, 2011)
    NAM Petition for Administrative Stay  (April 27, 2011)

     

    West Virginia v. EPA   (U.S. Supreme Court)

    Supreme Court grants stay pending litigation of EPA's Clean Power Plan

    The NAM filed an application for an immediate stay of the final rule for existing electric utility generating units pending litigation over the rule in the U.S. Court of Appeals for the District of Columbia Circuit. The Environmental Protection Agency’s (EPA) Clean Power Plan attempted to aggressively transform the domestic energy generation industry in violation of the Clean Air Act. If upheld, this rule would have imposed significant regulatory costs on manufacturers, thereby threatening global competitiveness. The NAM’s brief argued that the rule is far in excess of EPA’s statutory authority under the Clean Air Act and would cause irreparable harms to NAM members if a stay was not granted. In a win for manufacturers, the Supreme Court granted the stay.


    Related Documents:
    Coalition Reply Supporting Stay  (February 4, 2016)
    Coalition Application for Stay  (January 27, 2016)

     

    American Petroleum Institute v. EPA   (D.C. Circuit)

    Challenging EPA's new rules on definition of solid waste

    The NAM challenged two final regulations promulgated by the Environmental Protection Agency (EPA) that define hazardous solid waste and would impose stringent regulatory obligations governing waste generation, treatment, storage, disposal and permitting. The EPA asserted jurisdiction to regulate solid and hazardous waste under the Resource Conservation and Recovery Act (RCRA), which defined “hazardous waste” as “solid waste” that may pose a danger to human health or the environment. The definition is important to manufacturers that reuse materials in the manufacturing process, as well as for disposal and recycling procedures. The NAM sued the EPA to resolve concerns related to new affirmative duties and conditions on in-process materials that are not discarded. The NAM argued that EPA’s attempt to regulate materials that are not yet waste exceeds the agency’s authority. In a win for manufacturers, the court held that that some of the requirements imposed on companies using third-party recyclers exceeded the EPA's statutory authority and improperly presumed that recycled materials were discarded simply because the recyclers did not meet various paperwork requirements.


    Related Documents:
    NAM reply brief  (May 19, 2016)
    Opening brief of industry petitioners  (December 9, 2015)

     

    California Chamber of Commerce v. California Air Resources Board   (California Supreme Court)

    Challenging CARB cap-and-trade auction allowance revenues

    The NAM asked the California Supreme Court to review a case challenging a greenhouse gas cap-and-trade auction system created by California’s Air Resources Board (CARB) as an unauthorized tax disguised as a regulatory action. This was an appeal of an adverse decision where the lower court held that revenues collected by CARB from California businesses, which must acquire greenhouse gas emissions allowances from the state in order to remain in business, are not taxes subject to Proposition 13. Proposition 13 requires an authorization by two-thirds of the legislature. This decision brings uncertainty to California manufacturers who are now unsure of the application to any other financial exactions. The NAM argued that the California Supreme Court did not apply existing precedent to assess whether a charge imposed for regulatory purposes is a tax, and by rejecting that precedent, the court provided a roadmap for the evasion of Proposition 13. Furthermore, the lower court’s holding defies precedent, the record evidence and common sense, and taken to its logical conclusion, would mean that virtually all taxes are “voluntary.” Unfortunately, the California Supreme Court declined to hear this appeal.


    Related Documents:
    NAM reply brief  (June 26, 2017)
    NAM petition for review  (May 16, 2017)

     

    Chemical Manufacturers Association v. EPA   (U.S. District Court for the District of Columbia)

    Superfund

    This suit, filed by the NAM, CMA, American Automobile Manufacturers Association, American Petroleum Institute, Electronics Industry Association, and the Chamber of Commerce of the United States, challenges an EPA policy that allows municipalities to avoid some liability for Superfund cleanup costs. It affects all companies at "co-disposal" Superfund sites (with both industrial and municipal wastes), by allowing municipalities to escape liability by paying a fixed price for cleanup costs. The suit was dismissed by U.S. District Court for the District of Columbia for lack of jurisdiction (EPA's policy was not "final agency action") on 11/16/98. A similar suit filed in the D.C. Circuit was stipulated for dismissal on 7/2/98 by the EPA.

     

    Constitution Pipeline Co. v. New York State Dep't of Envtl. Conservation   (2nd Circuit)

    Supporting FERC approval of pipelines

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Second Circuit supporting Constitutional Pipeline in an energy infrastructure litigation suit after New York state denied a permit for construction of a natural gas pipeline through part of the state, although the Federal Energy Regulatory Commission (FERC) approved the project. The Clean Water Act permit was denied after extensive environmental, safety and economic review, and approval by FERC. This litigation is important to manufacturers because state intervention can impede the efficient, transparent and predictable approval of natural gas pipelines even when those projects have been approved by other agencies. The NAM’s brief argued that FERC conducted a thorough review process that assessed the environmental impact of the pipeline as required by the National Environmental Policy Act and the Natural Gas Act and that although states should play an important role in the pipeline approval process, states should not be permitted to override FERC’s assessment of a pipeline’s benefits and environmental impact. Unfortunately, the court rejected the arguments and deferred to the judgment of state officials.


    Related Documents:
    NAM brief  (July 19, 2016)

     

    Ohio Valley Env'l Coalition, Inc. v. Fola Coal Co.   (4th Circuit)

    Effect of water quality standards on existing CWA permit shield

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit arguing that courts should not apply new conditions to an existing National Pollution Discharge Elimination System (NPDES) water discharge permit when the regulatory agency has already considered those conditions and did not require them in the permit. Although West Virginia’s permit included boilerplate language that prohibited discharges that cause violations of state water quality standards, the district court used the boilerplate language to convert those water quality standards into enforceable effluent limits in the permit. That decision is important as NAM members who hold these permits with similar boilerplate language may now be subjected to civil and criminal penalties and injunctive action. The NAM’s brief argued that Fola was entitled to protection from the permit and that the district court’s interpretation usurps the state’s authority to establish water quality standards. Unfortunately, the Fourth Circuit did not agree with NAM’s arguments, leaving current permit holders liable for discharges that are otherwise permitted at the time of issuance.


    Related Documents:
    NAM amicus brief  (April 20, 2016)

     

    Orange Cty. Water Dist. v. Sabic Innovative Plastics US, LLC   (California Supreme Court)

    Erroneous expansion of California Superfund liability

    The NAM filed an amicus brief urging California’s Supreme Court to review a series of cases that grant a private right of action to impose liability for environmental remediation, regardless of prior remediation efforts and regulatory action. Historically, California businesses were able to rely on state agency direction when remediating contaminated sites, potentially obtaining a “No Further Action” letter that signified the sites were safe for productive economic use; businesses would only face liability for additional remediation in exceedingly rare cases. Private liability for environmental remediation undermines the relationship between businesses and regulators and discourages proactive remediation efforts. The NAM’s brief explained that these cases will discourage both voluntary remediation and swift compliance with regulators’ Remedial Action Plans, which runs counter to the interest of California citizens and discourages cooperation between businesses and regulators. Unfortunately, the California Supreme court denied review.


    Related Documents:
    NAM letter  (October 13, 2017)

     

    Sciscoe v. Enbridge Gathering (North Texas), L.P.   (Texas Supreme Court)

    Preemption of tort claims for permitted emissions

    The NAM submitted an amicus letter urging the Texas Supreme Court to grant review of a lower court decision that did not clarify whether the Federal Clean Air Act and the Texas Clean Air Act preempt state tort law claims for damages. The issue stemmed from an earlier claim where residents near natural gas compressor stations and a metering station sued alleging that the facilities interfered with their rights by generating noise and fumes. If tort law claims like these are not preempted by the federal or state Clean Air Act, manufacturers would be exposed to massive additional liability. The NAM argued that both the Federal Clean Air Act and the Texas Clean Air Act preempt state tort claims for damages against facilities lawfully operating under the regulations. The matter remains unsettled as the court dismissed petitioners appeal on other grounds.


    Related Documents:
    NAM brief  (November 9, 2015)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Defending EPA's sulfur dioxide regulation against accelerated enforcement

    The NAM intervened in a suit brought by the Sierra Club and Natural Resources Defense Council against the EPA for its regulation on sulfur dioxide (SO2). The regulation, published August 5, 2013, designated 29 areas as “nonattainment” for SO2 based on recorded air quality monitoring data, and the EPA announced its intention to address the rest of the country in separate regulations in the future. The modeling predictions urged by the Sierra Club would allow areas to be designated as nonattainment when in fact they are not. That would increase the number of such areas, and manufacturers would have to spend billions of dollars to achieve far greater emission reductions than would be required if designations were based on actual air quality monitoring data. The NAM intervened to help secure a more positive regulation for manufacturers. A district court approved a consent decree requiring the EPA to include any areas with stationary sources that emitted more than 16,000 tons of SO2 in 2012 and extending the timeline for the EPA to promulgate a new rule. The deadline is now December 31, 2020, which will allow for real-life modeling data to be used instead of the Sierra Club's recommendation of computer modeling. This is a favorable outcome for manufacturers. The consent decree was appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed the district court’s approval.


    Related Documents:
    Motion to Intervene  (November 4, 2013)

     

    Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers   (D.D.C.)

    Continuing to delay pipelines is unnecessary and harmful

    The NAM filed an amicus brief supporting the continuance of Dakota Access Pipeline (DAPL) operations. The litigation arose from alleged deficiencies in National Environmental Policy Act review, assessment and analysis following a procedural error in the U.S. Army Corps’ Environmental Assessment. This issue is important to manufacturing as halting DAPL would significantly impede access to crude oil on which manufacturers heavily rely. The NAM’s brief argued that halting operations due to a procedural error is not an appropriate remedy but would instead produce serious and irreparable harm including harm to energy businesses, states benefiting from DAPL operations and individuals employed through DAPL. The court agreed with the NAM’s arguments that the pipeline should be permitted to continue operations while the U.S. Army Corps of Engineers conducted further NEPA review.


    Related Documents:
    NAM brief  (July 17, 2017)

     

    TransCanada Keystone XL Pipeline, LP v. Kerry   (S.D. Texas)

    Challenge to Executive authority to block Keystone XL Pipeline

    The NAM filed an amicus brief in support of TransCanada’s challenge to the Obama Administration’s disapproval of a cross-border permit for the Keystone XL pipeline. The denial violates the separation of powers and would directly affect U.S. trade with other nations. The NAM’s brief argued that the president’s justification for denial was not based on national security but was instead intended to regulate foreign commerce, which is an impermissible exercise of the foreign affairs power to usurp Congress’s authority over foreign commerce. This matter was dismissed as moot when the new administration granted the pipeline permit.


    Related Documents:
    NAM amicus brief  (May 9, 2016)

     

    Airborn, Inc. v. OSHA   (8th Circuit)

    Challenging OSHA's beryllium standard

    The NAM and other associations and companies involved in the manufacture or use of beryllium filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit seeking an administrative stay of U.S. Occupational Safety and Health Administration’s (OSHA) new rule regulating beryllium and to reopen the rulemaking record. Beryllium is critical to some manufacturing processes and products, and OSHA did not adequately address industry’s concerns about overly restrictive provisions of the new rule.The NAM requested that the effective date of the standards be delayed for six months, and that OSHA re-open the rulemaking record to allow comment on the substantial changes made between issuance of the proposed rule and adoption of the final rules, and to allow the new Secretary of Labor to take office and have adequate time to consider the standards in accordance with a new policy to freeze and review all holdover regulations. OSHA agreed to undertake a new rulemaking to propose and implement sweeping changes to the regulation that will benefit companies that manufacture and use beryllium.


    Related Documents:
    NAM Motion  (June 23, 2017)

     

    Chamber of Commerce v. EPA   (10th Circuit)

    Jurisdictional issue in challenge to Waters of the US rule

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in an appeal to a court ruling which held that challenges to the EPA’s rule establishing jurisdiction over waters of the United States should be heard in appellate courts, rather than in district courts. Federal law specifies that, while most lawsuits are filed in trial courts, a few types of suits must be filed directly in the federal courts of appeals; however, the statute that provides appellate jurisdiction for certain challenges to EPA regulations does not apply to this challenge. Resolving this procedural issue is an important first step in resolving substantive arguments by many states and members of the business community against EPA’s decision to assert jurisdiction over many areas of the country previously not under their jurisdiction. The NAM’s brief argued that the district court erred when it deferred to the U.S. Court of Appeals for the Sixth Circuit’s jurisdictional decision and that the district court, in fact, had jurisdiction over plaintiffs’ complaint. On January 22, 2018, the Supreme Court ruled unanimously in favor of the NAM's position in a case that determined that district courts, rather than appellate courts, should be the first courts to hear challenges to the new regulation defining the waters of the United States.


    Related Documents:
    NAM brief  (July 8, 2016)

     

    Constitution Pipeline Company v. New York   (U.S. Supreme Court)

    State veto authority over interstate natural gas pipelines

    The NAM filed an amicus brief in the U.S. Supreme Court in support of Constitution Pipeline Company’s authority to construct a new natural gas pipeline from Pennsylvania to New York State. New York rejected the proposed pipeline because the state disagreed with the pipeline’s proposed route. Because routing decisions for natural gas pipelines are within the power of the Federal Energy Regulatory Commission, New York’s denial improperly encroached on FERC’s siting authority. The NAM’s brief argued that the Supreme Court should hear this case because New York’s rejection violates the law and would harm manufacturers and other users of natural gas. Unfortunately, the Court denied certiorari.


    Related Documents:
    NAM Brief  (February 20, 2018)

     

    Georgia v. McCarthy   (11th Circuit)

    Which court has jurisdiction to decide Waters of the US challenges?

    This is one of several cases filed in various courts challenging the EPA's new rule regarding the scope of its jurisdiction over land in the United States that is subject to permitting requirements of the Clean Water Act. The issue on appeal before the 11th Circuit is whether a federal appeals court has jurisdiction to hear challenges to the rule in the first instance.

    The NAM and others in a coalition of organizations challenging the EPA rule argued that nothing in the Clean Water Act says that our challenge should go first to the appeals court. Rather, we argued that a federal district court is the proper forum for filing suit. Only a few exceptions are written into the Clean Air Act, and none of them applies in the challenge to the waters rule.

    The court ruled on August 16, 2017, to stay the case pending the outcome of the Sixth Circuit's jurisdictional determination. On January 22, 2018, the U.S. Supreme Court ruled that jurisdiction over the various WOTUS challenges belong in the district courts. The 11th Circuit thereafter remanded the case back to the district court.


    Related Documents:
    NAM amicus brief  (September 21, 2015)

     

    Hawaii Wildlife Fund v. County of Maui   (9th Circuit)

    Opposing conduit theory under Clean Water Act

    The NAM filed an amicus brief in the Ninth Circuit to oppose a district court decision that broadly interpreted the scope of liability under the Clean Water Act. The district court adopted a liability theory, the "conduit theory," which stated that any pollutants released to dry land or underground that might seep into groundwater then to nearby surface waters are an illegal "discharge" under the Clean Water Act (CWA). That ruling could impose incalculable liability risk on manufacturers and other regulated industries. The NAM’s brief argued that the CWA clearly distinguishes between point sources and nonpoint sources, and the conduit theory impermissibly extends the EPA's authority. Unfortunately, the Ninth Circuit affirmed the district court’s ruling.


    Related Documents:
    NAM amicus brief  (March 28, 2016)

     

    Kentucky Waterways Alliance v. Kentucky Utilities Co.   (6th Circuit)

    "Conduit theory" of liability under the Clean Water Act

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to oppose lawsuits by environmental plaintiff groups that sought to massively expand manufacturers’ liability under the Clean Water Act. In a lawsuit against electric generation facilities, the plaintiffs argued that federal jurisdiction applies to all groundwater throughout the United States (in addition to certain categories of surface waters). If that theory of jurisdiction prevails, manufacturers could be subject to massive and unpredictable liability for any impacts their operations may have on groundwater. The NAM’s amicus brief argued against this overbroad theory of liability. The Sixth Circuit ruled against the plaintiffs and in favor of manufacturers by rejecting the plaintiffs’ claims and holding that the Clean Water Act does not apply to discharges to groundwater.


    Related Documents:
    NAM brief  (May 4, 2018)

     

    Monsanto Co. v. Office of Envtl. Health Hazard Assessment   (California Supreme Court)

    Constitutional problems for Prop 65 chemical listings

    The NAM filed an amicus brief in support of Monsanto urging the California Supreme Court to grant review of this case to address the serious constitutional questions presented by California’s Proposition 65, which maintains a list of chemicals that can potentially cause cancer, birth defects and other reproductive harm. If a product contains or produces any of the chemicals on that list, manufacturers are required to place a warning label on that product before it may be sold in California. In addition, Proposition 65 requires that a chemical be automatically listed if the International Agency for Research on Cancer (IARC) classifies it as carcinogenic. What chemicals are listed is important because of the costs borne by manufacturers and the public by the listing of a chemical under Proposition 65. The NAM’s brief argued that substances listed under Proposition 65 should be based on sound and generally-accepted science and that delegating that authority to IARC is unconstitutional. Unfortunately, the California Supreme Court denied review of this case.


    Related Documents:
    NAM brief  (June 28, 2018)

     

    Murray Energy Corp. v. EPA   (6th Circuit)

    Rule broadening definition of "waters of the United States"

    The NAM intervened in a group of consolidated cases challenging a final rule from the EPA defining its jurisdiction over navigable “Waters of the United States” under the Clean Water Act (CWA). Federal law specifies that, while most lawsuits are filed in federal district courts, some suits must be filed directly in the federal courts of appeals. The statute that provides appellate jurisdiction for certain challenges to EPA regulations does not apply to the WOTUS challenge, though the EPA argued that it did. Prompt resolution of this jurisdictional issue was important so that the WOTUS case could proceed expeditiously through the courts. The NAM’s brief explained that certain legal challenges, such as this issue, belong in the federal district courts and argued that this is not the type of appeal from agency rulemakings under the CWA that is limited to the federal appeals courts by statute. On January 22, 2018, the Supreme Court held that jurisdiction properly belongs in the federal district courts.


    Related Documents:
    Industry brief on the merits  (November 1, 2016)

     

    National Association of Manufacturers v. U.S. Dep't of Defense   (U.S. Supreme Court)

    Appeal of Waters of the United States (WOTUS) jurisdictional issue

    The MCLA secured a 9–0 victory in the U.S. Supreme Court that resolved a procedural obstacle that had delayed the appropriate federal court from considering legal challenges to the Environmental Protection Agency’s (EPA) 2015 “Waters of the United States” (WOTUS) Rule. This legal win cleared the path for the MCLA’s lawsuit to invalidate the rule to proceed in federal district court, where the U.S. District Court for the Southern District of Texas ultimately invalidated the rule and remanded it back to the EPA for reproposal.


    Related Documents:
    NAM merits reply brief  (September 11, 2017)
    NAM merits brief  (April 27, 2017)

     

    Natural Resources Defense Council v. EPA   (2nd Circuit)

    Supporting EPA in NRDC challenge to TSCA Section 5

    The NAM intervened in a lawsuit in the U.S. Court of Appeals for the Second Circuit to support the EPA’s new regulations on chemicals under the updated Toxic Substances Control Act (TSCA). The Natural Resources Defense Council (NRDC) claimed that the new standards put consumers at risk of harmful exposure. In this case, NRDC challenged Section 5 of TSCA, which deals with the risk assessment standard for significant new use rules (SNURs) for chemicals. This challenge could have been harmful to manufacturers by potentially hindering approvals of new uses of chemicals. The NAM intervened to support EPA and attacked NRDC’s standing to bring the case. The NAM argued that the proposed rule is not subject to challenge, is consistent with TSCA and would protect human health and the environment. Soon after the NAM filed its principal brief in the case, NRDC moved to dismiss its case with prejudice, which the court granted.


    Related Documents:
    NAM response  (August 28, 2018)
    NAM intervenor brief  (August 14, 2018)
    NAM Motion  (February 5, 2018)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Boiler MACT reconsideration rule

    The NAM intervened in a case before the U.S. Court of Appeals for the D.C. Circuit involving a 2015 EPA Rule regarding environmental restrictions on industrial boilers. The rule requires maximum achievable control technology (MACT) for equipment to reduce emissions of hazardous air pollutants, taking into consideration the cost of achieving such reductions. There are two primary issues in the case: (1) whether the EPA properly established a minimum standard level of 130 parts per million (ppm) of carbon monoxide for certain boiler emissions and; (2) whether the EPA reasonably established work practice standards for periods of startup and shutdown where it is impracticable to determine compliance with numerical standards during those periods. Manufacturers would bear a large burden and financial hardship if the Sierra Club prevailed in its challenge to this rule. Our brief argued that EPA properly justified setting the limit at 130 ppm for carbon monoxide as a proxy for hazardous air pollutants The court held that the 130 ppm limit is reasonable and also held that the rule’s flexibility on emissions during startup and shutdown of the boilers is reasonable and consistent with the Clean Air Act. The plaintiffs filed a petition for rehearing with the court, which the NAM opposed, and the court denied the rehearing request.


    Related Documents:
    NAM Petition  (June 5, 2018)
    NAM intervenor brief  (November 16, 2016)
    NAM motion to intervene  (February 18, 2016)

     

    Tennessee Clean Water Network v. Tennessee Valley Authority   (6th Circuit)

    Conduit theory of liability for pollutants

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to oppose lawsuits by environmental plaintiff groups that sought to massively expand manufacturers’ liability under the Clean Water Act. In a lawsuit against electric generation facilities, the plaintiffs argued that federal jurisdiction applies to all groundwater throughout the United States (in addition to certain categories of surface waters). If that theory of jurisdiction prevails, manufacturers could be subject to massive and unpredictable liability for any impacts their operations may have on groundwater. The NAM’s amicus brief argued against this overbroad theory of liability. The Sixth Circuit ruled against the plaintiffs and in favor of manufacturers by rejecting the plaintiffs’ claims and holding that the Clean Water Act does not apply to discharges to groundwater.


    Related Documents:
    NAM brief  (February 7, 2018)

     

    Upstate Forever v. Kinder Morgan   (4th Circuit)

    "Conduit theory" of liability under the Clean Water Act

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit to support Kinder Morgan’s request for a rehearing of a lawsuit by environmental plaintiff groups that sought to expand the scope of liability under the Clean Water Act. The case involved a pipeline release of gasoline to dry land, which then allegedly migrated through groundwater to a nearby stream. The plaintiffs alleged that the gasoline seepage to the stream violated the Clean Water Act. This case is significant for manufacturers because the plaintiffs’ theory would impose massive liability for any pollution to dry land (no matter how insignificant) that migrates through groundwater to nearby surface waters. The plaintiffs lost in federal district court but prevailed on appeal to the Fourth Circuit. The NAM’s brief explained how the Fourth Circuit’s decision conflicts with Supreme Court and appellate court precedent. The Fourth Circuit denied the petitions for rehearing and rehearing en banc.


    Related Documents:
    NAM brief  (May 3, 2018)

     

    Weyerhaeuser v. U.S. Fish and Wildlife Service   (U.S. Supreme Court)

    Government overreach under the Endangered Species Act

    The NAM filed an amicus brief in the U.S. Supreme Court to oppose government overreach under the Endangered Species Act (ESA) that restricts land use in the name of helping an endangered species that does not even live on the land. The U.S. Fish and Wildlife Service (FWS) declared 1,544 acres of private property in Louisiana as “critical habitat” for the dusky gopher frog, which does not live on that property and could not even survive there under current conditions. Such designations can significantly harm manufacturers and other landowners by severely restricting land use activities and driving up permitting costs and delays. The NAM’s brief in support of the landowner argued that FWS exceeded its statutory authority under the ESA and highlighted how FWS’s actions imposed significant harm and business uncertainty on manufacturers. The Supreme Court issued a largely favorable decision for manufacturers and remanded to the lower court the question of whether the property at issue even qualifies as habitat for the frog (a question that suggests the answer is “no”) and ruled that an agency’s critical habitat designation is subject to judicial review.


    Related Documents:
    NAM brief  (April 30, 2018)

     

    American Farm Bureau Federation v. EPA   (S.D. Texas)

    Challenging Waters of the United States regulation

    The NAM and 13 other organizations sued the EPA and the U.S. Army Corps of Engineers in 2016 to challenge the agencies’ 2015 rule defining the scope of jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). The 2015 WOTUS rule exerts jurisdiction over a staggering range of waters and dry landscape features -- large and small; permanent, intermittent, or ephemeral; flowing or stagnant; natural or manmade; and interstate or intrastate. The NAM’s complaint argues that the rule exceeds the Clean Water Act and the United States Constitution.

    The 2015 WOTUS rule defines which waters and land areas require a permit under the Clean Water Act for discharges of pollutants to those areas. The rule’s definitions and prohibitions are complex and vague, and often require case-by-case determinations by the agencies. Manufacturers will be required to undertake expensive and laborious efforts to determine whether landscape features on their property are jurisdictional. Penalties for unpermitted discharges (which can include simply moving dirt or mud without a permit) are tens of thousands of dollars per day, per violation.

    The U.S. Court of Appeals for the Sixth Circuit initially asserted jurisdiction to hear the various legal challenges to the 2015 WOTUS rule. Due to questions about that Court’s authority to decide these cases, however, the NAM asked the United States Supreme Court to rule that federal district courts in fact are the proper venue for challenges to the 2015 WOTUS rule. In a unanimous decision issued on January 22, 2018, the Supreme Court ruled in the NAM’s favor, declaring that challenges to jurisdictional rules under the Clean Water Act must proceed in the federal district courts. That decision gave manufacturers and other regulated industries long-needed clarity on judicial resolution of rulemakings under the Clean Water Act. That clarity will expedite future litigation under the Clean Water Act.

    While that procedural wrangling unfolded, the agencies began the regulatory process of rescinding the 2015 WOTUS rule and replacing it with a new jurisdictional rule. To ensure that the 2015 WOTUS rule does not come back into effect while the agencies complete their rule replacement process, the agencies issued a rule on February 6, 2018, that delays the effectiveness of the 2015 WOTUS rule until February 2020. In August 2018, a federal court enjoined that rule, which bring the 2015 WOTUS rule back into effect in the 26 states not already subject to a stay of the rule.

    On October 18, 2018, the NAM filed our motion for summary judgment, which seeks to invalidate the 2015 WOTUS rule in its entirety. Our brief argues that the rule violates federal law and the U.S. Constitution, and should be invalidated in its entirety.

    In a major win for manufacturers, on May 28, 2019, the court ruled that the EPA violated the law by issuing the rule without adequate notice and opportunity to comment on the proposed rule. The court remanded the rule to the agency to re-propose the rule and provide adequate opportunity to comment.


    Related Documents:
    Motion for Reconsideration  (July 25, 2019)
    NAM Reply  (December 3, 2018)
    NAM Reply  (November 7, 2018)
    NAM Motion  (October 18, 2018)
    NAM Motion  (February 7, 2018)
    NAM Opposition to Motion to Dismiss  (May 13, 2016)

     

    Appalachian Voices v. FERC   (D.C. Circuit)

    Federal review of new energy infrastructure projects

    The NAM filed an amicus brief in support of the Mountain Valley Pipeline, a major new natural gas transmission pipeline to bring natural gas from the Marcellus shale region to manufacturers, electricity generators, and other consumers in the eastern United States. The U.S. Federal Energy Regulatory Commission (FERC) approved the pipeline under Section 7 of the Natural Gas Act. Environmental groups sued to challenge that authorization, arguing that FERC's environmental review under the National Environmental Policy Act (NEPA) should have quantified the greenhouse gas emissions impacts of all possible downstream uses of the natural gas. If courts interpret NEPA as imposing that requirement, the approval process for major energy infrastructure projects will only become more complex, delayed, and uncertain as FERC undertakes a speculative GHG analysis that environmental groups would inevitably challenge in court to delay project commencement. The NAM's amicus brief argued that NEPA does not compel a GHG analysis for every new energy infrastructure project, and that FERC properly exercised its discretion in determining that GHG emissions are not indirect effects of its approval of the Mountain Valley Pipeline. On February 19, 2019, the U.S. Court of Appeals for the D.C. Circuit upheld FERC's approval, concluding that FERC's consideration of the potential emissions impacts was reasonable under NEPA.


    Related Documents:
    NAM brief  (November 27, 2018)

     

    California Communities Against Toxics v. EPA   (D.C. Circuit)

    Streamlined air permitting under the Clean Air Act

    The NAM filed an amicus brief to defend the EPA’s withdrawal of a prior EPA policy known as "once in, always in" that imposed unreasonable and unlawful regulatory burdens on manufacturers under the Clean Air Act. In January of 2018, the EPA issued a guidance memorandum withdrawing the prior policy for the classification of major sources of hazardous air pollutants under section 112 of the Clean Air Act. With the new guidance, sources of hazardous air pollutants previously classified as “major sources” may be reclassified as “area” sources when the facility limits its potential to emit below major source thresholds. The new policy promotes regulatory clarity and reduces burdens for manufacturers while continuing to ensure stringent and effective controls on hazardous air pollutants. Environmental groups sued to challenge the policy change. The NAM filed an amicus brief in support of the EPA. Our brief explains how the policy change will continue to preserve air quality while removing unlawful and excessive regulatory burdens on manufacturers. In a win for manufacturers, on August 20, 2019, the court dismissed the challenge, finding the guidance was not final agency action subject to judicial review.


    Related Documents:
    NAM brief  (January 14, 2019)

     

    California Communities Against Toxics v. EPA   (D.C. Circuit)

    Hazardous waste recycling

    The NAM intervened in a lawsuit by environmental groups that seeks to constrain manufacturers' ability to recycle hazardous waste. The plaintiffs challenged a 2018 rule by the U.S. Environmental Protection Agency (EPA) that removed significant burdens on manufacturers to recycle hazardous waste under the federal Resource Conservation and Recovery Act (RCRA). Those burdens had been removed in the 2018 rule as a result of successful NAM litigation in 2017 that challenged an earlier EPA regulation that unreasonably burdened manufacturers. Hazardous waste recycling is important to many segments of the manufacturing industry because it allows companies to reuse or repurpose chemicals, minerals, or other products that otherwise would require disposal (typically at significant expense). By intervening on behalf of EPA, the NAM sought to preserve the 2018 rule and to bring the voice of manufacturers to the litigation. On July 2, 2019, the D.C. Circuit, in a unanimous ruling, rejected the plaintiffs’ challenge. This ruling preserves a safe and cost-effective means for companies to recycle hazardous waste.


    Related Documents:
    NAM Motion  (July 12, 2018)

     

    Center For Biological Diversity v. EPA   (5th Circuit)

    Protecting offshore energy development

    The NAM filed an amicus brief opposing environmental groups' efforts to invalidate a critical Clean Water Act permit for offshore oil and natural gas development. The case involves EPA's reissuance of a regional general permit under the Clean Water Act that authorizes certain pollutant discharges from offshore oil and natural gas platforms in the Gulf of Mexico. EPA's environmental review in support of that permit adopted a recent environmental analysis of the Gulf of Mexico by another federal agency. The plaintiffs argue that federal law required EPA to perform a separate and redundant environmental review. If their argument prevails, EPA would be required to undertake time-consuming environmental reviews for a range of new energy infrastructure projects and any other economic activity that could impact the environment. Those delays would in turn delay new projects. In support of the defendant EPA, the NAM filed an amicus brief that highlights the importance of oil and natural gas development to the national economy and energy security and argues that EPA's adoption of the related environmental review is lawful, appropriate, and consistent with past practice. In a win for manufacturers, on August 30, 2019, the court dismissed the plaintiff's claims for lack of standing.


    Related Documents:
    NAM brief  (September 28, 2018)
    NAM brief  (August 23, 2018)

     

    Cowpasture River Preservation Ass'n v. U.S. Forest Service   (4th Circuit)

    Unreasonable pipeline permitting restrictions

    The NAM filed an amicus brief in support of en banc review by the U.S. Court of Appeals for the Fourth Circuit to reverse a panel holding that invalidated a federal permit for a major natural gas transmission pipeline that crosses U.S. Forest Service lands. An environmental group sued the U.S. Forest Service to invalidate its permit allowing the Atlantic Coast Pipeline to cross beneath the Appalachian Trail hiking route. A panel of the Fourth Circuit held that the Mineral Leasing Act does not allow agencies to grant rights-of-way for pipelines to cross any stretch of the Appalachian Trail; rather, such approvals must come from a majority vote of the U.S. congress. This holding effectively converts the Appalachian Trail into a 2,200-mile barrier to pipeline construction from Maine to Georgia. The court’s reasoning could also be applied to any one of the dozens of pipelines that currently cross beneath the trail because such pipelines require periodic permit renewals. In support of the intervenor Atlantic Coast Pipeline’s petition for en banc review by the Fourth Circuit, the NAM filed an amicus brief that explained the legal flaws in the panel’s reasoning and highlighted the important benefits that pipelines provide for manufacturers and the national economy. On February 25, 2019, the Fourth Circuit denied en banc review.


    Related Documents:
    NAM brief  (February 19, 2019)

     

    Environmental Defense Fund v. EPA   (D.C. Circuit)

    TSCA inventory reset intervention

    The MCLA intervened in a lawsuit by environmental groups that seeks to overturn an EPA rule implementing the Toxic Substances Control Act (TSCA). The rule, “TSCA Inventory Notification (Active-Inactive) Requirements,” governs the process whereby the EPA must update the list of chemicals used in commerce in the United States. The EPA’s final rule allowed companies to keep certain information about the chemical free from public disclosure on confidentiality grounds. An environmental group sued to challenge the rule, arguing that the EPA failed to comply with various procedural requirements in promulgating the rule and that the rule unlawfully shields information from public disclosure. The confidentiality of chemical information is critically important to chemical manufacturers. To help defend the rule, the MCLA intervened in the case. On June 26, 2019, the D.C. Circuit Court of Appeals rejected all but one of the plaintiffs’ claims. It broadly upheld the confidentiality aspects of the rule of greatest concern to chemical manufacturers. Given the EPA’s relatively minor procedural misstep on only one aspect of the rule, the court allowed the rule to continue in force while the EPA addresses the procedural error.


    Related Documents:
    NAM intervenor brief  (May 31, 2018)
    Motion to Intervene  (October 2, 2017)

     

    Georgia v. Wheeler   (S.D. Ga.)

    Challenge to WOTUS rule

    In 2015, a coalition of states led by Georgia sued the U.S. Environmental Protection Agency (EPA) to challenge an EPA regulation governing jurisdictional "Waters of the United States" (WOTUS) under the Clean Water Act. Soon after Georgia filed suit, the court stayed the litigation while a separate federal appellate court asserted jurisdiction to resolve the case. In January of 2018, the U.S. Supreme Court ruled that challenges to the WOTUS rule should be heard in federal district courts. The Georgia district court thereafter reopened the case to allow Georgia's suit to proceed.

    The NAM's litigation coalition moved to intervene in the case to bring the voice of manufacturers to the case. The 2015 WOTUS rule defines which waters and land areas require a permit under the Clean Water Act for discharges of pollutants to those areas. The rule’s definitions and prohibitions are complex and vague, and often require case-by-case determinations by the agencies. Manufacturers will be required to undertake expensive and laborious efforts to determine whether landscape features on their property are jurisdictional. Penalties for unpermitted discharges (which can include simply moving dirt or mud without a permit) are tens of thousands of dollars per day, per violation.

    On July 10, 2018, the Court granted the NAM's intervention. On August 31, 2018, the NAM filed its motion for summary judgment with the court, and on September 26, 2018, filed a motion for a nationwide injunction against the rule. In a major win for manufacturers, the court on August 21, 2019, invalidated the rule on procedural and substantive grounds, including that the regulation seeks to impose federal jurisdiction beyond the limits imposed by the Clean Water Act.


    Related Documents:
    NAM brief  (December 24, 2018)
    NAM Motion  (September 26, 2018)
    NAM Motion  (August 31, 2018)
    NAM Complaint  (June 29, 2018)
    NAM Motion  (June 29, 2018)

     

    In re: PennEast Pipeline Company LLC   (3rd Circuit)

    State interference with energy development

    The NAM filed an amicus brief to oppose New Jersey’s efforts to stop construction of a major new proposed natural gas pipeline to deliver natural gas from Pennsylvania to the eastern United States. The proposed PennEast Pipeline is natural gas transmission pipeline to bring abundant and low-cost natural gas from northeastern Pennsylvania to manufacturers, power generators, and other customers in New Jersey and throughout the eastern United States. The state of New Jersey resisted the pipeline's exercise of eminent domain under the federal Natural Gas Act, arguing that the 11th Amendment to the U.S. Constitution prohibits federal courts from effectuating the eminent domain over lands in which the state has a property interest (such as a conservation easement). If New Jersey's argument prevails, it would give that state and others a unilateral veto over federally approved natural gas transmission pipelines. Those vetoes would restrict future pipeline infrastructure development, leading to lower availability of natural gas and increased costs to manufacturers for natural gas, electricity, and other products derived from natural gas. The NAM's amicus brief explains the practical implications of New Jersey's argument and argues why the 11th Amendment does not support the state's interpretation. In a troubling decision for manufacturers, the Third Circuit on September 10, 2019, held that New Jersey's sovereign immunity bars eminent domain proceedings against New Jersey under the Natural Gas Act. On October 29, 2019, our coalition petitioned the court for rehearing and rehearing en banc, in which we highlighted the 3rd Circuit's significant disruption of new energy infrastructure development and why the full 3rd Circuit court should hear the case en banc. Unfortunately, the court denied en banc review.


    Related Documents:
    NAM brief  (October 29, 2019)
    NAM brief  (May 15, 2019)

     

    Lighthouse Resources Inc. v. Inslee   (W.D. Wash.)

    State interference with free trade

    The NAM filed an amicus brief in a case involving the state of Washington’s authority to prohibit certain exports from Washington’s coastal ports. Washington state denied several environmental permits necessary to construct a new coal export terminal near Longview, Washington. The denials were improperly based on climate concerns about the use of coal for electricity generation in foreign countries. The state’s actions have dangerous implications for the power of individual states to interfere with interstate and international trade. The NAM’s amicus brief argued that this interference is unconstitutional and harms the national economy. Unfortunately, the district court rejected the plaintiffs' claims. The plaintiff appealed to the 9th Circuit, where the NAM filed another amicus brief on their behalf.


    Related Documents:
    NAM brief  (March 11, 2019)
    NAM brief  (May 3, 2018)

     

    Martinez v. Colo. Oil & Gas Conservation Comm'n   (Colorado Supreme Court)

    Colorado oil and gas permits

    In April of 2018, the NAM filed an amicus brief that asked the Colorado Supreme Court to reverse an appellate ruling that required the Colorado Oil and Gas Conservation Commission (COGCC) to consider a rulemaking request that would have effectively banned oil and natural gas development in Colorado. A group of Colorado residents filed the rulemaking proposal for the purpose of restricting fossil fuel development, and hydraulic fracturing in particular. On January 14, 2019, the Colorado Supreme Court ruled that the COGCC properly rejected the rulemaking proposal. This ruling benefits energy producers and manufacturers in Colorado and beyond by ensuring the continued supply of abundant and cost-effective energy.


    Related Documents:
    NAM brief  (April 2, 2018)
    NAM brief  (May 18, 2017)

     

    Murray Energy Corp. v. EPA   (D.C. Circuit)

    Challenging 2015 ozone standard

    In 2015 the NAM sued the U.S. Environmental Protection Agency to challenge its final rule lowering the ozone National Ambient Air Quality Standard (NAAQS) from 75 to 70 parts per billion. The rule could be one of the most expensive in history and burden manufacturers by limiting their air emissions and ability to grow and expand operations. The NAM seeks to invalidate the standard and secure an instruction from the court to raise the standard. The court stayed litigation in April 2017 to allow the new presidential administration to determine whether to revise the standard. On August 1, 2018, EPA announced that it would not revise the standard but instead expedite the consideration and issuance of the 2020 NAAQS standard. In August of 2019, the D.C. Circuit upheld the 2015 ozone NAAQS standard of 70 ppb against claims by environmental groups that the standard is too lax, but also rejected arguments by the NAM and other industry groups and states that the standard is too strict and fails to properly account for background sources of ozone. This ruling avoids the serious economic consequences that would have come with the court mandating a lower standard.


    Related Documents:
    Opposition Motion to Intervene  (July 17, 2017)
    Industry Reply Brief  (September 14, 2016)
    Intervenor Brief  (August 17, 2016)
    Opening Brief  (April 22, 2016)

     

    Natural Resources Defense Council v. EPA   (D.C. Circuit)

    Defending regulatory clarity for Clean Air Act permits

    The NAM intervened in a legal challenge by environmental groups to a policy by the U.S. Environmental Protection Agency that clarifies manufacturers' permitting obligations under the Clean Air Act. The lawsuit seeks to invalidate an EPA interpretive memorandum that identifies factors to guide a facility’s determination of whether separate physical or operational changes to the facility constitute a single project” under the EPA’s New Source Review (NSR) permitting program. Determining the extent of a project under NSR is important for many manufacturers because combining several pollution sources at a facility can trigger NSR permitting requirements that mandate expensive air pollution control technologies. The NAM intervened as a defendant on behalf of the EPA to help defend the interpretation and preserve regulatory clarity for manufacturers. On June 25, 2019, the environmental plaintiffs moved to dismiss their case. Although their dismissal motion did not state the reasons, we infer that our intervention arguments might have caused them to realize the weakness of their case.


    Related Documents:
    NAM Motion  (February 13, 2019)

     

    Otsego 2000 v. FERC   (D.C. Circuit)

    Greenhouse gas analysis of pipelines

    The NAM filed an amicus brief to argue that the Federal Energy Regulatory Commission (FERC), when reviewing a pipeline company’s permit application for a new pipeline infrastructure project, does not have a categorical obligation under federal law to forecast the speculative greenhouse gas impacts of possible uses of the natural gas by unknown and unknowable customers of the natural gas. The case arises from FERC’s approval of upgrades to an existing natural gas pipeline in New York state. In reviewing the environmental impacts of those upgrades under the National Environmental Policy Act (NEPA), FERC declined to undertake a speculative analysis of the greenhouse gas impacts of the possible uses of the natural gas by the ultimate customers of the gas. An environmental group sued FERC to challenge that determination. In FERC’s defense, the NAM filed an amicus brief to support FERC’s approach of determining on a case-by-case basis whether a greenhouse gas analysis is appropriate for a particular energy infrastructure project. This approach is important to manufacturers because it avoids prolonged and speculative environmental reviews that opposition groups can use as a basis to challenge and delay new energy infrastructure development. On May 9, 2019, the court found the plaintiffs lacked standing and therefore dismissed the case.


    Related Documents:
    NAM brief  (February 1, 2019)

     

    Puget Soundkeeper Alliance v. Wheeler   (W.D. Wash.)

    Challenge to delayed implementation of EPA's 2015 "Waters of the U.S." rule and waste treatment exclusion

    The NAM intervened in a legal challenge by environmental groups to the EPA’s delayed implementation of the 2015 rule governing jurisdictional “Waters of the United States” (WOTUS) under the Clean Water Act, and to that rule’s jurisdictional exception for waste treatment systems. After a change in presidential administrations in early 2017, the EPA delayed the effective date of the 2015 WOTUS rule until February 2020. The purpose of that delay was to preserve the pre-rule status quo while the EPA proposes and finalizes a replacement WOTUS rule. A coalition of environmental groups sued to challenge that delay. On November 26, 2018, the court found that the delay failed to comply with applicable procedural requirements. The court invalidated the delay rule, thereby causing the 2015 WOTUS rule to come back into effect.

    After this procedural win, the environmental plaintiffs then turned their attention to the merits of the 2015 WOTUS rule. In May of 2019, the plaintiffs filed a motion for summary judgment to seek to invalidate the 2015 WOTUS rule’s exception of waste treatment systems from Clean Water Act jurisdiction. Waste treatment systems are essential elements of various industrial operations. They are used in mining, power generation, pulp and paper mills, manufacturing, infrastructure, and a host of other activities. Waste treatment systems prevent pollution by treating, settling, retaining, or removing pollutants before being discharged into rivers, lakes, streams, or other waters. The NAM’s litigation coalition filed a motion opposing the plaintiffs’ summary judgment motion. In our brief we explained the environmental benefits of waste treatment systems and the Clean Water Act’s express allowance and process for creating and issuing permits for those systems. We also attacked the plaintiffs’ standing to bring the challenge.

    In a great win for manufacturers, the court on November 25, 2019, dismissed the plaintiffs' case for lack of standing.


    Related Documents:
    NAM brief  (May 29, 2019)
    NAM Motion  (June 28, 2018)

     

    South Carolina Coastal Conservation League v. Wheeler   (D.S. Car.)

    Applicability of "Waters of the United States" rule

    On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional "Waters of the United States" under the Clean Water Act (2015 WOTUS rule). A coalition of environmental groups sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule. On August 16, 2018, the court ruled in the plaintiffs' favor, finding that EPA violated the Administrative Procedure Act by failing to request and consider comments on the flaws of the 2015 WOTUS rule and by refusing to consider the substantive implications of suspending the rule.


    Related Documents:
    NAM brief  (July 6, 2018)

     

    West Virginia v. EPA   (D.C. Circuit)

    Challenging EPA's Clean Power Plan

    In 2015, the NAM challenged the EPA’s Clean Power Plan, a rule that went beyond the EPA’s legal authority to regulate carbon dioxide emissions under the Clean Air Act. Before the rule became effective, the U.S. Supreme Court stayed the rule pending the resolution of the litigation. Then, in 2017, the D.C. Circuit held the litigation itself in abeyance to allow the incoming administration to decide whether to rescind or revise the rule. The EPA proposed a replacement rule—the Affordable Clean Energy Rule—in August 2018. A final rule issued in June 2019. With the Clean Power Plan rule replaced by the Affordable Clean Energy Rule, the parties moved to dismiss the case. On September 17, 2019, the court dismissed the case as moot.


    Related Documents:
    NAM reply brief  (April 22, 2016)
    NAM merits brief on core legal issues  (February 19, 2016)

     

    Atlantic Coast Pipeline, LLC v. Cowpasture River Preservation Ass'n   (U.S. Supreme Court)

    Unreasonable pipeline permitting restrictions

    The NAM filed an amicus brief in support of a petition for certiorari seeking U.S. Supreme Court review and reversal of a 4th Circuit holding that invalidated a federal permit for a major natural gas transmission pipeline that crosses U.S. Forest Service lands. An environmental group sued the U.S. Forest Service to invalidate its permit allowing the Atlantic Coast Pipeline to cross beneath the Appalachian Trail hiking route. A panel of the Fourth Circuit held that the Mineral Leasing Act does not allow agencies to grant rights-of-way for pipelines to cross any stretch of the Appalachian Trail; rather, such approvals must come from a majority vote of the U.S. congress. This holding effectively converts the Appalachian Trail into a 2,200-mile barrier to pipeline construction from Maine to Georgia. The court’s reasoning could also be applied to any one of the dozens of pipelines that currently cross beneath the trail because such pipelines require periodic permit renewals. In support of the pipeline’s petition for Supreme Court review, the NAM filed an amicus brief that explained the legal flaws in the panel’s reasoning and highlighted the important benefits that pipelines provide for manufacturers and the national economy. On October 4, 2019, the court granted review for the 2019-2020 term, and on December 9, 2019, the NAM filed a coalition amicus brief on the merits in support of the pipeline. On June 15, 2020, the Court agreed, reversing the Fourth Circuit and upholding the longstanding precedent allowing infrastructure crossings of the Appalachian Trail.


    Related Documents:
    NAM brief  (December 9, 2019)
    NAM brief  (July 26, 2019)

     

    Atlantic Richfield Co. v. Christian   (U.S. Supreme Court)

    Preemption of private restoration plans by CERCLA

    In May of 2018, the NAM filed an amicus brief to urge the U.S. Supreme Court to review and reverse a Montana Supreme Court decision that undermines the predictability of EPA’s environmental remediation orders. The case arises under the federal Comprehensive Environmental Response, Compensation, and Liability Act (known as “CERCLA” or “Superfund”). Under CERCLA, EPA has the authority to order comprehensive clean up orders for sites containing hazardous wastes. Those orders preempt state and individual efforts to impose remediation requirements. The Montana Supreme Court nonetheless allowed nearby landowners to seek compensation for a remediation plan that conflicts with the EPA’s cleanup order. If not overturned, that decision will undermine the certainty and predictability for manufacturers that own Superfund sites. In support of a petition for review by the U.S. Supreme Court, the NAM filed an amicus brief that explains how the Montana Supreme Court’s decision frustrates environmental remediation. On June 10, 2019, the Court granted review of the case for the Court’s 2019-2020 term. On August 28, 2019, the NAM filed an amicus brief on the merits that supports Atlantic Richfield's arguments on the merits. And on April 20, 2020, the Court held that the landowners needed EPA approval to take remedial action to ensure “a single EPA-led cleanup effort rather than tens of thousands of competing individual ones.” Although the opinion leaves open future state lawsuits related to Superfund sites, the need to obtain prior EPA approval presents a significant obstacle to such challenges—and provides meaningful certainty for manufacturers.


    Related Documents:
    NAM brief  (August 28, 2019)
    NAM brief  (May 31, 2018)

     

    County of Maui, Hawaii v. Hawaii Wildlife Fund   (U.S. Supreme Court)

    Scope of Clean Water Act jurisdiction

    The U.S. Supreme Court should rule that the federal Clean Water Act does not regulate groundwater because the Act by its terms applies only to surface waters and would conflict with other environmental laws specifically tailored to protect groundwater. The U.S. Court of Appeals for the Ninth Circuit held in 2018 that groundwater is jurisdictional under the Clean Water Act, reasoning that groundwater can serve as a conduit to jurisdictional surface waters. Under this "conduit theory" of jurisdiction, certain industrial activities on dry land could give rise to lawsuits alleging such activities polluted nearby surface waters through groundwater connections. On appeal to the U.S. Supreme Court, the NAM’s amicus brief argued that this broad interpretation goes far beyond the scope and intent of the Clean Water Act, interferes with other environmental statutes focused on groundwater protection, would be impossible to implement, and would impose incalculable liability risk on manufacturers and other regulated industries. Unfortunately, in a 6-3 decision, the Court held on April 23, 2020 that the CWA does regulate groundwater "if the addition of the pollutants through groundwater is the functional equivalent of a direct discharge from the point source into navigable waters."


    Related Documents:
    NAM Brief  (May 16, 2019)

     

    Meritor, Inc. v. EPA   (D.C. Circuit)

    Superfund vapor intrusion mitigation

    The NAM filed an amicus brief in the U.S. Court of Appeals for the DC Circuit challenging the Environmental Protection Agency’s (EPA) decision to place an industrial site on the National Priorities List (NPL) under the Superfund program. The NPL is a list of contaminated sites that EPA has determined have the highest priority for investigation and possible cleanup. The site at issue in this case was placed on the list based solely on subsurface intrusion, also known as “vapor intrusion,” without considering the site’s sub-slab depressurization system used to mitigate vapor intrusion. If upheld, the EPA’s decision to exclude the mitigation system would undermine the efforts of manufacturers who have proactively installed and operated these systems. The NAM’s brief argued that the EPA arbitrarily and unlawfully failed to take into account the active mitigation system and used a residential rather than industrial exposure benchmark. Unfortunately, on July 28, 2020, the court declined to review EPA's decision.


    Related Documents:
    NAM brief  (April 8, 2019)

     

    New York v. EPA   (D.C. Circuit)

    Defending current Clean Air Act permits for hundreds of manufacturers

    The NAM intervened on behalf of the EPA to defend the EPA’s decision not to impose new Clean Air Act emissions limitations on hundreds of manufacturing facilities throughout the Midwest. In 2018, New York petitioned the EPA to force nine nearby states to impose stringent new air emissions restrictions on manufacturers and other facilities within their borders. The NAM filed coalition comments with the EPA that explained why the EPA should reject the petition, which it did in October of 2019. New York then sued the EPA to overturn the rejection. The NAM -- together with other impacted trade associations and individual companies -- intervened in the case to defend the EPA’s decision and to represent the interests of manufacturers in the litigation, filing an initial proof brief in the D.C. Circuit Court of Appeals on March 5, 2020. Unfortunately, on July 14, 2020, the court vacated EPA's decision and remanded the petition back to EPA for further proceedings.


    Related Documents:
    NAM brief  (March 5, 2020)

     

    Oakland Bulk & Oversized Terminal, LLC v. City of Oakland   (9th Circuit)

    Opposing local interference with energy exports

    The NAM filed an amicus brief to defend energy producers against efforts by municipalities to ban energy exports from costal ports. In 2016, the city of Oakland, California, passed an ordinance that restricted the construction of a proposed new coal export terminal along the San Francisco Bay. The public explanation for the ordinance was the protection of local health and safety, but the actual rationale for the ban is the city’s ideological objection to the exportation of American coal to global markets. If allowed to stand, this action has dangerous implications for the power of individual cities to interfere with interstate and international trade. The NAM's amicus brief highlights how such restrictions can harm manufacturers and argues that this interference violates the U.S. Constitution. On May 26, 2020, the court held that city's ordinance was invalid, but declined to reach the constitutional arguments.


    Related Documents:
    NAM brief  (February 15, 2019)

     

    Tex. Ass'n of Mfrs. v. CPSC   (5th Circuit)

    Challenge to CPSC phthalates rule

    On 12/14/17, the NAM and American Chemistry Council, along with local Texas groups, filed a challenge in the Fifth Circuit Court of Appeals to the Consumer Product Safety Commission’s (CPSC) final rule on phthalates, which restricts the phthalate DINP. The CPSC’s decision to restrict DINP was misguided, scientifically inaccurate and the result of a deeply flawed process that fabricated rationales for a predetermined outcome. The Commission should have relied on scientifically reasonable statistics when assessing the exposure data, which demonstrate the cumulative risk of exposure to these phthalates is actually well below any level of concern – even for sensitive populations. DINP, as currently used in commercial and consumer products, does not pose a risk to human health at typical exposure levels. The CPSC’s unfounded decision here could be a slippery slope to restrict other chemicals that special interests find objectionable.

    On 2/5/18, the NAM filed a response to the CPSC's motion to dismiss. The NAM's filed its opening brief on 8/20/18 and its reply brief on 12/3/18. On March 1, 2021, a unanimous three-judge panel held that CPSC violated the Administrative Procedure Act by (1) not allowing sufficient opportunity for notice and comment when it shifted its justification for the rule from relying upon an HI=1 at the 95th percentile to relying on spot samples of actual women; and (2) CPSC failed to adequately consider costs and benefits when it continued the interim prohibition on DINP. The Court remanded the rule without vacatur to CPSC to address these shortcomings.


    Related Documents:
    Opinion  (March 2, 2021)
    NAM reply brief  (December 3, 2018)
    NAM opening brief  (August 20, 2018)
    NAM response  (February 5, 2018)
    NAM petition for review  (December 14, 2017)

     

    Troy Corporation v. EPA   (D.C. Circuit)

    Scope of CERCLA listings

    The NAM filed an amicus brief on behalf of Troy Corporation to argue that the EPA’s listing of sites under the Comprehensive Environmental Response, Compensation, and Liability Act should accurately reflect the site’s potential environmental risks and not rely on artificial and inaccurate rules of thumb. The EPA added a creek that runs through and adjacent to Troy Corporation’s manufacturing facility in Newark, NJ to CERCLA’s National Priority List. The listing was based in significant part on the EPA’s assessment that the creek had the potential to contaminate a fishing pier located 13 miles away. That assessment was based solely on regulatory assumptions that Troy rebutted in regulatory comments. In response to those comments, EPA responded that it is entitled to rely on the bright line presumptions in the regulation and need not demonstrate any actual risk of contamination. If such a position is upheld, many manufacturing sites could be listed as “priority” CERCLA sites when they have no actual potential to cause such environmental harm. The NAM’s amicus brief argues that this approach to listing sites violates CERCLA and could adversely impact many manufacturers. Unfortunately, on November 13, 2020, the court denied Troy's petition for review.


    Related Documents:
    NAM brief  (October 25, 2019)

     

    New Mexico v. Sterigenics   (N.M. State Trial Ct.)

    Public Nuisance Suit Seeks to Undermine Ethylene Oxide Regulations

    The NAM filed an amicus brief urging a New Mexico trial court to exercise its discretion, under the doctrine of primary jurisdiction, to dismiss a public nuisance lawsuit brought under the name of the state’s Attorney General that would create a parallel and deeply problematic regulatory regime for medical product sterilization facilities that use ethylene oxide. The facility at issue is already subject to comprehensive regulations and permit conditions developed by the U.S. EPA and the New Mexico Environment Department, but the AG’s suit, led by a prominent national plaintiffs’ law firm, would seek to rewrite those rules to essentially shut down the facility unless it pays up to satisfy the state and its outside law firm. The NAM’s brief argues that allowing ethylene oxide use, management, and emission standards to be fashioned and hammered out in a tort case by a local jury applying malleable public nuisance standards is not in the best interests of health care, sound science, or sensible regulation. Unfortunately, on June 29, 2021, the court allowed the case to proceed.


    Related Documents:
    NAM brief  (June 4, 2021)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Defending Clean Air Act trading program for ozone NAAQS

    The NAM filed an amicus brief to support EPA’s defense of a trading program for ozone NAAQS pollutants. The Clean Air Act (CAA) requires EPA to establish national ambient air quality standards for six pollutants, including ozone. A 2018 EPA rule allowed companies to trade ozone pollutants with other emitters to meet federal emissions requirements. An environmental group sued to challenge the rule, arguing that the trading program is not allowed by the CAA. NAM members that seek to expand or build a new facility in many areas of the country can benefit greatly from this trading program. Pollutant trading programs like this provide a market-based solution that companies can use to grow their operations while reducing harmful air emissions in the aggregate. The NAM’s amicus brief explains the important and effective role of emissions trading and why such a program complies with the CAA. Unfortunately, on January 29, 2021, the court held that as a matter of statutory construction, the CAA prohibits the program.


    Related Documents:
    D.C. Cir. Opinion  (January 29, 2021)
    NAM brief  (November 8, 2019)

     

    United States v. Ameren   (8th Circuit)

    Clean Air Act permits for generator repairs

    The NAM filed an amicus brief to seek to overturn a district court ruling that erroneously penalized an electric generating facility under the Clean Air Act and improperly imposed additional penalties on a separate and unrelated generation facility. Electric utility company Ameren undertook needed repairs to a coal-fired electric generation unit. The EPA then sued Ameren, claiming that the repairs failed to comply with the Act’s New Source Review provisions, which require permits for “major modifications” to generating units. A federal district court judge agreed with the EPA. For a remedy, the judge ordered Ameren to obtain the permit and ordered a decrease in emissions at a separate Ameren electric generating unit. On appeal to the 8th Circuit, the NAM filed an amicus brief that highlights the problematic consequences of this decision on generators and other facilities that require Clean Air Act permits. Unfortunately, on August 20, 2021, the court affirmed the lower court's liability determination as to one facility and reversed as to the unrelated facility.


    Related Documents:
    NAM Brief  (January 30, 2020)

     

    United States v. Denka Performance Elastomer LLC   (E.D. La.)

    Preserving the chemical risk assessment process

    On August 14, 2023, the NAM requested permission to file an amicus brief in an enforcement action the EPA commenced in the Eastern District of Louisiana under the Clean Air Act to compel Denka Performance Elastomer to limit its chloroprene emissions or cease production of the chemical. Chloroprene is a chemical used to manufacture synthetic rubber. The EPA brought this action, based on its Integrated Risk Information System (IRIS) value for chloroprene and view that the IRIS value demonstrates that the emissions from Denka’s plant exceeding that value present an imminent risk of harm to the public.

    We argue in our brief that IRIS values are neither statutes nor regulations and therefore the values are an improper basis for an enforcement action. IRIS simply assists the EPA in developing its emissions standards and other related rules under the Clean Air Act to assess the possible health effects of chemical exposure; IRIS does not definitely measure adverse effects of exposure. If the use of IRIS values for an enforcement action is condoned, companies could be subject to liability for their chemical emissions levels even if compliant with statutes, regulations and permit requirements.

    Unfortunately, on August 16, 2023, the district court denied our motion for leave to file an amicus brief.


    Related Documents:
    NAM brief  (August 14, 2023)

     

    Air-Conditioning, Heating & Refrigeration Institute, et al. v. U.S. EPA   (D.C. Circuit)

    Emergency Compliance Relief for PIP (3:1) rule

    The NAM joined with partner organizations to bring a prophylactic challenge to a final rule regulating PIP (3:1)—a persistent, bio-accumulative chemical that is ubiquitous in manufacturing operations and supply chains—under the Toxic Substances Control Act. The rule called for the prohibition of PIP (3:1) on an aggressive timeline that would have severely impacted supply chains for a wide variety of electronics, from cell phones, to robotics used to manufacture semiconductors, to equipment used to move COVID-19 vaccines and keep them at the appropriate temperature. After the NAM coalition files it petition in the D.C. Circuit raising these compliance issues, the EPA agreed to seek additional public input on the rule for a period of 60 days, with a special focus on alternative exposure reduction measures for certain products. The agency also issued a issued a rare “No Action Assurance” to notify regulated industry that it would not enforce the rule for 180 days pending next steps in the rulemaking process to provide longer-term relief. The case is currently in abeyance pending the new rulemaking.


    Related Documents:
    NAM comments  (May 17, 2021)
    NAM Petition for Review  (March 4, 2021)

     

    American Chemistry Council v. EPA   (D.C. Circuit)

    Risk Management Program litigation

    In 2017, the MCLA sued the EPA to challenge the agency’s rule governing risk management plans for chemical facilities and oil refineries. The rule imposed costly and burdensome requirements on facilities that handle hazardous substances without improving worker or community safety. The court stayed the litigation after the EPA delayed enforcement of the rule and proposed a substantive replacement. The EPA then issued a final rule in 2019. The litigation remains stayed pending further orders from the court.


    Related Documents:
    Petition for review  (March 13, 2017)
    Petition to EPA for reconsideration  (February 28, 2017)

     

    Baker v. Saint-Gobain Performance Plastics Corp.   (2nd Circuit)

    Medical monitoring and economic loss claims in class action lawsuit

    A group of individual plaintiffs brought a class action lawsuit against defendant Saint-Gobain Performance Plastics Corp., alleging that Saint-Gobain released perfluorooctanoic acid (PFOA) into groundwater that seeped into the plaintiffs' nearby land. The plaintiffs argued that they are entitled to financial damages to pay for ongoing medical health monitoring because of their alleged exposure to PFOA, and to compensate them for lower property values allegedly caused by the contamination. Saint-Gobain moved to dismiss the complaint because New York law does not recognize claims for medical monitoring absent any evidence of physical harm and does not recognize diminution of property value due to alleged groundwater contamination. The district court denied the motion to dismiss but certified immediate appellate review by the United States Court of Appeals for the Second Circuit. The NAM filed an amicus brief on behalf of Saint-Gobain to ensure that the law limiting medical monitoring and diminution-of-value claims remains appropriately balanced and favorable to manufacturers. Without appropriate limitations on these types of claims, manufacturers would be subject to massive and unwarranted increases in liability exposure.


    Related Documents:
    NAM brief  (March 1, 2018)

     

    City and County of San Francisco v. EPA   (U.S. Supreme Court)

    Challenging General NPDES Permit Prohibitions to Protect CWA Permit Shield

    On February 12, 2024, the NAM filed an amicus brief asking the U.S. Supreme Court to address whether the Clean Water Act allows the EPA to include generic (and vague) prohibitions in National Pollutant Discharge Elimination System permits that subject permitholders to enforcement for exceedances of water quality standards. A NPDES permit is required to discharge a pollutant through a “point source” into “a water of the United States.” In this case, San Franscisco v. EPA, the 9th Circuit affirmed EPA’s use of a generic prohibition in San Francisco’s NPDES permit for a water treatment facility—stating that water discharge “shall not cause or contribute to the violation of any applicable water quality standard.” This ruling directly conflicts with 2nd Circuit precedent deeming generic prohibitions impermissible and could impact manufacturers’ ability to assert the permit shield defense—a defense that provides protection from liability if a manufacturer is operating under a valid permit and its facility discharges waste in accordance with the permit. Permit operators need specific guidance as to allowable discharges in accordance with the permit.

    Our brief urges the Supreme Court to review this case to resolve the circuit split and highlights the key role of the permit shield defense in guarding against citizen suits and unforeseen enforcement actions.


    Related Documents:
    NAM brief  (February 12, 2024)

     

    Commonwealth of Kentucky v. EPA   (D.C. Circuit)

    Challenging PM 2.5 NAAQS

    On March 6, 2024, the NAM joined a coalition of other major business trade associations to file suit in the D.C. Circuit to challenge the Environmental Protection Agency’s misguided final rule lowering the National Ambient Air Quality Standards for fine particulate matter (PM2.5) to 9 micrograms per cubic meter. The Clear Air Act requires manufacturers to obtain preconstruction permits for new and modified emissions sources obtainable only after showing that emissions from the proposed new source will not cause or contribute to a PM 2.5 NAAQS violation. The Clean Air Act also requires the EPA to review the NAAQS every five years to determine whether the PM2.5 standard should be retained or revised. In December 2020, following a complete review of the PM NAAQS, the EPA decided to retain the PM2.5 standard of 12 micrograms per cubic meter. But in June 2021, the agency announced it would reconsider that decision. The EPA ultimately issued the revised standard in an out-of-cycle reconsideration becoming the first administration to redo a promulgated NAAQS. The standard stands to impede economic development in much of the country due to many manufacturers’ inability to establish that a proposed new construction or modified emission source will not cause or contribute to a PM 2.5 NAAQS violation. The NAM therefore sued to protect manufacturers’ ability to obtain permits, expand facilities and pursue long-term investment plans, and defend our country’s competitive advantage.


    Related Documents:
    Petition for Review  (March 4, 2024)

     

    County of San Mateo v. Chevron Corp.   (9th Circuit)

    Public nuisance cases seeking to drive national energy policy on climate change.

    The NAM filed an amicus brief in support of rehearing en banc by the 9th Circuit in one of over two dozen public nuisance cases seeking to drive national energy policy on climate change. This case is part of a coordinated, national litigation campaign filed in carefully chosen states and federal circuits by agenda-driven lawyers and activists. The issue presented is whether putative state-law tort claims alleging harm from global climate change are removable because they arise under federal law. In April 2022, the 9th Circuit rejected federal-question jurisdiction and all other bases for subject matter jurisdiction and remand the case to state court. In support of rehearing, the NAM filed an amicus brief arguing that the subject matter and remedies sought through this litigation are inherently national, as well as legislative and regulatory in nature, and that such complex policy matters should not be driven by individual state judges in individual state courtrooms applying (or misapplying) various state liability laws.

    Unfortunately, on June 27, 2022, the 9th Circuit denied the petition for rehearing.


    Related Documents:
    NAM brief  (May 27, 2022)

     

    Environment Texas Citizen Lobby, Inc. v. ExxonMobil Corp.   (5th Circuit)

    Citizen suit interference with environmental regulation

    In 2015, the NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting a federal judge’s decision not to impose excessive penalties on ExxonMobil for various permit violations. On remand to the district court, the groups reduced their requested penalties from $642 million to about $40 million, and the district judge awarded them about $20 million, prompting Exxon’s appeal back to the Fifth Circuit. In 2018 and 2021, the NAM filed additional amicus briefs arguing that the Constitution and Clean Air Act limit citizen suits under the Clean Air Act and asking the Fifth Circuit to enforce the constitutional line that limits federal courts to deciding discrete cases and controversies and prevents them from acting as regulators or policymakers.

    Unfortunately, on August 30, 2022, the Fifth Circuit affirmed the district court's latest decision imposing a $14.25M penalty on defendant-appellants (for 3,651 purported violations). On, October 20, 2022, the NAM filed an amicus brief in support of Exxon’s petition for the 5th Circuit to rehear en banc its appeal challenging the district court’s penalty award.

    Happily, on February 17, 2023, the 5th Circuit granted the petition for rehearing en banc and vacated the panel decision. On March 27, 2023, the NAM filed an amicus brief asking the full 5th Circuit to reverse the panel’s decision to enforce the limits of federal courts’ jurisdiction. This case is important to manufacturers because courts should exercise discretion in determining civil penalties to prevent creating perverse incentives for plaintiffs.


    Related Documents:
    NAM En Banc brief  (March 27, 2023)
    Per Curiam Order  (February 17, 2023)
    NAM brief in support of Exxon’s petition for rehearing en banc  (October 20, 2022)
    Decision on Exxon’s second appeal  (August 30, 2022)
    NAM brief in support of Exxon’s second appeal  (July 14, 2021)
    NAM brief in support of Exxon’s first appeal  (January 19, 2018)
    NAM brief in support of the district court’s initial decision  (September 17, 2015)

     

    Environmental Comm. of the Fla. Elec. Power Coord. Grp. v. EPA   (D.C. Circuit)

    Challenging the EPA's effort to amend state plans regarding emissions during startups, shutdowns and malfunctions

    The NAM sued the EPA in 2015 to challenge the EPA’s declaration that 36 states’ state implementation plans (SIPs) under the Clean Air Act are invalid because they allow air emissions in excess of permit limits during startup, shutdown or equipment malfunctions. That flexibility is important to manufacturers that might temporarily exceed permit limits for reasons beyond their control. The litigation has been held in abeyance since April 2017 while the EPA considers whether to revise or rescind the rule.

     

    Environmental Defense Fund v. EPA   (D.C. Circuit)

    Air permitting streamlining

    On June 25, 2018, the NAM moved to intervene in a case involving permitting requirements for manufacturers under the Clean Air Act. Environmental groups sued to challenge a guidance document from the U.S. Environmental Protection Agency (EPA) that streamlines Clean Air Act permits under the New Source Review program for facilities that expand or modify their operations. If the plaintiffs' claims are successful, facility modifications could be significantly delayed and rendered more expensive. The NAM's motion asks the court to allow the NAM to become a co-defendant in the case with EPA to bring the voice of manufacturers in defense of the EPA's sensible policy.

    On July 13, 2018, the court held the case in abeyance pending the completion of an EPA rulemaking to implement the terms of the guidance document. The litigation is expected to reactivate when the final rule issues.


    Related Documents:
    NAM Motion to Intervene  (June 25, 2018)
    NAM brief  (May 31, 2018)

     

    Lighthouse Resources, Inc. v. Inslee   (9th Circuit)

    Local interference with free trade

    The NAM filed an amicus brief in a case involving the state of Washington’s authority to prohibit certain exports from Washington’s coastal ports. Washington state denied several environmental permits necessary to construct a new coal export terminal near Longview, Washington. The denials were improperly based on concerns about the use of coal for electricity generation in foreign countries. The state’s actions have dangerous implications for the power of individual states to interfere with interstate and international trade. A federal district court rejected the plaintiffs’ claims. On appeal to the 9th Circuit, the NAM’s amicus brief explained how state and local interference with foreign trade undermines a uniform foreign policy and is harmful to the national economy. Moreover, we argued that Washington’s actions violate the foreign commerce clause and that allowing the state’s actions to stand would give a green light to state and local interference with foreign trade policy.


    Related Documents:
    NAM brief  (November 6, 2019)

     

    Natural Resources Defense Council v. Wheeler   (S.D.N.Y.)

    Applicability of "Waters of the United States" rule

    On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). A coalition of environmental groups sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule.


    Related Documents:
    NAM brief  (June 29, 2018)

     

    North Dakota v. EPA   (D.N.D.)

    Challenge to "Waters of the United States" rule

    Upon promulgation of the EPA's 2015 rule defining jurisdictional "Waters of the United States" (WOTUS) under the Clean Water Act, a coalition of states led by North Dakota sued the EPA in federal district court in North Dakota to challenge the rule. The states then moved for preliminary injunction against the rule, which the court granted within the territorial boundaries of the plaintiff states (North Dakota, Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, New Mexico, Nevada, South Dakota, and Wyoming). Soon thereafter, however, the U.S. Court of Appeals for the Sixth Circuit claimed authority to consider all challenges to the WOTUS rule—to the exclusion of the North Dakota district court and several other district courts in which lawsuits had been filed, including an NAM coalition lawsuit in the U.S. District Court for the Southern District of Texas. In January 2018, however, the U.S. Supreme Court ruled that the Sixth Circuit lacked jurisdiction to consider the various WOTUS challenges. This reactivated the North Dakota case, allowing the court to proceed to the states’ merits challenges to the 2015 rule. On June 8, 2018, the NAM filed an amicus brief on behalf of the states that explains how the rule was promulgated without required procedure and how the rule violates the Clean Water Act and the U.S. Constitution.


    Related Documents:
    NAM brief  (June 8, 2018)

     

    North Dakota v. EPA   (D.C. Circuit)

    Challenging the EPA's denial of reconsideration of Clean Power Plan

    On 2/16/17, the NAM and other associations moved to intervene in a case brought by North Dakota challenging the EPA's latest action on its Clean Power Plan (CPP). The agency rejected a petition to reconsider the rule, and that decision is now being challenged in court. The case is likely to be affected by the court's soon-to-be-issued ruling in our main challenge to the CPP rule, since the procedural and substantive defects in the petition for reconsideration overlap significantly with the issues raised in the case already before the court. A motion to hold the case in abeyance pending EPA reconsideration was granted, and the case remains in abeyance.


    Related Documents:
    Motion to Intervene  (February 16, 2017)

     

    North Dakota v. EPA   (D.C. Circuit)

    EPA’s New Source Performance Standards (NSPS) for greenhouse gases from electric utilities

    The NAM sought review in the U.S. Court of Appeals for the D.C. Circuit of the Environmental Protection Agency’s (EPA) 2015 Clean Power Plan rule governing New Source Performance Standards (NSPS) for greenhouse gases from electric utilities. The rule is an attempt to address emissions from new, modified and reconstructed electric generating units. This case is important for manufacturers because EPA should not rely on policy preferences rather than the rule of law.

    The NAM sued the EPA with a broad industry coalition to challenge the NSPS rule. We seek to invalidate the rule to pave the way for a sensible alternative. Our briefs argue that the rule is unlawful because EPA’s conclusions are arbitrary and capricious, not supported by substantial evidence, and fail to make the requisite endangerment findings. In 2017, the D.C. Circuit held the rule in abeyance while the current administration considers whether to revise or rescind the rule.


    Related Documents:
    Brief on the merits  (October 13, 2016)
    Preliminary statement of issues  (January 25, 2016)

     

    Oklahoma v. EPA   (10th Circuit)

    Challenge to 2015 "Waters of the U.S. Rule"

    Oklahoma and a coalition of business groups sued to challenge the EPA's 2015 rule governing jurisdictional "Waters of the United States" under the Clean Water Act. The rule adversely impacts manufacturers by asserting federal jurisdiction and permitting requirements over millions of acres of dry land throughout the country and by imposing unclear rules on land development. Oklahoma sought a preliminary injunction to stop the rule. A district court denied that injunction, and Oklahoma appealed. In support of their appeal, the NAM filed a coalition amicus brief that explains the impact of the rule on manufacturers and other sectors of the economy and supports an injunction in Oklahoma.


    Related Documents:
    NAM brief  (August 16, 2019)

     

    Portland Pipe Line Corporation v. City of South Portland   (1st Circuit)

    Local interference with energy exports

    The NAM filed an amicus brief in the U.S. Court of Appeals for the First Circuit to overturn the city of South Portland, Maine’s ban on crude oil exports from the city’s harbor. The city council claimed it enacted the ban for health and safety reasons, but various public statements revealed a political opposition to the planned transportation of Canadian crude oil by pipeline to the harbor for export. The pipeline owner sued the city, arguing the ban violates the U.S. constitution’s commerce clause. A federal district court sided with the city. If such local energy export bans are allowed to stand, energy production and transportation would be restricted, shutting some products out of some markets, and increasing energy prices for many manufacturers. On appeal to the First Circuit, the NAM’s amicus brief explains the importance of the free trade of energy for manufacturers and argues that the city’s interference with free trade violates the U.S. constitution. On January 10, 2020, the court "sidestepped" the federal constitutional questions and certified three questions to Maine’s high court concerning potential preemption of the ordinance by state law.


    Related Documents:
    NAM brief  (February 19, 2019)

     

    Sierra Club v. EPA   (D.C. Circuit)

    Challenge to affirmative defense for equipment malfunctions

    In June, 2014, the Sierra Club challenged 9 EPA Clean Air Act rules in court, alleging that provisions in each rule are no longer valid as a result of a decision in April by the U.S. Court of Appeals for the D.C. Circuit. The provisions at issue allows companies an affirmative defense to civil penalties for exceeding emissions limits that are caused by malfunctions. A company must prove that the malfunction was sudden, infrequent, not reasonably preventable and not caused by poor maintenance or careless operation, and that it took steps to correct the malfunction and minimize resulting emissions.

    In April, the court decided in Natural Resources Defense Council v. EPA to vacate portions of a Portland cement industry rule pertaining to the affirmative defense, finding that the EPA lacked the authority to create a defense applicable in federal court. This Sierra Club suit attempts to remove the defense from 9 other rules in which it arises, involving various industries and kinds of equipment. Challenges to regulations must be brought within 60 days of their promulgation unless the petition "is based solely on grounds arising after such sixtieth day . . . ." The suit claims that the NRDC case decision constitutes grounds arising after the rules were promulgated.

    In July, the NAM and 13 other business associations filed a motion to intervene in the suit. Manufacturers will be negatively impacted if the suit is successful, since it could make them liable for permit violations arising from unavoidable equipment malfunctions. That liability can arise both from EPA citations and from citizen suits around the country.

    The rules at issue govern chemical manufacturing, pulp and paper mills, steel pickling, marine tank vessel loading operations, industrial steam-generating units, nitric acid plants and others.

    On July 25, the court ordered the case held in abeyance while the EPA decided on a pending administrative petition from the Sierra Club to revise the rules. The EPA granted the petition, and on December 17, 2014, the court held this case in abeyance until the EPA completes the rules revision process. As of July 30, 2019, the EPA has not yet completed its administrative process.


    Related Documents:
    NAM Motion to Intervene  (July 17, 2014)

     

    South Carolina Coastal Conservation League v. Wheeler   (D.S. Car.)

    Defending EPA's rescission of the 2015 "Waters of the United States" rule

    The MCLA intervened in an environmental group’s legal challenge to the EPA’s rescission of the prior administration’s 2015 “Waters of the United States” rule. The EPA rescinded the 2015 rule because the rule’s lack of clarity resulted in regulatory uncertainty and confusion. Additionally, because some federal courts invalidated the 2015 rule in some parts of the country and not others, manufacturers faced a regulatory patchwork that made compliance across different states very difficult. The EPA’s rescission of the 2015 rule restored regulatory consistency and clarity. A coalition of environmental groups sued to challenge the rescission, arguing that the EPA exceeded its authority in doing so. The NAM and other leading industry trade associations intervened in the case to help defend the rule and to represent the interests of our members in the litigation.

     

    State of New York v. Wheeler   (S.D.N.Y.)

    Applicability of "Waters of the United States" rule

    On February 6, 2018, the EPA issued a final rule that adds an applicability date of February 6, 2020, to the EPA’s 2015 rule governing jurisdictional “Waters of the United States” under the Clean Water Act (2015 WOTUS rule). A group of states led by New York sued EPA to challenge the rule, arguing that EPA lacks the statutory authority to impose an applicability date. The applicability date rule is important to manufacturers because it precludes application of the 2015 WOTUS rule while EPA develops and issues a sensible replacement WOTUS rule. The 2015 WOTUS rule asserts federal jurisdiction over millions of acres of landscape features throughout the United States, triggering permitting requirements that will slow development and increase permitting costs on manufacturers. The rule’s vague and ambiguous terms also create confusion and increase the risk of inadvertent violations. The NAM intervened in the litigation to help EPA defend the applicability date rule to allow EPA the necessary time to develop and issue a new WOTUS rule.


    Related Documents:
    NAM brief  (June 28, 2018)

     


    Labor Law --



    NLRB v. CNN America, Inc.   (D.C. Circuit)

    Joint employer status

    The NAM filed an amicus brief opposing an expansion of employer liability for companies that share control over certain employees. In this case, the National Labor Relations Board (NLRB) departed from precedent and imposed new “indirect” control factors into its analysis of CNN’s status as a joint employer, which could challenge traditional business relationships and expose manufacturers to additional liability. The NAM’s brief argued that the new control factors would create a standard that would impose significant burdens and uncertainties in business relationships. In a win for manufacturers, the court noted that the NLRB had not explained how CNN satisfied the traditional “direct and immediate” test for determining joint-employer status and remanded the case.


    Related Documents:
    NAM amicus brief  (February 2, 2016)

     

    Auer v. Robbins   (U.S. Supreme Court)

    Pay docking

    In this case, a group of St. Louis police sergeants sued their police commissioenrs for overtime pay under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. Sec. 207, which requires employers to pay overtime to employees who work more than forty hours per week. The police commissioners argued that the sergeants were "bona fide executive, administrative, or professional" employees exempted from FLSA overtime pay requirements by 29 U.S.C. Sec. 213(a)(1). Under the Secretary of Labor's regulations implementing this exemption, employees who were paid a specified minimum amount ($250.00 per week) on a "salary basis" fall within this exemption as long as their compensation is not "subject to" being reduced "because of variations in the quality or quantity of the work performed." The police sergeants claimed that they did not meet these requirements because, under the terms of a Police Department Manual that applied to all employees, their compensation theoretically could be reduced for a variety of disciplinary infractions, some of which related to the "quality or quantity" of their work. Both the District Court and the Eighth Circuit agreed with the police commissioners, holding that the Secretary's salary-basis test was satisfied.

    The Supreme Court affirmed on 2/19/97. Justice Scalia, writing for a unanimous court, held as follows:

    First, the Secretary's "salary-basis" test, with its exception for disciplinary deductions, reflects a permissible reading of the FLSA as it applies to public employees. Neither the absence of other, non-salary reduction means of discipline, nor the peculiar needs of law enforcement organizations, rendered the Secretary's interpretation obviously unreasonable as applied to public sector employees. In light of the Secretary's broad authority to "defin[e] and delimi[t]" the exemption's scope, the Secretary's salary-basis test and exemption for disciplinary deductions are clearly permissible.

    Second, the Secretary's interpretation that the salary-basis test is met whenever an employee's compensation cannot "as a practical matter" be adjusted in ways that are inconsistent with the test is reasonable. Since the Secretary's interpretation of the salary-basis test fits well within the key language of the exemption -- that the employee's compensation not be "subject to" disciplinary reduction -- the Secretary's interpretation is not "plainly erroneous," and is thus entitled to deference.

    Third, relying on the plain language of the Secretary's implementing regulations, the Court held that employers may preserve the exempt status of employees whose pay has been improperly deducted as long as the employer reimburses those employees, and so long as the deductions were either inadvertent or made for reasons other than lack of work.

    Manufacturers that consider certain executive, administrative or professional employees exempt from the FLSA should make sure that those employees' salaries are not subject to disciplinary reduction relating to the quality or quantity of their work.

     

    California v. Dillingham Construction, N.A. Inc.   (U.S. Supreme Court)

    State apprenticeship law

    The Employee Retirement Income Security Act of 1974 (ERISA) preempts any state law that "relate[s] to" a benefits plan covered by the Act. 29 U.S.C. Sec. 1002(1). In a host of cases beginning shortly after the enactment of ERISA, the Supreme Court construed this pre-emption provision expansively. Two years ago, however, in New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Ins., 115 S. Ct. 1671 (1995), the Court appeared to rein in the preemption clause, suggesting that in areas of traditional state regulation the pre-emption clause applies only where its application would further the purposes of ERISA. In Dillingham, a unanimous court confirmed this change in direction.

    At issue in Dillingham was a California prevailing wage law. Under that law, state public contractors are required to pay their workers prevailing local wages unless those workers are enrolled in a state-approved apprenticeship program. Arguing that such apprenticeship programs are ERISA-covered benefits plans, a contractor asserted that the prevailing wage law "relate[s] to" ERISA-covered plans and is therefore pre-empted by the Act. The Ninth Circuit agreed, and in Dillingham the Supreme Court reversed.

    The Court began by noting that a law relates to a covered benefit plan under ERISA's pre-emption clause if it has a "connection with or a reference to such a plan." The Court then found that California's prevailing wage law does not make reference to an ERISA plan under the clause because the effect of the law is not limited to ERISA-covered benefit plans. Specifically, the prevailing wage law applies to apprenticeship plans funded out of an employer's general assets and therefore not subject to ERISA. The Court also found that the prevailing wage law lacks a sufficient connection with ERISA-covered plans to trigger pre-emption because the law simply provides employers with an economic incentive to obtain state approval for their apprenticeship plans. Relying on Travelers, the Court held that a law which only "alters the incentives, but does not dictate the choices, facing ERISA plans" is not sufficiently connected to an ERISA plan to trigger pre-emption. Consequently, as Justice Scalia observed in his concurrence, it appears that at least in areas of traditional state regulation pre-emption under ERISA will be no broader than in other areas of the law.

    The NAM filed an amicus brief opposing the ultimate result in this case.

     

    Robinson v. Shell Oil Co.   (U.S. Supreme Court)

    Legal protection for former employees

    This employment discrimination case turned on whether the term "employees" specified in Section 704(a) of Title VII of the Civil Rights Act of 1964 includes former employees. The majority of circuits had broadly interpreted "employee" to include former employees "as long as the alleged discrimination is related to or arises out of the employment relationship." The en banc Fourth Circuit, however held that the plain language of the provision excluded former employees and upheld the district court's determination that former employees may not bring suit under Section 704(a) for retaliation occurring after termination of their employment.

    The Supreme Court reversed on 2/18/97, holding that former employees are included with Section 704(a)'s protection. In an opinion delivered by Justice Thomas, a unanimous Court held that "employees" as used in Section 704(a) was ambiguous as to whether it included former employees. The Court reasoned that the broader context and purpose of Title VII supported an expansive interpretation of "employees" and that exclusion of former employees would undermine the effectiveness of the statute by allowing the threat of post employment retaliation to deter employees from filing complaints with the EEOC.

     

    Walters v. Metropolitan Education Enterprises Inc.   (U.S. Supreme Court)

    Definition of "employer"

    These cases involved the determination of the term "employer" under Title VII of the Civil Rights Act of 1964. Title VII defines an employer as someone who "has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." If the employer has fewer than 15 employees, Title VII does not apply to the employer's actions. The question presented by this case was, in essence, how to count employees.

    The petitioners (the EEOC and an individual plaintiff) claimed that an employer "has" an employee whenever the employer has an employment relationship with that employee in a particular week. Because this method focuses on whether the employer had 15 or more persons on the payroll in a given week, this was referred to in the courts as the "payroll method" of counting employees. The respondent advocated a narrower interpretation, focusing on whether the employee was actually performing work for the employer on a given day, a standard that would exclude part-time employees. The Court unanimously held on 1/14/97 that the ordinary meaning of this provision of Title VII was more consistent with the "payroll method." The Court concluded that the phrase "for each working day" was intended to make clear that employees who leave employment in the middle of the calendar week are not counted toward the statutory minimum number of employees. Thus, the Act applies to any employer who has an employment relationship with 15 or more employees in each of twenty or more calendar weeks in the current or preceding calendar year.

     

    Air Line Pilots Association v. Miller   (U.S. Supreme Court)

    Exhaustion of administrative remedies not required when challenging union dues assessments for political purposes

    Over the last two decades, the Supreme Court has twice considered the legal implications of "agency shops," that is, a workplace in which all employees, whether union members or not, are required to pay union dues. First, in Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977), the Court held that, while non-union employees in an agency shop may be required to bear their share of a union's collective bargaining costs, the First Amendment prohibits the use of their dues on political advertisements and other speech with which the non-union employees may disagree. Second, in Chicago Teachers Unions Local No. 1 v. Hudson, 475 U.S. 292 (1986), the Supreme Court developed concrete guidelines for implementing this prohibition on forced speech including the requirement that unions enjoying an agency shop arrangement offer a neutral decision maker to resolve any disputes over the calculation of collective bargaining expenses.

    In this case, the Supreme Court will consider whether non-union employees can be forced to exhaust their remedies under procedures adopted in compliance with Hudson. The union here adopted an arbitrator as its neutral decision maker, and, when non-union employees refused to submit a challenge to the union's calculation of its collective bargaining costs before filing suit in federal court, the union claimed that the employees' challenge was barred by their failure to exhaust administrative remedies. Noting that the employees had never agreed to the arbitration procedure, the D.C. Circuit rejected the union's claim. The four other courts of appeals to consider this question were split evenly over its resolution.

    The Supreme Court affirmed the D.C. Circuit on May 26, 1998, by a vote of 7-2. Justice Ginsburg's opinion held that, unless they agree to the procedure, agency-fee objectors may not be required to exhaust an arbitration remedy before bringing their claims in federal court."

     

    Allentown Mack Sales and Service, Inc. v. NLRB   (U.S. Supreme Court)

    Polling when union majority status is in doubt

    The Supreme Court, in a 5-4 decision on 1/26/98, held that an NLRB standard, under which an employer must have a "good faith reasonable doubt" about a union’s majority support before conducting an internal polling of employee support for that union, is rational and consistent with the National Labor Relations Act. An employer who believes that an incumbent union no longer enjoys the support of a majority of its employees has three options: (i) to request a formal, Board-supervised election; (ii) to withdraw recognition from the union and to refuse to bargain; (iii) or to conduct an internal poll of employee support for the union. The Board has held that the latter two options constitute unfair labor practices, unless the employer can show that it had a "good faith reasonable doubt" about the union's majority support.

    The employer in this case argued that it is irrational to require the "good faith reasonable doubt" showing to justify a poll because that same showing would justify an outright withdrawal of recognition. According to the employer, this would leave the employer with no legal incentive to poll. The Court rejected this argument, concluding that it falsely assumed that every employer would want to withdraw recognition once presented with enough evidence of lack of union support to defend against an unfair-labor-practice. On the specific facts, however, the Court reversed the Board's finding that Allentown lacked the required reasonable doubt as not supported by substantial evidence on the record as a whole.

     

    Board of Education of the Township of Piscataway v. Taxman   (U.S. Supreme Court)

    Racial discrimination to promote diversity

    This case was settled on November 21, 1998. The issues that were not resolved by the Supreme Court are described below.

    In this case, which received widespread publicity because the Department of Justice changed its position during the litigation, the United States and Sharon Taxman initially sued her former employer, the Board of Education, under Title VII. They alleged that the Board's use of race as a factor in selecting which of two equally qualified employees to lay off violated federal law prohibiting an employer from discriminating against an individual with respect to her employment conditions on the basis of her race.

    In 1989 because of budgetary constraints, the Board of Education was forced to lay off one teacher in the Business Department at Piscataway High School. Under New Jersey law, teachers were to be released in reverse order of their tenure with the Board deciding which of two equally tenured teachers to release. Forced to choose between two equally tenured, qualified, and able business teachers, the Board of Education retained a minority faculty member instead of Ms. Taxman, who is white. The Board admittedly made this choice solely to maintain a diversity among the faculty of the High School's Business Department.

    A divided Third Circuit held that the Board's decision violated Title VII. Relying on the Supreme Court's decision in United Steel Workers v. Weber, the court of appeals concluded that the Board's decision violated Title VII because it did not further the purposes of the civil rights legislation and unnecessarily trammeled the interests of a white employee. With respect to Title VII's purpose, the Third Circuit noted that the Act was designed to "end discrimination" and to "remedy the segregation and under representation of minorities that discrimination has caused" in the workplace. Consequently, the Board's decision to use race as a factor to promote diversity rather than remedy prior discrimination was inconsistent with the remedial nature of this legislation. Further, the court of appeals noted that even if the Board's goal of racial diversity was appropriate under Title VII, that goal could not be pursued at the expense of a person's job.

    Questions presented:

    1. Does Title VII of the Civil Rights Act of 1964, as amended, permit employers to take race into account for purposes other than remedying past discrimination?
    2. If so, is fostering diversity among a high school faculty a lawful purpose?
    3. Assuming a lawful purpose, does consideration of race in a layoff decision invariably violate the rights of affected non-minority employees?
    4. May a district court award full backpay to a Title VII plaintiff who stands no more than an even chance of securing, or retaining, employment?

    Lower court opinion: 91 F.3d 1547 (3d Cir.)

     

    Burlington Industries, Inc. v. Ellerth   (U.S. Supreme Court)

    Liability for quid pro quo sexual harassment without effect on job

    In this case, the Supreme Court addressed the circumstances under which an employer could be held liable for sexual harassment where an employee refused unwelcome sexual advances from her supervisor, suffered no adverse job consequences, and where the employer was not negligent or otherwise at fault for the supervisor’s actions. The plaintiff alleged that her supervisor made repeated sexually offensive comments and had intimated that she would not do well at the company unless she submitted to his advances. Although the plaintiff did not submit, she was nonetheless promoted, and she resigned without ever attempting to invoke the company’s policies against sexual harassment.

    The Court noted that under Title VII, an individual can claim sexual harassment based either upon a hostile work environment, or "quid pro quo" harassment. Because this case involved unfulfilled job threats, the Court accepted the trial court’s finding that it was a hostile work environment claim. The Court then turned to basic agency principles to formulate a rule to govern when employers may be held vicariously liable for hostile work environment sexual harassment.

    The Court concluded that employers will be liable for actionable hostile environments created by any supervisor with immediate authority over the employee. In cases where no tangible employment action is taken, the defending employer may raise an affirmative defense to liability or damages, consisting of two elements: (1) that the employer exercised reasonable care to prevent and promptly correct any sexually harassing behavior; and (2) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. No affirmative defense is available if the supervisor’s harassment culminated in a tangible employment action.

     

    Caterpillar, Inc. v. UAW   (U.S. Supreme Court)

    Paying union grievance official when he no longer works for the company

    This case involves the interpretation of § 302 of the Labor Management Relations Act ("LMRA"), which forbids an employer to pay union officials who represent its employees, but exempts such payments where the union representative is a current or former employee and is being compensated "for, or by reason of," that employment. 29 U.S.C. § 186(c).

    Caterpillar is a manufacturer and distributor of heavy equipment. Under a collective bargaining agreement with the United Auto Workers ("UAW"), union grievance chairpersons could devote their entire work week to union business without losing company-paid wages or benefits. Once the collective bargaining agreement expired, however, Caterpillar informed the union that the company questioned the legality of these payments under the LMRA and therefore would cease paying the grievance chairmen. Thereafter, the UAW filed an unfair labor charge with the NLRB, prompting Caterpillar to file a federal suit seeking a declaratory judgment that such payments violate § 302 of the LMRA.

    The district court held that Caterpillar's payments to the union's grievance chairmen violated § 302, and the union appealed. A divided Third Circuit, sitting en banc, overruled its own precedent and became the first court of appeals to extend § 302's exemption to union officials who no longer perform any work for the employer. The court observed that although such payments were not compensation for hours worked in the past, they were — by virtue of their inclusion in the collective bargaining agreement — compensation "by reason of" that service and were, thus, consistent with § 302.

    Question presented:

    …Whether section 302(c)(1) permits an employer to pay or agree to pay the current wages of full-time union officials who are former employees of the employer but who no longer perform any work for the employer.

    Lower court opinion: 107 F.3d 1052 (3d Cir.)

    Status: Oral argument January 20, 1998. The case was dismissed on March 23, 1998 without a decision.

     

    Faragher v. City of Boca Raton   (U.S. Supreme Court)

    Employer liability for sexually harassing acts of supervisor

    When is an employer liable for the acts of supervisory employees in a hostile work environment sexual harassment claim? In a 7-2 decision on 6/26/98, the Supreme Court held that an employer may be held liable for discrimination caused by a supervisor, subject to an affirmative defense that would look to the reasonableness of the employer’s and the victim’s conduct.

    Plaintiff, a lifeguard employed by the City, sued her supervisors and the City for hostile work environment sexual harassment. The district court found for the plaintiff, holding the City liable because it had constructive knowledge of the harassment and because the supervisor was the City’s agent. In an en banc opinion, the Court of Appeals for the Eleventh Circuit reversed the district court's judgment for the plaintiff.

    The Supreme Court reversed the decision of the Court of Appeals, and ordered judgment for the lifeguard.

    Speaking through Justice Souter, the Court ruled that an employer is subject to vicarious liability for hostile work environment sexual harassment perpetrated by a supervisor. Where no tangible employment action has been taken, the employer may assert an affirmative defense consisting of two elements: (1) that the employer exercised reasonable care to prevent and promptly correct sexual harassment in the workplace, and (2) that the employee unreasonably failed to avoid the harm by taking advantage of preventive measures established by the employer. The employer may not avail itself of this defense where the supervisory harassment resulted in an adverse employment decision.

    The NAM filed an amicus brief 1/28/98 in support of Boca Raton, arguing that an employer should not be liable for a hostile workplace environment unless it should have known about or failed to respond reasonably to incidents of sexual harassment. The Court has now held that the employer may be held liable for the acts of a supervisor regardless of whether the employer should have known about them. The new affirmative defense for companies thus becomes crucial to defending these cases.

     

    Oncale v. Sundowner Offshore Service, Inc.   (U.S. Supreme Court)

    Same-sex discrimination

    In this case, the Supreme Court held that same-sex sexual harassment may constitute illegal sexual discrimination.

    Joseph Oncale brought suit against his former employer, Sundowner Offshore Services, Inc., and several male employees of Sundowner under Title VII of the Civil Right Act of 1964. Oncale alleged that while employed for Sundowner he was on several occasions subjected to sex-related humiliating actions, including a physical sexual assault and the threat of homosexual rape. The United States District Court for the Eastern District of Louisiana rejected Oncale's claims, holding that as a matter of law a male had no cause of action for harassment by other males. The Fifth Circuit affirmed.

    A unanimous Supreme Court reversed. Speaking through Justice Scalia, the Court stated that "same-sex harassment claims" can be covered by Title VII. Earlier decisions that illegal discrimination "includes sexual harassment must extend to sexual harassment of any kind that meets the statutory requirements." In reaching this conclusion, the Court stressed two significant limitations upon Title VII. First, while Title VII expressly prohibits "discrimination . . . because of sex," not all sexual harassment constitutes discrimination. "The critical issue . . . is whether members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed." Discrimination may be inferred from a variety of evidentiary routes, including evidence of motivation and direct comparative evidence of how the alleged harasser treated members of both sexes in a mixed-sex workplace.

    Second, Title VII "does not reach genuine but innocuous differences in the ways men and women routinely interact with members of the same sex and of the opposite sex." While Title VII prohibits the creation of "an objectively hostile or abusive work environment," there is no statutory prohibition against ordinary "horseplay," "flirtation," "teasing," or "roughhousing." The question of whether a particular act could be considered "severely hostile or abusive" from the perspective of a reasonable person in the plaintiff’s perspective could vary from one situation to the next. Answering this key question requires examination of the social context, including the "surrounding circumstances, expectations, and relationships."

    Justice Thomas wrote a brief concurring opinion to stress that in every sexual harassment case, Title VII requires proof of "discrimination ‘because of … sex.’"

     

    Oubre v. Entergy Operations, Inc.   (U.S. Supreme Court)

    Keeping severance payment does not constitute valid release of ADEA claims

    The Older Workers Benefit Protection Act (OWBPA), 29 U.S.C. § 621 et seq., imposes specific requirements for releases of age discrimination claims that are often executed when an older employer is terminated. Among other things, the Act requires that older workers signing such releases be given enough time to consider their options, that they have seven days after execution to change their minds, and that the releases specifically mention the Age Discrimination in Employment Act. See 29 U.S.C. § 626(f). In this case, the release signed by the plaintiff admittedly did not comply with these requirements. The defendant claimed, however, that the plaintiff was nonetheless bound by it because she had ratified the release by retaining the monies received in exchange for the release.

    By a six-to-three vote, the Supreme Court ruled 1/26/98 that the OWBPA permits the employees suit. Writing for the majority, Justice Kennedy noted that there was some authority suggesting that at common law a plaintiff's failure to return money received in exchange for a defective release ratified the release or equitably estopped the plaintiff from repudiating it. The majority found, however, that the common law was irrelevant because the OWBPA "sets up its own regime for assessing the effect of ADEA waivers, separate and apart from contract law." The majority also found that the common law rule, deeming a release ratified by the failure to return monies received, would frustrate the operation of the OWBPA because many discharged employees lack the means to return the monies received by them.

    Justice Breyer and O'Connor concurred to point out that, in their view, a release that fails to satisfy the strictures of the OWBPA is voidable, rather than void. Under this view, an employee might choose to accept a release that fails to satisfy the OWBPA. The two justices also observed that nothing in the statute prevented an employer from seeking restitution, recoupment or set-off against an employee retaining monies received in exchange for a release. Three members of the Court – Chief Justice Rehnquist and Justices Scalia and Thomas – dissented on the ground that the OWBPA should be interpreted to comply with the common law.

     

    Textron Lycoming Reciprocating Engine Division, Avco Corp. v. UAW   (U.S. Supreme Court)

    Validity of suits to void labor contracts prior to breach

    In a unanimous decision, the Supreme Court held that federal courts generally do not have jurisdiction over suits seeking to invalidate collective bargaining agreements. Section 301 of the National Labor Relations Act grants federal courts jurisdiction over "[s]uits for violation of contracts between an employer and a labor organization." 29 U.S.C. § 185(a). Although several federal courts of appeals had found that Section 301confers jurisdiction over all contract-related claims, the Court unequivocally held that Section 301 confers jurisdiction only over suits claiming that a contract has been violated. The Supreme Court also rejected the suggestion that federal jurisdiction could be based upon the Declaratory Judgment Act. This part of the Court's decision, however, was more equivocal: while the decision left open the possibility that suits anticipating violations of labor contracts might be brought, it also raised questions concerning the appropriateness of anticipatory suits in general.

    In this case, the UAW alleged that it had been induced to enter into a collective bargaining agreement by fraudulent representations, and it sought a declaration that the agreement was voidable at the UAW's option as well as both punitive and actual damages. In an opinion written by Justice Scalia, the Court held that a suit such as this one seeking to invalidate a labor contract was not "for violation" of a labor contract within the meaning of Section 301. "Suits for violation" of labor contracts, the Court reasoned, are "suits filed because a contract has been violated." The validity of a contract may, of course, be adjudicated in federal court in the course of deciding whether the contract has been violated. This power is, however, ancillary to, and not independent of, the power to adjudicate "[s]uits for violation of contracts."

    The Supreme Court also held that the UAW's claim was not saved by the fact that it sought a declaratory judgment. The UAW argued that its request for declaratory relief was in anticipation of a suit by the petitioner Textron Lycoming seeking to enforce the collective bargaining agreement, that Section 301 would confer jurisdiction over such a suit, and that jurisdiction could therefore be premised upon the anticipated coercive suit. Although the Supreme Court had previously stated that jurisdiction over declaratory judgment actions may be based upon the coercive suit that might have been brought by the declaratory judgment defendant, it questioned whether federal jurisdiction over a nonfederal defense may be based upon an anticipated claim, particularly under Section 301. The Court found, however, that there was no need to resolve this issue because there was no actual case or controversy over the voidability of the agreement. In a concurrence, Justice Breyer suggested that the federal courts could consider a declaratory judgment suit seeking to invalidate a contract would be proper so long as there was an imminent threat of a suit to enforce the contract.

     

    Albertsons, Inc. v. Kirkinburg   (U.S. Supreme Court)

    Disabilities under ADA

    On January 8, 1999, the Supreme Court granted certiorari to determine whether a monocular driver of a commercial vehicle, who fails to meet the minimum federal vision requirements, is "disabled" and "otherwise qualified" under the ADA. In addition, the Court will decide if an employer must adopt an experimental vision waiver program as a means of "reasonable accommodation.”

    This case involves a truck driver who claimed that the Albertson’s supermarket chain violated the ADA when it fired him after he failed a vision test. Kirkingburg, who has monocular vision, has been a commercial truck driver since 1979 with a good driving record when he was hired in 1990 by Albertson's supermarket. Prior to being hired, Kirkingburg performed well on a 16-mile road test administered by the company and was certified by a company physician that he met federal Department of Transportation vision standards. He was recertified after several months on the job.

    In 1991, Kirkingburg suffered a non-driving injury and was off the job for almost a year. When he returned to work and took a new vision test, a company physician refused to certify that he met the DOT vision standard. Kirkingburg told the company that he applied for a waiver of the regular vision requirement under the Federal Highway Administration's vision waiver program established to bring DOT standards in compliance with the ADA. Albertson's told him that it would not accept the waiver and fired him in 1992 for failing to meet the vision standard. Albertson's refused to reconsider hiring Kirkingburg after he received the waiver.

    The trial court ruled for the employer. The Ninth Circuit Court of Appeals reversed, stating that Kirkingburg suffers from a disability and he is therefore protected under the ADA. The court further held that the company cannot selectively adopt and reject federal safety regulations when the effect of its policy is to discriminate against otherwise qualified drivers with disabilities.

    The Supreme Court reversed, ruling on 6/22/99 that an employer is entitled to require as a job qualification that an employee meet the standards of an applicable federal safety regulation that tends to exclude the disabled. The ADA does not require an employer to defend itself against participating in an experimental federal waiver program.

    The Court ruled that an ADA plaintiff must show that he or she was "substantially impaired" in a major life activity, not just that there was a significant difference. In addition, mitigating factors must be taken into account.

     

    Associated Builders & Contractors v. Southern Nevada Water Authority   (Nevada Supreme Court)

    Project labor agreements

    The Nevada Supreme Court ruled 6/7/99 that a project labor agreement requirement in bid specifications for a reservoir project outside Las Vegas did not violate state competitive bidding law. The NAM filed an amicus brief supporting ABC's argument, since such agreements force companies to impose unwanted union agreements on their employees if they want to work on state public works projects. This reduces the number of companies that bid on government contracts, and raises costs to the state.

     

    Associated Builders & Contractors v. Metropolitan Water District   (California Supreme Court)

    Project labor agreements

    The NAM supported this challenge to California project labor agreements for state construction projects. Project labor agreements promote favoritism and undermine competitive bidding laws to the detriment of taxpayers and non-union companies that want to bid on state government contracts. The appeal was dismissed and remanded on 11/20/99.

     

    Cleveland v. Policy Management Systems Corp.   (U.S. Supreme Court)

    Effect of disability under Social Security Act on ADA claim

    The U.S. Supreme Court unanimously ruled that receipt of Social Security Disability Insurance (SSDI) benefits does not automatically estop the recipient from pursuing an ADA claim. The Court further stated that in order to survive a defendant's motion for summary judgment, the plaintiff must explain why her SSDI contention is consistent with her ADA claim that she can "perform the essential functions" of her previous job.

    The Fifth Circuit ruled that an employee will find rough sailing in court when she claims she is a "qualified individual with a disability" under the Americans With Disabilities Act (ADA) after she has applied for and received social security disability benefits based on a total disability and inability to work. The court ruled that such a plaintiff must overcome a presumption that her total disability disqualifies her from suing under the ADA. The Supreme Court decided that this presumption is inappropriate.

    Many ADA suits are dismissed because plaintiffs make claims under social security and workers' compensation laws, and then try to claim an ability to work under the ADA requirements. Consequently, this case will have a substantial impact on such cases in the future.

     

    Connecticut Associated Builders & Contractors v. Anson   (Connecticut Supreme Court)

    Project labor agreements

    On November 4, 1999, the Connecticut Supreme Court affirmed a Superior Court ruling that greatly impairs the ability of injured parties to challenge unlawful government action in the competitive bidding process. The NAM had filed an amicus brief on February 11, 1999, urging the court to reverse the holding.

    Both the State Department of Public Works and the City of Hartford imposed new bid specifications on public works projects that would require all successful bidders to sign a labor agreement with a designated union as a condition of performing work on the projects. The Superior Court dismissed challenges filed by general contractors, subcontractors, and an association of contractors who have been deterred from bidding by the union-only requirements. The Superior Court held that notwithstanding the injury suffered by the plaintiffs as a result of the alleged unlawful favoritism in the competitive bid process, they have no standing to sue.

    The NAM believes that government agencies should not dictate the labor relations of contractors as a condition of awarding government contracts under competitive bidding laws.

     

    Haddle v. Garrison   (U.S. Supreme Court)

    Employer liability for deterring employees from testifying in court

    In this civil rights case, the Supreme Court ruled 12/14/98 that the loss of "at will" employment is a compensable injury under 42 U.S.C. § 1985(2), which provides a private cause of action for injuries arising from attempts to deter a witness from testifying in court. Haddle, a former at-will employee of a home health care company, claimed that Garrison and others had conspired to have him fired from his job to keep him from testifying as a witness in a Medicaid-fraud trial. The Eleventh Circuit, like the district court, held that the loss of at-will employment is not a compensable injury under § 1985(2) since an at-will employee has no constitutionally protected property interest in continued employment. The Supreme Court reversed and held that a constitutionally protected interest in continued employment is not a prerequisite to a claim for damages under § 1985(2).

     

    In re Vizcaino   (9th Circuit)

    Temporary leased employees

    The NAM on 6/2/99 urged the Ninth Circuit to rehear a panel decision calling temporary leased workers "employees" for purposes of eligibility for Microsoft’s stock option plan. The panel decision allows a dual employer situation, potentially allowing duplicative benefits and creating confusion and disrupting temporary staffing services, especially in high tech industries. On June 24, the Ninth Circuit rejected the appeal and sent the case back for further proceedings.

     

    Kolstad v. American Dental Association   (U.S. Supreme Court)

    Punitive damages under Title VII

    In one of the most awaited decisions of the Term, the Supreme Court considered the standard for awarding punitive damages in Title VII actions. The Civil Rights Act of 1991 authorizes punitive damages whenever a defendant is found to have engaged in intentional discrimination with "malice or reckless indifference to [the plaintiff’s] federally protected rights." 28 U.S.C. § 1981a.

    The Court 6/22/99 rejected the requirement suggested by the D.C. Circuit in the decision below that there be egregious misconduct. Finding the common-law basis for this requirement uncertain, the Supreme Court held that a culpable mental state is the only special requirement for imposing punitive damages under Title VII in cases where intentional discrimination is found.

    The majority went out of its way, however, to stress that the culpable mental state of even high-level employees will not always be imputable to their employers, who alone are suable under Title VII. Instead, the Court held that for purposes of punitive damages the mental state of employees may only be imputed to their employers under the relatively restrictive common-law agency principles. Furthermore, noting Title VII’s policy in favor of promoting voluntary compliance programs and polices, the Court interpreted the common-law rule to protect employers that make good-faith efforts to comply with Title VII.

    As a consequence, even though the Court’s opinion in Kolstad rejected the egregious conduct requirement, it provides ample protection against punitive damages for employers who act in good faith, especially when they adopt bona fide compliance programs and policies.

     

    Marquez v. Screen Actors Guild, Inc.   (U.S. Supreme Court)

    Union security clauses

    The Supreme Court held 11/3/1999 that a union does not breach its duty of fair representation by negotiating a union security clause that tracks the language of section 8(a)(3) of the National Labor Relations Act (NLRA) without explaining in the agreement the Supreme Court's interpretations of section 8(a)(3). The petitioner had complained that a union security clause in a collective bargaining agreement negotiated by the Screen Actors Guild (SAG) should have explained that the Court's decisions in NLRB v. General Motors Corp., 373 U.S. 734 (1963), and Communications Workers v. Beck, 487 U.S. 735 (1988), permit "unions and employers to require only that employees pay the fees and dues necessary to support the union's activities as the employees' bargaining representative." The Court held that the SAG's conduct was neither arbitrary nor in bad faith since the language of section 8(a)(3) contains "terms of art" that "encompass the rights that we announced in General Motors and Beck." It opined that requiring unions to spell out all of the "intricate rights and duties associated with a legal term of art" in these clauses would convert contracts into "massive and unwieldy treatises" with "no discernible benefit." Justices Kennedy and Thomas concurred to express their view that the Court's opinion does not immunize agreements where the section 8(a)(3) shorthand is inserted with the intent or effect of deceiving employees.

     

    Murphy v. United Parcel Service, Inc.   (U.S. Supreme Court)

    Disabilities under ADA

    On March 24, 1999, the NAM filed an amicus brief urging the Supreme Court to maintain the fair standards of the ADA and to prevent the expansion of the term "disabled" to cover individuals with controllable medical conditions. The NAM argued that employees may not claim the special protections of the ADA when their medication allows them to live normal lives.

    In this case, Murphy has had high blood pressure most of his life but medication controls his condition. In August 1994, Murphy applied for a position as a mechanic for UPS. All mechanic applicants must obtain a Department of Transportation health card. At the time of his medical exam, Murphy's blood pressure met the DOT standards. He was issued a health card, and UPS hired him. In September 1994, a company nurse reviewed his file and determined that his blood pressure did not meet DOT requirements for commercial drivers. UPS decided that the card was issued in error and Murphy was fired.

    The trial court ruled in favor of UPS, holding that Murphy is not an individual with a disability. The court stated that the determination of whether an individual's impairment substantially limits a major life activity should take into consideration mitigating or corrective measures utilized by the individual. The Tenth Circuit affirmed, and so did the Supreme Court.

    On 6/22/99, it held that the determination of whether a person with a physical or mental impairment is "disabled" under the Americans with Disabilities Act (ADA) must be made with reference to measures — such as medication, medical devices, or assistive devices — that mitigate the person’s impairment. The Court also held that a person is "regarded as" disabled under the ADA only if the employer mistakenly believes that the person’s actual, nonlimiting impairment substantially limits one or more major life activities. Therefore, ADA plaintiffs who claim that an employer regards them as substantially limited in the major life activity of working must, at a minimum, allege an inability to work in a broad class of jobs. The Court’s decision is a tremendous victory for employers facing the specter of ADA liability.

     

    Sutton v. United Airlines, Inc.   (U.S. Supreme Court)

    Disabilities under ADA

    On January 8, 1999, the Supreme Court granted certiorari in this case to determine whether a person with a physical or mental impairment under the Americans with Disabilities Act can be excluded from protection under the Act if her impairment can be corrected. In June it ruled that she could be excluded.

    Plaintiffs are twin sisters who are commercial airline pilots for regional commuter airlines. The twin sisters applied to be pilots for United Airlines but were told by the airline that their uncorrected vision disqualified them from pilot positions. United refused to hire the twins because they failed to meet the requirement that all pilot applicants have uncorrected vision of 20/100. Their uncorrected vision in the right eye is 20/200 and 20/400 in the left eye.

    The trial court ruled that the twins are not protected under the ADA because their poor vision is 20/20 in both eyes when they wear glasses or contact lenses. The Tenth Circuit affirmed, holding that the plaintiffs cannot present any set of facts showing that their vision, when viewed with mitigation or corrective measures, substantially limits a major life activity.

    The Supreme Court ruled that the plaintiffs had failed to allege that they were actually disabled, since their vision was 20/20 or better with corrective lenses. The Court also held that a person is "regarded as" disabled under the ADA only if the employer mistakenly believes that the person’s actual, nonlimiting impairment substantially limits one or more major life activities. Therefore, ADA plaintiffs who claim that an employer regards them as substantially limited in the major life activity of working must, at a minimum, allege an inability to work in a broad class of jobs.

     

    TNS, Inc. v. Oil, Chemical and Atomic Workers International Union   (NLRB)

    Recusal

    The NAM urged that NLRB Chairman Gould be recused from participating in this case because of his public pronouncements in opposition to legal precedents permitting employers to hire permanent replacements for economic strikers. A decision in this case on 9/30/99 made the recusal motion moot, since Chairman Gould was no longer on the Board

     

    United States v. Haggar Apparel Co.   (U.S. Supreme Court)

    Deference to Treasury Dept. regulations under Tariff Act

    The Supreme Court ruled 4/21/99 that Treasury Department regulations interpreting the Tarriff Act are entitled to deference under Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984). The Court reversed the ruling and rejected the reasoning of the Federal Circuit which had found that Chevron deference was inappropriate because the governing statute, 28 U.S.C. § 2643(b), instructs the Court of International Trade to "reach the correct decision." The Court remanded to the Federal Circuit for a determination whether, under Chevron, 19 C.F.R. 10.16(c) reasonably interprets the statutory phrase "operations incidental to the assembly process" in Subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States to exclude the "permapressing" of items of clothing assembled abroad.

     

    Wright v. Universal Maritime Service Corp.   (U.S. Supreme Court)

    Arbitration not required before litigation of ADA claims

    This case involves the enforcement of the ADA. The Supreme Court ruled 11/16/98 that an arbitration provision in a collective bargaining agreement does not require employees to arbitrate claims arising under federal anti-discrimination statutes where the arbitration provision does not clearly and unmistakably waive the employees' right to litigate such claims in federal court.

    In this case, Wright sued his employer under the ADA in federal district court. The employer successfully moved to dismiss the case on the grounds that Wright had failed to exhaust his remedies (arbitration) under the collective bargaining agreement. However, the Supreme Court held that Wright was not required to arbitrate his ADA claim, because the collective bargaining agreement did not clearly require arbitration of claims arising under federal anti-discrimination statutes. The Court further noted that even a sufficiently clear waiver might not be enforceable, but declined to resolve that issue.

    NAM Comment: The NAM filed an amicus brief on June 29, 1998, supporting Universal Maritime. We argued that arbitration is a well-established, vital aspect of a broad range of legal relationships, and that arbitration provisions in collective bargaining agreements should be enforced. While this decision is a temporary setback for having these issues resolved through arbitration, companies can include more express language in collective bargaining agreements that clearly encompass the resolution of statutory claims, and we will await another Supreme Court case to resolve whether such provisions will be enforced by the courts.

     

    Gemini, Inc. v. Thorson   (8th Circuit)

    FMLA coverage

    The NAM’s amicus brief failed to convince the Eighth Circuit to reject a Department of Labor regulation that allows the common cold, flu and other minor ailments to qualify as "serious health condition[s]" under the Family & Medical Leave Act. Case decided on 3/3/00.

     

    Local 702, IBEW v. NLRB   (D.C. Circuit)

    Company lockout of union engaged in inside-game tactics

    On 10/15/99, the NAM filed a brief supporting the NLRB’s decision allowing a company to lock out employees who engage in inside-game tactics. The D.C. Circuit ruled 5/9/00 to uphold the company’s lockout.

    Union employees use "inside game" tactics to win bargaining-table concessions, slowing down the work pace, refusing to work overtime, asking for minute instructions from supervisors, filing mass charges with government agencies, calling in sick, or otherwise impeding or disrupting operations without actually going on strike. By taking the strike inside, union employees continue to be paid. The company in this case faced this situation and locked them out.

    The U.S. Court of Appeals for the D.C. Circuit affirmed an NLRB decision in favor of the company, Central Illinois Public Service Co. (CIPSCO). The court and the Board allow companies to lock out such employees, as a legitimate countervailing economic weapon. According to the court, lockouts are not "inherently destructive of employee rights," and the employer had a "legitimate and substantial business justification" for the lockout. A lockout is a reasonable tool to help bring about a resolution of collective bargaining negotiations, and there was no evidence of anti-union animus on the part of the employer.

     

    UAW v. Chelsea Inds., Inc.   (NLRB)

    Withdrawal of recognition of union

    The NAM joined the U.S. Chamber of Commerce in filing a brief 5/18/98 opposing an NLRB proposal that would require elections whenever employees want to decertify their union as their authorized collective bargaining representative. In Chelsea, the Board ruled that an employer may not rely on signatures from a majority of workers to decertify a union, if the signatures were received during the first year of the union's representation of the employees. In Levitz, the Board ruled that an employer may not withdraw recognition from a union unless the union "has actually lost the support of the majority of the bargaining unit employees." It also ruled that an employer needs uncertainty, but not disbelief, as to a union's continuing majority status in order to seek a Board-conducted election by its employees. Also filed under as UFCW v. Levitz Furniture Co.

     

    UFCWU v. Levitz Furniture Co.   (NLRB)

    Withdrawal of recognition of union

    The NAM joined the U.S. Chamber of Commerce in filing a brief 5/18/98 opposing an NLRB proposal that would require elections whenever employees want to decertify their union as their authorized collective bargaining representative. In Chelsea, the Board ruled that an employer may not rely on signatures from a majority of workers to decertify a union, if the signatures were received during the first year of the union's representation of the employees. In Levitz, the Board ruled that an employer may not withdraw recognition from a union unless the union "has actually lost the support of the majority of the bargaining unit employees." It also ruled that an employer needs uncertainty, but not disbelief, as to a union's continuing majority status in order to seek a Board-conducted election by its employees.

     

    United States Bakery, Inc. v. Schneider   (U.S. Supreme Court)

    Preemption of state overtime claim

    This case involves federal preemption of claims by union employees that they are entitled to overtime pay under state law for work they did under a collective bargaining agreement. The NAM filed an amicus brief 3/1/2000 urging the court to reverse a Washington Supreme Court decision that would allow a class action, worth at least $40 million in this case, to proceed on the theory that baker-salespersons are not "outside salespersons" under state law. The NAM’s brief cites federal precedent that local claims involving the interpretation of collective bargaining agreements are preempted. The Supreme Court declined to review the case.

    The case has implications for any unionized company with an agreement that defines, either explicitly or implicitly, certain employees as exempt or not exempt from the overtime laws. Preemption applies whenever the remedies sought, such as overtime pay, depend on or are inextricably intertwined with an interpretation of the provisions of the collective bargaining agreement.

    If a company and a union agree to classify certain employees as salespersons, union employees should not be able to enjoy the benefits of the contract, then sue later, claiming they didn't like the contract.

     

    Epilepsy Foundation v. NLRB   (D.C. Circuit)

    Investigatory interviews

    On 11/2/01, the D.C. Circuit ruled that the NLRB acts legally when it requires that employees in non-union workplaces be given the right to have a co-worker or other individual with them during an investigatory interview by an employer. Section 7 of the National Labor Relations Act protects the right of an employee to engage in concerted activities for the purpose of mutual aid or protection, and having a co-worker present during an investigatory interview is justifiable to ensure that the employer "does not initiate or continue a practice of imposing punishment unjustly." However, the court refused to apply the NLRB's revised interpretation retroactively in this case. It will be applied in future cases.

    The NAM and other groups filed an amicus brief on 5/15/01 objecting to the extension of so-called Weingarten rights of union employees to non-union workers, arguing that an individual non-union employee's representative does not represent the interests of the entire workplace.

     

    Green Tree Financial Corp. v. Randolph   (U.S. Supreme Court)

    Arbitration of consumer sale may be enforceable even without knowing specific costs in advance

    Randolph financed the purchase of her mobile home through Green Tree Financial Corporation. Randolph sued Green Tree alleging that it had violated the Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and the Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691-1691f, by requiring Randolph to arbitrate her statutory causes of action. The Eleventh Circuit held that the district court’s order compelling arbitration was appealable and that the arbitration agreement was unenforceable because Randolph’s ability to vindicate her statutory rights would be undone by steep arbitration costs.

    The Supreme Court held 5 to 4 on 12/11/00 that an arbitration agreement is not rendered unenforceable because it does not identify who will pay the costs of an arbitration or how much those costs might be: "The risk that Randolph will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement." The Court left open the question whether an arbitration agreement would be enforceable if large arbitration costs in fact precluded a claimant from vindicating federal statutory rights. Resolving a circuit split, the Court also held unanimously that a district court’s order compelling arbitration and dismissing with prejudice the underlying claims is a final decision with respect to an arbitration and thus immediately appealable under the Federal Arbitration Act. This case is important because it affirms that arbitration clauses in consumer contracts, employment agreements, and other transactions involving parties with unequal financial resources are not per se unenforceable because those clauses are silent on who shall pay the costs of arbitration. It leaves open, however, the question of what costs may be imposed in such cases.

     

    NLRB v. Kentucky River Community Care, Inc.   (U.S. Supreme Court)

    Some nurses are supervisors under NLRA

    In a partial victory for the NLRB, the Supreme Court 5/29/01 affirmed the Board’s rule that the burden of proving that an employee is a "supervisor" for purposes of the National Labor Relations Act falls on the party making the claim. Accordingly, the Court affirmed that the Board had properly placed the burden of proof on the operator of a mental health care facility, where the operator had claimed that its six registered nurses were supervisors and should therefore be excluded from an employee bargaining unit. Nevertheless, the Board failed to win the Court’s approval for its decision to reject the employer’s offer of proof. Under the National Labor Relations Act, an employee is a supervisor if his or her exercise of authority over other employees requires the use of "independent judgment." According to the Board’s interpretation of the Act, however, employees do not use independent judgment when they exercise "ordinary professional or technical judgment in directing less-skilled employees to deliver services in accordance with employer-specified standards." The Court rejected that interpretation, finding no justification for its categorical exclusion of employees who would otherwise fall within the Act’s definition of a "supervisor.”

    This decision will broaden the class of individuals that the NLRB must recognize as supervisors under the NLRA.

     

    PGA Tour, Inc. v. Martin   (U.S. Supreme Court)

    PGA rules must yield to golfer under ADA

    The Supreme Court held 5/29/01 that Title III of the Americans With Disabilities Act (ADA) covers professional golf tournaments, and thus regulates the rules by which such tournaments are organized and conducted. In this case, the PGA had refused to allow Casey Martin, who suffers from a rare circulatory disease in his leg, to use a golf cart during tournaments. Although the PGA conceded that allowing Martin to use a cart was both a reasonable and necessary accommodation, it argued that doing so would fundamentally alter the nature of the tournaments in which he sought to play. Rejecting that argument, the Court concluded that the PGA’s "walking rule" was not an "essential attribute" of the game of golf. And, noting that the ADA requires evaluation of the disabled person’s needs on an individualized basis, the Court held that in light of Martin’s particular medical condition, allowing him to use a cart would not fundamentally alter the nature of the PGA’s tournaments.

    Note that the decision interprets Title III of the ADA relating to public accommodations, while Title I covers employers generally, and has a defense based on "undue hardship of the operation of the business." These provisions use different language, and the Title III defense that a service or facility would be "fundamentally altered" is not at issue in most cases against manufacturers. However, the Court's willingness to second-guess the judgment of the PGA in this context shows how the ADA may be used to interfere with reasonable decisions of employers in other contexts.

     

    Pollard v. E.I. DuPont de Nemours and Co.   (U.S. Supreme Court)

    No statutory caps on front-pay damages

    The Supreme Court on 6/4/01 held that an award of "front pay," (i.e., money awarded an employee for lost compensation during the period between judgment and the reinstatement of the employee’s job, or in lieu of such reinstatement) is not an element of compensatory damages under Title VII, and thus not subject to a $300,000 damages cap imposed by 42 U.S.C. § 1981a(b)(3). One important effect of the Court’s holding will be to prevent employees asserting front pay claims from having the right to proceed before a jury. The case is important to employers subject to federal employment discrimination laws.

    NAM Comment: Plaintiffs in civil rights cases have an obligation to mitigate damages if they feel they can no longer work for their previous employer because of discrimination. As a result, the size of front-pay damages may not be nearly as great as potential punitive damages against employers that are found liable. Nevertheless, there are some instances where front-pay awards have been sizeable, and now it is clear that plaintiffs may seek both front pay damages without a cap and other compensatory and punitive damages with a cap.

     

    The Park Associates, Inc. v. NLRB   (D.C. Circuit)

    Successorship bargaining issues

    The NAM joined in an amicus brief urging the D.C. Circuit to reverse a recent 2 to 1 NLRB ruling. The ruling required the new owner of a company to bargain with the union that represented the employees of the company before it was sold, in spite of the fact that a majority of the employees signed a petition to decertify the union as their representative. The decision undermines employee freedom of choice, forcing upon them an artificial and unwanted relationship which could give rise to industrial strife and tension. The NAM, joining with the Master Printers of America, the Center on National Labor Policy, Inc., and Associated Builders and Contractors, Inc., argues that the National Labor Relations Act gives an employer the right not to recognize a union when it has a good faith doubt that the union represents a majority of its employees.

     

    Adarand Constructors, Inc. v. Mineta   (U.S. Supreme Court)

    Court declines to review validity of race-conscious federal contracting procedures

    The Supreme Court granted certiorari 3/26/01 to determine whether federal subcontracting procurement procedures using race-conscious presumptions violate the Equal Protection Clause. Following the Supreme Court’s decision in Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995), which held that such procedures are to be reviewed under the demanding "strict scrutiny" standard, the Tenth Circuit held that the government’s revised procedures satisfy that standard, accepting the government’s evidentiary showing that the measures are necessary to remediate the effects of past discrimination in government contracting markets. The case is of importance to businesses bidding for federal subcontracting, but on 11/27/01, the Court dismissed the writ of cert. as improvidently granted. It will not decide the issue.

    Lower Court Opinion: 228 F.3d 1147 (10th Cir. 2000)

     

    BE&K Construction Co. v. NLRB   (U.S. Supreme Court)

    NLRA's policy to penalize employers that unsuccessfully sue unions

    The Supreme Court held 6/24/02 that the National Labor Relations Board (“Board”) may not sanction an employer that brought an unsuccessful suit against a union unless the Board first finds, at a minimum, that the suit was brought for the purpose of “impos[ing] the costs of the litigation process” on the union, “regardless of the outcome, in retaliation for NLRA protected activity.” In reaching this holding, the Court rejected the Board’s view that the Board may sanction an employer for committing an unfair labor practice if (1) a court earlier found an employer’s suit unmeritorious, and (2) the Board subsequently finds that the “suit is one ‘brought with a motive to interfere with the exercise of protected” union activity.’” The Court reasoned that “the Board’s definition broadly covers a substantial amount of genuine petitioning,” such as when an employer files “suit to stop conduct by a union that [the employer] reasonably believes is illegal under federal law, even though the conduct would otherwise be protected under the [National Labor Relations Act].” From there, the Court concluded that the Board’s definition of retaliation cuts into the First Amendment right to petition the government and, therefore, violates the Constitution. In casting about for a permissible definition of retaliation, the Court stated that “evidence of antiunion animus” is insufficient “to infer retaliatory motive” because, as a practical matter, most “[d]isputes between adverse parties generate” ill will. Rather, the Court made clear that the touchstone for prohibited retaliatory suits is whether the suit was brought simply to “impose the costs of the litigation process” on the union. This case is particularly important to employers that may want to challenge labor-union activities directed at them in response to an employer-union dispute.

     

    Chevron U.S.A., Inc. v. Echazabal   (U.S. Supreme Court)

    ADA coverage for conditions affected by certain work

    The Supreme Court ruled 9-0 on 6/10/02 to uphold an EEOC regulation permitting an employer to defend against an ADA claim by showing that the worker’s disability on the job would prose a direct threat to his, rather than a co-worker’s, health. This means that an individual with a disability cannot use the ADA to require an employer to provide a reasonable accommodation to work in a location that may be hazardous to him. Instead, the employer can refuse to put the person in harm’s way.

    Two points are clear from the Court’s ruling. First, the EEOC has the authority to fill in gaps that Congress left in the statute when the ADA was passed. In this case, the EEOC properly interpreted a broadly worded employer defense to include situations that are hazardous to the affected employee himself.

    Second, the Court recognized that employers are in a very difficult position when trying to comply with the employee accommodation requirements of the ADA and the safety and health requirements of the Occupational Safety and Health Act (OSH Act). It found that the EEOC could reasonably resolve this conflict by refusing to hold the employer liable for acting to protect employees from hazards that the employees themselves are willing to risk.

    This decision is an important victory for all companies subject to the ADA. It gives employers a path with some breathing room between government demands for maximum workplace safety and competing demands by employees who are willing to risk their lives on jobs that others can do more safely. It highlights a fundamental question that will continue to cause conflict. To what degree are we willing to sacrifice an individual’s need for a job to prevent injuries to that person in the workplace?

    This will not open the floodgates for companies to refuse to hire individuals based on broad types of conditions. Companies must make individual determinations in each case to conclude that a particular workplace is not suitable for a particular employee’s condition. They must consider reasonable medical judgments based on “the most current medical assessment of the individual’s present ability to safely perform the essential functions of the job," and must consider "the imminence of the risk and the severity of the harm portended." Thus, there will continue to be cases where these choices are evaluated by the courts.

     

    Edelman v. Lynchburg College   (U.S. Supreme Court)

    EEOC claims

    The Supreme Court held 3/19/02 that claimants filing a discrimination charge with the EEOC are not required to verify the charge allegation during the applicable filing period, but instead verify the allegations after the expiration of the filing period. The Court held that an EEOC regulation permitting the "relation-back" of a verification of an otherwise timely charge was an "unassailable" interpretation of § 706(b) of Title VII. The Court reasoned that the filing deadline and verification requirement are separate, distinct, and intended to achieve "two quite different objectives." This decision is important to all employers subject to the federal employment discrimination laws.

     

    Equal Equipment Opportunity Commission v. Waffle House, Inc.   (U.S. Supreme Court)

    EEOC suit is independent of arbitration

    The Supreme Court held on 1/15/02 that an agreement between an employer and its employees requiring the arbitration of employment-related disputes does not prevent the EEOC from seeking judicial relief on behalf of an individual employee under the Americans with Disabilities Act ("ADA"). The Court noted that the ADA empowers the EEOC to exercise the same enforcement powers, seek the same remedies, and employ the same procedures as are set forth in Title VII of the Civil Rights Act of 1964. Since 1991, the EEOC has been able to pursue reinstatement, backpay, and compensatory or punitive damages on behalf of individual employees under Title VII. Accordingly, the EEOC may pursue those same remedies on behalf of individual employees under the ADA.

    The Court rejected the suggestion that the Federal Arbitration Act's policy favoring the arbitration agreements limits the scope of the EEOC's powers under the ADA. The Federal Arbitration Act requires the courts to treat arbitration agreements as they would other contracts, but it does not expand the reach of such agreements. Because the EEOC was not a party to the arbitration agreement between the respondent and its employees, the Court concluded that the EEOC was not bound by that agreement.

    This case is of interest to any employer that has entered into arbitration agreements with its employees.

    While the Court’s decision is an understandable reading of the EEOC’s power, it illustrates the conflict between that power and the Federal Arbitration Act, which was enacted to allow parties to settle disputes by themselves. It is obviously unfair for an employee to agree to arbitrate employment disputes, and then to turn around and bring in the EEOC to sue the employer.

    Now that employers know what the rule is, they will be less certain that arbitration clauses will be as effective as had been hoped. Employees now have two opportunities to make a claim against an employer: if they fail to convince the EEOC to intervene on their behalf, they can still proceed with arbitration on their own. And if the EEOC intervenes, a company must face the power of the federal government.

    Nevertheless, we expect that companies will continue to use arbitration extensively, in part because it is quicker and simpler for both sides, and in part because EEOC suits have traditionally represented a relatively small fraction of all employment related litigation.

     

    Hoffman Plastic Compound v. NLRB   (U.S. Supreme Court)

    NLRB back-pay remedy for illegal alien

    The Supreme Court held 3/27/02 that federal immigration policy, as expressed in the Immigration Reform and Control Act of 1986 (IRCA), forecloses awards of backpay to illegal aliens. Chief Justice Rehnquist, writing for the Court, noted that while the National Labor Relations Board enjoys considerable discretion in fashioning remedies for violations of the nation’s labor laws, that discretion is limited not only by the labor laws themselves, but also by other federal statutes and policies. Combating the employment of illegal aliens is one such policy – a policy that Congress elevated to a central role in immigration law when it enacted IRCA. Granting backpay to an illegal alien, as the Board did in this case, runs directly counter to that policy. Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, dissented, emphasizing that backpay serves important remedial purposes, such as deterrence of labor law violations. Furthermore, he contended, by rendering the labor laws toothless in cases involving illegal aliens, the Court’s decision creates an incentive for employers to hire illegals, and thus thwarts immigration policy. This case is important to all employers.

     

    Mulder v. NLRB   (U.S. Supreme Court)

    Using compulsory union dues for organizing another company

    The NAM and Associated Builders & Contractors filed an amicus brief supporting a petition for cert. in this case involving union dues. We argue that employees may not be required to pay portion of union dues for organizing a competitor’s business, since such expenditures by unions are not germane to collective bargaining and violate prohibitions in the 1988 Beck case.

     

    National Railroad Passenger Corp. v. Morgan   (U.S. Supreme Court)

    Title VII statute of limitations

    The Supreme Court, in a splintered decision, decided 6/10/02 that the statute of limitations for employment discrimination suits depends on the type of discrimination alleged. Plaintiffs alleging that a discrete act by an employer constitutes unlawful discrimination must file a charge with the EEOC within 180 or 300 days of the act (depending on the state), while plaintiffs alleging a hostile work environment may charge that a series of acts prior to that time are illegal, as long as one occurred within the 180- to 300-day time window.

    Hostile work environment claims are treated differently because they involve repeated conduct that may occur over a period of days or even years. They involve an analysis of all the circumstances of the allegedly offensive workplace, including the frequency of the discriminatory conduct, its severity, whether it is physically threatening or humiliating, and whether it unreasonably interferes with an employee's work performance. All that the Court requires is that some act contributing to the claim fall within the statutory period. The Court tempered its broad interpretation of the time window for hostile work environment claims by emphasizing that an employer can raise fairness issues relating to a plaintiff's tardiness in filing suit.

    Significantly, the Court left open “the timely filing question with respect to ‘pattern-or-practice’ claims brought by private litigants”—an issue arising typically in the class or collective action context.

     

    Ragsdale v. Wolverine Worldwide, Inc.   (U.S. Supreme Court)

    FMLA notification requirements

    The Supreme Court held 5 to 4 on 3/19/02 that 29 C.F.R. § 825.700(a), a Department of Labor regulation purporting to implement the Family and Medical Leave Act (“FMLA”), exceeds the Secretary of Labor’s authority under the Act. The FMLA guarantees eligible employees twelve weeks of leave in a one-year period to attend to family health problems or the birth or adoption of a child. Under 29 C.F.R. § 825.700(a), employers were required specifically to inform employees when their leave is considered FMLA time, or else the leave did not count against the FMLA entitlement. The Court held that this regulation is a categorical penalty on employers that is incompatible with the FMLA’s comprehensive remedial scheme. It wrongly presumes that all employees are harmed by an employer’s failure to provide notice, alters the employee’s burden of proof under the Act, and punishes employers that allow employees to take more leave than the FMLA requires. This case is important to all business covered by the FMLA.

     

    Swierkiewicz v. Sorema N.A.   (U.S. Supreme Court)

    Specificity of discrimination complaint

    The Supreme Court on 2/26/02 unanimously held that an employment discrimination complaint is not required to allege facts constituting a prima facie case of discrimination under the framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). That framework, the Court noted, establishes an evidentiary standard, not a pleading requirement. Before discovery, the nature of the required prima facie case may be difficult to determine, and discovery could reveal direct evidence of discrimination that would render McDonnell Douglas altogether inapplicable. Further, requiring a heightened pleading standard is inconsistent with Federal Rule of Civil Procedure 8(a)(2), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” This decision is important to any employer subject to federal employment discrimination statutes.

    The Second Circuit had ruled that merely stating that the employee was Hungarian in a workplace predominantly comprising French workers was a complaint with insufficient specificity to put his employer on notice of his discrimination claims. The court also ruled that an allegation that the company president wanted to "energize" his department was insufficient to raise an inference of age discrimination. The High Court reversed this ruling.

     

    Tamko Roofing Products v. United Steelworkers   (U.S. Supreme Court)

    Arbitration

    The NAM filed an amicus brief urging the Supreme Court to review an 11th Circuit ruling that allowed a labor arbitrator to reinstate an employee who had been fired for racially harassing a third-party worker. The arbitrator ruled that since there was no written policy prohibiting racial harassment of outsiders, an employee could not be fired for doing so. This decision undermines an employer's ability to comply with antidiscrimination laws.

    Our brief argued that the case involves situations where collective bargaining agreements are in effect. Employers needs to be able to root out racial harassment, and arbitrators should respect not only the at-will employment doctrine but also the business judgment rule. Employment policies need not memorialize in writing every conceivable standard of behavior, including compliance with the thousands of laws and regulations that apply to personal behavior of employees.

    Unfortunately, the Court on 2/19/02 declined to hear the appeal.

     

    TNS, Inc. v. NLRB   (6th Circuit)

    Walk-offs in hazardous conditions

    The NAM filed an amicus brief 6/13/00 asking a federal appeals court to overturn an NLRB decision that allows employees to walk off the job anytime they may feel they're being exposed to dangerous working conditions--without regard to factual evidence.

    The court was to decide two key issues: 1) who decides what are abnormally dangerous working conditions; and 2) if employees walk off, can the company hire permanent replacements?

    The NAM argued that there must in fact be "abnormally dangerous" workplace conditions before employees may walk out. Federal, state and local safety and health agencies that monitor workplace conditions--not the NLRB--should make that decision.

    On 7/10/02, the court upheld the NLRB's legal rulings but vacated on factual grounds and because the case was not resolved in a reasonable time.

     

    Toyota Motor Manufacturing, Kentucky, Inc. v. Williams   (U.S. Supreme Court)

    Scope of ADA coverage

    The Supreme Court unanimously ruled on 1/8/02 that an individual cannot establish the existence of a disability under the Americans with Disabilities Act by simply showing that she is restricted from performing certain elements of a single job.

    The plaintiff in this case had carpal tunnel syndrome and tendinitis, and the lower court had found that Williams could be considered disabled due to her inability to perform certain manual tasks associated with her job. On appeal, the Supreme Court ruled that the inability to perform a single job - or, as here, elements of a single job - cannot be the basis for finding a disability. Rather, there must be "an impairment that prevents or severely restricts the individual from doing activities that are of central importance to most people's daily lives. The impairment's impact must also be permanent or long-term."

    Moreover, the Court said that an individual can't prove a disability merely by submitting evidence of a medical diagnosis of an impairment. Instead, there must be evidence that the limitation caused by their impairment in terms of their own experience is substantial. Each person must show that central activities in his or her daily life are severely restricted.

    On March 5, the NAM filed an amicus brief in the Supreme Court supporting Toyota’s petition to review this case. The brief, written by Peter Susser and Joseph Schuler at Littler Mendelson, highlights the erroneous result and the serious consequences for manufacturers if it is allowed to stand. The petition for cert. was granted, and the NAM filed a brief on the merits on 6/28/01, along with the Equal Employment Advisory Council.

     

    US Airways, Inc. v. Barnett   (U.S. Supreme Court)

    ADA and seniority

    The Court narrowly reversed the lower court ruling, finding that a bona fide seniority system generally need not be disrupted to provide a reasonable accommodation to a qualified employee under the ADA.

    The Ninth Circuit had ruled that companies must engage in an interactive process when determining an employee's qualification for a reasonable accommodation under the Americans with Disabilities Act. In this case, a disabled employee received a transfer to an easier job in the mail room, but was bumped from that job when two other employees with greater seniority applied for jobs there. The Supreme Court decided that the ADA does not require an employer to reassign a disabled employee to a different position as a "reasonable accommodation" where another employee was entitled to hold the position under the employer's bona fide and established seniority system. Decided 4/29/02.

     

    Washington Employers Concerned About Regulating Ergonomics v. Washington Dept. of Labor and Industries   (Thurston County Superior Court)

    Ergonomics regulation challenge

    The NAM has joined with WE CARE, a broad-based coalition of 230 private and public employers and other organizations, to sue the State of Washington over its new ergonomics standards, which are to become effective July 1, 2002. The suit charges that the rule requires "unnecessary, scientifically unsupported and economically irrational modifications" to the workplace, and that the state's actions are unauthorized, procedurally defective and arbitrary and capricious. The suit asks that the rule be declared invalid.

    Ruling from the bench, the judge threw out a large business coalition suit, including the Association of Washington Business and the NAM, that challenged Washington State's new ergonomics regulation. The court rejected challenges involving cost/benefit analysis, timeliness, statutory authority, the validity of the evidence supporting the rule, and the sufficiency of the implementation plan.

     

    Breuer v. Jim’s Concrete of Brevard, Inc.   (U.S. Supreme Court)

    Removal of FLSA cases from state to federal court

    The Supreme Court unanimously held 5/19/03 that the provision of the Fair Labor Standards Act of 1938 ("FLSA") providing that suit "may be maintained...in any Federal or State court of competent jurisdiction" does not bar removal of an FLSA action from state to federal court. The federal removal statute, 28 U.S.C. § 1441(a), provides that if an action over which the federal district courts have original jurisdiction is brought in state court, it may be removed by the defendant to federal district court "[e]xcept as otherwise expressly provided by Act of Congress." The Supreme Court held that there was no question that this FLSA suit could have been brought initially in federal district court. And 29 U.S.C. § 216(b)’s "may be maintained" language is ambiguous, and thus does not "expressly" prohibit removal. This case is important to all entities that are or may become involved in litigation brought in state court under the FLSA.

     

    Desert Palace, Inc. v. Costa   (U.S. Supreme Court)

    Direct evidence not required in mixed motives cases

    The Supreme Court 6/9/03 held unanimously that a plaintiff need not present direct evidence of discrimination in order to obtain a “mixed-motive” jury instruction under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (the “Act”). In a “mixed-motive” case, both legitimate and illegitimate reasons motivated the employment decision at issue. Under the Act, “an unlawful employment practice is established” if the plaintiff demonstrates that his or her race, color, religion, sex, or national origin was a “motivating factor,” but an employer can limit the available remedies by demonstrating that it “would have taken the same action in the absence of the impermissible motivating factor.” The Court emphasized the fact that, in defining the term “demonstrates” to mean satisfaction of “the burdens of production and persuasion,” the Act does not include language that would require these burdens to be met by direct evidence or some other heightened showing. The Court reasoned that, in the face of the statute’s silence, it would be inappropriate to depart from the conventional rule of civil litigation that requires a plaintiff to prove his case by a preponderance of the evidence, using direct or circumstantial evidence. This decision, which rejects the heightened evidentiary burden previously recognized by several courts of appeals, is important to all employers covered by Title VII and similar statutes.

     

    Grutter v. Bollinger   (U.S. Supreme Court)

    Equal protection

    In a 5-4 decision in Grutter, the Supreme Court 6/23/03 upheld the University of Michigan Law School’s admissions policy that allowed race to be considered as one of many factors in an individualized admissions process. Endorsing Justice Powell’s concurring opinion in Regents of the University of California v. Bakke, 438 U.S. 265 (1978), the Court first held that “student body diversity is a compelling state interest that can justify the use of race in university admissions.” Distinguishing this case from its companion, Gratz, the Court then held that the law school’s program, which centered on using race as a “plus” factor in an individualized process to achieve a “critical mass” of underrepresented minorities was constitutional because it “bears the hallmarks of a narrowly tailored plan.” Finally, the Court noted that because “the number of minority applicants with high grades and test scores has indeed increased” in the 25 years since “Justice Powell first approved the use of race to further an interest in student body diversity in the context of public higher education,” it “expect[ed] that 25 years from now, the use of racial preferences will no longer be necessary to further” that interest.

    In Gratz, the Supreme Court held 6-3 that the University of Michigan’s use of racial preferences in its undergraduate admissions violates the Equal Protection Clause of the Fourteenth Amendment, Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and 42 U.S.C. § 1981. The Court first noted that, as set forth in Grutter, the use of race in admissions can be a compelling interest capable of supporting narrowly-tailored means. However, the Court held that “the University’s policy, which automatically distributes 20 points, or one-fifth of the points needed to guarantee admission, to every single ‘underrepresented minority’ applicant solely because of race,” is not narrowly tailored to achieve the University’s asserted compelling interest in diversity. Responding to the University’s contention that more individualized consideration is “impractical” for such a large institution, the Court stated that “the fact that the implementation of a program capable of providing individualized consideration might present administrative challenges does not render constitutional an otherwise problematic system.”

    These cases are significant to all institutions of higher education. They are also important to employers and government contractors whose personnel and other decisions are subject to equal protection and similar civil rights requirements. A group of large employers supported the school's affirmative action program because it encouraged diversity in the student body, which makes a more diverse pool of potential workers from which to choose. See also case #02-516 Gratz v. Bollinger

     

    State ex rel. Diehl v. O'Malley   (Missouri Supreme Court)

    Jury trial in employment discrimination case

    The NAM filed a joint amicus brief with Associated Industries of Missouri, the Greater Kansas City Chamber of Commerce, the Missouri Bankers Association, and the Missouri Chamber of Commerce and Industry urging the Missouri Supreme Court to affirm ruling that state’s Human Rights Act on employment discrimination provides trial by judge, not by jury. We argued that the Act is clear on its face, and is supported by legislative history and the Missouri Constitution. Allowing jury trials in such cases would burden small manufacturers, clog the courts and lead to venue shopping.

    On 1/28/03, the Missouri court held there is a right to trial by jury for money damages.

     

    Washington Employers Concerned About Regulating Ergonomics v. Washington Dept. of Labor and Industries   (Washington State Supreme Court)

    Ergonomics regulation

    The NAM joined with hundreds of companies and other associations in a brief 11/13/02 on the appeal of an adverse ruling in a case where the business community challenged the validity of Washington's new ergonomics regulation. The brief argues in part that the issuance of the rule violated the Regulatory Reform Act of 1995 by not having a cost-benefit analysis prior to adoption, that the eventual cost-benefit analysis was poor, and that the Department exceeded its statutory authority in attempting to regulate simple physical activity in the workplace.

    On 11/4/03, Washington voters approved the ballot initiative rescinding the Washington State ergonomics rule. The initiative would also bar the state from adopting another ergonomics rule unless a federal standard is put in place. The overreaching ergo regulation would have required all employers (private and public) to identify jobs likely to cause "work-related musculoskeletal disorders." Employers then would have been required to do whatever was "technologically or economically feasible" to eliminate ergonomic hazards. This state regulation was as bad as the old Clinton federal ergonomics regulation.

    A big congratulations to the Washington State business community--especially the NAM ’s state affiliate, The Association of Washington Business-- for its part in rescinding the regulation. This is a very big victory for all of the business community especially manufacturers. It is also a substantial loss for the unions because future adoption of comprehensive, but misguided, ergonomics rules at the state level will be even more difficult.

     

    Barnhart v. Thomas   (U.S. Supreme Court)

    Social Security eligibility

    The Supreme Court 11/12/03 upheld the Social Security Administration’s determination that a claimant is not disabled -- and therefore ineligible for disability insurance benefits and Supplemental Security Income -- if the claimant is able to perform her previous work, regardless of whether that previous work exists in significant numbers in the national economy. The Court held that the SSA’s interpretation of 42 U.S.C. § 423(d)(2)(A) was a reasonable one, and therefore entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). This case is important to any business that provides disability benefits and is entitled to a set-off when an employee becomes eligible for Social Security benefits.

     

    Cavin v. Honda of America, Inc.   (6th Circuit)

    FMLA notice requirements

    The NAM and the Equal Employment Advisory Council filed an amicus brief 10/23/03 supporting Honda's petition to rehear a Sixth Circuit decision that restricts that company from adopting formal reporting requirements for employees that want to avail themselves of time off under the Family and Medical Leave Act (FMLA). We argue that the court should reassess a 3-judge panel's ruling that allowed an FMLA suit to proceed. The court ruled that Honda's procedures were too strict and that it was sufficient that the employee gave "timely verbal or other notice" that he was going to miss work for reasons that satisfy the requirements for FMLA leave. We argue that companies are allowed to enforce reasonable notice procedures, that written notices need only be waived for medical emergencies, that restricted compliance requirements will discourage more generous leave benefits, and that other circuit courts are in conflict with the Sixth Circuit. Review denied 2/04.

     

    Gratz v. Bollinger   (U.S. Supreme Court)

    Equal protection

    In a 5-4 decision in Grutter, the Supreme Court 6/23/03 upheld the University of Michigan Law School’s admissions policy that allowed race to be considered as one of many factors in an individualized admissions process. Endorsing Justice Powell’s concurring opinion in Regents of the University of California v. Bakke, 438 U.S. 265 (1978), the Court first held that “student body diversity is a compelling state interest that can justify the use of race in university admissions.” Distinguishing this case from its companion, Gratz, the Court then held that the law school’s program, which centered on using race as a “plus” factor in an individualized process to achieve a “critical mass” of underrepresented minorities was constitutional because it “bears the hallmarks of a narrowly tailored plan.” Finally, the Court noted that because “the number of minority applicants with high grades and test scores has indeed increased” in the 25 years since “Justice Powell first approved the use of race to further an interest in student body diversity in the context of public higher education,” it “expect[ed] that 25 years from now, the use of racial preferences will no longer be necessary to further” that interest.

    In Gratz, the Supreme Court held 6-3 that the University of Michigan’s use of racial preferences in its undergraduate admissions violates the Equal Protection Clause of the Fourteenth Amendment, Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and 42 U.S.C. § 1981. The Court first noted that, as set forth in Grutter, the use of race in admissions can be a compelling interest capable of supporting narrowly-tailored means. However, the Court held that “the University’s policy, which automatically distributes 20 points, or one-fifth of the points needed to guarantee admission, to every single ‘underrepresented minority’ applicant solely because of race,” is not narrowly tailored to achieve the University’s asserted compelling interest in diversity. Responding to the University’s contention that more individualized consideration is “impractical” for such a large institution, the Court stated that “the fact that the implementation of a program capable of providing individualized consideration might present administrative challenges does not render constitutional an otherwise problematic system.”

    These cases are significant to all institutions of higher education. They are also important to employers and government contractors whose personnel and other decisions are subject to equal protection and similar civil rights requirements. A group of large employers supported the school's affirmative action program because it encouraged diversity in the student body, which makes a more diverse pool of potential workers from which to choose. See also case #02-241, Grutter v. Bollinger

     

    IBEW, Wal-Mart Stores, Inc. & IBM Corp.   (NLRB)

    Right to have representative in investigatory interview of non-union employee

    IBEW, Wal-Mart Stores, Inc. & IBM Corp. The NAM and other business groups urged the NLRB to reinstitute its position prior to the Epilepsy Foundation case (2000) that non-union employees do not have statutory right to have a third-party representative with them during an investigatory interview by their employer. On 6/15/04, the NLRB agreed. Because employers are subject to increasing legal obligations regarding employment discrimination, financial fraud and heightened security concerns, the Board found sufficient justification for adopting a policy that gives greater weight to the employer's right to conduct investigations than to an employee's right to have a co-worker present during a confidential interview. We were concerned that third party presence in such investigations will hinder getting at the truth and maintaining confidentiality. Employers are under substantial legal and moral pressure to fully and adequately address sexual or racial discrimination, financial malfeasance, simple theft or violence, job-impairing drug use, or terrorism and other homeland security issues. The NAM joined with the EEAC, Associated Builders & Contractors, the U.S. Chamber of Commerce, the Society for Human Resource Management and the International Mass Retail Association in the amicus brief in this case.

     

    In re California Assembly Bill 1889   (NLRB)

    Seeking injunction against state contractor labor relations restraints

    The NAM and 4 other business groups 6/28/02 urged the NLRB to sue California to enjoin the enforcement of that state’s Assembly Bill 1889, which is now law and is being enforced. We feel strongly that the National Labor Relations Act preempts the law, which pervasively regulates the labor relations activities of private sector recipients of state funds, lessors of state property, and anyone else doing business with California. It prohibits employers from using state funds and state property for a wide variety of otherwise legitimate labor relations activities, while allowing union-friendly activities such as recognizing a union without a secret ballot representation election. Before the NLRB could act, a federal court enjoined the provisions at issue. The 9th Circuit affirmed on 4/2/04 in a case captioned Chamber of Commerce v. Lockyear.

     

    Jones v. R.R. Donnelley & Sons Co.   (U.S. Supreme Court)

    § 1981 statute of limitations

    The Supreme Court unanimously held 5/4/04 that the four-year statute of limitations set forth in 28 U.S.C. § 1658 applies to a civil action brought under 42 U.S.C. § 1981(b). Section 1981(b), created by the Civil Rights Act of 1991, expanded protection of the right to “make and enforce contracts” by defining this phrase to include “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” 28 U.S.C. § 1658 creates a default four-year statute of limitations for civil actions arising under a federal statute enacted after December 1, 1990. Although Section 1981 was enacted long before December 1, 1990, the addition of subsection (b) occurred after that date. The Supreme Court held that the four-year limitations period applied, explaining that a cause of action “aris[es] under” an Act of Congress enacted after December 1, 1990, and therefore is governed by Section 1658’s 4-year statute of limitations, “if the plaintiff’s claim against the defendant was made possible by a post-1990 enactment.” This case is important to all entities that are or may become involved in litigation under 42 U.S.C. § 1981(b) or other federal statutes amended after December 1, 1990.

     

    Pennsylvania State Police v. Suders   (U.S. Supreme Court)

    Whether sexual harassment is actionable without "tangible employment action"

    The Supreme Court 6/14/04 clarified the circumstances under which employers may assert affirmative defenses to Title VII-based claims that a hostile work environment created by a supervisor culminated in constructive discharge. The Court held that , to establish “constructive discharge,” a plaintiff must show that her work environment was so intolerable that her resignation qualified as a fitting response. If “constructive discharge” is established, the employer may, consistent with the Court’s 1998 decisions in Ellerth and Faragher, assert affirmative defenses that: (i) the employer exercised reasonable care to prevent and correct the harassment, and (ii) the plaintiff unreasonably failed to take advantage of any employer-provided or other opportunities to correct or avoid harm. If, however, the plaintiff resigned in reasonable response to official employer actions changing her employment status − such as humiliating demotions, cuts in pay, or transfers − then the employer may not assert these affirmative defenses. This decision is important for all employers subject to Title VII.

     

    Raytheon Company v. Hernandez   (U.S. Supreme Court)

    ADA eligibility

    On 12/2/03, the Supreme Court decided 7 to 0 that an employer may, without violating the Americans with Disabilities Act (“ADA”), maintain a policy against rehiring former employees terminated for violating workplace conduct rules, such as testing positive for cocaine. The Ninth Circuit had held that such a policy “violates the ADA, as applied to employees with the disability of drug addiction whose only work-related offense was testing positive for drug use but are now rehabilitated.” The Supreme Court ruled that the company's "no-hire policy is a quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules." The policy was litigated under a disparate treatment analysis. As long as the employer could show a legitimate, nondiscriminatory reason for the refusal to hire, and the employee could not show that the decision was actually made on the basis of his disability, the employer wins. Unresolved was whether the employee would win under a disparate impact theory -- that is, whether the employer's no-hire policy falls more harshly on people protected by the ADA than on others. This theory was not raised in a timely manner in the litigation.

     

    Yates v. Hendon   (U.S. Supreme Court)

    Single employer ERISA plans

    The Supreme Court held 3/2/04 that a sole proprietor or sole shareholder of a business may qualify as a “participant” in a pension plan covered by the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA’s “text contains multiple indications that Congress intended working owners to qualify as plan participants.” Moreover, the Court reasoned, “Congress’ aim is advanced” by this reading: “The working employer’s opportunity personally to participate and gain ERISA coverage serves as an incentive to the creation of plans that will benefit employer and non-owner employees alike.” Accordingly, the Court held that “[i]f the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants.” This case is important to all single-owner businesses that maintain ERISA plans.

     

    IBP, Inc. v. Alvarez   (U.S. Supreme Court)

    Pay for changing clothes

    The Supreme Court 11/8/05 held that under the Fair Labor Standards Act (“FLSA”) and Portal-to-Portal Act, employers must compensate their employees for pre- and post-shift time spent donning or doffing employer-required clothing or equipment and time spent walking between such clothing and equipment stations and the employees’ work areas; compensation for time spent waiting at clothing and equipment stations is not required, however. Regulations promulgated under the Portal-to-Portal Act adopted the “continuous workday rule,” which provides that an employee’s compensable “workday” includes all time from commencement to completion of the employee’s “principal activity or activities.” The Portal-to-Portal Act nevertheless excepts from the FLSA’s coverage time spent on activities “preliminary or postliminary” to the employee’s principal activity. Justice Stevens, writing for a unanimous Court, reiterated the Court’s earlier holding that donning or doffing required equipment constitutes an “integral and indispensable part of the [employee’s] principal activities” and therefore is a compensable part of the workday. Moreover, under the continuous workday rule, time then spent walking between the clothing or equipment station and the employee’s work area also necessarily constitutes part of the compensable workday. Time spent simply waiting to don the first piece of clothing or equipment does not qualify as an “integral or indispensable part of the principal activity,” however, and therefore is not required to be compensated. The decision in these consolidated cases is important to any business whose employees must pick up and/or wear certain clothing or equipment in order to perform their jobs.

    The NAM, the American Chicken Council and the American Meat Institute filed an amicus brief urging the Supreme Court to review the IBP case.

    On 8/1/05, the NAM joined with the U.S. Chamber of Commerce, the Society for Human Resources Management and the Association of International Automobile Manufacturers in a brief on the merits.

    See also Case #04-66, Tum v. Barber Foods.

     

    Tum v. Barber Foods, Inc.   (U.S. Supreme Court)

    Pay for changing clothes

    The Supreme Court 11/8/05 held that under the Fair Labor Standards Act (“FLSA”) and Portal-to-Portal Act, employers must compensate their employees for pre- and post-shift time spent donning or doffing employer-required clothing or equipment and time spent walking between such clothing and equipment stations and the employees’ work areas; compensation for time spent waiting at clothing and equipment stations is not required, however. Regulations promulgated under the Portal-to-Portal Act adopted the “continuous workday rule,” which provides that an employee’s compensable “workday” includes all time from commencement to completion of the employee’s “principal activity or activities.” The Portal-to-Portal Act nevertheless excepts from the FLSA’s coverage time spent on activities “preliminary or postliminary” to the employee’s principal activity. Justice Stevens, writing for a unanimous Court, reiterated the Court’s earlier holding that donning or doffing required equipment constitutes an “integral and indispensable part of the [employee’s] principal activities” and therefore is a compensable part of the workday. Moreover, under the continuous workday rule, time then spent walking between the clothing or equipment station and the employee’s work area also necessarily constitutes part of the compensable workday. Time spent simply waiting to don the first piece of clothing or equipment does not qualify as an “integral or indispensable part of the principal activity,” however, and therefore is not required to be compensated. The decision in these consolidated cases is important to any business whose employees must pick up and/or wear certain clothing or equipment in order to perform their jobs.

    The NAM, the American Chicken Council and the American Meat Institute filed an amicus brief urging the Supreme Court to review the IBP case.

    On 8/1/05, the NAM joined with the U.S. Chamber of Commerce, the Society for Human Resources Management and the Association of International Automobile Manufacturers in a brief on the merits.

    See also Case #03-1238, IBP v. Alvarez

     

    Arbaugh v. Y & H Corp.   (U.S. Supreme Court)

    Definition of an employer

    The Supreme Court unanimously held 2/22/06 that satisfaction of the numerosity component of Title VII’s definition of “employer” is an element of a plaintiff’s claim for relief, not a prerequisite to federal subject-matter jurisdiction. Section 701(b) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e(b), limits the definition of “employer” to those having “fifteen or more employees.” The lower courts in this case held that the numerosity requirement is jurisdictional and thus required dismissal even though it had not been raised by the defendant until after a jury verdict for the plaintiff. Reversing, the Supreme Court analyzed the text and structure of Title VII’s jurisdictional provision, 42 U.S.C. § 2000e-5(f)(3), together with 28 U.S.C. § 1331, the general statute that confers federal-question jurisdiction. The Court concluded that the numerosity requirement contained in Title VII’s definition of “employer” is not a threshold jurisdictional requirement akin to the monetary floor clearly specified for diversity actions in 28 U.S.C. § 1332. In doing so, the Court articulated a bright-line rule: if Congress does not definitively state that a threshold limitation on the scope of a statute is jurisdictional in nature, the courts must treat the restriction as nonjurisdictional. The Court’s decision is important to employers with fewer than fifteen employees and to any business that may be involved in litigation under federal statutes with specifically limited scope.

    Decision Below: 380 F.3d 219 (5th Cir. 2004)

     

    Burlington N. and Santa Fe R.R. Co. v. United States   (U.S. Supreme Court)

    Employment discrimination

    The Supreme Court 6/22/06 decided that the anti-retaliation provision in Title VII of the Civil Rights Act of 1964 is not limited to protecting employees from retaliatory action taken by employers that relates to employment or occurs in the workplace. Rather, the provision covers any material action taken by the employer that would likely discourage a reasonable worker from making or supporting a charge of employment discrimination. The Court determined that a plain reading of Title VII indicated that Congress intended to provide employees broad protection from employer retaliation. Specifically, the Court pointed out that unlike the language of the substantive anti-discrimination provision, which limits its scope to actions that affect employment or alter the conditions of the workplace, the wording of the anti-retaliation provision contains no such qualifiers. Congress’s unqualified prohibition against retaliation was a recognition, the Court stated, that employers can effectively retaliate against employees outside of the workplace and in ways that do not relate directly to employment. But the Court was also careful to emphasize that the anti-retaliation provision does not cover petty slights or minor annoyances experienced by an employee who reports discriminatory behavior, but only materially adverse actions. Furthermore, the Court held that a finding of materiality must be based on the perspective of a reasonable worker, rather than on a particular employee’s subjective feelings. This case is of importance to every business covered by Title VII.

    Decision Below: 364 F.3d 789 (6th Cir. 2004) (en banc)

     

    Domino’s Pizza v. McDonald   (U.S. Supreme Court)

    Race discrimination in contracts

    The Supreme Court decided 2/22/06 that a shareholder of a corporation cannot bring a claim under Section 1 of the Civil Rights Act of 1866, 42 U.S.C. § 1981, which prohibits discrimination in the making and enforcement of contracts, if the shareholder has no rights under the contract that he claims the defendant’s discrimination impaired. In this case, the plaintiff was the president and sole shareholder of a corporation that entered into a set of contracts with the defendant for the construction of four restaurants. The plaintiff sued, claiming violation of Section 1981, when the defendant terminated these contracts allegedly because the plaintiff is African American. In an opinion authored by Justice Scalia, the Supreme Court today held, based on the language of Section 1981, that a claimant can sue only for discrimination that impairs a contractual relationship if the claimant actually has rights under the contract at issue. In this case, the Court indicated, the plaintiff has no claim because the shareholder of a corporation has no rights and is exposed to no liability under a corporation’s contracts. This case is of interest to any business that forms contractual relationships because it limits the class of plaintiffs who can claim racial discrimination in the making and enforcement of contracts.

    Decision Below: 107 Fed. App. 18 (9th Cir. 2004)

     

    Olivo v. ExxonMobil Corp.   (New Jersey Supreme Court)

    Liability for second-hand exposure

    The NAM joined with six other groups in an amicus brief 12/12/05 urging the New Jersey Supreme Court to reject a theory of liability that would hold a company liable for second-hand exposure to a hazard in the workplace. The court, however, ruled 4/24/06 that the company owed a duty to protect against foreseeable harm to an employee’s wife (who laundered his work clothes). The court sent the case back for further proceedings on the extent of the duty owed to the worker and whether the company had satisfied the duty. It also left open the possibility that the company could be exonerated if the hazard-incident-to-work exception applies.

    The wife of a contractor allegedly was harmed by asbestos brought home by her husband from work.  Her husband worked as a union pipe welder at over fifty worksites during his 37-year career, sometimes being exposed to asbestos insulation and carrying it home on his clothing.  Sixteen years after his retirement, she was diagnosed with mesothelioma.  Her husband sued 30 companies over her illness.  Whether a landowner or employer is liable to third parties for second-hand exposure to hazardous substances brought home from work is an aggressive new position that plaintiffs are pressing in the courts.  Two state courts have recently refused to create this new liability.  Our brief highlighted the fact that liability to remote parties is a policy issue for the legislature, and that extending it in a case like this is not appropriate because of difficult questions relating to causation, control and limitless liability.

     

    Sereboff v. Mid Atlantic Medical Services, Inc.   (U.S. Supreme Court)

    Recovering health care expenses advanced to employees

    The Supreme Court held 5/15/06 that section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), authorizes an action by a plan fiduciary against a beneficiary to recover specifically identified funds where the beneficiary has recovered for its injuries from a third party. According to the terms of the ERISA plan administered by Respondent, Mid Atlantic Medical Services, a plan beneficiary is required to reimburse Mid Atlantic for benefits paid by the plan if the beneficiary subsequently recovers from a third-party tortfeasor, as Petitioners, the Sereboffs, did. After Mid Atlantic had claimed a lien on the expected proceeds from the Sereboffs’ tort suit, it brought an action under section 502(a)(3) of ERISA to recover approximately $75,000 in medical expenses that it had paid on the Sereboffs’ behalf. The district court approved a stipulation by the parties creating a separate account to segregate the amount sought by Mid Atlantic from the remainder of the Sereboffs’ recovery. Rejecting the Sereboffs’ argument that Mid Atlantic’s claim was really a legal claim for damages, the Supreme Court held that Mid Atlantic’s claim was “equitable” within the meaning of section 502(a)(3) because Mid Atlantic “sought its recovery through a constructive trust or equitable lien on a specifically identified trust, not from the Sereboffs’ assets generally.” In so holding, the Court relied on precedent “from the days of the divided bench” to determine “those categories of relief that were typically available in equity.” This decision is important to any business that maintains an ERISA plan.

    Decision Below: 407 F.3d 212 (4th Cir. 2005)

     

    BCI Coca-Cola Bottling Co. v. EEOC   (U.S. Supreme Court)

    Cat's paw liability for discrimination

    Employers can protect themselves against liability for unlawful discrimination by their representatives if they have procedures in place, and use them, to provide employees with procedural protections. This case involves a supervisor's discriminatory act that led to a subordinate's termination, carried out by the human resources department.

    The issue on appeal was whether the employer is automatically liable for discrimination if the supervisor exerted some influence over the formal decision to take a discriminatory employment action, or whether the supervisor must be shown to have been the one principally responsible for the adverse action. The Tenth Circuit here took a middle ground approach, finding liability if the supervisor was part of the causal link to the termination, but allowing the company to absolve itself of liability if it conducted an independent investigation of the allegations against the terminated employee and came to the same conclusion.

    This case involves what is being called "cat's paw" liability, where one person (the supervisor) uses another (a human resources manager) to achieve an end. The decision would have helped flesh out the procedures that employers should implement to avoid unintended discriminatory acts, but the Court dismissed the case on 4/12/07 without a decision.

     

    Dana Corp. and Metaldyne Corp.   (NLRB)

    Secret ballot elections regarding union representation

    The NAM and 18 other associations filed a brief at the National Labor Relations Board urging the Board to allow secret ballot elections when there is doubt about whether the employees actually authorized a union to represent them. The cases arose where the companies had agreed to neutrality agreements with the UAW, whereby the companies would not communicate information to employees, or lawfully express views, arguments and opinions which the union perceived as critical of the union. The union then obtained signatures from a majority of the employees authorizing them to represent the employees, but the validity of that majority was subsequently challenged. This neutrality agreement/card-check procedure has proven significantly more effective for union organizing than other methods.

    The NAM argued that in this situation the NLRB's procedures should allow for a secret ballot to accurately and definitively determine whether the union enjoys majority support, rather than require employees to have to wait until a contract is negotiated and run its course before being allowed to have an election. The NAM joined with Associated Builders and Contractors, the National Restaurant Association, Printing Industries of America, the Society of Human Resource Managers, and 14 NAM-member employer association groups around the country in the brief.

    On Sept. 29, 2007, the NLRB agreed by a vote of 3 to 2. It ruled that employees must have 45 days after their employer recognizes a union based on card-check authorizations to file a petition to decertify the union or to support an election petition from another union. The Board underscored the preferred method of having a secret election to determine the majority status of a union. The majority found that card-check procedures are much less reliable as indicators of employee free choice on union representation than secret elections. To have an election, an employee petition must be supported by 30% or more of the unit employees eligible to vote. The new rule will be applied prospectively only, so the decertification petitions involving the two companies in this case were dismissed.

     

    Ledbetter v. Goodyear Tire & Rubber Co.   (U.S. Supreme Court)

    Statute of limitations in employment discrimination suits

    The Supreme Court issued a 5 to 4 decision on 5/29/2007 addressing the time for filing a claim alleging discrimination in pay under Title VII of the 1964 Civil Rights Act. It ruled that even though the unequal pay may be received with each new paycheck, the statute of limitations on filing a claim begins to run when the alleged illegal pay discrimination first occurred.

    Lilly Ledbetter, a female tire plant employee, sued her employer, Goodyear, for allegedly paying her a smaller salary than it paid her male co-workers. In accordance with the statute of limitations, Ledbetter filed her charge with the Equal Employment Opportunity Commission (EEOC) within 180 days of her most recent allegedly discriminatory annual employee evaluation. But at trial she was permitted to introduce evidence of many years’ worth of annual employee evaluations and respective raises to show that she had been continually subject to disparate pay because of her sex. The Eleventh Circuit held that this was improper because “in the search for an improperly motivated, affirmative decision directly affecting the employee’s pay, the employee may reach outside the limitations period created by her EEOC charge no further [than] the last such decision immediately preceding the start of the limitations period.”

    The Supreme Court ruled that an employee must file a charge with the EEOC within 180 days after the alleged unlawful employment practice occurred. The majority differentiated between acts that are intentionally discriminatory, such as pay decisions, and acts that are nondiscriminatory and that entail adverse effects resulting from the past discrimination. Even if a past discriminatory act has current effects, a charge must be filed within 180 days of the discriminatory act, not its effects.

    The majority also differentiated this case from cases where an employer uses a discriminatory pay structure. In that circumstance, each paycheck constitutes a new discriminatory act, but there is no general rule that a regular paycheck triggers a new period in which to charge discrimination for conduct that occurred long ago.

    This is a significant decision that helps insure that complaints about workplace discrimination are handled promptly, as Congress intended.

     

    Long Island Care at Home, Ltd. v. Coke   (U.S. Supreme Court)

    Deference to agency interpretations

    How powerful are government departments when it comes to interpreting the laws they are charged with administering? Typically, courts defer to departmental interpretations that are issued through notice and comment rulemaking, or that are based on particular expertise that the department has because it deals with the subject so extensively. In this case, however, the Department of Labor's interpretation of minimum wage and overtime requirements for "companion services" provided by an agency were not entitled to deference, according to the Second Circuit, because it was inconsistent with some congressional purposes in the law, with other regulations, with past interpretations, and was not sufficiently explained.

    On June 11, 2007, the Supreme Court unanimously reversed. It ruled that Congress expressly left several unanswered issues for the Department of Labor to resolve, and the Department did so with notice-and-comment rulemaking. Because the Department's interpretation was reasonable and the final regulation was the "logical outgrowth" of the proposed regulation, the Court accepted it.

     

    Norfolk Southern Railway Co. v. Sorrell   (U.S. Supreme Court)

    Causation standard under FELA

    The Supreme Court granted certiorari 5/15/06 to determine whether the causation standard for employee contributory negligence under the Federal Employers Liability Act (“FELA”) differs from the causation standard for railroad negligence. Under FELA, 45 U.S.C. §§ 51-60, state courts have jurisdiction over personal injury claims brought by railroad employees against their employer, but those courts must apply the common law “as established and applied in the federal courts.” The trial court in the case below applied the jury instructions approved by the Missouri Supreme Court, which provide different substantive standards of causation for determining a defendant-railroad’s negligence than a plaintiff-employee’s contributory negligence. The Missouri Court of Appeals affirmed solely on the ground that the jury instructions approved by the Missouri Supreme Court were binding. In contrast, the Third, Fifth, and Sixth Circuits and the Oregon Supreme Court all have held that FELA’s causation standards for negligence and contributory negligence are the same. Likewise, the model jury instructions in the Fifth, Eighth, Ninth, and Eleventh Circuits also employ the same standard for negligence and contributory negligence. This case is important to any individual or business that may be subject to litigation under FELA.

    On Jan. 10, 2007, the Court unanimously decided that FELA requires Missouri to use the same causation standards for negligence and contributory negligence. Since there is no express statutory basis for applying different standards, the common law rule of a uniform causation standard applies. What that standard is has been left to further litigation.

     

    Taylor v. Progress Energy, Inc.   (4th Circuit)

    Release of FMLA claims

    The NAM filed a motion 8/3/05 to join in an industry amicus brief in this case involving an employee’s voluntary release of rights under the Family and Medical Leave Act (FMLA). The plaintiff was paid more than $12,000 as part of an enhanced severance benefits package during a reduction in force, in return for a release of all legal claims relating to her employment. She then sued, claiming the release was ineffective for FMLA claims. A 3-judge panel of the U.S. Court of Appeals for the Fourth Circuit interpreted a Department of Labor (DOL) regulation as requiring DOL or court approval for all waivers, and the employer sought rehearing on this issue by the full court.

    The industry brief, filed by the Equal Employment Advisory Council, the U.S. Chamber of Commerce, and the Society for Human Resource Management, argued that employees should be able to voluntarily release claims they may have against their employer under the FMLA without having that release approved by the Department of Labor or a court. The DOL regulation should be declared invalid if it requires supervision of releases. Another court, the 5th Circuit, has ruled that the regulation only applies to releases of future FMLA claims, but the 4th Circuit has created a difficult conflict that threatens to make it virtually impossible for employers to obtain an enforceable general release without litigation, since DOL lacks any vehicle for supervising the hundreds of thousands of releases signed every year.

    The NAM needed to file a motion to join the brief because of an unusual Fourth Circuit rule that requires trade associations to disclose their membership lists to the court. To protect the confidentiality of our membership list, we moved to waive the rule and join the brief, but the motion was denied 8/9/05.

    The court decided to rehear this case, but affirmed its first ruling on 7/3/07.

     

    Arizona Contractors Ass'n. v. Napolitano   (U.S. District Court for Arizona)

    Exclusive federal jurisdiction over immigration

    The NAM is part of a coalition of business entities that filed a joint brief on 9/14/07, urging a federal district court to declare that an Arizona immigration law is preempted by federal law.

    Passed in July, Arizona’s House Bill 2779 requires employers to use a voluntary federal government-administered electronic verification system, commonly known as the “Basic Pilot,” to verify work eligibility of all employees. Our brief argued that federal immigration law preempted the new Arizona law, because the state law conflicted with federal law and with congressional intent. Deference to Congress, which has plenary authority in this field, is essential to ensuring a consistent national immigration policy and avoiding local policies that frustrate Congress’ objectives. Additionally, state immigration laws impose inconsistent requirements on and create substantial confusion for employers who conduct business in multiple jurisdictions, with conflicting state laws occasionally making it impossible for employers to comply with all of the laws simultaneously.

    In addition to Arizona, Arkansas, Colorado, Georgia, Illinois, Iowa, Louisiana, Massachusetts, Nebraska, Nevada, New Hampshire. Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, and West Virginia all have passed legislation addressing the general issue of immigration control at the worksite, but with each state enacting its own unique requirements.

    On February 7, 2008, the district court upheld the Legal Arizona Workers Act, holding that its licensing sanctions did not make employers "conform to a stricter standard of conduct than federal law." The court also held that the Act provided employers with procedural due process for their claims to be heard.

     

    CBOCS West, Inc. v. Humphries   (U.S. Supreme Court)

    Retaliation claims under the Civil Rights Act

    The Civil Rights Act of 1991 prohibits discrimination in the making and enforcement of contracts. The Supreme Court ruled 5/27/08 that that law allows retaliation claims by employees who allege that discrimination led to their termination. Here, a restaurant manager claimed he was fired in retaliation for complaining about racially discriminatory treatment of another employee, but his employer claimed he was fired for leaving the restaurant safe open.

    The Supreme Court held that although the Act does not specifically provide for race retaliation claims, employer conduct after the formation of a contract is subject to Section 1981 because Congress amended the law in 1991. Courts have interpreted Section 1982 to allow suits for retaliation, and Sections 1981 and 1982 have long been interpreted alike.

    Employers will face a somewhat expanded scope of potential liability in discrimination cases, both from the ruling that retaliation is actionable and from the additional benefits that plaintiffs have under Sec. 1981 compared to Title VII of the Civil Rights Act, namely a longer statute of limitations, no requirement that EEOC administrative remedies be pursued, and no damages caps.

     

    Chamber of Commerce v. Brown   (U.S. Supreme Court)

    Preemption of federal labor law

    The Supreme Court ruled 6/19/2008 that a California law that prohibits employers who receive more than $10,000 in state funds annually from using those funds to “assist, promote, or deter union organizing” is preempted by the National Labor Relations Act (NLRA). The NRLA provides that companies’ anti-labor speech cannot be considered evidence of an unfair labor practice so long as it does not threaten or coerce workers. The Chamber argued that California’s law violated the NLRA’s safe harbor for anti-union speech, and is therefore preempted. The Court agreed, finding that noncoercive speech is fully protected by the NLRA. Congress intended to leave unregulated uninhibited, robust and wide-open debate on labor disputes.

    The impact of the Supreme Court’s decision in this case could be significant for state government contractors, as more than a dozen states were considering adopting laws similar to California’s.

     

    Huber v. Wal-Mart Stores, Inc.   (U.S. Supreme Court)

    Reasonable accommodation under the ADA

    Seventeen years after it was passed, the Americans With Disabilities Act continues to generate litigation over fundamental questions it left unresolved. One involves the requirements for providing a reasonable accommodation to a disabled worker. In this case, the plaintiff became disabled and could no longer perform the essential elements of her job. She sought another vacant job, and her employer considered her application equally with other candidates. Since others were better qualified, she did not get the transfer, but instead was given a less favorable job.

    The Eighth Circuit ruled that the employer's procedure treated candidates equally, and that the plaintiff was not entitled to the vacant job when that reassignment would violate a legitimate nondiscriminatory policy of the employer to hire the most qualified candidate.

    The company provided a reasonable accommodation to the plaintiff by finding her another job. It may not have been the best alternative for her, but the law only requires a reasonable accommodation.

    The Supreme Court initially agreed to hear this appeal, but the parties settled and the case was dismissed without a ruling.

     

    Illinois Bell Tel. Co. v. IBEW, Local 21   (U.S. Supreme Court)

    Whether recognition clause justifies arbitration of disputes not specified in collective bargaining agreement

    This case arises from a dispute between AT&T's subsidiary, Illinois Bell Telephone Co., and its union, the IBEW, which sought to compel arbitration concerning new "performance guidelines" the company implemented for sales staff. The applicable collective bargaining agreement limits arbitration to matters involving the interpretation and application of the agreement's terms or provisions, and it says nothing about the arbitrability of performance guidelines. The Seventh Circuit nevertheless ruled that the guidelines were arbitrable, basing its decision solely on the fact that the agreement contained a recognition clause, i.e., standard language found in virtually every labor agreement in the country which says that the union is recognized as the exclusive bargaining agent for the defined bargaining unit of employees.

    The NAM joined with the Council on Labor Law Equality to support Illinois Bell's appeal of this case to the Supreme Court. We urged the Court to take the case, arguing that the lower court's decision converts virtually any company action that is contrary to a union's interests into a violation of a boilerplate recognition clause. Arbitration should only be required where the parties have agreed to it, and courts should decide whether the parties have done so.

    On March 17, the Court refused to hear this appeal. This precedent improperly introduces a judicially imposed form of 'interest arbitration' over a limitless set of issues arising under labor agreements that do not authorize such arbitration.


    Related Documents:
    NAM brief  (January 2, 2008)

     

    Meacham v. Knolls Atomic Power Lab.   (U.S. Supreme Court)

    Burden of proof in disparate impact suits under the ADEA

    Under the Age Discrimination in Employment Act (ADEA), employers may not discriminate against employees 40 years of age or older based on age. However, employers may “take any action otherwise prohibited where the differentiation is based on reasonable factors other than age.” In the mid-90s, Knolls Atomic Power Lab instituted an involuntary workforce reduction, determining which employees to dismiss based primarily on three factors — performance, flexibility, and criticality of skills. Even though years of service also factored into the determination, 30 of the 31 employees terminated were over the age of 40. Subsequently, 26 of the dismissed workers filed suit, alleging age discrimination in violation of the ADEA.

    At trial, a jury rendered a verdict in favor of the former employees, based on the employer’s failure to monitor the discretionary process in deciding who should be terminated, which resulted in an unlawful disparate impact on older workers. Although the Second Circuit initially affirmed the verdict, its decision was vacated and remanded as a result of the Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005). In that case, the Court held that in disparate impact suits filed under the ADEA, employers must be given the opportunity to show that their actions were reasonable. On remand, the Second Circuit reversed its earlier ruling, concluding that the employees had the burden of demonstrating the employer’s discretionary termination process was unreasonable and that they failed to carry this burden.

    The Supreme Court ruled on 6/19/08 that the employer bears the burden of production and the burden of persuasion under the ADEA in establishing that it acted in reliance on “reasonable factors other than age” in a disparate impact case. This is an affirmative defense that, like other affirmative defenses, the employer must prove. Because this is a disparate impact case, involving alleged discrimination that results in a workplace disparity based on statistical evidence, plaintiffs must still point to a specific employment practice that caused the disparity. The case was sent back to the lower courts to determine whether the employer proved its defense.

     

    Noe v. PolyOne Corp.   (6th Circuit)

    Lifetime vesting of retiree health care benefits

    The NAM and 4 other organizations filed an amicus brief 4/9 urging all the judges on the U.S. Court of Appeals for the Sixth Circuit to review a ruling by three of their members that threatens to impose huge health care liabilities on manufacturers. At issue is whether a union contract implies lifetime health care for retirees if the contract does not specify that health benefits are provided for the length of the contract only. We argue that in the non-union context, courts do not presume that retiree health care benefits are vested for life without a clear intent by the employer to do so, and there is no reason to apply a different presumption in the union context.

    The Sixth Circuit is the only federal appeals court to cling to the so-called Yard-Man inference that retiree health benefits vest. This conflicts with the goal of federal labor policy to provide some degree of uniformity around the country, and encourages lawsuits in the Sixth Circuit.

    The petition for rehearing was denied on June 2, 2008.


    Related Documents:
    NAM Brief  (April 9, 2008)

     

    14 Penn Plaza LLC v. Pyett   (U.S. Supreme Court)

    Whether arbitration clause in collective bargaining agreement is enforceable

    Members of the Service Employees International Union who had worked as night security guards for 14 Penn Plaza were replaced in August 2003, when 14 Penn Plaza contracted with another firm to provide security for the building. Claiming that they were the building’s only employees over 50 years old, the union members filed an age discrimination suit against 14 Penn Plaza under the Age Discrimination in Employment Act (ADEA). 14 Penn Plaza filed a motion to compel arbitration under the union members’ collective bargaining agreement, which clearly required that discrimination claims be resolved via arbitration.

    The district court denied 14 Penn Plaza’s motion to compel arbitration and the Second Circuit affirmed, holding that a “mandatory arbitration agreement purporting to waive a covered worker’s right to a federal forum with respect to statutory rights is unenforceable,” even when such an agreement had been freely negotiated by a union.

    On April 1, the Supreme Court held that an arbitration clause contained in a collective bargaining agreement is enforceable. The Court reasoned that because the arbitration clause was freely negotiated and “clearly and unmistakably” required that ADEA claims be resolved by arbitration, it had no legal basis to strike down the provision. An earlier decision allowed arbitration of ADEA rights for individuals, and the Supreme Court has now applied this principle to collective bargaining agreements, as long as the waiver of the right to sue for ADEA violations is clearly expressed. The decision is important because it applies the right to arbitrate ADEA disputes broadly to employer agreements with individuals and unions alike.

     

    Crawford v. Metropolitan Gov't of Nashville   (U.S. Supreme Court)

    Retaliation claims under the Civil Rights Act

    In 2002, local Tennessee school officials conducted an internal investigation into charges of sexual misconduct by the school district’s employee relations director, Gene Hughes. During the investigation, Vicky Crawford, a payroll supervisor, reported that she witnessed and had been the victim of sexual harassment by Hughes. The investigation did not result in any disciplinary action or EEOC charge against Hughes. Six months later, Crawford was fired for alleged embezzlement and drug use, along with two other employees who had participated in the investigation.

    Crawford filed a charge of discrimination with the EEOC, alleging that she had been fired in retaliation for what she told investigators about Hughes. Crawford later brought her suit in federal court, asserting that her employer’s actions violated Title VII of the Civil Rights Act, which forbids retaliation against an employee because the employee has participated in an investigation, proceeding, or hearing “under this subchapter” (known as the “participation clause”).

    The district court granted summary judgment for the employer, holding that employees are not protected under Title VII’s anti-retaliation provision when participating in an employer’s internal investigation. The Sixth Circuit affirmed, holding that “participation in an internal investigation” initiated by the employer, “in the absence of any pending EEOC charge,” is not a “protected activity” under Title VII’s participation clause. The court also reasoned that extending Title VII’s protections to internal investigations may deter employers from undertaking such investigations.

    The Supreme Court will now decide whether Title VII’s anti-retaliation provision protects employees from being terminated when they allege misconduct by another employee during their employer’s internal investigation of discrimination. This is a tricky situation because allowing retaliation suits prior to formal charges at the EEOC will increase litigation, but not allowing them will encourage employees to file charges under the EEOC’s procedures.

    On 1/26/09, the Supreme Court unanimously reversed, holding that Title VII's anti-retaliation provision protects employees from being terminated when they allege misconduct by another employee during their employer's internal investigation of discrimination. The Court stated that when "an employee communicates to her employer a belief that the employer has engaged in … a form of employment discrimination, that communication virtually always constitutes the employee's opposition to the activity." In his concurring opinion, Justice Alito remarked that this holding did not address "opinions" that were not communicated directly to the employer but instead were informally communicated to co-workers, thereby suggesting that such opinions would not be protected by the anti-retaliation provision.

     

    Locke v. Karass   (U.S. Supreme Court)

    Whether union can charge nonmembers for litigation expenses of national affiliate

    The Supreme Court has held that unions can collect service fees from nonmembers to cover expenses for collective bargaining and contract administration, but cannot collect service fees from nonmembers to support political or ideological expression. In this case, the Maine State Employees Association (MSEA), the exclusive bargaining agent for certain state employees, paid a portion of the service fees collected from nonmembers to its national affiliate, the Service Employees International Union (SEIU), who in turn used part of it to pay for litigation activities undertaken by SEIU throughout the country.

    The nonmembers challenged on First Amendment grounds the portion of the service fee attributable to SEIU's litigation costs. The federal district court held that collecting the service fee was not unconstitutional, because the union adequately explained the basis for the fee, provided the employees an opportunity to challenge the fee in impartial arbitration, and provided for escrow of disputed amounts.

    The First Circuit held that MSEA may lawfully collect service fees from nonmembers for this "extra-unit litigation" because it is related to the union's collective bargaining duties. The Supreme Court agreed to decide whether a union serving as the exclusive bargaining agent for state employees can charge nonmembers for litigation expenses incurred by its national affiliate.

    On Jan. 21, 2009, the Court allowed the union's charge for national litigation expenses as long as (1) the litigation is of a kind that would be chargeable if it were local (appropriately related to collective bargaining rather than political activities), and (2) the charge is reciprocal (other locals contribute similarly).

     

    Ricci v. DeStefano   (U.S. Supreme Court)

    Standards for discarding employment test results with disparate racial impact

    This controversial 5 to 4 decision involves whether New Haven could properly discard promotion test results that they believed could have led to a racial discrimination suit by blacks. The majority ruled that the city could not reject the test results unless it could demonstrate a strong basis in evidence that it would have been liable under the disparate impact provisions of Title VII of the Civil Rights Act. The Court found that if it had certified the test results, black plaintiffs may have been able to show a prima facie case of disparate impact, but the city could have rebutted that case by showing that the test was job-related and consistent with business necessity and there was no alternative with a less disparate impact.

     

    Thompson v. North American Stainless, LP   (6th Circuit)

    Whether Title VII covers third-party retaliation claims

    Title VII of the Civil Rights Act of 1964 protects employees from retaliation by their employers after complaining about discrimination in the workplace. This case involves not the employee who complained, but her fiance, who was terminated from his job. He claimed the termination was in retaliation for his fiancee's complaint, while the company cites performance-related problems. The company also argued that the plain language of the statute provides claims only to those who make a charge or otherwise participate in an investigation, proceeding or hearing.

    A 3-judge panel of the Sixth Circuit ruled that a fiance or other person that is closely related or associated with those who are directly involved in protected activity may sue if there is a "causal connection between the protected activity and adverse employment action." The trial judge had ruled that the plaintiff had presented no evidence that he had participated in any protected activity.

    The NAM filed an amicus brief urging the full complement of Sixth Circuit judges to uphold the trial judge, arguing that the statute is clear on its face and already protects those who "oppose discriminatory employment practices" or "participate" in equal employment proceedings. A rule that permits third-party retaliation claims would increase even more dramatically retaliation charges, which are the fastest-growing category of charges filed under Title VII, and would put employers in the untenable position of having to speculate about possible relationships an employee may have that could give rise to potential liability each time they contemplate disciplinary or other action against that employee.

    This case presents a clear example of judges reading statutes in a way to achieve a policy objective rather than to enforce the text as written. A strong dissent by one judge in this case warns against legislating from the bench.

    On June 5, 2009, the full Sixth Circuit ruled that "the authorized class of claimants [in third-party retaliation cases] is limited to persons who have personally engaged in protected activity by opposing a practice, making a charge, or assisting or participating in an investigation." The majority affirmed dismissal of the case against the company, finding the language in the anti-retaliation provision plain on its face. Congress did not provide a cause of action by those who do not personally oppose an unlawful employment practice, make a charge, testify, assist or participate in an investigation. The text of the statute should not be disregarded in favor of arguable public policy preferences.

    The Supreme Court agreed on 6/29/2010 to hear this case on appeal.


    Related Documents:
    NAM Brief  (October 10, 2008)

     

    Baker v. American Horticulture Supply, Inc.   (California Supreme Court)

    Interpreting California's Independent Wholesale Sales Representatives Act

    On Aug. 20, 2010, the NAM and the California Manufacturers and Technology Association filed an amicus letter urging the California Supreme Court to review a state appellate decision that subjects manufacturers to treble damages liability for inadvertent violations of a state statute that prescribes various formalities for contracts with sales representatives. The Independent Wholesale Sales Representative Act, Cal. Civ. Code Sec. 1738.13, requires, among other things, that contracts specify the rate and method by which commissions are computed, the precise geographical area covered, and that sales representatives sign a written receipt acknowledging that he or she has received a copy of the contract. "Willful" violations are subject to treble damages, but the statute does not specify the level of damages that are available for non-willful violations. In this case, a California appellate court ruled that this legislative oversight would be corrected by allowing suits for single damages where a party does not act willfully, but it also adopted a loose standard of willfulness that could make most suits by sales representatives subject to treble damages.

    Our amicus letter urged the California Supreme Court to review this decision. The lower court's ruling threatens to "open the floodgates of litigation against manufacturers doing business in California who inadvertently run afoul of the Act . . . No matter how innocuous the violation." In addition, by lowering the threshold for recovery of treble damages, the opinion "creates a trap for unwary manufacturers who do not know about technical requirements of the Act." The result is bad for manufacturers doing business in California.

    The California court declined to review this appeal.


    Related Documents:
    NAM amicus letter  (August 20, 2010)

     

    Chamber of Commerce v. Edmondson   (10th Circuit)

    Preemption of state immigration verification requirements

    The NAM is a member of the Human Resource Initiative for a Legal Workforce, which filed an amicus brief on 10/23/08 in the 10th Circuit in a case involving an Oklahoma law that requires every business that has a contract or subcontract with a public employer to use the federal Status Verification System to verify the employment authorization status of all new employees. The law also makes it illegal to fire a U.S. citizen or permanent resident alien while retaining in a similar job an employee who is an illegal alien. Employers using the federal system are exempt from liability, investigation or suit under this section; those who do not are at risk of litigation.

    The problem is that Oklahoma is one of a growing number of states and municipalities that have passed or are considering such laws, but their enforcement schemes are different, making it increasingly difficult for an employer doing business in multiple states to navigate the conflicting requirements. The laws impose a wide variety of inconsistent verification requirements, squarely conflicting with the intent of Congress to create a nationally uniform and comprehensive federal system for regulating the employment of alien workers.

    Our amicus brief enumerated the serious flaws that exist with the federal verification system, specifically the experimental Basic Pilot Program known as E-Verify. Studies have pointed out the errors in the system, including 17.8 million records that contain discrepancies related to name, date of birth or citizenship status. The GAO reported that the government is not equipped to manage a significant expansion of E-Verify users. Employers have complained of multiple problems and delays, prompting Illinois to prohibit employers from using it. Participation in the program is burdensome and costly.

    On 2/2/2010, the court ruled that the lawsuit was likely to succeed on the merits regarding Sections 7(C) and 9 and that the trial court properly issued an injunction against enforcement of the law. The court also found that Section 7(B) of the law is not impliedly preempted by federal law. Section 7(C) prohibits discharging an employee who is a U.S. citizen while still employing employees who are unauthorized aliens, and Section 9 requires verification of employment authorization.. Section 7(B) applies to state government contractors.


    Related Documents:
    Human Resource Initiative's Brief  (October 23, 2008)

     

    EEOC v. Kronos Inc.   (3rd Circuit)

    Breadth of EEOC administrative subpoenas

    How broad is the EEOC's administrative subpoena authority? That agency urged the courts to allow it to seek information from companies and third party testing firms that goes far beyond the bounds of an individual complaint. The EEOC wants to search for systemic discrimination by employers or the third parties they hire to do personality tests or other tests prior to employment. However, the courts are not all so expansive.

    The defendant in this case, Kronos, won before a federal judge. The EEOC appealed to the Third Circuit. The NAM and others filed an amicus brief arguing that the EEOC’s tactics in this case exceed its statutory authority. Pursuing unbridled fishing expeditions in search of a big system case diverts valuable resources from investigating actual, live charges. The statute granting the EEOC investigatory powers is limited to investigations relating to the specific charge that an individual files.

    Also on appeal was a district court order protecting the confidentiality of personality test information disclosed to the lawyers during discovery. We argued that validated employment tests are important hiring tools whose integrity could be compromised by even a minor breach of confidentiality.

    On Sept. 7, 2010, the Third Circuit reversed in part, allowing the EEOC authority to expand an investigation of a single complaint into a broader investigation involving hiring practices in general and other job positions. It allowed a broadening of the time period to be examined and allowed the EEOC to look at the effect of the company's use of an employment assessment in hiring nationwide. According to the Third Circuit, the EEOC's power to investigate "encompasses not only the factual allegations contained in the charge, but also any information that is relevant to the charge." The court also ruled that while the EEOC may expand its investigation to include various legal theories of disability discrimination, it may not expand its investigation to seek out racial discrimination that is wholly unrelated to the original charge. Only "reasonable" expansion of the investigation is allowed.

    The court sent the confidentiality issue back to the trial court for further explanation.


    Related Documents:
    NAM brief  (December 14, 2009)

     

    Granite Rock Co. v. International Brotherhood of Teamsters   (U.S. Supreme Court)

    Union contract formation and remedies for breach

    After Granite Rock reached an agreement with the union representing one of its facilities, and the workers ratified the agreement, the union sought an additional contract provision that would absolve the international union of any liability for damages arising from its activities at other Granite Rock facilities. The company refused to make the additional concession, and the union went on strike. When Granite Rock sued for breach of the no-strike clause, two issues wound up on appeal to the Supreme Court.

    The first involved whether a court or an arbitrator should decide whether there was in fact a valid contract. The NAM filed an amicus brief May 1, 2009, urging the Supreme Court to hear the appeal and apply existing law that federal courts have the authority to determine the existence of a collective bargaining agreement. In its ruling on June 24, 2010, the Court agreed. Whether a collective barganing agreement has been created is an issue to be decided by a court, not an arbitrator, according to the 7-2 majority.

    Also at issue in the case was whether there is any remedy under Section 301 of the Labor Management Relations Act against the international union for allegedly interfering in the contractual obligations of the local. The NAM supported review of the Ninth Circuit decision, which said the international union was immune from suit even if it compelled its affiliated union to refuse to honor its previous commitment to Granite Rock. We argued that many unionized employers will face the prospect of internationally sanctioned strikes that violate local bargaining agreements but that cannot be remedied. It is very common for international unions to retain control over the bargaining process even though they do not sign the final agreement, and the Ninth Circuit's narrow interpretation conflicted with other federal court rulings and ignored the realities of the relationship between local unions and their international controllers. On this issue, the Supreme Court ruled unanimously that the Ninth Circuit did not err in rejecting Granite Rocks' request for a remedy under Section 301, but 7 Justices left the door open to such a claim if further proceedings in this case fail to provide relief under a different statute. It is possible that the Court could recognize a claim under Section 301 if no other remedies are available.


    Related Documents:
    NAM brief on the merits  (September 3, 2009)
    NAM brief on the petition  (May 1, 2009)

     

    Lewis v. City of Chicago   (U.S. Supreme Court)

    Filing deadline for EEOC charges

    Before an employee may file a suit against an employer for discrimination, the employee must file a charge with the EEOC "within 300 days after the unlawful employment practice occurred." This case, brought under Title VII of the Civil Rights Act, involved whether the 300-day period begins when the employer announced the results of a discriminatory hiring test, or whether it begins again each time the employer makes a hiring decision based on the results of the test. On 5/24/10, the Court ruled unanimously that the employment practice that allegedly was discriminatory was the selection of firefighter hires on the basis of an old test. Thus, each new decision based on old test results constitutes a new employment practice that starts the 300-day time limit for filing suit.

    This outcome could substantially lengthen the time during which employers are exposed to liability from tests or other employment practices that are nondiscriminatory of their face but that may have a discriminatory impact.

     

    New Process Steel, L.P. v. NLRB   (U.S. Supreme Court)

    NLRB quorum requirement

    The National Labor Relations Board had only 2 members beginning on December 31, 2007, even though 5 were authorized and the Board allows 2 members to decide cases when a quorum of 3 exists. The Seventh Circuit upheld a decision by the 2-member board, but the D.C. Circuit, on the same day, ruled that the Board must have at least 3 sitting members. Several hundred decisions by the 2-member Board were affected. This dilemma was caused when President Bush's recess appointments were blocked by Senate Democrats.

    On 5/24/10, the Supreme Court ruled 5 to 4 that the National Labor Relations Act requires that there be at least 3 members on the Board in order to exercise the delegated authority of the Board. Section 3(b) requires delegation to at least 3 members. Their membership must be maintained for this delegation to continue to be valid. Since the decision, the NLRB has been revisiting many of the decisions that were thrown into doubt.

     

    Chamber of Commerce v. Whiting   (U.S. Supreme Court)

    Preemption of state immigration verification requirements

    The NAM is a member of the Human Resource Initiative for a Legal Workforce, which filed an amicus brief on 8/27/2009 urging the Supreme Court to review an adverse decision from the Ninth Circuit in a case involving the Legal Arizona Workers Act. That state law requires businesses to use a particular employment verification program, E-Verify, that Congress decided should be voluntary, not mandatory. It also imposes penalties beyond those prescribed by federal law.

    The problem is that Arizona is one of a large number of states and municipalities that have recently passed or are considering such laws, but their enforcement schemes are different, making it increasingly difficult for an employer doing business in multiple states to navigate the conflicting requirements. The laws impose a wide variety of inconsistent verification requirements, squarely conflicting with the intent of Congress to create a nationally uniform and comprehensive federal system that limits the imposition of undue burdens on businesses.

    Our amicus brief enumerated the serious flaws that exist with the federal verification system. Studies have pointed out the errors in the system, including 17.8 million records that contain discrepancies related to name, date of birth or citizenship status. We also provided compelling evidence about the different penalties and enforcement schemes embodied in various laws around the country, and the burdensome and costly effect these will have on business.

    On May 26, 2011, the Supreme Court, over dissents from Justices Breyer, Ginsburg & Sotomayor, affirmed the lower court's decision. It found that the Arizona law falls well within the confines of the authority Congress chose to leave to the states and is not expressly preempted. Federal law does not prohibit state licensing law restrictions, but it does prohibit civil or criminal sanctions.

    A plurality of the Court found that the Arizona law is not impliedly preempted by federal law, because Congress expressly allowed the states to pursue sanctions through licensing laws, and because the state law uses federal definitions and verification information.

    The Court also found that mandating the use of the federal E-Verify program is not preempted. Federal law limits what the federal government can do with E-Verify, but does not prevent states from participating in it. The Court found that the consequences to an employer that does not use the E-Verify system to verify the employment eligibility of an employee are simply that the employer forfeits an otherwise available rebuttable presumption of compliance with the state law.


    Related Documents:
    NAM brief  (August 27, 2009)

     

    EEOC v. Schwan's Home Service   (8th Circuit)

    Breadth of EEOC subpoena authority

    The NAM joined with the Equal Employment Advisory Council and the U.S. Chamber of Commerce in an amicus brief urging the Eighth Circuit to overturn a trial court ruling that authorized the EEOC to enforce an administrative subpoena that is not based on a valid charge of discrimination, and that broadly seeks information through a subpoena enforcement action that is not relevant to the charging party’s claims.

    A single employee complained to the EEOC about alleged sexual harassment and retaliation under Title VII of the Civil Rights Act of 1964, but the company says she did not meet the performance requirements of the general manager position she sought. The EEOC sought a variety of information and documents from the company based on amended allegations that included a charge of class-wide discrimination.

    Our brief argued that the new allegations fail to provide a “clear and concise statement of the facts” constituting the alleged violation and would authorize an open-ended audit of all of the company’s employment practices, in violation of statutory language designed to prevent the exercise of unconstrained investigative authority.

    We also argued that the individual did not herself claim to be aggrieved by class-wide hiring discrimination, an essential element to an EEOC investigation in this case. The EEOC’s subpoena must be limited to the charges made and supported with facts by the complaining party.

    On July 13, 2011, the Eight Circuit affirmed the district court's order enforcing the EEOC's broad subpoena. It found that the charging party had complied with all the statutory requirements, and the charge did not need more than an unsubstantiated belief that discrimination had occurred. It also found that the subpoena generally related to the charge of potential systemic gender discrimination. The ruling validates broad subpoena power at the EEOC, based on unsubstantiated claims.


    Related Documents:
    NAM brief  (November 10, 2010)

     

    Harris v. Superior Court   (California Supreme Court)

    Classifying employees under California's administrative exemption

    The NAM filed an amicus letter urging the California Supreme Court to review a lower court ruling that throws into question whether employers can classify many different kinds of employees as exempt from the minimum wage and overtime provisions of California law under the "administrative" exemption. Administrative personnel are exempt from the wage and hour laws, but defining who is administrative is the heart of this case.

    Our letter points out that the lower court's ruling will affect many more jobs than just the insurance claims adjusters that are the plaintiffs, and that the California Supreme Court should try to help ensure that state and federal interpretations are consistent and predictable.

    Also, the test used by the court of appeal ignores the fact that employees do not necessarily need to “participate in the formulation of management policies or in the operation of the business as a whole” to be doing work “directly related to management policies or general business operations” and thus be covered by the administrative exemption. Employees need only affect policy or have the responsibility to carry out policy to be doing work “directly related” to management policies or to general business operations.

    On Dec. 29, 2011, the California Supreme Court reversed the lower court and sent the case back to them to apply a legal standard outlined in its decision. According to the court, "The essence of our holding is that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue."


    Related Documents:
    NAM Amicus Letter  (October 11, 2007)

     

    In re Specialty Healthcare and Rehabilitation Center v. .   (NLRB)

    Defining scope of bargaining units

    This case involves how to define a bargaining unit at a company. The United Steelworkers attempted to organize and represent a group of certified nursing assistants at a nursing home, while the employer contended that the appropriate unit includes all nonprofessional service and maintenance employees. The NLRB’s regional director ruled for the union. When issues like this are appealed, the NLRB decides them on a case-by-case basis, and it asked for input on how to determine the appropriate employees to include in each bargaining unit. In nursing homes and other nonacute health care facilities, the Board considers “community of interests” factors and background information about the workplace in determining the bargaining unit, and it asked for the views of interested parties on this question, not only for nursing homes but also for all industries. It planned to issue rules governing appropriate units via this litigation, rather than by a rulemaking process.

    The Coalition for a Democratic Workplace, of which the NAM is a member, filed an amicus brief March 8, 2011, focusing on the Board’s broader question of whether employees performing the “same job at a single facility is presumptively appropriate” as the bargaining unit. Our brief urged the Board not to tackle this question in the context of the nursing home case, but if it did, to continue to use the “community of interest” test that has guided employers and labor organizations for decades. If the Board were to adopt a standard that allows very small bargaining units, employers would be burdened with negotiating and administering a number of different contracts covering only a few of its employees. The Board should not attempt to establish a comprehensive approach to bargaining unit designations by adjudicating a nursing home dispute; rather, it should use the rulemaking process with public hearings.

    In addition, the proliferation of units limits the rights of employees by creating barriers in the workplace, creating the risk of balkanizing the workforce and making employee advancement more difficult. A bargaining unit should include employees who have a community of interest that is sufficiently distinct from those excluded from the unit.

    On August 30, 2011, the Board released a 3-1 ruling that the group of certified nursing assistants was the appropriate bargaining unit, and did not need to include all other nonprofessional service and maintenance employees of the workplace. It did so by applying a community-of-interest approach, adding that the burden is on the employer to prove that employees not included in the group seeking recognition "share an overwhelming community of interest with the included employees." This means that the factors used in determining whether members of groups share a community of interest must "overlap almost completely." The majority adopted this formulation to provide employers and employees with a clear standard to reduce litigation and produce more predictable and consistent results.

    The National Labor Relations Act creates a set of presumptively appropriate bargaining units encompassing "the employer unit, craft unit, plant unit, or subdivision thereof." If the employees choose to define a bargaining unit in a way that is "appropriate," their decision will be upheld by the Board. This means that small bargaining units will be allowed as long as members in that unit share a community of interest, and the majority even stated that a unit is not "inappropriate simply because it is small."

    NLRB Member Hayes dissented, arguing that the decision "fundamentally changes the standard for determining whether a petitioned-for unit is appropriate in any industry subject to the Board's jurisdiction," and warning about proliferation of bargaining units. He said that the majority's community-of-interest test effectively gives controlling weight to whatever unit a union has been able to organize. Rather, he would require a showing that a group's interests "are sufficiently distinct from those of other employees to warrant the establishment of a separate unit." Thus, the decision "encourages unions to engage in incremental organizing in the smallest units possible." He concluded by saying that the majority's opinion in this case and their proposed snap elections and limited Board review means that unions will organize in units as small as possible and it will be "virtually impossible for an employer to oppose the organizing effect either by campaign persuasion or through Board litigation."

    The rule created in this case was overturned in December 2017 in a case called PCC Structurals, Inc.


    Related Documents:
    CDW amicus brief  (March 8, 2011)

     

    Kasten v. Saint-Gobain Performance Plastics Corp.   (U.S. Supreme Court)

    Whether oral complaints are covered by anti-retaliation provisions of FLSA

    An employee orally complained about the placement of a time clock during a period of months in which he was receiving increasing discipline for time-clock violations. When he was terminated after the fourth offense, he sued his employer, alleging a violation of the anti-retaliation provision in the Fair Labor Standards Act. That provision makes it unlawful for an employer to terminate an employee because such employee has "filed any complaint . . . ." under the Act.

    The Seventh Circuit, along with a majority of other federal appeals courts, ruled that this law covers employees who have filed written complaints, not just made oral statements. On March 22, 2011, the Supreme Court reversed, deciding that the statute also covers employees who do not put their claims in writing. It interpreted "filing" a complaint broadly to encourage "those who would find it difficult to reduce their complaints to writing, particularly the illiterate, less educated, or overworked workers who were most in need of the Act's help at the time of passage[.]"

    This interpretation could open up a tremendous volume of lawsuits following termination decisions. In August, 2010, the NAM joined with the Equal Employment Advisory Council and the NFIB in an amicus brief arguing that the Fair Labor Standards Act provision is clear and narrower than similar provisions under other federal civil rights statutes which prohibit retaliation based on an individual's mere opposition to an employment practice. Extending the FLSA to verbal complaints would undermine the ability of employers to effectively manage their workforces and enforce legitimate workplace rules.

    Requiring written complaints of potential violations "not only would facilitate swift resolution of the dispute, but also would discourage employees from making false or frivolous complaints that stem more from idle 'grumblings' than from legitimate workplace concerns." Written complaints are fully protected against retaliation and can be properly addressed by management.

    The Court's new interpretation providing special status to employees making oral complaints makes employers face more difficult problems when addressing poor performance or disciplinary situations. It can be difficult to tell when an employee is making a statement that constitutes "filing a complaint," but the Court adopted the following test to make that decision: "To fall within the scope of the antiretaliation provision, a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection. This standard can be met, however, by oral complaints, as well as by written ones." This issue is likely to be one of those raised in future cases fleshing out this decision.


    Related Documents:
    NAM brief  (August 23, 2010)

     

    Kraft Foods Global, Inc. v. Spoerle   (U.S. Supreme Court)

    Preemption of state wage law on donning and doffing

    This law suit is about compensation for time spent putting on and taking off steel-toed boots, hard hats, smocks and hair nets when working at a meat processing plant. In collective bargaining, the union agreed to exclude such "donning and doffing" time from hours worked in return for a higher wage rate. Federal law allows such a tradeoff. Wisconsin law does not.

    The Seventh Circuit ruled that a collective bargaining agreement cannot override the state law, and the company must pay for the donning and doffing time at the higher compensation rate. This decision was appealed to the Supreme Court. The NAM filed an amicus brief urging review, arguing that the decision was of national significance and interfered with long-standing collective bargaining agreements and customs and practices in various industries. In addition, the provision at issue was specifically addressed by Congress, and federal law should preempt inconsistent state laws in this area. Unfortunately, on Jan. 10, 2011, the Court declined to review it.


    Related Documents:
    NAM brief  (December 2, 2010)

     

    Lamons Gasket Co. v. .   (NLRB)

    Secret ballot elections regarding union certification

    Forty-one associations joined the NAM in an amicus brief submitted to the National Labor Relations Board in response to the Board's request for advice on its 2007 decision in the Dana Corp. case. There, the Board ruled 3 to 2 that employees must have 45 days after their employer recognizes a union based on card-check authorizations to file a petition to decertify the union or to support an election petition from another union. The Board underscored the preferred method of having a secret election to determine the majority status of a union. The majority found that card-check procedures are much less reliable as indicators of employee free choice on union representation than secret elections.

    The current Board reversed that ruling. On August 30, it ruled 3-1 that only a small percentage of card-signing union authorizations are ultimately overturned with a secret ballot, calling those cases "buyer's remorse." It also held that requiring employers to post a notice informing employees of their right to seek a decertification election after a card-check procedure "actually placed the Board's thumb decidedly on one side of what should be a neutral scale" by requiring a notice of only two of their many rights under the law.

    Our amicus brief argued that Dana should not be overruled. Individual free choice regarding whether to be represented at all by a third party is a necessary precondition to any collective negotiation. "In nearly 25 percent of the 54 Dana elections conducted by the Board, employees exercising free choice voted to reject the employer’s initial, voluntary recognition."

    We also argued that without a card-check review process in the form of a secret election, "employees are left . . . with the likelihood of peer pressure and/or coercion, lack of information, no measurement of unit-wide employee sentiment at the same point in time, and no assurance that the alleged, resulting majority is an accurate reflection of free choice."

    One member of the NLRB dissented from the Lamons Gasket ruling. He said that the majority's decision was "a purely ideological policy choice, lacking any real empirical support and uninformed by agency expertise." He said that the law only imposes an election bar after a valid Board election, not after a voluntary recognition of a union by an employer. He also pointed out that there is no doubt but that a Board-supervised election "provides a more reliable basis for determining employee sentiment than an informal card designation procedure where group pressures may induce an otherwise recalcitrant employee, to go along with his fellow workers." A reversal rate of 25% against the incumbent recognized union is "substantial and supports the need for retention of a notice requirement and brief open period."

    The NAM is also a member of the Coalition for a Democratic Workplace, which filed a separate brief.


    Related Documents:
    NAM brief  (November 1, 2010)

     

    Staub v. Proctor Hospital   (U.S. Supreme Court)

    Cat's paw theory of liability for employment discrimination under USERRA

    The Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), prohibits discrimination based on an employee’s membership in the armed services. This case involves an employee who was discharged allegedly because of his association with the military. Normally an employer is liable when an employment decision is made with an animus against the protected employee. But in this case the decisionmaker had no such animus, and the Seventh Circuit ruled that the animus of another employee could not be imputed to the employer if the employer conducts a separate investigation into the facts relevant to the decision.

    On March 1, 2011, the Supreme Court decided that an employer will be held liable for the discriminatory animus of an employee who affects an employment decision, even if that employee did not make the ultimate employment decision. The case involves the "cat's paw" theory of liability, where the company's decisionmaker is overly influenced by an employee with an improper motive. The term is derived from a fable about a monkey who persuaded a cat to pull chestnuts out of the fire, burning the cat's paw and giving the monkey the chestnuts.

    Here, the Court found that where a management official expresses a discriminatory animus against an employee, and that employee is ultimately fired by another company official partially on the basis of that animus, the company may be liable for discrimination. According to the Court, "[I]f a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." The Supreme Court sent the case back to the lower courts to determine whether the jury instruction given constituted an error big enough to retry the case.

    The decision poses particular difficulties for employers who wish to overcome the impact of a rogue supervisor's discriminatory actions. An employer must take steps to ensure that such actions are not the proximate cause of any adverse employment action against an employee.

     

    Thompson v. North American Stainless, LP   (U.S. Supreme Court)

    Whether Title VII covers third-party retaliation claims

    Title VII of the Civil Rights Act of 1964 protects employees from retaliation by their employers after complaining about discrimination in the workplace. This case involves not the employee who complained, but her fiance, who was terminated from his job. He claimed the termination was in retaliation for his fiancee's complaint, while the company cites performance-related problems. The company also argued that the plain language of the statute provides claims only to those who make a charge or otherwise participate in an investigation, proceeding or hearing.

    A 3-judge panel of the Sixth Circuit ruled that a fiance or other person that is closely related or associated with those who are directly involved in protected activity may sue if there is a "causal connection between the protected activity and adverse employment action." The trial judge had ruled that the plaintiff had presented no evidence that he had participated in any protected activity.

    The NAM filed an amicus brief in the Sixth Circuit (see summary here) and in the Supreme Court. We argued that the statute is clear on its face and protects only those who personally “opposed” a discriminatory employment practice or personally “made a charge, testified, assisted, or participated” in a Title VII proceeding.

    A rule that permits third-party retaliation claims would increase even more dramatically retaliation charges, which are the fastest-growing category of charges filed under Title VII, and would put employers in the untenable position of having to speculate about possible relationships an employee may have that could give rise to potential liability each time they contemplate disciplinary or other action against that employee.

    On Jan. 24, 2011, the Supreme Court unanimously reversed the lower court (Justice Kagan did not participate), ruling that the antiretaliation provision in Title VII must be construed to cover a broad range of employer conduct. It prohibits an employer from action that might dissuade a reasonable worker from making or support a discrimination charge. The test must be applied in an objective fashion, and in this case, a reasonable worker might be dissuaded from engaging in a protected activity if she knew that her fiance would be fired. The Court refused to identify a fixed class of relationships that are protected against reprisals, instead ruling that the standard for judging harm must be "objective."

    In addition, the Court slightly narrowed the universe of potential plaintiffs -- it is not enough that a plaintiff have some injury caused by the company and remediable by a court. Instead, a plaintiff must be within the "zone of interests" sought to be protected by the statutory provision. Thus, a statute protecting employees covers an employee who is the fiance of another employee intended to be harmed by the employer. The fiance was not an accidental victim of the retaliation, but rather a person with the zone of interests protected by the statute, and he therefore had standing to sue. This result will be difficult to apply in many situations, and more litigation over the breadth of third-party retaliation rights can be expected.


    Related Documents:
    NAM amicus brief  (October 29, 2010)

     

    Brinker Rest. Corp. v. Superior Court   (California Supreme Court)

    Mandated lunch and rest breaks

    The NAM and 9 other associations and companies filed an amicus brief 8/18/2009 urging the California Supreme Court to uphold a lower court ruling that an employer's duty to "provide" meal periods is a duty to make meal periods available, not a duty to ensure meal periods are actually taken, and that statistical evidence concerning actual breaks is irrelevant to determining whether an employer afforded the opportunity to take a break. The statute is clear on its face that employers need to "provide" a lunch break, meaning to make it available.

    Our brief warned that reversing this ruling would have negative consequences for employees: (1) employees nearing the end of a 6-hour shift would have to take a 30-minute meal period before returning to work for a few more minutes, (2) employees would be subject to discipline if they are late to clock out for a meal or early to clock in, and (3) employees would be unable to work through a meal period to end the workday 30 minutes earlier. The brief expanded upon adverse consequences in the restaurant, retail, waste management, construction, agricultural, temporary staffing and hospitality industries.

    On 4/12/2012, the California Supreme Court generally upheld the lower court, ruling that (1) an employer need only provide a reasonable opportunity to take the 30-minute lunch break, not ensure that employees use it, (2) meal periods must start after no more than five hours of work, (3) rest breaks are required according to a clarified formula, and (4) a class of employees making off-the-clock claims could not be certified as a class action because there was no substantial evidence of a uniform company policy pressuring employees to work off the clock. This California law has been the basis for thousands of class action suits involving lunch breaks, rest breaks and off-the-clock work. The court's decision is a very important new ruling to help manufacturers with employees in California to understand the requirements and to establish compliant workplace policies.


    Related Documents:
    NAM brief  (August 18, 2009)

     

    Chamber of Commerce v. NLRB   (D.D.C.)

    Challenging NLRB's ambush elections rule

    This lawsuit challenged the NLRB's ambush election rule, issued in December, 2011, which effectively shortened the amount of time in which union certification elections take place and could allow votes to occur in as little as 20 days. The Coalition for a Democratic Workplace, of which the NAM is a leading member, immediately filed a legal challenge to this rule in federal court in Washington, D.C.

    The final rule, effective April 30, 2012, is harmful to employers. Specifically, it alters what types of pre-election hearings can be held (such as who is even eligible to vote in the election) and what types of appeals can be filed prior to an election. If certain matters can be discussed only after an election is held, these matters will often become moot, leaving the employer with no voice to be heard prior to the election. The rule also appears to shorten the time between a petition for certification being filed and the election being held. If most pre-election matters will be deferred until after the election, the election itself could take place very quickly.

    The complaint sought to enjoin the NLRB from enforcing the final rule. It charged that the rule violates the statutory requirement that the NLRB must hold pre-election evidentiary hearings if there are questions concerning whether representation exists. The rule also eliminates a party's right to seek Board review of a regional director's pre-election rulings until after an election, thus depriving employees of the fullest freedom in exercising their rights as required by the law. Other claims raised fundamental concerns that the Board's action impinges on the freedom of speech by employers, that it did not provide an adequate opportunity for comments, and violated the Regulatory Flexibility Act.

    On Feb. 3, 2012, the CDW filed a motion for summary judgment, arguing that employees need at least 30 days to decide how to vote in NLRB elections. Even former Senator and President John F. Kennedy emphasized the need for this time to "safeguard against rushing employees into an election where they are unfamiliar with the issues."

    On April 27, the Chamber and CDW filed a motion for a temporary stay of NLRB action pending judicial review to allow the court time to decide the issues in the case before the rule goes into effect. The next day, the judge denied the motion, saying that the plaintiffs will not suffer irreparable injury because the court will issue its opinion on the merits by May 15, "which date will precede any potential election under the new rule."

    True to his word, Judge Boasberg ruled on May 14, denying the NLRB's motion for summary judgment and granting the plaintiffs'. He ruled that the vote to adopt the rule did not have a quorum. The vote was 2-0, with the third member of the NRLB not voting, and the judge found that the vote of two members in an online voting situation is "simply not enough." The third member "need not necessarily have voted, but he had to at least show up." More is required than just being a member of the Board in order to establish a 3-person quorum. He must "participate" in the decision, although he need not vote to be counted in determining a quorum. In the context of electronic voting, he had to affirmatively express an intent to abstain, or acknowledge receipt of the notification about the vote, but that did not happen. It was as if he had failed to attend the vote at all.

    The ruling leaves open the possibility that members of the NLRB could simply not participate in votes in order to prevent the Board from having a quorum. This could slow down the rulemaking and adjudicatory process at the agency. The court did not reach any of the other procedural and substantive challenges to the ambush election rule, and those issues may have to be litigated later, if the Board reissues the rule with a proper quorum.

    On June 11, 2012, the NLRB filed a motion to alter or amend the judgment, arguing that Member Hayes was in fact present in the Board's electronic voting room. This motion was denied on July 27.


    Related Documents:
    Memo in Support of Motion for Summary Judgment  (February 3, 2012)

     

    Christopher v. SmithKline Beecham Corp.   (U.S. Supreme Court)

    Pharmaceutical salesmen qualify as "outside salesmen" and are exempt from overtime pay

    The Supreme Court held July 18, 2012, that pharmaceutical “detailers” (as they are known in the industry) qualify as outside salesmen when they act to promote drugs to doctors, and are therefore exempt from requirements for overtime pay. The Department of Labor argued that the detailers were not actually salesmen (and therefore entitled to overtime pay) because they did not transfer title of the property, in this case the prescription drugs. The Court rejected this argument and found that the law at issue allowed transfers of title to be considered in qualifying salesmen, but it did not require it. The majority found unpersuasive the Department’s attempt to adopt its policy through a series of amicus briefs rather than using a more deliberate process involving public comment. Using the traditional tools for determining who is an outside salesman, the Court found considerable language in the Department’s regulations supporting its conclusion that these were outside salesmen.

     

    National Association of Manufacturers v. NLRB   (U.S. District Court for the District of Columbia)

    Challenging NLRB's requirement to post provisions of NLRA

    The NAM filed this suit challenging a regulation issued by the National Labor Relations Board that requires employers to post in their workplaces a notice of the right of employees to organize into unions, bargain collectively, discuss wages, benefits and working conditions, jointly complain, strike and picket, or choose not to do any of these activities. The required notice also lists all the things an employer or a union may not do under the law.

    The regulation requires posting in "conspicuous places" as well as where other notices to employees are customarily posted, and on electronic sites if the employer customarily communicates with its employees about personnel rules or policies by such means. In addition, if 20% or more of an employer's workforce is not proficient in English and speaks a language other than English, the employer must post the notice in the language employees speak. Special requirements apply to different segments of the workforce that speak different languages. The NLRB listed this rule as "major," estimating a total compliance cost of $386.4 million for some 6 million employers nationwide.

    The NAM raised 4 issues in our complaint. First, we alleged that the National Labor Relations Act (NLRA) does not expressly grant the Board the authority to promulgate a rule requiring employers to post a notification of employee rights under the NLRA. Second, the Board's authority under the NLRA is triggered when a representation petition or an unfair labor charge is filed, not before. Third, the rule purports to establish a new unfair labor practice -- i.e., failing to post the required notice -- without the statutory authority to do so. And fourth, the new regulation authorizes the Board to allow any employee to file unfair labor practice charges long after the 6-month statute of limitations has expired. We argued that the NLRA does not authorize the Board to waive the statute of limitations except for members of the armed forces whose service interferes with their ability to file charges on time.

    The NAM asked the court to declare the notice posting requirement null and void. Failure to post the notice could result in the Board finding that an employer engaged in an unfair labor practice by interfering with, restraining or coercing employees in the exercise of their rights. It could also result in waiver of the statute of limitations for employee complaints about other unfair labor practices, or could be used as evidence against an employer in any case in which unlawful motive is an issue.

    On Sept. 28, the NAM and co-plaintiff Coalition for a Democratic Workplace, filed a motion for a preliminary injunction and an expedited hearing. We hoped to have the court rule before the effective date of the regulation, or enjoin NLRB implementation and enforcement of the rule indefinitely. We hoped to avoid a situation where companies needed to implement the rule by November 14, its original effective date, only to find that the rule was issued unlawfully.

    On Oct. 5, the NLRB announced that it would voluntarily delay implementation of the posting requirement until January 31, 2012., and after oral arguments on December 19 in which the judge sought a further extension, the Board postponed the effective date again, until April 30, 2012.

    On March 2, Judge Amy Jackson ruled that the NLRB has broad authority to issue rules, and the notice posting provision was valid. However, the Board did not have the authority to impose the penalties for noncompliance, namely making failure to post an unfair labor practice and suspending the statute of limitations for employees that want to file suit for unfair labor practices years after they occur. However, the NLRB may find the failure to post the required notices to be an unfair labor practice, or to toll the statute of limitations, in case-by-case decisions. Failure to post the notices could in some cases result in findings that an employer intended to improperly influence employees from exercising their rights, or could make it easier for the Board to allow an employee to file charges after the statute of limitations has run out.

    The court rejected the NAM's First Amendment arguments, and found that the enforcement provisions were severable from the posting requirement, thus allowing the posting requirement to continue to stand even though a portion of the regulation was found to be invalid.

    On March 5, the NAM and others filed a notice of appeal. All are challenging the adverse decisions on the posting requirement, and all but the NAM are challenging the validity of the recess appointment of some of the current Board members who were appointed by President Obama while the Senate was still meeting regularly in pro forma sessions.


    Related Documents:
    NAM Notice of Appeal  (March 5, 2012)
    NAM Reply brief  (November 22, 2011)
    NAM Motion for Preliminary Injunction  (September 28, 2011)
    NAM Complaint  (September 8, 2011)

     

    Sandifer v. United States Steel Corp.   (7th Circuit)

    Whether changing clothes is a principal activity that starts the work day

    The NAM, the American Meat Institute and the Society for Human Resource Management filed a joint brief in a federal appeals court arguing that courts should respect collective bargaining decisions relating to whether clothes-changing activities are excluded from the compensable workday.

    The case involves whether to compensate time spent walking from a locker room to a work station. In some industries, this is a substantial issue. Here, an employer and union agreed that the activities of donning, doffing and washing (clothes-changing activities) were to be excluded from the work day. The company argued these same activities are not “principal activities” that start or end the continuous workday, and thus no additional compensation, including overtime, is required. Various union-represented employees sued to have this travel time compensated, and the trial court held open the possibility.

    Our amicus brief argued that courts should defer to the collective bargaining process. Congress has repeatedly emphasized the need for courts and governmental entities to defer to the sanctity of the collective bargaining process to protect the interests of both employees and employers, by giving them the flexibility to resolve the challenges of their specific industry as they deem best. The Portal-to-Portal Act was adopted to rein in litigation that was forcing employers to pay for unbargained-for wages relating to clothes-changing activities. Moreover, until last year, the Department of Labor has long advocated that where a collective bargaining agreement excludes clothes-changing activities from the start of the workday, travel time would be non-compensable.

    The trial court wrongly left open the possibility that clothes changing could be a principal activity that starts the work day, but that decision undermines the collective bargaining process and deprives employers and employees of the latitude that Congress intended. Unions negotiate other benefits, such as higher rates of pay for time actually worked, in exchange for not counting travel time as compensable. Paying for travel time rewards employees who are inefficient when using it, at the expense of those who are more efficient. The law was enacted to avoid situations where courts could override collective bargaining terms through litigation, and was designed to keep the Department of Labor from stepping in and changing expectations, potentially resulting in the award of many years of back pay. Instead, in a time of economic crisis, we should be focusing on strengthening relationships between employers and their unions, not making it more expensive for employers to maintain their present workforces.

    On 5/8/12, the Seventh Circuit ruled that the workers here changed into "clothes" as defined in the Fair Labor Standards Act (FLSA), and that activity was covered by the collective bargaining agreement and not subject to compensation under the FLSA. In addition, the court found that if the union and employer agree that such activity is not compensable, then it cannot be a "principal activity" under the statute that would start the clock for the workday. According to the court, "Not all requirements imposed on employees constitute employment." The court also refused to defer to the position of the Department of Labor in this case, because the Department's position has shifted from one administration to another, and they did not offer any useful knowledge that might help the court decide the case. The opinion is filled with straightforward, common-sense, practical and economic-based reasons why clothes-changing provisions in collective bargaining agreements should be enforced as written.

    Interesting note: The court denied our request to file this amicus brief, so we filed an additional motion urging reconsideration, which was also denied. The Seventh Circuit has recently taken a more restrictive attitude toward briefs from groups that are affected by litigation but that are not parties to the litigation. At the same time, it used the fact that no union filed an amicus brief to support its view that the employee claims in this case would not help unions.


    Related Documents:
    NAM brief  (August 29, 2011)

     

    Chamber of Commerce v. NLRB   (D.C. Circuit)

    Challenging NLRB's ambush elections rule

    The NLRB has appealed a decision of a federal judge who ruled that it did not have a quorum when it promulgated its “ambush election” rule in 2011. The Coalition for a Democratic Workplace, of which the NAM is a leading member, challenged the rule. Click here for a summary of the proceedings in the trial court.

    The NLRB filed its main brief on Nov. 16, and the Chamber and CDW filed their brief on Dec. 31, 2012. Oral arguments were scheduled before Judges Henderson, Brown and Kavanaugh, but the arguments were postponed and the case was held in abeyance pending resolution of the Noel Canning decision on whether the recess appointments to the Board were constitutional.

    In December of 2013, the NLRB voluntarily dismissed its appeal in Chamber of Commerce v. NLRB, the case in which the U.S. District Court for the District of Columbia found the Board’s expedited representation election rule invalid because the Board lacked a quorum when it issued the rule in December 2011.


    Related Documents:
    Chamber and CDW brief  (December 31, 2012)

     

    D.R. Horton, Inc. v. NLRB   (5th Circuit)

    Validity of class-action waivers in employment agreements

    The Fifth Circuit Court of Appeals rejected the D.R. Horton, Inc. decision from the National Labor Relations Board (NLRB).

    The Supreme Court and the federal courts of appeals have issued numerous decisions endorsing the use of arbitration agreements and class action waivers to limit abusive litigation against employers. However, in January 2012, in D.R. Horton, the NLRB ruled for the first time that the National Labor Relations Act (NLRA) bans employers from including class action waivers in their employment arbitration agreements. D.R. Horton appealed the NLRB's decision to the Fifth Circuit. In its opinion, that court rejected the NLRB's interpretation of the NLRA as giving employees a non-waivable right to pursue class actions against their employers.

    The NAM filed an amicus brief June 6, 2012 noting that such agreements help reduce business costs, and that the Board does not have the authority to regulate the individual contracts dealing with rights not covered by the National Labor Relations Act (NLRA).

    On December 3, 2013, the Fifth Circuit held that the NLRB's decision in D.R. Horton violated the Federal Arbitration Act (FAA). That statute generally requires courts to enforce arbitration agreements according to their terms, subject to limited exceptions. The court held that no exceptions applied in this case.

    First, the court held that the FAA's "savings clause" did not cover the NLRB's decision. That "savings clause" allows courts to refuse to enforce arbitration agreements on the same grounds that apply to any other contract. Second, the court held that the NLRA did not contain any congressional command overriding the FAA. The court noted as a general rule that a claim under another federal statute may be subject to arbitration unless Congress has overridden the FAA's general mandate that arbitration agreements be enforced. Finally, the Fifth Circuit also noted that three other federal courts of appeal have rejected the argument that class action waivers in employment arbitration agreements violate the NLRA and have stated that they would not defer to the NLRB's decision in D.R. Horton.

    On a separate issue, the Fifth Circuit found that D.R. Horton's arbitration agreement did not make sufficiently clear that employees retained a right to file unfair labor practice charges with the NLRB. The court noted that an arbitration agreement may not prohibit employees from filing unfair labor practice charges. It further observed that even if an agreement does not expressly ban the filing of such charges, it may nevertheless violate the NLRA if "employees would reasonably construe the language" of the agreement as doing so.

    This decision affects employers in two practical ways. First, employers have the authority to utilize arbitration agreements with a class action waiver. Second, every employer with an arbitration agreement should evaluate the wording to ensure compliance with the evolving law on the enforceability of such agreements.

    For reasons not entirely clear, the NLRB allowed the deadline to pass and opted to not appeal the Fifth Circuit’s decision. As the issue now stands, companies will likely prevail in federal court on the issue, but will still battle the NLRB at the agency level. It is possible that the NLRB refused to appeal the case to the high court because it feared an adverse ruling. If this controversy between agency and federal court continues, the Supreme Court will likely have to review the issue. The NAM will continue to weigh in on this issue and take whatever steps appropriate to prohibit the NLRB from stepping outside its statutory authority.


    Related Documents:
    NAM brief  (June 6, 2012)

     

    Genesis HealthCare Corp. v. Symczyk   (U.S. Supreme Court)

    Is a case moot when a defendant offers full value of a plaintiff's claim

    This case involves a suit by an individual for back pay. She sued her employer on her own behalf and on behalf of other similarly situated individuals. The employer offered to settle her claim for the full amount, and asked that the case be dismissed because it no longer was a “case or controversy” subject to resolution in court. On 4/16/13, the Supreme Court decided that this kind of suit, often called a collective action under the Fair Labor Standards Act, should be dismissed. The plaintiff had no personal interest in representing other unnamed plaintiffs, and was made completely whole for her own complaint. The case is important for reigning in litigation driven more by lawyers and the parties, and this ruling will help prevent excessive litigation by plaintiffs that lack a personal interest in the outcome.

     

    Huntington Ingalls Inc. v. NLRB   (4th Circuit)

    Defining scope of bargaining units

    This is another case in which the NLRB has applied its decision in the Specialty Healthcare case to allow employees to create a bargaining unit that is small and underinclusive. The Board’s decision was appealed to a federal appeals court, and the NAM and other filed an amicus brief arguing that the Specialty Healthcare decision was wrong and violated at least two provisions of the National Labor Relations Act. An employer should not have to bear the burden of demonstrating that a proposed bargaining unit should include additional employees who share “an overwhelming community of interest with the included employees.”

    In this case, the company argued that a unit of technical employees working in one department at its shipyard should include all the technical employees at that location. We argued that the Board’s rule eliminates important considerations in determining the breadth of the bargaining unit, and will disrupt the smooth operation of the company processes at a time when American employers face unprecedented economic and competitive pressures. The rule also places too much weight on the grouping selected by the organizing employees, thus effectively violating a statutory provision that the “extent to which the employees have organized shall not be controlling.” In addition, the statute requires the bargaining unit decisions assure employees the fullest freedom in exercising their legal rights, but the Board’s rule failed to consider the rights of employees to refrain from collective activities. By allowing small bargaining units, the Board effectively denies the rights of a majority of the remaining workers to refrain from having union representation in an appropriately defined unit.

    This is another example of how the Board’s new ruling fosters disruptions that smaller or multiple bargaining units can have on business operations, stable labor relations, and realistic collective bargaining. A unit determination should reflect an employer’s functional integration and the resulting “community of interests” shared by its employees. Smaller units reduce employer flexibility and employee advancement opportunities as separate units isolate employees in different seniority systems and job classifications.

    On 7/17/2013, the Fourth Circuit ruled that the NLRB did not have a quorum to issue the decision in this case, because three recess appointments to the Board were unconstitutional. But it also upheld the selected bargaining unit under the standard that was in place prior to the Specialty Healthcare decision, thus avoiding any decision on the propriety of the standard adopted in that case. Although the employees in this case possessed a sufficiently distinct community of interest to qualify for their own bargaining unit, the court refused to enforce the Board's order because it was not properly constituted. Subsequently, the Board issued another decision in October 2014 that required Huntington Ingalls to bargain with the micro-bargaining units. Huntington Ingalls then filed a petition of review of the Board’s order, claiming that the Board did not have jurisdiction, but the 4th circuit enforced the Board’s order.


    Related Documents:
    NAM brief  (October 17, 2012)

     

    Kindred Nursing Centers East, LLC v. NLRB   (6th Circuit)

    Challenging burden on companies to prove "overwhelming community of interest" when contesting bargaining units

    The NAM, along with the HR Policy Association and the Society of Human Resource Management, filed an amicus brief 4/23/12 urging the Sixth Circuit to overturn a new NLRB rule that makes it much easier to create exceedingly small collective bargaining units in a workplace. The rule, announced by the NLRB in the Specialty Healthcare case, allows a group of employees to select the bargaining unit they want, and as long as the unit is defined to include those workers who share a “community of interest,” that defined union can only be rejected if an employer can prove that a larger unit is appropriate because the excluded employees share an “overwhelming” community of interest. This burden of proof is extremely difficult to satisfy, and our brief argued that it violates Section 9(c)(5) of the National Labor Relations Act, which limits the Board from granting controlling authority to a union based on the extent to which the employees are organized. Instead, the Board should decide not only that the employees in a proposed unit have a community of interest, but also whether their interests “are sufficiently distinct from those of other employees to warrant the establishment of a separate unit.”

    We also noted that Section 9(b) of the Act requires the Board to decide on the appropriateness of a bargaining unit, and we argued that it may not delegate this duty to petitioning employees or unions, because that would undermine its obligation to guarantee all employees – including those excluded from the union’s proposed unit – the fullest freedom in exercising their collective bargaining rights. Otherwise, unions can gerrymander the bargaining units “to their hearts’ content” and leave many employees out of the collective bargaining process.

    Furthermore, the Board must act to effectuate the law’s policy of promoting efficient collective bargaining, and the micro-union policy announced in Specialty Healthcare leads to piece-meal unionization and inefficient collective bargaining. Multiple unions may have inconsistent goals, may shut down a plant, affecting other employees, and will create a state of chaos.

    Finally, we argued that the NLRB must change its policy through notice-and-comment rulemaking, not by simply announcing its new rules in a decision in one of its many cases. This change is a legislative-type judgment that is generalized and designed to govern all future cases.

    On August 15, 2013, the Court of Appeals approved the NLRB’s "overwhelming community of interest test" in bargaining unit determination cases. The court rejected all of the employer's challenges to the Board's decision and found that not only did the Board have considerable discretion under the Act in determining the appropriateness of voting units, but also that the Board, in this case, did not substantially change prior law in the unit determination area. The court also held that the Board's decision in Specialty Healthcare did not violate Section 9(c)(5) of the NLRA, which prohibits the approval of bargaining units on an extent-of-organizing basis.


    Related Documents:
    NAM brief  (April 23, 2012)

     

    National Association of Manufacturers v. NLRB   (D.C. Circuit)

    Challenging NLRB's requirement to post provisions of NLRA

    The NAM has won a major victory for manufacturers that we have been fighting for since 2011. This win came from the U.S. Court of Appeals for the D.C. Circuit, where we appealed a federal court ruling that upheld the NLRB's regulation that required employers to post in their workplaces a notice of the right of employees to organize into unions, bargain collectively, discuss wages, benefits and working conditions, jointly complain, strike and picket, or choose not to do any of these activities. For details on the district court proceedings, click here.

    On 5/22/2012, the NAM filed a brief arguing 3 main issues. First, we challenged the fundamental authority of the Board to issue a posting rule at all. Congress never authorized notice-posting requirements, and rejected an express notice-posting amendment in the National Labor Relations Act (NLRA) while accepting notice-posting requirements in other labor laws.

    Second, we again raised the argument that a mandate that private parties post government notices, without a clear statutory basis or compelling governmental interest, violates the First Amendment rights of employers as well as the balance of requirements spelled out in the NLRA.

    Third, if the penalties for failing to post the required notice were themselves unlawful, the judge should have thrown out the entire regulation, because the NLRB did not intend for the posting requirement to stand on its own without enforcement teeth. The posting requirement was not severable from the enforcement provisions, and the entire regulation should fall.

    We later filed a reply brief arguing that the NLRB failed to establish any statutory authority for the posting requirement. The Board had no authority to impose affirmative duties on employers who are charged with violations of the NLRA. The rule also violated the statutory provision which prohibits the Board from regulating expression that “contains no threat of reprisal or force or promise of benefit,” and violated employers’ First Amendment rights by forcing employers to communicate an unwanted editorial judgment to their employees.

    On May 7, 2013, the D.C. Circuit agreed and overturned the NLRB regulation. It found that the rule's requirement that employers post a Government message requires an act of speech, and Section 8(c) of the Labor Management Relations Act declares that speech "shall not constitute or be evidence of an unfair labor practice under the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit." Thus the rule itself violates Section 8(c) because it makes an employer's failure to post the Board's notice an unfair labor practice.

    It also ruled that the Board could not consider noncompliance with the rule to be evidence of antiunion animus, since that is also an unfair labor practice based on protected speech. Finally, the court ruled that the Board did not have the authority to amend the statute of limitations for filing unfair labor practice charges. Unless Congress intended the statute of limitations to include exceptions, the NLRB cannot create them years after the law was enacted.

    Because all three means of enforcing the Board's posting requirement were invalid, the court ruled that the posting requirement itself was invalid, because the NLRB would never have promulgated it in the first place without ways to enforce it. The Board did not want just voluntary compliance.

    A concurring opinion from 2 of the 3 judges found that the Board did not have authority under Section 6 of the NLRA to issue the rule because the posting requirement was not necessary to carry out the Board's responsibilities. It may only issue regulations that are necessary to carry out its responsibilities. The law does not impose an obligation on employers to educate its employees on labor relations law. In addition, the NLRB was set up to handle complaints that are filed by others, not promulgate rules that are "so aggressively prophylactic as the posting rule."

    On 7/22/13, the NLRB asked the full complement of judges on the D.C. Circuit to rehear this case. The NAM filed a brief in opposition, arguing that the Board failed to identify any conflict between the court's ruling and any other court decision that would warrant further review. We also noted that a majority of the panel that decided the case also ruled that the Board exceeded its statutory authority on other grounds which independently preclude enforcement of the poster rule. On Sept. 4, the court declined to rehear the case. The NLRB had 90 days to appeal to the Supreme Court, but it declined to do so. The D.C. Circuit's ruling is now final.


    Related Documents:
    NAM Opposition to Appeal  (August 20, 2013)
    NAM reply brief  (July 11, 2012)
    NAM opening brief  (May 22, 2012)
    D.C. Circuit's Injunction  (April 17, 2012)

     

    Vance v. Ball State University   (U.S. Supreme Court)

    Sexual harassment liability toward supervisors and job directors

    Companies are liable when their supervisors engage in sexual harassment. On June 24, 2013, the Supreme Court decided that supervisors includes only those employees who are empowered by their employer to take tangible employment actions against the victim, such as controling employment, discipline and advancement. Co-workers or other employees who are not supervisors but who may control the day-to-day activities of other employees are not supervisors such that the employer would be strictly liable for their actions. However, an employer may be still be liable for such discrimination if it is negligent.

     

    Banner Health Sys. v. NLRB   (D.C. Circuit)

    Challenging NLRB decision undermining confidentiality of investigatory interviews

    This case involves an employer who asked employees not to discuss their complaints about co-workers with others while an investigation was ongoing. The NLRB ruled that an employer violates employee union-organizing rights when it has such a blanket policy, and that employers must “first determine whether in any given investigation witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.”

    The NAM and other business groups submitted an amicus brief in support of the employer, stating that the NLRB was incorrect in its decision because the Board failed to take into account the challenges employers will now face when conducting an investigation. For example, with the Board’s decision an employer may not be able to uncover the entire story because employees will not come forward if they know the investigation is not confidential. Additionally, the amicus brief pointed out the Board ignored its previous decisions on investigations and overturned decades of its own precedent on the matter. The Board’s decision places an enormous burden on employers to justify the confidentiality of their investigations prior to interviewing all the witnesses or even assessing the situation.

    The D.C. Circuit sent the case back to the NLRB. In June 2015, the NLRB again ruled the employer’s confidentially policy violated the NLRA, and Banner again appealed to the D.C. Circuit. The NAM also filed an amicus brief in the second appeal.


    Related Documents:
    NAM brief  (January 14, 2013)

     

    Cochran v. Schwan's Home Service Inc.   (California Supreme Court)

    Employee reimbursement for a personal item used for work purposes

    On September 29th the NAM submitted an amicus letter to the Supreme Court of California supporting Schwan’s Home Service’s Petition for Review in the case of Colin Cochran v. Schwan’s Home Service. The case asks if an employee is owed reimbursement for a personal item used for work purposes even if the employee incurred no additional costs. California Labor Code Section 2802 requires that employers reimburse employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” The trial court ruled that calculating compensation for use of personal item at no cost would be too hard to calculate. However, the Court of Appeals (CoA) held that “The answer is that reimbursement is always required.” Nothing in the language of the decision limits the analysis to cell phones, and thus employees could be owed compensation for any number of mundane personal items utilized in a work context, even if the employee suffered no loss or expenditure. We argued that this ruling is so broad as to be completely unworkable, as well as completely unreasonable. Additionally, the Private Attorney General Act allows for civil fines to be levied against an employer for any violation of the Labor Code, thus compounding innocent failures to reimburse into disproportionate and frivolous fines. Thus, the NAM argued that the Supreme Court of California should take the decision up for review.


    Related Documents:
    NAM brief  (September 29, 2014)

     

    In re Purple Communications, Inc.   (NLRB)

    Protecting employer email systems

    The NAM and our association allies filed an amicus brief with the NLRB arguing that the Board should not create an exception for employer owned email from the longstanding rule that employees generally have no right to use employer-owned property, equipment, or materials for purposes of Section 7 organizing activities, as long as the employer’s restrictions on such usage are not discriminatory. There is no discrimination in keeping the use of employer email systems restricted to legitimate business purposes and there are many alternatives available for these communications.

    On December 11, 2014 the NLRB issued a decision the Purple Communications, Inc case. The 3-2 decision overturns the 2007 Register Guard case, and holds that employees now may use email for union-related communications during nonworking time. The NAM filed a brief with the NLRB arguing against this possible outcome.


    Related Documents:
    NAM brief  (June 16, 2014)

     

    Integrity Staffing Solutions, Inc. v. Busk   (U.S. Supreme Court)

    Whether security screening time is compensable work

    On June 4th the NAM filed an amicus brief in the Supreme Court in Integrity Staffing v. Busk. This case presents the question of whether routine post shift security screenings of employees are compensable under the FLSA. Such screenings are conducted by many employers, as in this case, to help prevent theft. The resolution of this case could also have an effect on the compensability of the entire broad range of pre and post-shift screenings, conducted by employers to ensure the security of employers’ property and the safety of employees and the public. Until the 9th Circuit’s decision, employers have been able to rely on a uniform body of case law holding that security screenings are not compensable under the Portal-to-Portal Act of 1947, 29 U.S.C. §§ 251-262, as applied by this Court and regulations adopted by the Department of Labor.

    The Ninth Circuit’s decision undermines the decades-old understanding of the Portal-to-Portal Act as interpreted by the Supreme Court in Steiner and Alvarez and by the Department of Labor. In holding time spent in post-shift security screenings to be compensable, the Ninth Circuit incorrectly applied the well-established “integral and indispensable” test and instead developed a new approach based on its view that the screenings were compulsory and done for the employer’s benefit. In so ruling, the court did away with the requirement under the Portal-to-Portal Act of a close and intertwined relationship between the productive work for which an employee is hired and the activity for which the employee seeks additional compensation. The court’s rule would disrupt established workplace practices imposing an unwieldy test that has already increased litigation. The Solicitor General has also filed an amicus brief in the case supporting the legal arguments raised by Petitioner and the NAM brief.

    On December 9, 2014 the U.S. Supreme Court ruled unanimously that the Fair Labor Standards Act (FLSA) does not require employers to compensate employees for the time spent in security checks before and after the work day. The ruling reversed a decision by the U.S. Court of Appeals for the Ninth Circuit and reinforces arguments asserted in the amicus brief filed by the NAM and a coalition of industry groups.


    Related Documents:
    NAM brief  (June 4, 2014)
    NAM brief  (November 7, 2013)

     

    Macy's, Inc.   (NLRB)

    Challenge to micro-unions

    The NLRB’s Specialty Healthcare decision favoring micro-unions has led to numerous cases involving the definition of a bargaining unit. In Macy’s Inc., the Board’s regional director decided that employees of the fragrance and cosmetic departments at Macy’s could form their own union. The regional director found that the small group of employees was an appropriate unit because they were readily identifiable as a group and shared a community of interest. Moreover, the burden to show that the small unit is inappropriate is on the employer, who would have to demonstrate that a larger unit shares an overwhelming community of interest with the smaller unit. Interestingly, the previous year, the union unsuccessfully tried to organize a wall-to-wall unit in the entire store.

    The NAM filed an amicus brief urging the Board to overturn the regional director’s decision. The Board’s policy conflicts with the rights of employees who do not want to form a union by allowing them to be gerrymandered out of the bargaining unit. In effect, if the majority of employees in a facility do not favor forming a bargaining unit, they can be relegated to a minority status when a union selects a gerrymandered unit where it has majority support. The NAM argued that the burden should be shifted to the union to initially demonstrate that the a proposed smaller bargaining unit is constituted on factors other than union support and that the employees are readily identifiable as a group.

    Manufacturers are starting to face a multitude of small unionized bargaining units, making management of the workplace much more difficult and harming their ability to compete. This is the fifth case since Specialty Healthcare in which the NAM has sought to change the Board’s policy and encourage the proper definition of bargaining units in manufacturing facilities.


    Related Documents:
    NAM amicus brief  (February 27, 2013)

     

    Neiman Marcus Group, Inc.   (NLRB)

    Challenging NLRB's policy promoting micro-unions

    A small group of women’s shoe salespeople were handed a decision by an NLRB regional director that allowed them to hold a vote to unionize. The employer appealed, arguing that their group should include many more store employees that have common workplace interests.

    The NAM and other business groups filed a brief 6/13/12 arguing that the NLRB’s recent decision in the Specialty Healthcare case improperly allows this kind of micro-union to be formed, and puts an unreasonable burden on employers to show that a large group is more appropriate. The regional director had ruled that the employees at the store may serve different functions and thus vary in skills to the point that they qualify to form multiple unions. The NAM argued that Congress intended that each case be determined on its own, rather than having the NLRB impose a blanket determination for all cases that a proposed group is valid unless the employer can show otherwise.

    The brief noted that all employees have a statutorily protected “right to refrain from” unionizing activities, and micro-unions prevent those employees from exercising the right to reject a union.

    Furthermore, the Board abused its power by adopting its new standard in the Specialty Healthcare case when it should have gone through formal notice-and-comment rulemaking procedures.

    Finally, it is bad policy to favor micro-unions, because they prevent employees from performing varying job functions, thus inhibiting employee skill development. They also lead to “endless multiple negotiations, conflicting union demands and contract obligations, and burdensome administrative duties.” Micro-unions may foster disruptive employee and union rivalry, as well as situations where one small group of employees could shut down an entire location.


    Related Documents:
    NAM brief  (June 13, 2012)

     

    Nestle Dreyer's Ice Cream Co. v. NLRB   (4th Circuit)

    Forming micro-unions under a community of interest standard

    The NAM filed an amicus brief on July 10, 2012, arguing that the ruling in Specialty Healthcare, which allows very small numbers of employees to form a union, should be overruled because it violates provisions of the National Labor Relations Act (NLRA). That decision creates policy implications that will upset and reduce American investments and competitiveness. We argued that Specialty Healthcare prevents all of the employees from fully controlling the creation of the union. This violation allows micro-unions of as little as 2 employees to circumvent employees who do not wish to unionize. Further, by its ruling in Specialty Healthcare, the NLRB does not determine bargaining units “in each case,” and gives nearly all the control of determining who will be in the union to a very small group. The labor uncertainty from this precedent endangers investment in manufacturing, as employers would be required to deal with multiple and often conflicting unions.

    In 2014, the court vacated and remanded the case to the NLRB. The original decision had been made by a Board that was ruled unconstitutional by the Supreme Court in the Noel Canning case. In 2016, the 4th Circuit denied Nestle Dryer’s petition for review, stating the NLRB was correct in allowing a maintenance-only bargaining unit, holding that the maintenance workers shared a community of interest distinct enough from the production workers for them to have their own bargaining unit.


    Related Documents:
    NAM brief  (July 10, 2012)

     

    Thyssenkrupp Waupaca, Inc. v. DeKeyser   (U.S. Supreme Court)

    "Nature of the work" requires employees to don, doff and shower on-site

    On 8/27/14 the NAM supported review of this case in the Supreme Court. The issue presented revolved around whether the “nature of the work” at Waupaca’s foundries required employees to don, doff and shower on-site. Plaintiffs contended that foundry dust containing silica and other chemicals made the work so hazardous that on-site clothes changing and showering was required by the nature of the work. The district court disagreed and granted summary judgment. The Seventh Circuit reversed, finding that there was a factual dispute over whether the nature of the work required on-site donning, doffing and showering.

    This case is very important to manufacturers. The Seventh Circuit’s position takes the determination of health and safety out of the hands of the legislature and places it in the hands of each district court judge across the country. This is not the role the courts should play, and such a perspective creates instability and unpredictability, and increases costs on business and ultimately harms the employees.

    The NAM’s brief argued that OSHA had promulgated standards for foundries which do not require on-site clothes changing and showering after work. This bright-line rule has been referenced in the donning and doffing space since roughly 1968. It provides a clear and easily administrable criterion for determining whether time spent changing clothes and showering is compensable under the Fair Labor Standards Act (FLSA). If these activities can be performed offsite, at home or elsewhere, they are not compensable. If courts are going to be allowed to order them to pay for time spent changing clothes and showering when, as here, no federal or state agency requires that this conduct be performed on-site, and no rule of the employer requires that these activities be performed on-site, the impact of such a finding could be devastating. A flood of lawsuits would be filed in the foundry and other manufacturing industries, exposing these employers to huge potential payouts from overtime and require payment for additional hours of work at time and one-half. It is further likely that two to three years of back-pay would be in issue in every case, and all employees during this time period would potentially have a claim under the FLSA or Rule 23, the financial consequences would be staggering.

    On November 3, 2014, the Court declined to hear this appeal.


    Related Documents:
    NAM brief  (August 27, 2014)

     

    Baker DC, LLC v. NLRB   (U.S. District Court for the District of Columbia)

    Employers harmed by ambush rule

    The NAM and coalition associations filed an amicus brief supporting three construction employees from Baker LLC which joined a federal lawsuit challenging the National Labor Relations Board’s (NLRB) Ambush Rule. Baker requested a Temporary Restraining Order (TRO) against implementation of the Rule due to suffering irreparable harm on a variety of grounds including a strong objection to the Rule’s requirement mandating employer’s turn over employees personal information over to organizing officials. However, the court found no showing of irreparable harm on the notice posting requirement, a failure to show that the disclosure requirements caused certain and irreparable harm, and a failure to demonstrate that Baker’s due process rights will be irreparably injured. The judge distinguished the prior notice posting rule and states that the NAM case does not signal a substantial likelihood of success on the merits in this case. The Baker case has been consolidated with NAM’s challenge to the Rule in D.C. District court with a hearing scheduled for May 15.


    Related Documents:
    NAM brief  (April 21, 2015)

     

    In re Browning-Ferris   (NLRB)

    What constitutes a "joint-employer"

    On April 30, 2014, the Board issued an order granting review of the Acting Regional Director’s Decision and Direction of Election of the current joint-employer standard as articulated in the Board’s decisions in TLI, Inc., 271 NLRB 798 (1984), enfd. mem. 772 F.2d 894 (3d Cir. 1985), and Laerco Transportation, 269 NLRB 324 (1984). “To establish joint employer status there must be a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.” In June 2014, the NAM’s Manufacturers’ Center for Legal Action (MCLA) submitted an amicus brief outlining key concerns of manufacturers in changing the definition of joint employer.

    On August 27, 2015 in a 3-2 decision, the Board loosened the standard for determining joint employment under the National Labor Relations Act. For the past 30 years, the relevant joint employer inquiry was whether or not an entity exerts a direct and immediate degree of control over another business's employees and their essential terms and conditions of employment. Under the new standard, the Board evaluates whether an entity exercises indirect control over the means or manner of the employees' work and terms of employment, or whether the entity has the potential to exercise such control. This requires a very fact-specific case-by-case inquiry.

    The NLRB’s actions challenge the way manufacturers are able to work in the United States, and the NAM continues to advocate and fight for manufacturers on this issue.

    Browning-Ferris has appealed the Board's decision to the D.C. Circuit Court of Appeals. The NAM has joined that fight, which can be found here.


    Related Documents:
    NAM brief  (June 26, 2014)

     

    Case New Holland, Inc. v. EEOC   (D.D.C.)

    EEOC's authority to send blast emails to company employees

    On June 5, 2013, without any finding of discrimination or advance notice to Case New Holland (CNH), the EEOC delivered an email blast to the business email inboxes of 1,169 CNH employees. The blast email advised the employees, well over a hundred of whom were managers, that the EEOC was investigating CNH for age discrimination. It then directed the employees to provide to the government, through a secure Internet site, evidence of discrimination and personal contact information. The EEOC actually admitted, in later correspondence, that its blast email was trolling for class action plaintiffs to sue CNH.

    CNH asked for a declaratory judgment finding that the EEOC had overreached its authority under its governing statutes and the United States Constitution. There were five counts in the complaint. The First Count asserted an Administrative Procedure Act (APA) violation because no authorizing rule or regulation permitted the blast email. The Second Count asserted that the blast email was neither “necessary [n]or appropriate,” and thus exceeded the permissible scope of the EEOC’s authority under Section 7(a) of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 626(a). The Third Count alleged that the EEOC failed to comply with its own Compliance Manual’s provisions on the conduct of investigations, again in violation of the APA. The Fourth Count asserted an unreasonable invasion of the CNH computer network and of the privacy interests of CNH employees, in violation of the Fourth Amendment to the Constitution. Lastly, the Fifth Count asserted that the EEOC trespassed on the CNH computer network and, by so doing, effected a taking without compensation in violation of the Fifth Amendment to the Constitution.

    The EEOC moved to dismiss the complaint, and on Nov 14, 2013, the NAM filed an amicus brief opposing the motion. Our brief argued that the extensive CNH employee time and property used to complete the EEOC evaluations and interviews constitutes a violation of the Fifth Amendment’s takings clause.

    The EEOC took the highly unusual step of filing a reply brief to the NAM amicus brief calling it "unprecedented" and asked for an extension to file their full reply. The substance of the full EEOC reply demonstrates the significance of the NAM argument. On 1/6/14, we responded (see brief below).

    On 9/24/14, the judge dismissed the case for lack of jurisdiction based on standing. CNH amended its complaint and filed an appeal, and the judge reinstated the case. CNH voluntarily dismissed the case on 10/28/2015.


    Related Documents:
    NAM reply brief  (January 6, 2014)
    NAM amicus brief  (November 14, 2013)

     

    Chamber of Commerce v. NLRB   (U.S. District Court for the District of Columbia)

    Ambush Election Rule

    On January 5, 2015 the NAM sued the NLRB in D.C. District Court to stop the agency’s overreach on its “ambush elections” rule issued on December 12, 2014. The coalition brief argues that the Final Rule violates the statutory requirement for an “appropriate hearing” prior to the election, by giving Regional Directors authority to defer litigation of voter eligibility and inclusion issues until after the election. The brief also argues that the Rule is arbitrary and irrational. Specifically, it promotes speed over all other statutory goals, including employer free speech rights and the opportunity for a full and informed debate before the election; requires employers to give out employees’ private phone numbers and personal email addresses. The Board acknowledges that “the privacy, identity theft, and other risks may be greater than the Board has estimated” but nonetheless concludes that these “risks are worth taking.” Finally, the brief argues that the Rule will result in more election-related litigation, not less, even though the stated purpose of the Final Rule is to reduce such litigation.

    On February 4, 2015, the NAM filed a motion for summary judgment.

    On July 28, 2015, the Court ruled against the NAM's motion.


    Related Documents:
    NAM Opposition to Motion to Dismiss  (March 25, 2015)
    NAM Reply to Motion for Summary Judgment  (March 25, 2015)
    NAM Motion for Summary Judgment  (February 24, 2015)
    NAM complaint  (January 5, 2015)

     

    In re Constellation Brands   (NLRB)

    Unlawful application of bargaining unit determination

    The NAM filed a letter with the National Labor Relations Board affirming support for Constellation Brands. The NAM’s letter asserted that the Regional Director ignored important factors which influenced unit determinations including the departmental lines drawn by Constellation. NAM members have a vital interest in the Board’s application of Specialty Healthcare in the manufacturing setting. The standard for bargaining-unit determinations applied by the Regional Director in this case, which is an inaccurate application of the already unlawful standard established by the Board in Specialty Healthcare is problematic in all industries covered by the National Labor Relations Act (“Act” or “NLRA”), 29 U.S.C. §§ 151-169 including manufacturing. The NAM letter further asked that the Board grant Constellation’s Request for Review and invite NAM and other interested parties to brief these issues as they relate to manufacturing/production facilities.


    Related Documents:
    NAM letter  (February 12, 2015)

     

    M&G Polymers USA, LLC v. Tackett   (U.S. Supreme Court)

    Retiree health-care benefits

    On July 24, 2014, the NAM filed an amicus brief urging the Supreme Court to reverse a Sixth Circuit decision ruling that retiree health-care benefits, resulting from silence in collective bargaining agreements, are presumed to be indefinite. This decision undermines Congress’ intent regarding employee retirement health benefits and disrupts judicial precedent in other circuits. NAM’s brief clarified that when Congress passed the Employee Retirement Income Security Act (ERISA), it in no way intended retiree health care benefits to be indefinite. Furthermore, other federal circuits have effectuated Congress’ intent by requiring clear and express language in order for retiree health benefits to be provided indefinitely. Accordingly, the NAM encouraged the Supreme Court to adopt a clear and express rule affirming ERISA and precluding a presumption of indefinite health-care benefits.

    On January 26th, 2015, the Supreme Court rendered its opinion in this case holding that to determine whether retiree health-care benefits survive the expiration of a collective bargaining agreement, courts should apply ordinary contract principles. Those principles do not include the Sixth Circuit’s inference that parties to collective bargaining would intend retiree benefits to vest for life.


    Related Documents:
    NAM brief  (July 24, 2014)

     

    National Association of Manufacturers v. Perez   (D.D.C.)

    NAM sues OFCCP over its labor rights poster requirement

    Continuing the fight against forced speech and aggressive overreach by federal agencies, the NAM and the Virginia Manufacturers Association (VMA) filed a lawsuit 12/18/13 to stop the Office of Federal Contract Compliance Programs (OFCCP) from enforcing its “posting requirement” rule. The OFCCP, an agency within the Department of Labor, enforces rules and regulations imposed on federal contractors.

    The OFCCP rule adversely affects thousands of federal contractors and subcontractors by forcing them to promote unionization of their workforces or risk being debarred from federal contracts. Our lawsuit asked the court to strike down the rule on the grounds that poster is compelled speech and violates the First Amendment.

    A similar rule put forth by the National Labor Relations Board (NLRB) was struck down earlier in 2013 by a federal appeals court due to a successful lawsuit from the NAM. In that case, the court ruled that similar posters amount to compelled speech and extend beyond the intent of the National Labor Relations Act. Federal contractors deserve the same protection from this aggressive overreach.

    The NAM and VMA filed a joint Motion for Summary Judgment in D.C. District Court on 5/1/14. This case arises from a facial challenge brought by Plaintiffs against Defendant’s Final Rule, at 29 CFR Part 471, 75 F.R. 28368 implementing Executive Order 13496 which forces all federal contractors to post a “Notification of Employee Rights Under Federal Labor Laws”, prominently and conspicuously in places of employment. NAM and VMA argue that the Rule must be vacated as it constitutes compelled speech in violation of the First Amendment of the United States Constitution, has been promulgated in excess of Defendants’ statutory authority, is arbitrary and capricious, and is preempted by the NLRA.

    On May 7, 2015, the D.C. District Court denied the NAM’s motion for summary judgment and entered judgment for the DOL. The DOL rule requiring contractor posting of NLRA rights statement was upheld by the Court and does not violate the constitutional rights of covered employers.


    Related Documents:
    NAM brief  (May 1, 2014)
    NAM Motion  (May 1, 2014)
    NAM & VMA complaint  (December 18, 2013)

     

    Roundy's Inc.   (NLRB)

    Right to exclude nonemployee union handbillers from company property

    The NAM and 194 other national, state and local business organizations filed a brief at the NLRB as part of the Coalition for a Democratic Workplace in a case involving access by nonemployee union members to private property for purposes of handbilling. The case arose when union agents engaged in handbilling in front of 26 of the company's stores. The NLRB allowed the picketing where the company did not have a sufficient property interest, but asked for input from the public about 2 other stores where Roundy's property rights were arguably stronger.

    The NAM/industry amicus brief argues that the company may allow some handbillers, such as charitable solicitors, but may exclude others from its property. The company should have the right to exclude individuals whose handbilling advocates a boycott or otherwise is detrimental to the company. A company must have some degree of control over the messages it conveys to its customers on its private property, and the courts have upheld this principle. Our brief urged the Board to stop requiring employers to allow nonemployee union agents to trespass on private property for the purpose of harming the employer's business under any circumstances. If any limitation on a company's right to exclude handbillers is allowed, it should recognize the difference between handbillers that are engaged in beneficent activities and those that are engaged in harmful activities.


    Related Documents:
    NAM amicus brief  (January 7, 2011)

     

    Walgreen Co. v. Hinchy   (Indiana Supreme Court)

    Indiana court allows for vicarious employer liability for personal employee misconduct

    On February 18, 2015 the NAM filed an amicus brief with the Indiana Supreme Court in Hinchy v. Walgreen Co. An appeals court in Indiana adopted a “strict liability” respondeat superior theory, holding businesses liable for the actions of their employees, regardless of whether the employee was acting within what is traditionally considered the “scope of employment,” and regardless of whether the employee had been trained not to engage in the behavior.

    The NAM brief sought clarification from the Indiana Supreme Court on when an employer can be held liable for the unlawful actions of an employee, where the employee knowingly violated company policy. Although this particular case arose in the health care context, and could have very significant implications for health care companies, the issue is of interest to all Indiana employers.

    Unfortunately, the Court declined to take the case.


    Related Documents:
    NAM brief  (February 18, 2015)

     

    Augustus v. ABM Sec. Serv., Inc.   (California Supreme Court)

    Prohibiting on-call rest periods

    The NAM filed two amicus briefs with the California Supreme Court, in an employment litigation suit, to defend reasonable rest periods for manufacturing employees under California labor laws. The plaintiff alleged that while on-call rest periods are allowed under California law, an employer cannot satisfy its obligation to relieve employees from duties during rest periods when the employer nonetheless requires its employees to remain on call. This limitation could present manufacturers with operational uncertainty and impose additional costs. The NAM’s briefs argued that: under the plain language of the governing statutes and regulations, employers need not relieve employees of all duty during rest breaks because California wage regulations treat rest breaks differently than meal breaks; and the legislative history of the relevant statutes and regulations confirmed that California law authorizes on-call rest breaks. Unfortunately, the California Supreme Court denied the petition for rehearing.


    Related Documents:
    NAM amicus letter supporting reconsideration  (January 12, 2017)
    NAM amicus brief  (November 23, 2015)

     

    Constellation Brands US Operations, Inc. v. NLRB   (2nd Circuit)

    Standard for determining bargaining units

    The NAM filed an amicus brief supporting Constellation Brands in a collective bargaining dispute stemming from the application of the National Labor Relations Board’s (NLRB) new Specialty Healthcare doctrine. The NLRB determined that 46 winemaking cellar employees within a completely integrated production facility constituted an appropriate bargaining unit because they were “readily identifiable as a group” that “shared a community of interest.” This litigation is important to manufacturers because under the new standard, employers would have multiple bargaining agreements that make it difficult to address employee concerns and halt operations until those concerns are addressed. The NAM’s brief argued that 1) the NLRB wrongly decided Specialty Healthcare, which should be overruled because the Specialty Healthcare rule grants too much deference to the union’s proposed unit; 2) Specialty Healthcare represents a radical departure from the NRLB’s longstanding precedent and encourages a multiplicity of fractured units within workplaces throughout the country; and 3) in deciding Specialty Healthcare the NLRB violated the Administrative Procedure Act. Although the court upheld the Specialty Healthcare standard, it found the regional director did not apply the standard correctly.


    Related Documents:
    NAM brief  (December 16, 2015)

     

    District of Columbia v. U.S. Dep't of Labor   (D.C. Circuit)

    Davis Bacon Act does not apply to private construction projects

    The NAM filed an amicus brief in a labor litigation lawsuit to oppose the Department of Labor’s (DOL) application of the Davis-Bacon Act, which requires “prevailing wages” for construction workers on public buildings or public works projects funded by the federal or D.C. government, to a private construction project. This is an appeal after DOL ruled that the City Center DC project was subject to the 1931 Davis-Bacon Act. If left unchecked, the DOL’s attempt to apply the Davis-Bacon Act to the private construction industry would have had a significant and potentially negative impact on private industry, the government and the economy. The NAM’s brief argued that DOL’s application of the Davis-Bacon Act to a private construction project was contrary to the language of the Act and that it was an unprecedented attempt to expand the scope of the Davis-Bacon Act into the private construction industry. The court applied common sense reasoning to reject DOL’s expansion of federal law.


    Related Documents:
    NAM brief  (March 11, 2015)

     

    In re Cooper Tire & Rubber Company   (NLRB)

    ALJ rules that racist statements are not grounds for firing

    The NAM filed an amicus brief defending employers’ rights to implement and follow anti-discrimination and anti-harassment policies in an employment litigation suit. The litigation arose from Cooper Tire’s discharge of an employee for racist statements made by the employee while on a picket line. Manufacturers have a moral and legal obligation to ensure that employees are free of discrimination and harassment in the workplace. The NAM’s brief argued that 1) the National Labor Relations Act (NLRA) should not protect racist comments, regardless of where or when the comments are made; 2) the National Labor Relations Board (NLRB) cannot force employers to violate other federal statutes through its protection of racist speech used on a picket line; and 3) employers need to be able to rely on and apply their legitimate anti-discrimination and anti-harassment policies. Unfortunately, the NLRB held that although the employee’s “statements most certainly were racist, offensive and reprehensible,” they did not forfeit the protection of the NLRA.


    Related Documents:
    NAM brief  (August 20, 2015)

     

    In re Kellogg Brown & Root, Inc.   (D.C. Circuit)

    Privilege for investigations supervised by in-house lawyers

    The NAM filed an amicus brief supporting employers’ rights to protect sensitive communications between employees and an employer’s counsel. This case involves an in-house investigation of tips alleging potential False Claims Act violations where, although the company provided 100,000 pages of documents during the discovery phase, the trial judge ordered that 89 documents identified as privileged be disclosed. If upheld, this precedent will penalize companies for adopting internal compliance programs and force companies to either risk a waiver of attorney-client privilege or to forego legal advice. The NAM’s brief argued that 1) a communication with counsel should be protected provided that the predominant or primary purpose of the communication is for securing legal advice; and 2) if these communications were to lose their privilege solely because they were part of a compliance investigation, “required by regulatory law’” many regulatory programs would be frustrated. In 2014, the appellate court overruled the trial court’s decision and ruled that the communications were protected by the attorney-client privilege. The trial court again ruled against the privilege assertions, and the NAM filed a second amicus brief in 2015 supporting mandamus to the appellate court. In a win for manufacturers, the appellate court reversed the district court for a second time.


    Related Documents:
    NAM brief  (January 30, 2015)
    NAM brief  (March 19, 2014)

     

    In re Miller & Anderson   (NLRB)

    Defining multi-employer bargaining units

    The NAM filed an amicus brief opposing the creation of a joint bargaining unit composed of employees employed solely by one of the entities that comprise a joint employer without the consent of both employers. In this case, a union filed a petition seeking to represent a “multi-employer” bargaining unit consisting of employees from Miller & Anderson and temporary employees from a staffing company. This matter is important to manufacturers because a bargaining model where one entity has no employment relationship with all bargaining unit employees creates conflicting interests that are disruptive to productive bargaining. The NAM’s brief argued that any bargaining unit seeking to include employees employed solely by one of the constituent entities that comprise a joint employer is, of necessity, a multi-employer unit, which requires consent of both employers. The National Labor Relations Board decided that the union was not required to obtain consent from both employers and that it would apply traditional community-of-interest factors to determine if such a joint union is appropriate.


    Related Documents:
    NAM brief  (September 18, 2015)

     

    In re Space Exploration Technologies Corp.   (Dept. of Labor Admin. Rev. Bd.)

    Scope of Davis-Bacon Act coverage when government property is involved

    The NAM filed an amicus brief supporting Space X in its challenge against an extension of the scope of Davis-Bacon Act coverage. The Department of Labor (DOL) alleged that because the lessor, SpaceX, was located on government property, Space X was therefore subject to the prevailing wage requirements of the Davis-Bacon Act. If left unchecked, the DOL’s attempt to apply the Davis Bacon Act to the private construction industry would have had a significant and potentially negative impact on private industry, the government and the economy. The NAM’s brief argued that the DOL’s application of the rule to a private construction project is contrary to the language of the act and that the DOL’s interpretation was an improper attempt to expand the scope of the Davis-Bacon Act into the private construction industry. The National Labor Relations Board remanded this case to the DOL’s Wage and Hour Division for further proceedings.


    Related Documents:
    NAM brief  (February 18, 2014)

     

    In re The Boeing Company   (NLRB)

    Camera-enabled devices in non-restricted areas

    The NAM filed an amicus brief with the National Labor Relations Board (NLRB) supporting an employer’s right to properly manage its workforce during employee demonstrations and to adequately safeguard its manufacturing processes. The plaintiffs alleged that Boeing violated the National Labor Relations Act (the Act) by videotaping employee marches within production facilities on four separate occasions and that Boeing violated the Act when it promulgated and maintained a procedure prohibiting use of employees’ personal camera-enabled devices on site without a valid camera permit approved by security. If upheld, this decision would have significantly infringed on an employer’s ability to safeguard proprietary materials and monitor employee safety. The NAM’s brief argued that 1) photographing or videotaping employees on company premises did not violate the Act because Boeing maintained legitimate reasons to observe the marches; and 2) similarly, the restriction of camera enabled devices on company property did not violate the Act because Boeing had a legitimate business need to protect its manufacturing process. The NLRB concluded that Boeing violated the Act by videotaping employee marches but lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices.


    Related Documents:
    NAM brief  (June 12, 2014)

     

    International Union of Painters v. Great Wash Park LLC   (Nevada S. Ct.)

    Trespass is not protected union activity

    The NAM filed an amicus brief supporting the rights of property owners to access state courts in a dispute regarding third-party trespassers. The owner sought relief from trespass, under state law in a Nevada trial court after the defendants, a labor organization, used projection bombing to beam giant images onto the owner’s property. Effective trespass laws are necessary to protect property owners from trespass. The NAM’s brief argued that 1) the “photobombers” effectively took control of the physical space on which the image was displayed; 2) that state law property claims are not preempted by federal labor laws; 3) labor speech is not privileged over other types of speech; and 4) projection onto private property not only constitutes trespass but also takes property owners’ fundamental ownership rights. Unfortunately, the Nevada Supreme Court declined to hear this appeal.


    Related Documents:
    NAM brief  (September 2, 2015)

     

    Macy's, Inc. v. NLRB   (5th Circuit)

    Fifth Circuit case to reverse micro-unit determination

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit supporting Macy’s, Inc., in a collective bargaining dispute. In this case, the National Labor Relations Board applied the Specialty Healthcare standard to conclude that sales employees in the fragrance and cosmetic departments at a Macy’s location were an appropriate bargaining unit. This litigation is important to manufacturers because smaller bargaining units will render it virtually impossible for an employer to oppose the organizing effect and make it more difficult to address employee concerns. The NAM’s brief argued that the application of the Specialty Healthcare doctrine, which reversed 70 years of precedent and instated a new standard for determining a collective bargaining unit, should not apply because the standard is inconsistent with the National Labor Relations Statue and the legislative history. Unfortunately, the court upheld the Specialty Healthcare standard.


    Related Documents:
    NAM brief  (April 27, 2015)

     

    Nestle Dreyer's Ice Cream Co. v. National Labor Relations Board   (4th Circuit)

    Overturning the NLRB's "overwhelming community of interest" test for bargaining units

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit supporting Nestle Dreyer's Ice Cream Co. (Dreyer) in a collective bargaining dispute after the lower court held that Dreyer’s technical refusal to bargain violated the National Labor Relations Act (the Act). The litigation followed Dreyer’s refusal to bargain after the National Labor Relations Board’s (NLRB) certification of the petitioned-for unit, which consisted solely of maintenance employees. This case is important because to simply allow the instant certification of a maintenance-only unit would be a disservice to employers, employees and orderly collective bargaining. The NAM’s brief argued that the court should reverse the NLRB’s decision because the NLRB1) erroneously failed to give proper consideration to the bargaining history that included a broader unit of maintenance and production employees; 2) relied on the “overwhelming community of interest” test announced in Specialty Healthcare, which was inconsistent with prior doctrine; and 3) Incorrectly made the extent of organization a controlling factor in unit determination. The court denied Nestle Dryer’s petition for review.


    Related Documents:
    NAM brief  (January 13, 2015)

     

    Tyson Foods, Inc. v. Bouaphakeo   (U.S. Supreme Court)

    Uninjured class members should be excluded

    The NAM filed an amicus brief with the U.S. Supreme Court in a class action litigation urging the Court to determine whether a certified class may include uninjured claimants. The plaintiffs sued Tyson foods alleging injury and damages under the Fair Labor Standards Act (FLSA) and seeking overtime wages for time spent dressing and removing protective gear; however, the plaintiffs used statistical modeling to create a fictional plaintiff as the basis of class certification. The rise of no injury class plaintiffs is troublesome to manufacturers because it subjects them to increased litigation from plaintiffs who can hide the deficiencies of individual class member claims. The NAM’s brief urged the Supreme Court to set a bright-line rule against the inclusion of uninjured class members and argued that individuals without injuries do not have a claim. The Supreme Court affirmed the lower court’s ruling but did so on narrow grounds and did not reach the issue that was central to the NAM’s amicus brief.


    Related Documents:
    NAM brief  (August 14, 2015)
    NAM brief  (April 20, 2015)

     

    Volkswagen Group of Am., Inc. v. United Auto Workers, Local 42   (NLRB)

    Application of Specialty Healthcare to maintenance employee micro unit

    The NAM filed an amicus brief with the National Labor Relations Board supporting Volkswagen in a collective bargaining dispute with the United Auto Workers (UAW). The UAW brought the complaint after Volkswagen opposed the creation of a micro-bargaining unit exclusively for maintenance employees. UAW argued that because maintenance employees “share a unique function” they are readily identifiable and therefore should be recognized as a bargaining unit. This litigation is important to manufacturers because multiple bargaining agreements make it difficult to address employee concerns. The NAM’s brief argued that the application of the Specialty Healthcare doctrine, which reversed 70 years of precedent and instated a new standard for determining a collective bargain unit should not apply because the standard is inconsistent with the statute and the legislative history and that the decision in this case fails to even comply with the standard as set forth in Specialty Healthcare. The NLRB rejected Volkswagen’s request for review, but the case was appealed to the U.S. Court of Appeals for the D.C. Circuit, which remanded the case for reconsideration.


    Related Documents:
    NAM brief  (December 23, 2015)

     

    Banner Health Sys. v. NLRB   (D.C. Circuit)

    Challenging NLRB decision undermining confidentiality of investigatory interviews

    The NAM filed an amicus brief in support of an employer’s right to manage internal company investigations of employee misconduct. This case stemmed from a previous National Labor Relations Board (NLRB) decision where Banner Health Systems instructed employees to maintain confidentiality during ongoing investigations of employee misconduct. This issue is important to manufacturers because their business operations would be disrupted by employees discussing the details of a sensitive internal company investigation. The NAM’s brief argued that the NLRB’s ruling would burden employers by requiring them to justify the need for investigatory confidentiality at a point where such justification would be almost impossible. Although the decision is narrowly tailored, the outcome is a win for manufacturers as the court did not opine on the NLRB’s case-by-case approach to justify employer confidentiality.


    Related Documents:
    NAM amicus brief  (January 21, 2016)

     

    EEOC v. Day & Zimmermann NPS, Inc.   (D. Conn.)

    EEOC interference with employer free speech

    The NAM filed an amicus brief supporting manufacturers’ employment rights in an Equal Employment Opportunity Commission (EEOC) claim against an employer for retaliation and interference under the Americans with Disabilities Act (ADA) based on a letter sent from the employer to employees identified as witnesses advising the employees of their rights during a disability discrimination investigation. Not only would the EEOC’s interpretation have negatively impacted the employer/employee relationship by making it more difficult for manufacturers to provide information to employees, but the interpretation also violated employers’ constitutional rights to communicate with employees. The NAM’s brief argued that the EEOC’s action was unlawful because the letter did not violate the ADA and that the EEOC interfered with the employer’s First Amendment right to communicate with its employees. The parties settled the case.


    Related Documents:
    NAM brief  (October 28, 2016)

     

    FedEx Home Delivery v. NLRB   (D.C. Circuit)

    Delivery service contractors as employees

    The NAM filed an amicus brief in support of FedEx’s position that delivery service contractors working for FedEx were independent contractors, not employees of FedEx. The facts of this case were “materially indistinguishable” from a prior case where the U.S. Court of Appeals for the District of Columbia Circuit determined that a group of delivery service contractors were not FedEx employees, but were independent contractors under the National Labor Relations Act. This case is important as worker classification may have broad ramifications affecting the use of independent contractors and partnerships between manufacturers and commercial vehicle drivers are a key asset. The NAM’s brief explained that worker classification issues directly impact all segments of the economy and more directly, the trucking industry. In a win for manufacturers, the court ruled against the plaintiffs.


    Related Documents:
    NAM brief  (August 17, 2015)

     

    International Brotherhood of Boilermakers v. NASSCO Holdings Inc.   (Cal. Ct. App.)

    Notice requirements under the California WARN Act

    The NAM filed an amicus brief in the California Court of Appeals to challenge the California WARN ACT, which requires employers to provide 60-days’ notice before any “mass layoff, relocation, or termination.” This is an appeal from a lower court decision which held that NASSCO violated the WARN Act when it failed to provide required notice before informing 90 employees that they should not return to work for four to five weeks. California manufacturers, particularly those with cyclical employees or staffing requirements that ebb and flow, need certainty in meeting their staffing needs. The NAM’s brief argued that the court erred by reading “layoff” in the Act to include a furlough — a brief break during which about 90 employees (less than 3% of NASSCO’s workforce) did not earn wages but nevertheless remained as NASSCO employees. Unfortunately, the court did not agree with this view but instead affirmed the lower court’s decision, requiring an employer to provide 60 days’ notice prior to a mass layoff, even if the layoff is not permanent and is for less than six months.


    Related Documents:
    NAM brief  (May 1, 2017)

     

    Mendoza v. Nordstrom, Inc.   (California Supreme Court)

    Understanding California's Day-of-Rest law

    The NAM filed an amicus brief supporting Nordstrom Inc. in an employment litigation suit to defend reasonable rest periods for manufacturing employees under California labor law. The plaintiff argued that Nordstrom violated California labor laws when the company failed to provide statutorily guaranteed rest days. The issues in this case are 1) whether employees are statutorily required to take a rest on a defined weekly basis, rather than an undefined consecutive period; and 2) whether an employer may permit an employee to independently choose to decline a rest day. This case is important for manufacturers because it implicates employers’ ability to reasonably manage their workforce and allow flexible rest days to accommodate both the needs of the employer and the employee. The NAM’s brief argued that a defined workweek is the proper and most reasonable framework for calculating the required day of rest and the law should be interpreted to encourage employee flexibility and autonomy in scheduling. The court agreed with the NAM’s arguments, which allows manufacturers to continue to provide employees with flexible scheduling options.


    Related Documents:
    NAM brief  (November 30, 2015)

     

    Nevada v. U.S. Dept. of Labor   (5th Circuit)

    Appeal of DOL's new overtime rule

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit asking the court to uphold a preliminary injunction of a Department of Labor (DOL) overtime rule that would place significant economic burdens on businesses. The overtime rule would have increased the minimum salary exemption thresholds by more than 100% from $23,660 to $47,476 annually. If the injunction was not upheld, more than 4.2 million employees, many of them in manufacturing, would have immediately lost their exempt status causing economic harm to both employers and employees. The NAM’s brief argued that the DOL’s overtime rule is inconsistent with decades of regulations and failed to consider the business community’s legitimate interests. The court granted a motion by the DOL to dismiss the appeal, and the DOL reopened the rulemaking process.


    Related Documents:
    NAM amicus brief  (January 24, 2017)

     

    Plano Chamber of Commerce v. Perez   (E.D. Tex.)

    Challenging DOL's new overtime rule

    The NAM sued the Department of Labor (DOL) to challenge its overtime rule. The rule was scheduled to become effective on December 1, 2016 and would have increased the minimum salary exemption threshold for executive, administrative or professional employees by more than 100%, from $23,660 to $47,476 annually. This case is important as more than 4.2 million employees, many of them in manufacturing, would have immediately lost their exempt status causing economic harm to both employers and employees. The NAM argued that the rule exceeded the DOL’s authority under the Fair Labor Standards Act, and as such the rule is invalid. In a win for manufacturers, the judge granted summary judgement allowing business to continue to operate without a detrimental impact.


    Related Documents:
    NAM Opposition Motion to Intervene  (December 15, 2016)
    NAM Opposition Motion to Stay  (December 15, 2016)
    NAM Reply Brief  (November 21, 2016)
    NAM Response  (October 21, 2016)
    NAM Motion to Consolidate  (October 17, 2016)
    NAM Summary Judgment Brief  (October 14, 2016)
    NAM Complaint  (September 20, 2016)

     

    The Boeing Company v. National Labor Relations Board   (9th Circuit)

    Employee confidentiality in workplace investigations

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit challenging a National Labor Relations Board (NRLB) holding that prohibits employers from recommending employee confidentiality during workplace investigations. The NLRB disapproved of a Boeing form which recommended that employees refrain from discussing a case with any other Boeing employee, other than company representatives investigating the issue or the employee’s union representative. If upheld, this holding would have undermined the ability of employers and employees to engage in confidential workplace investigations for legitimate business purposes. The NAM’s brief explained that the NLRB’s holding infringes on employers’ free speech rights and impedes employers’ abilities to conduct effective workplace investigations. The court remanded the case back to the district court because the NLRB established new rules after the case was filed.


    Related Documents:
    NAM amicus brief  (May 23, 2016)

     

    Volkswagen Group of Am., Inc. v. United Auto Workers, Local 42   (D.C. Circuit)

    Application of Specialty Healthcare to maintenance employee union micro unit

    The NAM filed an amicus brief in the U.S. Court of Appeals for the D.C. Circuit supporting Volkswagen in a collective bargaining dispute with the United Auto Workers (UAW). The UAW brought the complaint after Volkswagen opposed the creation of a micro-bargaining unit exclusively for maintenance employees; UAW argued that because maintenance employees “share a unique function” they are readily identifiable and therefore should be recognized as a bargaining unit. This litigation is important to manufacturers because micro-bargaining units disrupt highly integrated manufacturing operations. The NAM’s brief argued that the Specialty Healthcare case, which reversed 70 years of precedent and instated a new standard for determining a collective bargain unit, should not apply because that case is inconsistent with the statue and the legislative history. After the National Labor Relations Board (NLRB) issued a revised ruling in another case, the D.C. Circuit remanded this case back to the NLRB for reconsideration.


    Related Documents:
    NAM amicus brief  (February 2, 2017)

     

    Williams v. S.C. (Marshalls of CA)   (California Supreme Court)

    Discovery limits under California's Private Attorney General Act

    The NAM filed an amicus brief urging the California Supreme Court to uphold longstanding discovery rules and to limit the delegation of state enforcement power to private plaintiffs to protect the public’s interest in an employment litigation case. The plaintiff brought this litigation against Marshalls under California’s Private Attorneys General Act (PAGA), alleging that Marshalls failed to provide its employees with meal and rest breaks or premium pay in lieu thereof, to provide accurate wage statements, to reimburse employees for necessary business-related expenses and to pay all earned wages during employment. Manufacturers need civil litigation and workplaces laws in California that are balanced, reflect sound public policy and respect due process. Allowing private plaintiffs to pursue discovery demands broader than their allegations contributes to the growth of opportunistic lawsuits, which harm manufacturers and California’s economic climate. The NAM’s brief argued that allowing private plaintiffs to leverage PAGA without first laying the factual and legal foundation for their claims goes around longstanding discovery rules, and the delegation of state enforcement power to private plaintiffs must be safeguarded to protect the public’s interest. Unfortunately, the court did not agree with NAM’s arguments.


    Related Documents:
    NAM amicus brief  (May 6, 2016)

     

    Alvarado v. Dart Container Corp.   (California Supreme Court)

    Proper formula for computing overtime pay

    The NAM filed an amicus brief with the California Supreme Court in support of Dart Container Corp. in its dispute regarding the proper formula for calculating overtime wages. This is an appeal from a lower court decision which held that Dart Container was correct to use the federal overtime formula when it calculated wages because, although the federal law did not preempt state law, there was no valid state law specifying a formula to calculate overtime. Employers should not be penalized because of the ambiguity of state law when trying to pay their employees fairly. The NAM's brief argued that no California law provides guidance to calculate overtime on bonuses, and in the absence of such a law, courts should look to federal regulations for guidance and employers should be able to rely on existing law. Unfortunately, the California Supreme Court held that the lower court erred in finding that there was no state law specifying a formula to calculate overtime.


    Related Documents:
    NAM brief  (September 28, 2016)

     

    Associated Builders & Contractors v. Perez   (E.D. Ark.)

    DOL Persuader Rule chills employer and employee communications

    The NAM challenged the Department of Labor’s (DOL) Persuader Rule, which required employers, third-party lawyers and other labor consultants to disclose their relationships more frequently than under the 50-year-old "bright line" standard. The new rule required employers to file reports if consultants provided guidance to employers even if the consultants did not contact employees directly. If upheld, the rule would have restricted manufacturers’ ability to communicate with their workforce and would have resulted in employers not seeking counsel for guidance on important employer and employee related questions. The NAM’s brief argued that the Rule was arbitrary and capricious, unconstitutionally overbroad under the First Amendment, vague under the Fifth Amendment and interfered with ethical duties to maintain confidentiality. In July 2018, the DOL officially rescinded the Rule.


    Related Documents:
    NAM Motion to Stay Brief  (December 12, 2016)
    NAM Memorandum  (April 2, 2016)
    NAM Motion  (April 1, 2016)
    NAM Complaint  (March 30, 2016)

     

    Browning-Ferris Indus. v. NLRB   (D.C. Circuit)

    What constitutes a "joint-employer"

    The NAM filed an amicus brief in the D.C. Circuit supporting Browning-Ferris in its appeal from an adverse decision by the National Labor Relations Board (the Board) in a dispute regarding the legal standard that should apply when determining whether two or more companies are “joint employers” under federal labor law. The Board abandoned its longstanding legal standard for joint employer determinations, replacing it with a new standard that evaluated whether an entity exercised indirect control over the means or manner of the employees’ work and terms of employment, or whether the entity had the potential to exercise such control. If upheld, the new standard would unreasonably expand the companies deemed to be an individual’s employer and impose employment obligations and liabilities on those employers. The NAM’s brief argued that the longstanding “direct control” standard should remain the standard for determining joint employment and that the Board’s loosened standard subjected companies to unmerited liability, without providing the same benefits as the old rule. The D.C. Circuit upheld the Board’s consideration of “reserved right to control” and “indirect control” in the joint-employer inquiry but remanded the case to the NLRB for it to adequately define what constitutes control.


    Related Documents:
    NAM amicus brief  (June 14, 2016)

     

    Cooper Tire & Rubber Co. v. NLRB   (8th Circuit)

    Challenging NLRB ruling that racist statements are not grounds for firing

    The NAM filed an amicus brief defending an employer’s right to implement and follow anti-discrimination and anti-harassment policies in an employment termination appeal. A National Labor Relations Board (NLRB) decision reinstated a Cooper Tire employee who was fired for using racial epithets toward replacement workers while the employee was on the picket line. Employers have a moral and legal obligation to protect the employees’ right to be free from discrimination and harassment in the workplace. The NAM’s brief urged the court to reverse the NLRB decision and establish that there is no statutory protection for racist or discriminatory statements made on the picket line and that protecting these statements is contrary to federal policies against discrimination and harassment. Unfortunately, the court deferred to the NLRB’s decision because the harassment took place in the context of picket-line activities during a strike.


    Related Documents:
    NAM brief  (September 29, 2017)

     

    DirecTV v. Hall   (U.S. Supreme Court)

    Joint employer liability under FLSA

    The NAM filed an amicus brief urging the U.S. Supreme Court to review a case addressing standards applicable to joint employment liability under the Fair Labor Standards Act (FLSA). The U.S. Court of Appeals for the Fourth Circuit’s ruling would treat any business as an FLSA joint-employer if the business is “not completely disassociated” from a worker’s direct employer and applies even if a business has no direct relationship with the employee, or if the business has only a limited relationship. That ruling unreasonably expands the scope of companies deemed to be an individual’s employer and imposes employment obligations and liabilities on those employers. The NAM’s brief explained that the Supreme Court should hear the case to bring uniformity to joint employment liability standards and avoid the potential imposition of extensive unanticipated liability on the many employers impacted by this new rule. Although the Supreme Court denied certiorari, the National Labor Relations Board overturned the Browning-Ferris case that initially broadened the definition of a joint employer.


    Related Documents:
    NAM amicus brief  (July 6, 2017)

     

    Emerson Electric Co. v. Superior Court of California   (U.S. Supreme Court)

    Federal OSHA preemption of state unfair competition law

    The NAM filed an amicus brief in the U.S. Supreme Court supporting Emerson Electric Co.’s request for review of the California Supreme Court’s decision that enforcement actions under California’s Unfair Competition Law (UCL) are not preempted by the federal Occupational Safety and Health Act (OSH Act). The OSH Act subjects employers and employees to one set of workplace safety regulations and imposes uniform health and safety requirements. States may regulate and enforce additional workplace safety only pursuant to a federally approved plan that avoids duplicative and counterproductive regulation. One California county sidestepped an approved state plan to seek additional penalties against Emerson for an alleged workplace violation. That circumvention could set a dangerous precedent for manufacturers by allowing counties to impose duplicative and conflicting workplace requirements on manufacturers. The NAM’s amicus brief argued that the federal OSH Act preempts such conflicting requirements and asked the U.S. Supreme Court to hear and reverse the decision, but the U.S. Supreme Court declined review.


    Related Documents:
    NAM brief  (July 27, 2018)

     

    McAdams v. Marquette University   (Wisconsin Supreme Court)

    Right of employers to terminate employees for disruptive conduct

    The NAM filed an amicus brief on behalf of Marquette University in a case involving the authority of a private employer to terminate an employee for conduct that violates the employment contract between the employee and employer. The NAM’s brief argued that private employers should remain free to discipline employees for conduct or speech that disrupts or adversely affects the employer’s mission, and where an employment contract establishes a process to resolve disciplinary disputes, courts should not disrupt that process. The Wisconsin Supreme Court ruled 4-2 that Marquette breached its employment contract with the professor by suspending him.


    Related Documents:
    NAM brief  (March 21, 2018)

     

    Newton v. Parker Drilling Management Services, Inc.   (9th Circuit)

    Applicability of state employment laws on the outer continental shelf

    The NAM filed an amicus brief arguing for en banc review of a decision by a panel of the U.S. Court of Appeals for the Ninth Circuit that held that workers employed on drilling platforms on the outer continental shelf (OCS) may bring claims under state wage and hour laws. The panel’s holding not only sharply departs from the settled expectations of both employers and employees working on OCS platforms, it also creates hundreds of millions of dollars of potential retroactive liability for employers and invites lawsuits in an area long understood to be under exclusive federal authority. The NAM’s brief argued that the panel opinion disrupts existing employer-employee relationships formed in reliance on longstanding interpretations of the Outer Continental Shelf Lands Act and that the decision improperly elevates state law to supremacy over federal law, conflicting with congressional intent and inviting states to frustrate offshore oil and natural gas development. The court denied the petition for rehearing en banc; however, the court issued a stay on the mandate that allows OCS platform workers to bring claims under state law pending the filing of a petition for a writ of certiorari in the U.S. Supreme Court.


    Related Documents:
    NAM brief  (April 2, 2018)

     

    Solus v. Superior Court of California   (California Supreme Court)

    Federal OSHA preemption of state unfair competition law

    The NAM filed an amicus brief urging the California Superior Court to hold that federal preemption prohibited a district attorney’s action under California’s Unfair Competition Law (UCL). The district attorney sought civil penalties, in addition to those already imposed by the California Division of Occupational Safety and Health, against a manufacturer under the state’s unfair competition law and fair advertising law. This litigation is concerning to manufacturers that are already subjected to federal workplace safety regulations, which impose uniform, deliberate and predictable health and safety requirements, because they would be subjected to duplicative and counterproductive regulation. The NAM’s brief argued that 1) the lawsuit is preempted by federal law, which determines the regulations and enforcement methods for workplace safety standards in California; 2) the UCL is inconsistent with California’s approved penalty structure for workplace safety violations; and 3) the court should require pre-approval under the state plan of unfair competition claims for workplace safety violations. Unfortunately, the California Supreme Court held that the UCL was not preempted by the federal Occupational Safety and Health Act.


    Related Documents:
    NAM brief  (May 28, 2015)

     

    BNSF Railway Co. v. EEOC   (U.S. Supreme Court)

    ADA definition of disability for preemployment screenings

    The NAM filed an amicus brief with the U.S. Supreme Court urging the court to reject expansion the scope of the Americans with Disabilities Act (ADA) “regarded as” prong of the definition of “disability.” This litigation arises from an Equal Employment Opportunity Commission (EEOC) charge after BNSF withdrew a conditional offer of employment because the company lacked enough information to determine whether an applicant suffered from an impairment that could limit his ability to perform the essential functions of the position. If allowed to stand, the decision would impose significant costs and expose employers to uncontrolled liability. A Supreme Court decision in this case would resolve a circuit split between the Ninth Circuit and other circuits that have considered this question. The NAM’s brief argued that 1) under the Ninth Circuit’s reasoning, an employer that requires an employee to undergo an individualized medical examination “for the purposes of determining whether he has an impairment” will be deemed to per se perceive the employee as having such an impairment and “regard” the employee as disabled; 2) other circuits have rejected this logic; and 3) that the Ninth Circuit’s holding improperly imposes the costs of medical examinations on employers. On November 13, 2019, the Court denied certiorari.


    Related Documents:
    NAM brief  (April 3, 2019)

     

    Boeing v. Int'l Ass'n of Machinists and Aerospace Workers   (NLRB)

    Supporting appeal of fractured, small union bargaining unit determination

    The NAM filed an amicus brief to support Boeing’s request for the National Labor Relations Board (NLRB) to review its finding that a small group of employees constituted a unit appropriate for collective bargaining. The Boeing Company’s 787 Dreamliner manufacturing facility in South Carolina employs approximately 3,000 production and maintenance employees, who have twice voted against joining a union. The NLRB Regional Director directed the election for a subset of employees at the plant. If the Regional Director’s decision stands, manufacturers could have their workforces artificially fractured into smaller bargaining units in violation of the “community of interest” standard required in making bargaining unit determinations. The NAM’s amicus brief argues that the Regional Director improperly applied a standard that had been overturned and that the fragmented unit creates an artificial barrier that separates employees and departments and frustrates the ability to maintain stable labor relations. On September 9, 2019, the NLRB reversed the regional director's decision, concluding that he misapplied the governing test for whether a subset of employees can bargain separately from the larger workforce.


    Related Documents:
    NAM brief  (July 16, 2018)

     

    Busk v. Integrity Staffing Solutions, Inc.   (U.S. Supreme Court)

    Compensation for security screenings

    The NAM filed an amicus brief with the U.S. Supreme Court urging review of a lower court decision that Nevada and Arizona employers were obligated to compensate warehouse workers for time spent going through security screenings at the end of the day. That decision identified a federal standard for compensable “work” under the Fair Labor Standards Act independent of the Portal to Portal Act; the court held that Nevada and Arizona did not have to take the Portal to Portal Act into account because neither state adopted the Act. If allowed to stand, that decision would have adverse consequences for businesses who would incur significant liability from the opportunistic plaintiffs’ bar or significant costs in revamping their procedures to try to avoid liability. The NAM’s brief argued that the decision undermines Supreme Court precedent and that it will invite significant financial implications for employers across the country. On October 7, 2019, the court denied certiorari.


    Related Documents:
    NAM brief  (April 5, 2019)

     

    Caesars Entertainment Corp. v. Int'l Union of Painters   (NLRB)

    Protection of employer email systems

    The NAM filed an amicus brief before the National Labor Relations Board (NLRB) in response to the NLRB’s request for input on whether to reconsider legal precedent that held that employees who have been given access to their employer’s email system for work-related purposes have a presumptive right to use that system for union communications. The NAM’s brief argues that employers should be allowed to safeguard their electronic communications for legitimate business interests, including to minimize distractions in the workplace, to prevent misuses of communications systems, to guard against data security vulnerabilities and to address other liabilities. On December 17, 2019, the NLRB agreed, and reinstated the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


    Related Documents:
    NAM brief  (October 1, 2018)

     

    Cellco Partnership v. NLRB   (9th Circuit)

    Restriction on use of email in employee handbooks

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit supporting employers’ right to limit what information is sent on work emails. The case arises from a decision by the National Labor Relations Board (NLRB) that deems illegal portions of Verizon's workplace Code of Conduct that restricts employee use of company email because the NLRB believes the policies violate employee rights to discuss wages, hours and terms of employment. This case is important because manufacturers need to be able to adopt reasonable workplace regulations. The NAM’s brief argues that the ruling ignores the rights of employers to establish safe and productive workplaces and secure email systems, creates legal and practical problems for employers of all sizes, and infringes First Amendment speech rights. On September 24, 2018, the court held the case in abeyance pending the NLRB's reconsideration of the standard set forth in Purple Communications Inc., 361 N.L.R.B. 1050 (2014), which held that employees who have been given access to their employer’s email system for work-related purposes have a presumptive right to use that system, on nonworking time, for communications protected by NLRA Section 7. On December 17, 2019, the NLRB issued its decision, agreeing with the NAM and reinstating the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


    Related Documents:
    NAM brief  (November 16, 2017)

     

    Communication Workers v. NLRB   (9th Circuit)

    Use of company email by employees

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit supporting restrictions on the use of company email systems by employees. This case arises from a 2014 decision by the National Labor Relations Board (NRLB) that if a company allows employees to use their email system, the employees have a statutory right to use the system on nonworking time for a wide range of messages and companies have limited oversight authority. This is important for manufacturers because the 2014 NLRB decision allows for extensive workplace distractions and personal misuse of business communication systems. The NAM’s brief argues that the ruling creates legal and practical problems for employers of all sizes, is unnecessary in today's world of social media and free email accounts, and infringes First Amendment speech and Fifth Amendment property rights. On September 24, 2018, the court held the case in abeyance pending the Board’s decision in a separate case, Caesars Entertainment Corp. v. Int’l Union of Painters, which similarly involved the NAM as amicus. The Caesars decision, issued on December 17, 2019, followed the NAM's rationale and reinstated the right of an employer to restrict employee use of its email system as long as it does so on a nondiscriminatory basis.


    Related Documents:
    NAM amicus brief  (October 10, 2017)

     

    Marathon v. NLRB   (6th Circuit)

    Unreasonable union document requests

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to support Marathon Petroleum in its appeal from a National Labor Relations Board (NRLB) decision that required Marathon to produce documents during a union discussion. The underlying issue is whether “meet and discuss” means “bargain” under labor law. Marathon agreed to meet and discuss over outside contractors but not to bargain. Manufacturers and their employees rely on maintaining a fair and balanced system for economic growth and job creation. The NAM’s brief argues that the NLRB abuses its discretion by finding that Marathon incurred a bargaining obligation by agreeing to meet and discuss with the union. The Sixth Circuit agreed with Marathon, denied enforcement of the NLRB decision and remanded the case to determine if Marathon had any duty to bargain with the union over outside contractors.


    Related Documents:
    NAM brief  (December 26, 2018)

     

    McDonald's v. Serv. Emp.'s Int'l Union   (NLRB)

    NLRB preclusion standards

    The NAM filed an amicus brief urging the National Labor Relations Board (NLRB) to uphold specific, well-established recusal standards. This case involves the Service Employees International Union’s (SEIU) attempt to force two republican NLRB members to recuse themselves because their former law firms represented clients with similar issues as the issues in this case, even though neither NRLB member nor their former law firms served as counsel for any of the parties in this case. This “issue preclusion” standard advocated by the SEIU is an extraordinary departure from established recusal procedures, is irreconcilable with federal regulations and unmanageable as a practical matter. The NAM’s brief explains why prior recusal standards should be upheld to allow the NLRB to efficiently decide the many matters it confronts without fundamentally altering how it functions. On November 19, 2019, the NLRB issued its Ethics Recusal Report, which largely upholds the prior recusal standards advocated by the NAM and establishes a new filing obligation requiring all parties appearing before the Board to file an organizational disclosure statement. The report also adopts a written Board member disqualification protocol and determines that Board members can challenge the agency’s ethics official recusal determination and insist on participating in a particular case (though this, according to the report, should be very rare). On December 12, 2019, the Board denied the SEIU's recusal motion.


    Related Documents:
    NAM brief  (August 28, 2018)

     

    Nat’l Women’s L. Ctr. v. OMB   (D.D.C.)

    EEO-1 Component 2 pay data reporting

    The NAM filed an amicus brief urging the U.S. District Court for the District of Columbia to delay the deadline for filing the Revised EEO-1 Report “Component 2” pay data. Because Component 2 significantly expands the data fields employers must submit, employers need sufficient time to revise their systems, implement new procedures and train employees in order to collect the data. Component 2 creates an administrative burden for employers who will now be forced to bear the costs of complying with the requirements. The NAM’s brief argued that the EEOC has previously recognized that changes to EEO-1 require implementation time; 2) employers reasonably relied on EEOC’s direction and did not take the steps need to comply with collection of the data; 3) consistent with these reasons employers should receive sufficient time to prepare for the revised EEO-1; and 4) the data should not be required until EEOC can preserve confidentiality. The court declined to delay the filing deadline.


    Related Documents:
    NAM summation  (April 22, 2019)
    NAM brief  (April 4, 2019)

     

    Nevada v. U.S. Dep’t of Labor   (5th Circuit)

    Defending the overtime preliminary injunction from a collateral attack

    The NAM filed an amicus brief on behalf of Chipotle Mexican Grill, supporting the nationwide injunction of the overtime rule. The plaintiff in this case filed suit against her employer, Chipotle, alleging violations of the new overtime rule, which had been enjoined by an Eastern District of Texas judge. The judge who issued the nationwide injunction held the plaintiff in contempt. The plaintiff is now appealing the contempt order, arguing that she was not within the judge’s jurisdiction and cannot be held in contempt. If the contempt order is vacated, it would functionally invalidate the nationwide injunction of the overtime rule because it would allow employees to sue employers for non-compliance. The 5th Circuit vacated the contempt order because the court lacked jurisdiction over the plaintiff.


    Related Documents:
    NAM brief  (July 13, 2018)

     

    Parker Drilling Management Services v. Newton   (U.S. Supreme Court)

    Employment liability on the outer continental shelf

    The NAM filed an amicus brief in the U.S. Supreme Court to overturn an appellate court ruling that workers on offshore drilling platforms may bring state-law labor and employment claims. An employee located on an offshore drilling platform in federal waters on the Outer Continental Shelf sued his employer—an offshore drilling services company—alleging the employer failed to pay the employee for his non-working “standby” time on the platform. The employee argued that California’s labor laws entitled him to payment for the standby time. The drilling company countered that federal labor laws applied because the platform is located on the Outer Continental shelf. A district court ruled that federal law applies, but the U.S. Court of Appeals for the 9th Circuit reversed. The drilling company petitioned the U.S. Supreme Court for review. The NAM filed an amicus brief in support of review. The Court granted review, and on June 10, 2019, concluded that federal labor law applies because the Outer Continental Shelf Lands Act broadly preempts state labor and employment laws. This decision restores certainty for offshore platform owners and operators and removes the specter of hundreds of millions of dollars in unwarranted wage-and-hour liability.


    Related Documents:
    NAM brief  (February 27, 2019)
    NAM brief  (October 26, 2018)

     

    Taylor v. Burlington Northern Santa Fe Railway Co.   (Washington State Supreme Court)

    Whether obesity is an impairment under Washington state law

    The NAM filed an amicus brief in the Washington State Supreme Court arguing that obesity is not a legally protected disability unless the obesity is the result of a physiological disorder. The U.S. Court of Appeals for the 9th Circuit sent a certified question to the Washington State Supreme Court asking whether obesity is an impairment under Washington law to resolve allegations by a plaintiff that his denial of employment because he was obese constituted discrimination. An adverse ruling on this question could affect employee relations and a wide variety of business interactions negatively and could impose significant costs and uncertainty on Washington businesses. The NAM’s brief argues that defining obesity as a “per se” disability would encompass 40 percent or more of the adult population, would be at odds with legislative intent and would place significant burdens on employers. The court held that obesity is always an “impairment” under Washington law, regardless of whether obesity is related to an underlying medical condition.


    Related Documents:
    NAM brief  (January 14, 2019)

     

    United Nurses & Allied Professionals   (NLRB)

    Union dues spent on lobbying

    The NAM filed an amicus brief with the National Labor Relations Board arguing against treating lobbying as a core union function and significantly altering the current way employees exercise their rights to object to union dues expenditures for political activities. Mandatory union dues may be used only to support union activities germane to collective bargaining, contract administration and grievance adjustment, and may not be used for political speech that conflicts with the First Amendment rights of the union members who pay dues. This case is important because union dues should not be used to promote political causes to which employee's object. Our brief argued that lobbying is not a core union function, the Supreme Court has already decided the issue and employees should not be compelled to fund these political activities. The NLRB agreed, and on March 1, 2019, issued a decision holding that lobbying activities are not so related to the Union’s representational duties to employees as to justify the compelled financial support of those activities.


    Related Documents:
    NAM brief  (February 19, 2013)

     

    UPS Ground Freight v. NLRB   (D.C. Circuit)

    As-applied challenge of the ambush election rule

    The NAM filed an amicus brief in support of UPS in the first as-applied challenge of the ambush election rule. In 2014, the National Labor Relations Board (NLRB) issued the election rule, which elevated speed above due process and transparency. Shortly thereafter, because the Election Rule failed to balance other important policy objectives, the NAM brought a facial challenge to the rule in the U.S. District Court for the District of Columbia, which rejected the challenge based on its belief that the rule would be applied in a fair manner. A fair, transparent and thorough election process is important for manufacturing employees to be able to have an informed choice whether they want to be represented by a union. The NAM’s brief argues that this case serves as a prime example of how the rule has been applied to deny employers due process, such as by failing to resolve a voter eligibility issue before the election and denying an appropriate hearing. The D.C. Circuit held that there was no defect in the Board’s decision to certify the Union and consequently denied UPS’s petition for review.


    Related Documents:
    NAM brief  (October 22, 2018)

     

    Zino v. Whirlpool Corp.   (6th Circuit)

    Whether collective bargaining agreement entitles retirees to vested healthcare benefits for life.

    The NAM filed an amicus brief supporting Whirlpool in this appeal to the Sixth Circuit. The issue is whether a collective bargaining agreement provides health benefits for life absent explicit language that the agreement provides for such benefits. Previously, the Sixth Circuit has provided conflicting holdings in similar cases, at times holding that the collective bargaining agreements do not provide such lifetime benefits and at times reading them into the agreement. However, in Tackett, the Supreme Court held that using ordinary contract principles, parties to collective bargaining agreements would not intend retiree benefits to vest for life if not explicitly stated in the agreement. The NAM encouraged the Sixth Circuit to provide a clear standard that does not conflict with Tackett, which it did by holding on February 15, 2019, that the agreement did not provide lifetime health benefits.


    Related Documents:
    NAM brief  (January 12, 2018)

     

    Franze v. Bimbo Bakeries USA, Inc.   (2nd Circuit)

    Defending the independent contractor model

    The NAM filed an amicus brief to seek to uphold a district court ruling granting summary judgment for defendant Bimbo Foods Bakeries in a putative class action brought by delivery drivers who allege that the company misclassified them as independent contractors and, as a result, they are entitled to overtime pay and other benefits guaranteed to employees under the Fair Labor Standards Act (FLSA) and related New York state labor laws. A federal district court applied a well-established set of factors to determine whether the drivers were independent contractors or employees including the degree of control exercised by the alleged employer over the drivers, the drivers’ opportunity for profit or loss and their investment in the business, and the degree of skill and independent initiative required to perform the work, among others, ultimately concluding that the drivers were indeed independent contractors. Many manufacturers contract with independent contractors and have a significant interest in the proper interpretation of laws that implicate the distinction between employees and independent contractors. On appeal to the 2nd Circuit, the NAM filed a coalition amicus brief which explains that the independent contractor business model is common across a diverse range of industries and offers significant benefits to businesses and contractors alike. On Sept. 15, 2020, the court affirmed the lower court's summary judgment ruling in favor of the defendant.


    Related Documents:
    NAM brief  (February 10, 2020)

     

    General Motors, LLC and Charles Robinson   (NLRB)

    When profane outbursts and offensive statements lose the protection of the NLRA

    The NAM filed an amicus brief with the National Labor Relations Board (NLRB) urging the Board to reconsider its standards for determining whether an employee's profane outbursts or offensive statements of a racial or sexual nature lose the protection of the National Labor Relations Act (NLRA). The NLRB invited interested amici to file briefs after prior Board decisions in which extremely profane or racially offensive language was judged not to lose the protection of the NLRA were met with frequent criticism. Those decisions were grossly out of touch with the realities of today's workplace and the interests of employers in ensuring workplaces are free from harassment, discrimination, and bullying. In response to the specific questions posed by the Board, the NAM's brief, filed November 12, 2019, argues that (1) there are instances of employee misconduct that are so egregious that they should automatically result in the forfeit of the NLRA's protection; (2) employers are not required to tolerate insubordination, particularly where racially or sexually charged language is used; (3) the "norms" of the workplace cannot be used as an excuse to protect harassment and incivility; (4) the Board should abandon the standard applied in prior cases to the extent it protects sexual or racially offensive language that would otherwise not be tolerated simply because it occurs in the context of picketing; and (5) the Board should afford great weight to civil rights and antidiscrimination laws, and the requirements they place on employers.

    On July 21, 2020, the Board issued a decision holding that the Wright Line, 251 NLRB 1083 (1980) standard applies to abusive conduct cases. Under that standard, the NLRB "General Counsel must make an initial showing that (1) the employee engaged in Section 7 activity, (2) the employer knew of that activity, and (3) the employer had animus against the Section 7 activity[.]" If the General Counsel meets her burden, "the burden of persuasion shifts to the employer to prove it would have taken the same action even in the absence of the Section 7 activity."


    Related Documents:
    Board Decision  (July 21, 2020)
    NAM brief  (November 12, 2019)

     

    Nat’l Women’s L. Ctr. v. OMB   (D.C. Circuit)

    EEO-1 Component 2 pay data reporting

    The NAM filed an amicus brief urging the U.S. Court of Appeals for the D.C. Circuit to reverse the U.S. District Court for the District of Columbia's refusal to delay the deadline for filing the Revised EEO-1 Report “Component 2” pay data. The district court also should not have crafted its own remedy that ignored the significant deficiencies in the record. Component 2 creates an administrative burden for employers who will now be forced to bear the costs of complying with the requirements. The NAM’s brief argued that the EEOC had previously recognized that changes to EEO-1 require significant time and expense, the record showed questionable public benefits and the data should not be required until EEOC can preserve confidentiality.


    Related Documents:
    NAM brief  (August 26, 2019)

     

    Mountaire Farms, Inc. v. UFCW   (NLRB)

    NLRB reconsiders contract bar doctrine

    The NAM filed an amicus brief with the National Labor Relations Board (NLRB) urging the Board to rescind or modify the "contract bar doctrine." The doctrine dictates that once a collective bargaining agreement is executed, no representative elections are permitted for that bargaining unit for up to three years. Further, an employee may only file a decertification petition during a narrow (and confusing) 30-day period between 60 and 90 days before the end of the contract. The rule is not found in the National Labor Relations Act (NLRA), but rather is a creature of NLRB case law. Following invitation from the NLRB, the NAM filed a coalition amicus brief recommending that the Board rescind the doctrine because it interferes with the statutory right of employees to choose or refrain from choosing union representation. In the alternative, the Board should limit the duration of the bar period to just one year, instead of three years. Unfortunately, on April 21, 2021, the NLRB decided to retain its longstanding contract-bar doctrine.


    Related Documents:
    NAM brief  (October 7, 2020)

     

    See’s Candies, Inc. v. Superior Court of California, et al.   (Cal. Ct. App.)

    Keeping COVID-19 claims derivative to Workers’ Comp Claims out of the Civil Court System

    The NAM filed an amicus letter brief asking the Court of Appeal for California’s Second Appellate District to review a trial court order that improperly creates a Covid-19 exception to the longstanding “derivative injury rule.” That rule establishes workers’ compensation as the exclusive remedy for all claims that are derivative of an employee’s covered workplace injury—including claims for injuries sustained by members of the employee’s household. In this case, the court created a new exception to that bright-line rule for injuries from Covid-19 that allegedly derive from employees who contract the virus in the employer’s workplace and then infect their family members.

    The NAM’s brief argues that if the trial court’s rule is allowed to stand, it could subject employers to potentially unlimited tort liability for alleged injuries that the Legislature intended to be addressed in the workers’ compensation system. Not only does the decision have the potential to devastate businesses already struggling to recover from the COVID-19 pandemic, it creates a clear conflict with a recent decision by a California federal court holding that such claims are barred by the exclusive remedy provisions of California’s workers’ compensation system. Unfortunately, on December 21, 2021, the court affirmed the trial court order.


    Related Documents:
    Opinion  (December 21, 2021)
    NAM brief  (August 30, 2021)
    NAM brief  (May 21, 2021)

     

    UPMC Presbyterian Shadyside v. NLRB   (3rd Circuit)

    Court limits on NLRB's subpoena authority

    The NAM filed an amicus brief in the U.S. Court of Appeals for the Third Circuit supporting constitutional protections for employer information. The National Labor Relations Board (NLRB) issued subpoenas requesting information purportedly in connection with an NLRB investigation of unfair labor practices. The district court found that those subpoenas are unprecedented in breadth and unrelated to the underlying charges. Limitations on the NLRB’s authority are important to protect the Constitution’s separation of powers and due process requirements and to protect against abuse of subpoena power. The NAM’s brief argues that the NLRB lacks the authority to compel an employer to produce information because that authority is vested exclusively in Article III courts. The Court later held the case in abeyance so that the parties could finalize the terms of a settlement agreement.

     

    Keene v. CNA Holdings, LLC   (South Carolina Supreme Court)

    Protecting South Carolina's statutory employer doctrine

    The NAM called on the South Carolina Supreme Court to reconsider a decision that leaves countless manufacturers and contractors exposed to unexpected tort liability and upsets the statutory scheme and purpose of having workplace injuries addressed through the no-fault workers’ compensation system. In this wrongful death case involving alleged asbestos exposure, the South Carolina Supreme Court defied 80 years of precedent by upholding a $20M jury verdict against CNA Holdings, even though the decedent was a “statutory employee” of CNA, meaning that he was covered by the workers’ compensation system and barred from pursuing a claim through the civil law tort system. Under the statutory employer doctrine—codified in South Carolina’s workers’ compensation statute—a business which subcontracts out work that is important, necessary, essential or integral to the business is treated as the statutory employer of the subcontractor’s employees and thus responsible for providing workers’ compensation insurance for those employees. That is precisely what CNA did in this case, yet the court deprived CNA of the immunity from civil liability that is the benefit of that bargain.

    The NAM filed an amicus brief in support of CAN’s petition for rehearing, emphasizing the significant destabilizing impact on the manufacturing sector should the court’s erroneous construction of the “statutory employer doctrine” not be reconsidered. Our brief further argues that the doctrine must be construed in the broadest manner possible in order to extend workers’ compensation coverage to South Carolina workers, as the state legislature intended.

    Unfortunately, in April 2022, the court denied rehearing.


    Related Documents:
    NAM brief  (November 8, 2021)
    Notice of Intent to file amicus brief  (September 13, 2021)

     

    Cothron v. White Castle   (Illinois Supreme Court)

    Plaintiffs should not be able to recover for “each violation” of the Biometric Information Privacy Act (BIPA)

    On March 3, 2022, the NAM filed an amicus brief asking the Illinois Supreme Court to reject an interpretation of the Illinois Biometric Information Privacy Act (BIPA)—one of the most stringent biometric privacy statutes in the country—that allows for a “per-scan” theory of accrual and recovery of statutory liquidated damages. Employers commonly use biometric data, including fingerprints, voice prints, and vein patterns in a person’s palm, for time management, security access, and safety reasons. Passed in 2008, the BIPA contains a comprehensive set of rules for companies collecting biometric data from Illinois residents, with a focus on preventing identity theft through responsible use and handling. The statute creates a private right of action and provides for statutory damages of $1,000 for each negligent violation and $5,000 for each intentional violation, which has led the BIPA to become a trial bar favorite—a whopping 1,450 BIPA class action lawsuits have been filed since 2017.

    The question presented in this case is whether BIPA claims “accrue each time a private entity scans a person's biometric identifier and each time a private entity transmits such a scan to a third party, respectively, or only upon the first scan and first transmission.” The NAM’s brief argues that the only reasonable interpretation of a law focused on ensuring notice and consent is that a violation occurs when biometric identifiers or biometric information is first collected or obtained. Given the remedial purposes of the BIPA, any damages resulting from alleged violations of the statute should encourage compliance, but not be punitive in nature. The “per-scan” theory of accrual suggested by the plaintiff here would lead to absurd and unjust results, as a single employee could scan 1,000 times over the course of a year.

    Unfortunately, on February 27, 2023, the Illinois Supreme Court held that BIPA’s plain language "shows that a claim accrues under the Act with every scan or transmission of biometric identifiers or biometric information without prior informed consent."

    On March 10, 2023, we filed in amicus brief requesting that the Supreme Court of Illinois reconsider its decision because it mistakenly construed BIPA in a way that would lead to the absurd result of astronomical damages awards that could bankrupt businesses, which is consistent with neither legislative intent nor the court’s case law requiring it to construe statutes in a way that prevents such absurd results.

    Unfortunately, on July 18, 2023, the Supreme Court of Illionis denied the request for it to reconsider its decision.


    Related Documents:
    NAM Petition for Rehearing  (March 10, 2023)
    Opinion  (February 17, 2023)
    NAM brief  (March 3, 2022)

     

    Kuciemba v. Victory Woodworks   (Supreme Court of California)

    Keeping COVID-19 claims derivative to Workers’ Comp

    On October 12, 2022, the NAM joined other business groups to file an amicus brief urging the Supreme Court of California to reject claims by non-employees seeking to impose liability on employers for COVID-19 infections they contract from an employee outside the employers’ place of business. In this case, the district court concluded that the derivative liability rule—which establishes workers’ compensation as the exclusive remedy for all claims that are derivative of an employee’s covered workplace injury—barred claims asserted by an employee’s wife based on her allegations that she contracted COVID-19 through direct contact with her husband outside of his workplace. The district court also found that the plaintiff failed to state a claim because an employer’s duty to provide a safe workplace to its employees does not extend to non-employees who contracted COVID-19 away from the workplace. On appeal, the 9th Circuit certified two issues to the Supreme Court of California: (1) does the derivative injury liability doctrine bar a spouse’s claim in this context; and (2) does an employer owe a duty to the households of its employees to exercise reasonable care to prevent the spread of COVID-19?

    Our brief argues that recognizing an exemption to the derivative liability injury rule would impermissibly deprive employers of the California Legislature’s careful balance of employer and employee rights and competing interests by subjecting employers to an assortment of claims based solely on a non-employee’s purported contact with an infected employee. Even assuming the derivative liability injury rule was inapplicable, the California Supreme Court should conclude that employers have no duty to protect non-employees from contracting infectious diseases from employees infected in the workplace. The NAM argues that the Court should do so because (1) too many intervening factors render it impossible to foresee whether an employer’s negligence will result in a non-employee contracting COVID-19, a community-transmitted disease, from an employee; (2) employers are unable to control whether COVID-19 is present in the workplace and the costs of imposing a duty on employers is high; and (3) the judicial system would be heavily burdened by trying to address whether an employer’s negligence caused a non-employee harm. Happily, on July 6, 2023, although the Court concluded that the derivative injury liability doctrine does not bar a spouse’s claim, it refused to recognize that employers owe a duty of care to the households of its employees to prevent the spread of COVID-19.


    Related Documents:
    Opinion  (July 6, 2023)
    NAM brief  (October 12, 2022)

     

    South Carolina State Ports Authority v. NLRB   (4th Circuit)

    Protecting the bar against secondary boycotts

    On April 7, 2023, the NAM filed an amicus brief urging the Fourth Circuit to reverse an NLRB decision that eviscerates the long-standing prohibition on secondary boycotts. Although the NLRA protects the right to strike or picket a primary employer (an employer with whom a union has a labor dispute), it seeks to keep neutral employers from being dragged into the fray by making it unlawful for a union to coerce a neutral employer to force it to cease doing business with a primary employer.

    This case involves the South Carolina State Ports Authority (SCSPA), which has operated the Port of Charleston for the last 50 years by employing state workers to run lift-equipment and members of the International Longshoremen’s Association (ILA) to perform the other longshoreman work there. The SCSPA opened another terminal at the Port in 2022, requiring the same division of labor. ILA subsequently sued the United States Maritime Alliance (USMX)—a multi-employer association of carriers that deliver and pick up containers at the ports—and two of its carrier-members who used the new terminal for $300 million. ILA alleged that the USMX and the two carrier members were violating the parties’ collective bargaining agreement by using state employees to perform port work. USMX, the State of South Carolina and the SCSPA filed unfair labor charges against the union, maintaining that the lawsuit sought to obtain an illegal secondary objective in violation of the NLRA’s secondary boycott provision. The NLRB disagreed and ruled against the plaintiffs in a 2-1 decision, concluding that ILA’s lawsuit had a lawful work-preservation objective. Board member John Ring dissented, reasoning that this is a “classic case of unlawful secondary pressure.

    We argue in our amicus brief that the ILA’s lawsuit is a quintessential secondary boycott: ILA is coercing the carriers to stop doing business at the new terminal unless a different party—the SCSPA—accedes to the union’s demands to hire more union workers to perform jobs that union members had never performed at the Port. The NLRB’s decision guts the distinction between work preservation and work acquisition and incorrectly concludes that carriers have control over the work assignments of another entity (the SCSPA). Allowing this decision to stand would turn the NLRA upside down, converting the clear statutory ban on secondary boycott activity into a presumptive authorization. All manufacturers have an interest in limiting this type of coercive and intimidating conduct by unions.

    Unfortunately, on July 28, 2023, the Fourth Circuit denied the petition for review.


    Related Documents:
    Opinion  (July 28, 2023)
    NAM brief  (April 7, 2023)

     

    Stericycle, Inc. and Teamsters Local 628   (NLRB)

    The NLRB should protect employers' rights to maintain facially neutral workplace rules

    On March 7, the NAM filed an amicus brief with the National Labor Relations Board urging the Board to maintain its current standard for determining whether an employer’s facially neutral work rule violates the National Labor Relations Act. In this case, Stericycle, Inc. and Teamsters Local 628, an administrative law judge held that three of Stericycle’s work rules, including a rule that prohibits retaliation against employees who report discrimination or harassment or participate in a discrimination or harassment investigation, violated the NLRA. Work rules encompass a wide variety of policies and employee handbook provisions that advance and protect vitally important interests like attendance, scheduling and time off; non-harassment, non-discrimination, and DE&I; and workplace safety and operating procedures. In 2017, the NLRB adopted a standard for evaluating work rules that properly balances a rule’s potential impact on NLRA-protected rights with the rule’s legitimate justifications. The NLRB recently invited interested amici to file briefs regarding whether that standard should be retained or modified to a more employee-friendly standard.

    In response to the specific questions posed by the Board, the NAM's brief argues that any evaluation of work rules, employment policies, and employee handbook provisions should consider both a rule’s potential “chilling” effect regarding NLRA-protected rights, as well as legitimate business justifications and the obligations imposed on employers by other laws. If the Board does modify the current standard, it should allow employers to implement standard disclaimer language in their rules, policies, or handbooks, that avoids an interpretation that would unlawfully interfere with protected rights under the NLRA. Further, rules requiring confidentiality in open workplace investigations, non-disparagement rules, and policies barring outside employment should continue to be deemed generally lawful.

    Unfortunately, on August 2, 2023, the Board announced a new approach for determining whether an employer’s facially neutral work rule violates the NLRA. Under the Board’s new approach, "[i]f an employee could reasonably interpret a rule to restrict or prohibit Section 7 activity, the General Counsel has satisfied her burden and demonstrated that the rule is presumptively unlawful”" An employer can only "rebut the presumption by proving that the rule advances a legitimate and substantial business interests, and that the employer is unable to advance that interest with a more narrowly tailored rule." The Board remanded the case to the ALJ for further consideration in light of its new standard.


    Related Documents:
    Decision  (August 2, 2023)
    NAM brief  (March 7, 2022)

     

    Arrmaz Prods. And Internat'l Chem. Workers Union   (NLRB)

    The NLRB should reject General Counsel Abruzzo’s effort to imposep “make-whole” relief for an employer’s refusal to bargain

    On August 26, the NAM filed an amicus brief urging the National Labor Relations Board to reject General Counsel Jennifer Abruzzo’s radical proposal to overturn longstanding and established precedent by awarding prospective, compensatory make-whole relief for the period when an employer refuses to bargain while challenging a union’s certification in court. The traditional remedy for cases where an employer unlawfully refuses to bargain with the chosen bargaining representative of its employees is a bargaining order whereby the NLRB commands the employer to stop its unlawful refusal and bargain with the representative. Over 50 years ago, in Ex-Cell-O Corp., the Board explicitly rejected make-whole relief—in that case raises for employees—as too speculative. The Board concluded that compelling employers “to accede to terms never mutually established by the parties” would violate the plain language of the National Labor Relations Act and Supreme Court precedent.

    In this case, Arrmaz Prods. And Internat’l Chem. Workers Union, GC Abruzzo asked the Board to “make the bargaining unit employees whole for the lost opportunity to engage in collective bargaining” during the period when the employer refuses to bargain in order to test the union’s certification in the courts.” As the NAM’s brief explains, this inherently speculative and arbitrary remedy would chill the protected rights of every employer to petition a court to review certification of a union as the exclusive representative of the employer’s employees. Further, section 8(d) of the National Labor Relations Act flatly states that the obligation to bargain collectively “does not compel either party to agree to a proposal or require the making of a concession.” Here, the proposed make-whole remedy cannot be calculated without presuming an agreement that the Board is not entitled to presume or to compel. Employers and employees alike rely on the Board to maintain labor relations stability. Such reliance interests are severely undermined when longstanding and established precedents are overturned without adequate justification, as is threatened in this case.

    On December 8, 2022, the Board held that respondent ArrMaz Products, Inc. violated the National Labor Relations Act by refusing "to recognize and bargain with the Union as the exclusive collective-bargaining representative of the employees in the appropriate unit." The Board did not address make-whole relief. The Board has severed this issue and plans to issue a supplemental decision regarding a make-whole remedy at a later date.


    Related Documents:
    NAM brief  (August 26, 2022)

     

    Ralphs Grocery Co. and Terri Brown   (NLRB)

    Arbitration agreements do not interfere with employees’ rights under the National Labor Relations Act

    On March 21, 2022, the NAM filed an amicus brief urging the National Labor Relations Board to adhere to U.S. Supreme Court and Board precedent by preserving the validity of employment arbitration agreements. In Epic Systems v. Lewis, the Supreme Court held that the Federal Arbitration Act prevents the NLRB from challenging enforcement of arbitration agreements between employers and employees. Building on that holding, the NLRB ruled in 2020 that an arbitration agreement explicitly and prominently assures employees that their right to file charges with the Board does not interfere with employee rights under the National Labor Relations Act.

    Despite this clear precedent, the current NLRB is seeking to abrogate its prior holdings and reconsider whether arbitration agreements interfere with employees’ right to file Board charges or otherwise access the Board’s processes. The NAM filed an amicus brief urging the Court to adhere to its current standard. Our brief highlights the Court’s holding in Epic Systems—that Congress does not alter the fundamental details of one statutory scheme (the FAA) through vague pronouncements in another (the NLRA). Any action by the Board to overrule its prior precedent and impose liability on an employer for enforcing its arbitration agreement would violate the FAA and lead to another confrontation with the Supreme Court. Many NAM members rely on lawful, voluntary arbitration agreements with their employees to reduce litigation costs and reach timely resolution of employment disputes through neutral fact finding and decision making, consistent with the FAA.


    Related Documents:
    NAM Brief  (March 21, 2022)

     

    South Carolina State Ports Authority v. NLRB   (4th Circuit)

    Protecting the bar against secondary boycotts

    On October 30, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to review the 4th Circuit’s refusal to reverse a National Labor Relations Board decision that eviscerates the long-standing prohibition on secondary boycotts (where a union coerces a neutral employer to cease doing business with an employer with whom a union has a labor dispute). In this case, the South Carolina State Ports Authority operates the Port of Charleston by employing state workers to run lift-equipment and having International Longshoremen’s Association members perform the other longshoreman work there. After SCSPA opened another terminal at the port in 2022 and attempted to use the same division of labor, ILA sued the United States Maritime Alliance (USMX), a multi-employer association of carriers that deliver and pick up containers at the ports, and two of its carrier-members, alleging that they were violating the parties’ collective bargaining agreement by using state employees to perform port work. USMX, the State of South Carolina and SCSPA countered by filing unfair labor charges, maintaining that the lawsuit sought to obtain an illegal secondary objective in violation of the NLRA’s secondary boycott provision. The NLRB disagreed and the 4th Circuit refused to reverse the NLRB’s decision on appeal.

    We argue in our amicus brief that the union’s actions in this case constitute a quintessential secondary boycott: the union is coercing neutral parties (the carriers) to stop doing business at a port unless a different party—the South Carolina State Ports Authority—accedes to the union’s demands. All manufacturers have an interest in limiting this type of coercive and intimidating conduct by unions. Unfortunately, on February 20, 2024, the U.S. Supreme Court declined to hear the case.


    Related Documents:
    NAM brief  (October 30, 2023)

     

    Starbucks v. McKinney   (U.S. Supreme Court)

    Pushing back against lower standard for NLRB to obtain preliminary relief

    On November 6, 2023, the NAM filed an amicus brief urging the U.S. Supreme Court to review and reverse a lower court decision granting preliminary relief in favor of a union—including forcing the employer to reinstate terminated employees—while the Board’s adjudication process remains ongoing. Under the National Labor Relations Act, federal district courts are empowered to grant preliminary relief at the NLRB’s request while an NLRB adjudication remains pending. In this case, the 6th Circuit affirmed a district court’s grant of preliminary relief—which is considered an extraordinary remedy reserved for extreme cases—under an unduly permissive standard. Specifically, the 6th Circuit, along with the 3rd, 5th, 10th and 11th Circuits, has held that the NLRB is entitled to preliminary relief upon a showing of reasonable cause to believe that the unfair labor practice alleged has occurred and that preliminary relief is just and proper. By contrast, other circuit courts have applied the traditional, and more stringent, four factor test to determine whether the NLRB is entitled to preliminary relief. Under that test, the NLRB must establish that (1) that it is likely to succeed on the merits of its claim, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest.

    We argue in our amicus brief that the Court should grant Starbuck’s petition to resolve the circuit split and that the 6th Circuit’s lenient standard places unreasonable burdens on employers subject to unfair labor practice proceedings.

    Happily, on January 12, 2024, the Court granted the petition.


    Related Documents:
    NAM brief  (February 28, 2024)
    NAM brief  (November 6, 2023)