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.

 


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)

 


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.