Administrative Procedure -- active



Kisor v. O'Rourke   (U.S. Supreme Court)

Scope of judicial deference to agency interpretations of its own regulations

The NAM filed a coalition 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 arises from the Department of Veteran's Affairs (VA’s) denial of disability benefits for a veteran of the U.S. Marine Corps. Both a federal district court and an appellate court ruled against the veteran and in favor of the VA, and in so doing gave extreme deference to the VA's interpretation of the governing regulations. This case has important implications for manufacturers because this permissive level of judicial review incentivizes agencies to promulgate vague regulations and stacks the decks in the agency's favor in enforcement actions and litigation against manufacturers. The NAM's amicus brief in support of Supreme Court review provides specific examples of how this permissive level of judicial review harms manufacturers and must be reversed.


Related Documents:
NAM brief  (August 1, 2018)

 

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 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 opening brief was filed 8/20/18.


Related Documents:
NAM response  (February 5, 2018)
NAM petition for review  (December 14, 2017)

 


Arbitration -- active



Five Star Senior Living, Inc. v. Mandviwala   (U.S. Supreme Court)

Federal Arbitration Act preemption of California claims

The NAM and a group of other associations 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 be submitted to arbitration and that California’s policy is not preempted by the Federal Arbitration Act (FAA). Our brief argues 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. Review of this case is needed to prevent an end-run around the U.S. Supreme Court’s longstanding precedents upholding the strong federal policy in favor of arbitration.

While PAGA claims were once an afterthought tacked onto putative employment class actions in California, the number of PAGA filings has skyrocketed in recent years as plaintiffs seek to evade the enforcement of their arbitration agreements. If this is permitted to stand, representative PAGA claims will become even more common, resulting in the effective invalidation of millions of arbitration agreements that are governed by the FAA.


Related Documents:
NAM amicus brief  (April 26, 2018)

 

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

Federal Arbitration Act preemption of California’s arbitration injunctive relief

On April 2, the NAM and the Chamber of Commerce filed an amicus brief in the 9th Circuit arguing that the Federal Arbitration Act (FAA) preempts California’s attempts to circumvent arbitration requirements by requiring class arbitration proceedings. Class arbitration, like class litigation, sacrifices the advantages of arbitration. Arbitration allows manufacturers to resolve disputes promptly and efficiently while avoiding the costs associated with traditional litigation. Arbitration is speedy, fair, inexpensive and less adversarial than litigation in court.

As way of background, in McArdle, the arbitrator issued an award denying all of McArdle’s claims on the merits. McArdle moved to vacate the award and for reconsideration of the initial order compelling arbitration in light of the California Supreme Court’s intervening decision in McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017), where the California Supreme Court held that the right to public injunctive relief is not waivable in any forum and, therefore, is not preempted by the FAA. AT&T appealed the district court’s denial of AT&T’s motion to confirm the award in McArdle on the grounds that the FAA preempts California’s prohibition of arbitration agreements that do not allow public injunctive relief.


Related Documents:
NAM amicus brief  (April 2, 2018)

 


Benefits -- active



Zino v. Whirlpool Corp.   (6th Circuit)

Whether collective bargaining agreement entitles retirees to vested healthcare benefits for life.

On January 12, 2018, 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 is now encouraging the Sixth Circuit to take this opportunity to provide a clear standard that does not conflict with Tackett.

Oral argument has been scheduled for August 2, 2018.


Related Documents:
NAM amicus brief  (January 12, 2018)

 


Civil Procedure -- active



Davidson v. Kimberly-Clark Corp.   (9th Circuit)

Standing requirements for an injunction relating to product labeling

The issue in this case is whether the possibility of future harm gives an individual standing to obtain an injunction against a company for its product labeling. The NAM and coalition organizations filed a brief urging the court to require that a plaintiff show actual and imminent injury to get injunctive relief, not hypothetical or conjectural injury. Otherwise, speculative claims may foster widespread abuse in class-action suits for injunctions.

The decision on appeal incorrectly found harm sufficient for standing. It accepted a convoluted theory of harm to the plaintiff. The plaintiff does not allege she will buy the product currently on the market. Rather, if the product is changed, she may want to buy it but she might not because she might not know that it has been redesigned, or she might not trust the label. The NAM argued that the court improperly allowed this to suffice as a showing of harm for standing purposes, conflicting with existing precedent in the Supreme Court and other courts.

Review is necessary to limit the scope of consumer-fraud cases. Under the panel’s decision, every person who believes a product is deceptively marketed will have standing to sue, regardless of whether they have ever purchased that product. This expansive scope will contribute to further abuse of consumer-fraud class actions that are already exploited by plaintiff’s lawyers attempting to extract settlements and fees.


Related Documents:
NAM brief  (November 13, 2017)

 

In re New York City Asbestos Litigation   (New York Supreme Court)

Punitive damages in asbestos cases

In 2017, an administrative judge in a trial court in New York City issued a Case Management Order (CMO) governing certain procedures for handling complex asbestos litigation there. Several companies that are defendants in asbestos cases filed appeals relating to this order, and the NAM joined with other associations in an amicus brief supporting the appeals. We argued that the CMO should be rejected, or at a minimum modified to continue the longstanding practice of deferring punitive damage claims. The court should also modify the CMO to require plaintiffs to file all eligible asbestos trust claims early in the discovery process and specify that trust claims materials are admissible in asbestos cases. This would help prevent manipulation and abuse of the trust claim and litigation process.


Related Documents:
NAM amicus brief  (October 10, 2017)

 


Class Actions -- active



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 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.

 

GlaxoSmithKline LLC v. Louisiana   (U.S. Supreme Court)

Sovereign immunity and duplicative state government suits

On August 8, the NAM filed an amicus brief in the U.S. Supreme Court asking the court to review a decision by the U.S. Court of Appeals for the Third Circuit that allowed Louisiana to sue GlaxoSmithKline (GSK) over Flonase marketing even though the state had already received benefits from a separate class action settlement on the same issues and in which it was a class member. At issue is whether the state can be bound by the settlement agreement when it claims sovereign immunity from litigation under the Eleventh Amendment. Certainty and fairness in class actions settlements are important to manufacturers because settlements, although often expensive, provide litigation closure and ensure that they will never again face the same claims. The NAM’s brief explains why the Supreme Court should review the case to resolve the conflict between the Third Circuit’s decision and numerous other decisions that sovereign immunity does not extend beyond claims filed against a state.


Related Documents:
NAM amicus brief  (August 8, 2018)

 

Martin v. Behr Dayton Thermal Products   (6th Circuit)

Class action certification

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 involves 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 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 argues 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.


Related Documents:
NAM brief  (August 6, 2018)

 


Discovery -- active



BouSamra v. Excela Health   (Pennsylvania Supreme Court)

Attorney–client privilege for non-lawyers

The NAM and other groups 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.


Related Documents:
NAM amicus brief  (March 12, 2018)

 

Kiobel v. Cravath, Swaine & Moore LLP   (2nd Circuit)

Foreign confidential document discovery

On April 20th, the NAM filed an amicus brief with other associations supporting Shell in an appeal now pending in the Second Circuit. The case concerns 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. Our brief draws the court’s attention to the serious consequences such discovery could have for attorney-client communications and to litigants’ confidence in confidentiality stipulations.

For nearly two centuries, courts have followed a simple rule when it comes to client documents transferred to an attorney: “If the client is compellable to give up possession [of a document], then the attorney is; if the client is not, then the attorney is not.” If the court affirms, New York’s firms would become the world’s repositories of discovery materials, accessible to any litigant seeking to sue foreign-based entities in foreign courts. Exposing documents—not otherwise subject to production—to discovery demands after delivery to one’s attorney whose office was located within the sweep of a subpoena is unacceptable.


Related Documents:
NAM amicus brief  (April 20, 2017)

 


Environmental -- active



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

Risk Management Program litigation

The NAM joined with the American Chemistry Council, American Forest & Paper Association, American Fuel & Petrochemical Manufacturers, American Petroleum Institute and the Chamber of Commerce in asking a federal appeals court to review the EPA's new rule on Risk Management Programs under the Clean Air Act. The rule, published on Jan. 13, 2017, revises an existing rule that is designed to reduce chemical hazards and related accidental releases. The court will determine the validity of the new rule.

While the case is pending, the EPA will be considering the associations' Petition for Reconsideration of the rule. Our Feb. 28 petition and request for a 90-day stay argues that the final rule raises significant security concerns and compliance issues that will cause irreparable harm to manufacturers, requiring them to make available sensitive information that could expose plant vulnerabilities. The rule also imposes costly audit requirements for "each covered process" without justification, and the agency failed to conduct an adequate assessment of the costs and benefits.

The EPA delayed the effective date until Feb. 19, 2019, while it reconsiders the rule. This will give the agency time to review our concerns and will temporarily suspend the compliance burden.


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

 

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 February 7, the NAM’s litigation coalition filed a motion with the court to enjoin the 2015 rule nationwide. In August we asked the court to expedite its consideration of our motion. We await the court's ruling.


Related Documents:
NAM Motion  (February 7, 2018)
NAM Opposition to Motion to Dismiss  (May 13, 2016)
NAM Complaint  (July 2, 2015)
Press release  (July 2, 2015)

 

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 Motion  (March 1, 2018)
NAM Motion  (March 1, 2018)

 

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 challenge a 2018 rule by the U.S. Environmental Protection Agency (EPA) that removed two 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 seeks to preserve the 2018 rule and to bring the voice of manufacturers to the litigation.


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.

 

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

Citizen suit interference with environmental regulation:

On 9/18/15, the NAM filed an amicus brief, along with other business groups, in the Fifth Circuit supporting a federal judge's decision not to impose an additional $642 million in penalties on ExxonMobil for various permit violations at its large Baytown, Texas facility. We argued that citizen suits should not be used to second-guess regulatory systems with "gotcha" tactics, but have a limited role to fill in gaps that may occur. The company had been pro-active and cooperative dealing with the regulatory agencies, and courts should not interfere with that process.

On 5/27/16, the Fifth Circuit concluded that the district court erred in both its count of the correct number of “actionable” violations and its assessment of penalties in light of those violations. The Fifth Circuit determined that the district court analyzed alleged violations inconsistently, determining certain violations were “undisputed” in one part of the analysis but then requiring corroboration of those same violations in another section. The Fifth Circuit also held that the district court abused its discretion when it determined that, even if every alleged violation were actionable, a penalty would still not be warranted.

On remand, the groups reduced their requested amount of penalties from $642 million to about $40 million, and the district judge awarded them about $20 million, prompting Exxon’s appeal. The plaintiffs asked for an additional $6 million in fees. On January 19, 2018, the NAM and other leading business associations filed another amicus brief arguing that the Constitution and Clean Air Act limit citizen suits under the Clean Air Act. We have asked 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.


Related Documents:
NAM amicus brief  (January 19, 2018)
NAM amicus brief  (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

On June 12, 2015, the EPA published a rule entitled "State Implementation Plans: Response to Petition for Rulemaking; Restatement and Update of EPA's SSM Policy Applicable to SIPs; Finding of Substantial Inadequacy; and SIP Calls for Amend Provisions Applying to Excess Emissions During Periods of Startup, Shutdown and Malfunction." That is a complicated way of saying they responded to a Sierra Club petition by ordering state environmental enforcement plans to conform to their policies relating to excess emissions into the air when plant equipment is started up, shut down, or when it malfunctions (SSM events). The agency found that provisions in 36 state implementation plans (SIPs) are inadequate, in part because they contain provisions that provide an affirmative defense to emissions violations during SSM events.

The NAM is a member of the SSM Litigation Group, which filed a petition to review the EPA's final rule. 18 states filed similar challenges, as have various companies and business organizations. On March 16, 2016, the NAM and all the other industry petitioners joined in our main brief on the merits, arguing: (1) the EPA failed to justify its SIP call, (2) its prohibition on so-called "exemptions" from emission limitations are not supported, and (3) its prohibition of affirmative defenses by industry is not supported by the Clean Air Act or case law.

On March 25, 2017, proceedings in the case were suspended while the EPA reviews the rule. The agency will submit reports on the status of this review to the court every 90 days.


Related Documents:
Industry reply brief  (September 26, 2016)
Industry brief  (March 16, 2016)

 

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

TSCA inventory reset intervention

The NAM and a group of other associations intervened in the Toxic Substances Control Act (TSCA) lawsuit filed by the Environmental Defense Fund. The “Inventory Reset Rule” at issue here, sorts the master list of chemicals, called the TSCA Chemical Substances Inventory “TSCA Inventory,” based on whether the chemicals are active or inactive in commerce. If a chemical is not identified as active, it will be listed as “inactive.” After the Reset, it will be illegal to manufacture, import, or process chemicals designated on the Inventory as inactive. An adverse decision in this litigation would adversely impact companies who manufacture or use chemicals that will be classified, prioritized and evaluated under TSCA.


Related Documents:
Motion to Intervene  (October 2, 2017)

 

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)

 

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. 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.


Related Documents:
NAM Motion  (August 31, 2018)
NAM Complaint  (June 29, 2018)
NAM Motion  (June 29, 2018)

 

Juliana v. United States   (D. Ore.)

Regulation by litigation -- public trust theory for greenhouse gas regulation

A group of young people are the plaintiffs in this case demanding that various federal agencies do more to reduce greenhouse gas emissions in the United States, so that world levels will drop by at least 6% per year. The theory of their case is that the President and 9 federal agencies have a constitutional duty to under the "public trust doctrine" to hold the atmosphere and other public trust resources in trust for current and future generations.

A similar challenge was already heard and rejected by federal courts from 2011 to 2014. Alec L. v. McCarthy.. The courts ruled that the plaintiffs did not present a federal question, because the theory of public trust is entirely a state law issue.

The NAM and other business groups moved to intervene in this latest litigation on Nov. 12, 2015. At the same time, we filed a motion to dismiss the case, arguing not only that the litigation does not present a federal question, but also that it raises political questions that should be addressed through the legislative and executive branches of government, rather than through an undemocratic and judicially unmanageable proceeding based on an archaic legal principle.

After a lengthy oral argument, the judge granted our motion to intervene on 1/13/2016. Additional arguments on our motion to dismiss took place in March, but the magistrate judge issued a recommendation to the court that the motion be denied. We filed objections to this report on May 2, 2016, underscoring the serious problems of standing and justiciability that the plaintiffs face in this case. The federal government filed similar objections, and oral argument was held on Sept. 13.

On Nov. 10, Judge Ann Aiken upheld the magistrate's recommendation and denied the motions to dismiss. The case will now proceed to trial.

On March 7, the U.S. Department of Justice asked the court to certify an immediate appeal of the ruling denying dismissal of the case. The NAM and other intervenors filed a similar motion on March 10. Those motions are pending.

In late May, the NAM and other intervenors in the case filed motions to withdraw from this case. These motions were granted on June 28. At the same time, a trial date was set for February 5, 2018.


Related Documents:
Objections brief  (May 2, 2016)
Motion to dismiss  (November 12, 2015)
Motion to intervene  (November 12, 2015)

 

Kentucky Waterways Alliance v. Kentucky Utilities Co.   (6th Circuit)

"Conduit theory" of liability under the Clean Water Act

The NAM filed an amicus brief to oppose a lawsuit by environmental groups that seeks to expand the scope of liability under the Clean Water Act. The lawsuit involves coal ash storage ponds, where electric generation facilities store residual ash from coal combustion for electricity generation. The plaintiffs allege that the coal ash seeps into groundwater that is hydrologically connected to nearby streams protected under the Clean Water Act. Such seepage, they allege, is an unpermitted "point source" discharge under the Clean Water Act. The defendant electric utility defended on the basis that diffuse underground migration of coal ash is not a point source under the Clean Water Act. The federal district court agreed. The environmental groups appealed to the Sixth Circuit Court of Appeals.

This case has significant implications for manufacturers because the plaintiffs' theory would impose massive liability for any pollution (no matter how insignificant) that migrates from a factory site or other facility into groundwater and then into nearby rivers, streams, or other waters. The NAM filed an amicus brief in support of the defendant utility that argues against this overbroad theory of liability under the Clean Water Act. Our brief argues that the plaintiffs' theory of liability is inconsistent with the Clean Water Act, conflicts with other environmental statutes intended to protect against land pollution and would lead to absurd results if implemented.

On September 24, 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)

 

Martinez v. Colo. Oil & Gas Conservation Comm'n   (Colorado Supreme Court)

Colorado oil and gas permits

The NAM, along with the the National Federation of Independent Business Small Business, the Colorado Association of Commerce & Industry and the Independent Petroleum Association of America, filed an amicus brief in the Colorado Supreme Court asking the Court to review a lower court decision to severely restrict energy production, which would essentially amount to a de facto ban on oil and gas production in Colorado and is in direct conflict with the Colorado Oil and Gas Conservation Act. Because the opinion restricts the consideration of cost and technical feasibility when promulgating rules, the lower court’s approach could lead to disastrous consequences for a variety of industries and the regulated community in general, particularly if adopted by other courts. Fortunately, the Colorado Suprme Court agreed to hear the appeal.

As way of background, in late 2013, several petitioners in Colorado filed a rulemaking petition with the Colorado Oil and Gas Conservation Commission (COGCC). Their petition sought an injunction on all new oil and gas permitting in Colorado, one of the country’s largest producers of oil and gas, until the COGCC could conduct superfluous new studies and put vague new regulations in place. COGCC rejected the petition in April 2014, and a state trial court affirmed the rejection in February 2016. On March 23, 2017, the Colorado Court of Appeals held in a 2-1 decision that the assessment of technological feasibility and cost effectiveness of regulations could give way to the extraordinary relief being sought by petitioners – i.e., a statewide moratorium on oil and gas permitting. The court remanded the petition to the COGCC for further consideration.


Related Documents:
NAM brief  (April 2, 2018)
NAM amicus brief  (May 18, 2017)

 

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 in Monsanto’s Petition relating to the listing of glyphosate (Roundup). Under Proposition 65, California 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.

Substances listed under Proposition 65 should be based on sound and generally-accepted science, but that is no longer the case because the listings are delegated to a biased, foreign entity. Proposition 65 requires that a chemical is automatically listed if the International Agency for Research on Cancer (IARC), classifies it as carcinogenic. Many agencies, from the EPA to the European Food Safety Authority, have determined that glyphosate poses no risks to human health. Nevertheless, IARC classified glyphosate as “probably carcinogenic to humans.” The delegation of authority and procedures related to determining what chemicals should be listed is important because of the costs borne by manufacturers and the public by the listing of a chemical under Proposition 65. Manufacturers and other businesses face stiff penalties and fee awards in bounty hunter litigation, such as settlements of $25 million in 2017 and over $30 million in 2016.


Related Documents:
NAM amicus brief  (June 28, 2018)

 

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. Oral argument is scheduled for December 18, with a ruling from the court possible in early 2019.


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)
Statement of Issues  (January 25, 2016)
Motion to intervene in Sierra Club challenge  (January 22, 2016)
Shopfloor blog  (December 23, 2015)

 

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)

 

Natural Resources Defense Council v. EPA   (2nd Circuit)

Supporting EPA in NRDC challenge to TSCA Section 5

The NAM, along with the American Chemistry Council, intervened in Natural Resources Defense Council v. EPA in the Second Circuit Court of Appeals, supporting the EPA’s new regulations on chemicals under the updated Toxic Substances Control Act (TSCA). NRDC claims that the new standards put consumers at risk of harmful exposure. NRDC is challenging Section 5 of TSCA, which deals with the risk assessment standard for significant new use rules (SNURs) for chemicals and could potentially hinder approvals of new uses of chemicals. The NAM intervened on behalf of the EPA to make sure it retains proper standards that protect the interests of chemical manufacturers and users. This is the fifth TSCA lawsuit, and the NAM is also involved in the TSCA inventory reset litigation.

More specifically, NRDC’s lawsuit challenges EPA’s New Chemicals Decision Framework and takes the position that TSCA mandates the use of enforceable orders whenever EPA finds it needs to regulate a new chemical as an interim step to avoid any potential regulatory gap. EPA, on the other hand, plans to limit the use of Section 5(e) enforcement orders in some cases and issue SNURs instead. NRDC’s preferred approach could create even more significant delays in commercializing new chemistries and could lead to more companies having to privately negotiate conditions with EPA that are detrimental to downstream users. One legal issue is whether EPA has discretion to issue rules instead of orders to regulate new chemicals so that intended, known or reasonably foreseen uses of new chemicals do not pose unreasonable risks.

Shortly after NAM filed its opening brief, NRDC decided to drop its lawsuit. On August 29, 2018, the court granted NRDC's motion to dismiss, resulting in a win for industry in this case.


Related Documents:
NAM Motion  (February 5, 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)

Challenge to the EPA's New Source Performance Standards (NSPS) for greenhouse gases from electric utilities

The Environmental Protection Agency issued a set of regulations in October 2015, governing greenhouse gas emissions from electric power plants. One covered existing units, and is the subject of separate litigation here. The other sets carbon pollution standards for new, modified and reconstructed power plants.

On December 18, the NAM and other associations in our coalition filed a petition for review in a federal appeals court. Our case was consolidated into 13 cases previously filed by North Dakota and other states and petitioners.

We are concerned that the EPA's new rules will eliminate coal-fired power plants from the mix of energy sources available to manufacturers, raising costs and threatening the reliability of the electric grid. As consumers of one-third of our nation's energy, manufacturers are put at a competitive disadvantage by this regulation.

The NAM and a variety of other industry groups, power companies and unions filed our main brief on the merits on Oct. 13, 2016. In our brief, we argue that the EPA exceeded its authority by determining that the best system of emission reduction for new coal-fired power plants is to require carbon capture and storage in deep underground saline formations. This process will require pipelines and the construction of deep new wells at locations with suitable geologic formations, involving costly and energy-intensive work. The EPA cannot establish that such formations are available throughout the country.

We also said that the EPA has not met the requirement that it show that the new emissions standard is achievable, because the technology required to achieve it is not demonstrated or available for full-scale application on a widespread scale. Instead, the regulation is based on Department of Energy engineering estimates of a hypothetical power plant.

The EPA’s analysis of the best system of emission reduction for modified and reconstructed steam generating units was minimal, and insufficient to satisfy the statutory requirements for imposing new regulatory requirements. It admitted that it did not have information regarding design factors and operation and maintenance practices that must form the basis for determining that a performance standard is achievable.

On March 28, 2017, the EPA moved to hold this case in abeyance pending EPA's review of the rule pursuant to an Executive Order from President Trump. Our coalition filed a brief in support, and on March 28, the court agreed. Status reports will be filed every 30 days, and the court ordered supplemental briefing by May 15 on whether the case should be remanded to the EPA rather than held in abeyance.


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

 

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)

 

Puget Soundkeeper Alliance v. Wheeler   (W.D. Wash.)

Challenge to delayed implementation of EPA's 2015 "Waters of the U.S." rule

On June 29, 2018, the NAM moved to intervene in a lawsuit by environmental groups that challenges the U.S. Environmental Protection Agency's (EPA's) efforts to invalidate EPA's delay of the 2015 "Waters of the United States" rule until February 2020. 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 moved to intervene 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. The court granted our intervention on July 25, 2018.


Related Documents:
NAM Motion  (June 29, 2018)

 

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 12/17/14, the court held this case in abeyance until the EPA completes the rules revision process.


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

 

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. The NAM is pursuing several appeal options.


Related Documents:
NAM brief  (July 6, 2018)

 

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 29, 2018)

 

Tennessee Clean Water Network v. Tennessee Valley Authority   (6th Circuit)

Conduit theory of liability for pollutants

The Tennessee Valley Authority (TVA) operates a coal-fired electric generation facility near Gallatin, Tennessee. The coal combustion produces coal ash, which TVA then stores within two on-site ponds. In 2015, environmental groups sued TVA, alleging that the coal ash seeps into groundwater with a hydrological connection to a nearby river. The plaintiffs allege that such seepage violates the Clean Water Act as an unpermitted discharge to a jurisdictional water. A district court ruled in favor of the plaintiffs based on a legal theory that if pollutants on land can reach a jurisdictional water through any underground conduit, then such pollutant is a "discharge" under the Clean Water Act, requiring a permit. This broad interpretation goes far beyond the scope and intent of the Clean Water Act, it duplicates other environmental statutes focused on land pollution, would be impossible to implement, and would impose incalculable liability risk on manufacturers and other regulated industries. The NAM’s amicus brief on behalf of TVA in the Sixth Circuit Court of Appeals argues against this overbroad theory of liability. On September 24, 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)

 

West Virginia v. EPA   (D.C. Circuit)

Challenging EPA's Clean Power Plan

On the day that the EPA's Clean Power Plan regulations were published in the Federal Register, twenty-six states filed suit. The suits are expected to repeat many of the arguments made in similar suits filed by various states and coal companies earlier this year. Those cases are summarized here, and were dismissed by the court as premature.

The NAM and a coalition of other national trade associations filed suit later that day, along with a motion asking the court to stay, or suspend implementation of, the rule until the legal issues are resolved in court.

The NAM filed extensive comments during the development of the rule, but they were largely ignored. Instead, the EPA came out with a rule that will lead to a tremendous change in the power industry and beyond, restricting fuel resources and reducing the reliability of the electric grid.

Manufacturers are committed to reducing greenhouse gases and have helped bring about a more than 10% reduction in them since 2005. the EPA's approach will drive up energy rates and make it increasingly difficult for manufacturers to make things and create jobs in the United States. We believe that we have a strong case that the regulation exceeds the EPA's authority under the Clean Air Act and that the courts will step in to restrain the agency.

On Jan. 21, 2016, the D.C. Circuit denied motions to stay the regulation pending the outcome of the litigation, but granted expedited briefing with oral arguments scheduled for June 2, 2016. West Virginia and 28 other states and state agencies filed an application for a stay in the U.S. Supreme Court on Jan. 26. In an unprecedented ruling, the Supreme Court granted the stay on Feb. 9. Click here for details.

All petitioners, including the NAM, numerous states, electric utilities and other business groups, filed a joint brief on Feb. 19 detailing the legal arguments against the EPA’s rule. First, we argued that the Clean Air Act does not authorize the EPA to restructure the power sector, invading a traditional state regulatory domain without clear congressional authorization. In addition, the regulation mandates emissions reductions that go beyond what any stationary source of emissions can achieve, and mandates that the owners and operators of those sources reduce or cease work and shift the generation of electricity to another power plant.

Second, the Clean Air Act expressly prohibits the EPA from imposing regulations under Sec. 111 on facilities that are already regulated under Sec. 112, which is the case here. This provision was designed to prevent duplicative or otherwise inefficient regulation.

Third, the regulation bars the authority granted to states to consider the remaining useful life of a source when establishing its standards, thus taking into account the tremendous costs associated with switching fuel sources away from fossil fuels.

Finally, we argued that the regulation violates states’ rights by commandeering their authority over intrastate generation and transmission of electricity and leaving them to bear the brunt of citizen complaints about increased costs and lost jobs.

We filed a reply brief on 4/22/16 reiterating and expanding on these arguments. Oral arguments, originally scheduled before a 3-judge panel for June 2, were held on September 27 before the entire (en banc) court (10 judges). This is a sign of the importance of the case to the D.C. Circuit judges, and of the need for a quicker resolution of this case than most. The arguments, scheduled to last under 4 hours, turned out to take 6 hours and 45 minutes because of the many issues and active questioning from the judges.

In the March, 2017, EPA moved to hold this case in abeyance in light of its announcement that it had started a review of the rule pursuant to an order from President Trump. Our coalition filed a supporting response brief, and the court agreed, suspending the case on March 28, 2017. Periodic reports from EPA will be filed, and the parties filed briefs on whether the case should be sent back to the agency rather than held in abeyance. Our coalition supported holding the case in abeyance, preserving our legal rights in the challenge and keeping the nationwide stay in effect.


Related Documents:
NAM response in support of abeyance  (April 6, 2017)
NAM reply brief  (April 22, 2016)
NAM merits brief on core legal issues  (February 19, 2016)
NAM Motion for Stay  (October 23, 2015)
NAM Petition  (October 23, 2015)
NAM press release  (October 23, 2015)

 

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 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. In 2001, 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. The frog does not live on that property and could not even survive there under current conditions. Nonetheless, FWS declared the land as critical habitat because the frog could survive on the land if the land were significantly transformed by cutting down the trees, planting a different type of tree, and conducting yearly controlled fires to promote vegetation necessary for the frog's survival.

A critical habitat designation broadly hampers the productive use of one’s land. Owners of land designated as critical habitat face immediate and significant restrictions on their otherwise lawful use of that land, as well as expensive and time-consuming new procedural requirements on ongoing and future projects, litigation risk, and often a significant reduction in the property’s value. The broader consequences of FWS's position are frightening to imagine. With over 1,500 different birds, mammals, amphibians, fish, plants, and insects currently listed as either endangered or threatened, any land, infrastructure, or factory site could be forced to comply with the onerous restrictions that accompany a critical habitat designation.

To fight this regulatory overreach, the landowner sued in federal court to overturn FWS's critical habitat designation. The NAM's amicus brief in support of the landowner argues that FWS exceeded its statutory authority under the ESA and highlights how its actions impose significant harm and business uncertainty on manufacturers and other businesses.

On January 22, the Supreme Court granted certiorari to hear the case.


Related Documents:
NAM brief  (April 30, 2018)

 


Expert Testimony -- active



Bradford v. CITGO Petroleum   (Louisiana Supreme Court)

Necessity for expert testimony in toxic tort cases

A group of individuals sued CITGO Petroleum, alleging 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 has now asked the Louisiana Supreme Court to grant discretionary review of the case.

The appeals court's unreasonably low legal standard for establishing liability risks imposing massive costs on manufacturers for alleged harms that lack any supporting scientific or other reliable evidence. The NAM's amicus brief explains the significant negative impacts of the appellate decision on manufacturers and provides strong legal arguments against such a lax liability standard.


Related Documents:
NAM brief  (February 9, 2018)

 


Free Speech -- active



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 March 22, 2018 the court ordered a stay pending National Institute of Family & Life Advocates v. Becerra , in which the U.S. Supreme Court recently issued a ruling that recognizes strong protections on commercial speech.


Related Documents:
NAM brief  (March 5, 2018)

 

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)

 

In re Murphy-Brown LLC   (4th Circuit)

Gag order restraints on free speech

On August 6, 2018, the NAM filed an amicus brief along with our North Carolina state partner in a petition to the 4th Circuit opposing an unjustified judicial gag order that limits constitutionally-protected free speech rights. A district court judge issued the gag order, without prompting by either party, to restrain speech on an ongoing line of cases against pork producers in North Carolina, which has resulted in some of the largest verdicts in state history. The NAM and its members are frequently in litigation that attracts media attention and need to rely on attorneys and communications teams to provide accurate information and advocacy to the press and the public. The NAM filed an amicus brief in this case to underscore the First Amendment and practical harms of the district court’s sweeping gag order on manufacturers. On September 5, 2018, the district court vacated its gag order.


Related Documents:
NAM amicus brief  (August 6, 2018)

 


Government Regulation -- active



Hodgin v. UTC Fire & Security Americas Corp.   (4th Circuit)

Manufacturer liability for third-party telemarketing calls

On September 1, 2017, the NAM joined with the U.S. Chamber and the Security Industry Association in an amicus brief in the 4th Circuit addressing the issue of vicarious liability for alleged telemarketing calls made by third-party dealers that sold equipment. UTC and Honeywell, as the manufacturers of the equipment, are the deep pockets the plaintiffs are trying to tap to pay for telemarketing violations under the Telephone Consumer Protection Act (TCPA). Plaintiffs pursue thousands of TCPA cases in pursuit of lucrative verdicts or settlements. The manufacturers here had no control over the calls or the third-party dealers whatsoever.

The court below held that UTC and Honeywell could not be vicariously liable under the TCPA for the complained-of calls placed by such “authorized dealers,” and we agree. For vicarious liability to be established, a principal-agent relationship must have existed. It is quite clear from both contractual language and the general nature of the manufacturer's relationship with the third-party dealers that no such relationship existed. Holding otherwise and establishing vicarious liability would be an incorrect application of the law, 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 Fourth Circuit agreed with us by affirming the lower court's decision on March 14, 2018.


Related Documents:
NAM amicus brief  (September 1, 2017)

 

Public Citizen, Inc. v. Trump   (D.D.C.)

Standing to challenge Exec. Order on 2-for-1 regulatory relief

President Trump’s Executive Order 13771 begins 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. Public Citizen filed a lawsuit claiming that the order is arbitrary. The government argues that the lawsuit is premature, since no regulatory action has yet been taken.

The NAM and other business associations filed an amicus brief to emphasize the importance of making the regulatory system efficient and to describe the way this new order is an extension of a bipartisan history of executive orders with the same goals. Federal regulations impose 297,696 separate restrictions on manufacturers’ operations, and cost an average of $19,564 per employee. The executive order will focus on low-yield regulations that fail to provide sufficient societal benefits when compared to their compliance costs.

The brief also highlights 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 case was argued on August 10, 2017, but plaintiffs were permitted to amend their complaint, which will delay a ruling on this issue.


Related Documents:
NAM amicus brief  (June 12, 2017)

 


International -- active



European Comm'n v. Stichting Greenpeace Nederland   (European Court of Justice)

Intellectual Property

The NAM, CropLife America and the American Chemistry Council filed a motion on April 18, 2014 to intervene in an international appeal before the European Court of Justice (ECJ) that could set a dangerous precedent for intellectual property protection. In this case, the plaintiffs requested the public disclosure of a massive amount of confidential business information relating to certain pesticides used both in the U.S. and Europe, including how products were manufactured, their final composition and information on impurities, in order to assess potential environmental impacts. This case has broad implications, not only for the crop protection industry, but for many, if not all of the U .S. chemical manufacturers operating both in the U.S. and in Europe.

On March 6, 2015 the ECJ granted the NAM intervener status in European Commission v. Stichting Greenpeace. This is a significant development in the case. Intervener status is more difficult to obtain in the European system because it grants the intervener the ability to argue before the court and have its issues addressed on the merits. Further, by allowing our intervention, the Court has recognized the interest of U.S. industry in this case. It is very unusual that U.S. trade associations appear before the EU courts and it was far from certain that we would succeed in being admitted. As way of background, the plaintiffs requested the public disclosure of a massive amount of confidential business information relating to certain pesticides used both in the U.S. and Europe, including how products were manufactured, their final composition and information on impurities, in order to assess potential environmental impacts. This case has broad implications, not only for the crop protection industry, but for many, if not all of the U .S. chemical manufacturers operating both in the U.S. and in Europe.

On April 14, 2015, the NAM filed with the ECJ a Statement of Intervention on behalf of NAM, ACC and CLA. The Statement details NAM’s full support for the Appellant’s single plea in law, according to which the General Court misconstrued the concept of information which ‘relates to emissions into the environment’ in the first sentence of Article 6(1) of the Aarhus Regulation. In sum, the Interveners consider that this concept (i) ‘…must be read narrowly…’; 3 (ii) ‘…refers to information about emissions which…emanate from installations such as factories and power stations’; 4 and (iii) ‘…concern[s] actual, not hypothetical emission[s]…’.

On February 4, 2016, the NAM crossed the Atlantic to represent U.S. manufacturers before the ECJ in Luxembourg and fight against the public disclosure of confidential business information. We had a good day in court, and our statement was the only one to focus on TRIPS and the international dimension, which is an important aspect of the case. On November 23, 2016, the ECJ agreed with the NAM that the lower court erred by broadly interpreting EU disclosure for emissions rule, and it set aside the lower court's judgment.

On February 2, 2017, the NAM filed an additional set of written observations to further explain the importance of the confidential business information to trade and competition. In March 2018, the NAM provided an additional oral statement on the global importance of the case and the EU's international law obligations.


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 Application for Leave 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

On April 3, 2018 the NAM and National Foreign Trade Council filed a Civil Report Brief in a case GE has been fighting 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. Holding GE liable for the obligations of RCA-Taiwan would apply Taiwan’s law in a manner that would be harmful to the critical interest of Taiwan in supporting its manufacturing industry and attracting foreign investment and violates international norms of corporate law. Traditionally, Taiwan’s legal system has encouraged foreign investment by honoring the principle of corporate separateness and providing foreign investors with lawful assurance that their liabilities relating to those investments will be limited to the amount invested – a fundamental principle of corporate law. The decision of the lower court, in disregarding these principles, departs from longstanding precedent and potentially could harm the economy of Taiwan by rendering it an unpredictable and unfavorable location in which to invest in manufacturing facilities and other businesses compared to other jurisdictions that follow international norms. We are urging the Taiwan Supreme Court to correct the lower court’s decision.


Related Documents:
NAM brief  (April 3, 2018)

 

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 a joint WTO statement because Thailand has failed to abide by its WTO commitments on customs valuation, which now threatens a company with fines of more than $2 billion and imprisonment of several individuals. The dispute raises important systemic issues for the international business community, and our statement emphasizes the importance of the WTO’s customs valuation rules to international trade.

As way of background, this statement is based on the Philippines’ panel request filed at the World Trade Organization (WTO) on June 29, 2016, which raised complaints against Thailand under, among others, the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, more commonly known as the Valuation Agreement. Of particular concern to our associations are the allegations that Thailand has engaged in improper customs valuation.

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. These supply and production chains often involve related-party transactions of the type at issue in the present dispute. Companies rely on these supply and production chains to produce goods as efficiently as possible and to access international consumers in the global marketplace.


Related Documents:
WTO statement  (May 12, 2017)

 


Jurisdiction -- active



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.

 


Labor Law -- active



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 of Region 10 directed the election for a subset of employees at the plant. The flight readiness technicians and flight readiness technician inspectors, according to the Regional Director, constituted an appropriate independent unit for collective bargaining. In reaching this decision, the Regional Director did not evaluate it under the required PCC Structurals standard, which relies on the “community of interest” standard to determine whether employees excluded from the bargaining unit have meaningfully distinct interests that outweigh their similarities. 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 by PCC Structurals. The fragmented unit created by the Regional Director creates an artificial barrier that separates employees and departments and frustrates the ability to maintain stable labor relations.


Related Documents:
NAM amicus brief  (July 16, 2018)

 

Cellco Partnership v. NLRB   (9th Circuit)

Restriction on use of email in employee handbooks

The case arises from a recent decision by the NLRB that deems illegal portions of Verizon's workplace Code of Conduct that prohibits employee use of company email and other systems in various ways. The NLRB said the policies violate employee rights to discuss wages, hours and terms of employment. The NAM joined with the Chamber of Commerce, the Coalition for a Democratic Workplace, the HR Policy Association and the National Federation of Independent Business in an amicus brief arguing 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. The rule does not impinge on employee opportunities to use a wide variety of other personal communications technology during their non-work time.


Related Documents:
NAM amicus brief  (November 16, 2017)

 

Communication Workers v. NLRB   (9th Circuit)

Use of company email by employees

This case involves the use of company email systems by employees. It arises from a 2014 decision by the NLRB 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 extremely limited, if any, oversight authority.

That decision, known as the Purple Communications case, reversed a previous NLRB decision and spawned substantial additional litigation involving other companies. The rule seeks to provide access to a company's own email system when other email systems can easily be accessed for free outside of the company's operations. The rule allows for extensive workplace distractions and personal misuse of business communication systems developed for business purposes.

The NAM joined with the HR Policy Ass'n, NFIB, and the Coalition for a Democratic Workplace in an amicus brief arguing 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. Further, the NLRB failed to provide an adequate justification and rationale for departing from longstanding precedent.


Related Documents:
NAM amicus brief  (October 10, 2017)

 

In re Space Exploration Technologies Corp.   (Dept. of Labor Admin. Rev. Bd.)

Scope of Davis-Bacon Act coverage when government property is involved

On 2/18/2014 the NAM led a coalition of associations filing an amicus in support of Space X. The brief highlights the adverse consequences of the Department of Labor’s Wage and Hour Division, Deputy Administrator’s misapplication of the Administrative Review Board’s (ARB) decision in CityCenterDC, No. 11-074, 2013 WL 1874818 (ARB 2013), which is currently being challenged in District of Columbia v. Department of Labor, 13-cv-00730 (D.D.C.). The decision finds that the Space X Florida launch facility project is subject to the 1931 Davis-Bacon Act, which requires "prevailing wages" for construction workers on public buildings.

The decision is exceedingly troubling, and the amici contend that the Deputy Administrator’s decision improperly expands the coverage of the Davis-Bacon Act (DBA) beyond the limited scope intended by Congress and calls into serious question the validity of the holding(s) in CityCenterDC itself. The brief argues that the plain language of the DBA shows that Congress intended the scope of the Act’s coverage to be limited to publicly funded construction projects. Congress never intended the Act to apply to privately funded, privately owned, and privately occupied construction projects, or else the statute would not have been limited by its terms to “public buildings and public works.” Prior to CityCenterDC, the Act had never been applied to a privately funded, owned and occupied construction project in its 80-year history. The ARB’s holding is almost limitless in scope and perverts the plain meaning of “contract for construction” of “public works” as used by Congress in the Davis-Bacon Act. This dramatic expansion of the Act to private development projects has vastly detrimental implications for industry.

Further, the amici argue that Space X should be distinguished from CityCenterDC. Unlike CityCenterDC, Space X did not have a contract or lease with a federal entity but merely a license issued by the Air Force. The license does not require Space X to engage in construction and does not incorporate a master plan for such construction to be specified or approved by the government as was the case in CityCenterDC.


Related Documents:
NAM amicus brief  (February 18, 2014)

 

McDonald's v. Serv. Emp.'s Int'l Union   (NLRB)

NLRB preclusion standards

On August 28, 2018, the NAM, along with other trade groups, 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.

 

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. In 2017, the judge in Plano Chamber of Commerce v. Perez held that the Department of Labor (DOL) contradicted the express will of Congress and issued a nationwide injunction to prevent implementation of the new Overtime Rule. Later, in an unrelated case in a different jurisdiction, a plaintiff filed suit against her employer, Chipotle, for violating the new overtime rule. The judge who issued the nationwide injunction in Plano held the plaintiff in contempt for filing a suit that seeks to enforce an enjoined rule. The plaintiff is appealing that contempt order, arguing that she was not within the judge’s jurisdiction and, therefore, cannot be held in contempt. If the plaintiff can sue her employer under the enjoined rule, the nationwide injunction would be functionally invalid, and manufacturers would be subjected to billions of dollars in overtime liability under the new rule.

The NAM argues that the validity of the nationwide injunction should not be relitigated when determining whether it was proper for the Plano judge to hold a party in another jurisdiction in contempt of court. The NAM’s amicus brief argues that the only question before the court is whether the contempt order was valid, not whether the nationwide injunction was meritorious. For more information on Plano, click here .


Related Documents:
NAM amicus brief  (July 13, 2018)

 

United Nurses & Allied Professionals   (NLRB)

Challenging the NLRB's presumption that union dues spent for lobbying are germane to collective bargaining

The NAM filed an amicus brief with the NLRB in a case that could significantly alter the current way employees exercise their Beck rights to object to union dues expenditures for political activities such as lobbying. The U.S. Supreme Court in Beck explained that 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. The decision does allow a union to charge for core union activities to prevent the “free rider” problem where benefits are bestowed on employees who might not otherwise contribute financially to the union’s activities.

Our brief argued that lobbying is not a core union function, and that the Supreme Court has already decided the issue in a case under an equivalent statute. Non-member employees should not be compelled to fund these union political activities.

In this case the NLRB is considering imposing a presumption that union dues for certain lobbying activities are germane to collective bargaining and other core union functions. The NAM argued that a union must bear the burden to prove that a lobbying expense is germane.

The Board also decided that an employee who objects to the union’s expenditures may not seek any verification of how the union spends funds. The NAM believes that all employees are entitled to a copy of an annual audit verification letter certifying that the union’s expenses were actually incurred, and the union must provide a statement of its chargeable and non-chargeable expenses.

If the NLRB adopts its presumption, it will be much harder if not impossible for objecting employees to determine whether any of the dues they pay are legitimate. The NAM’s approach prevents union dues from being used to promote political causes to which employee's object.


Related Documents:
NAM amicus brief  (February 19, 2013)

 

UPMC Presbyterian Shadyside v. NLRB   (3rd Circuit)

Court limits on NLRB's subpoena authority

The NAM filed an amicus brief with the Third Circuit Court of Appeals in UPMC Presbyterian Shadyside v. NLRB. In the case, the NLRB issued subpoenas requesting information to UPMC Presbyterian Shadyside Hospital, and under a “single employer” theory, to its corporate parent, UPMC, purportedly in connection with an NLRB investigation of unfair labor practice charges filed by the SEIU against Presbyterian Shadyside.

The district court found that those subpoenas are unprecedented in breadth and unrelated to the union’s underlying unfair labor practice charges. Indeed, the district court indicated that in view of “the NLRB’s efforts to obtain said documents for, and on behalf of, the SEIU, arguably moves the NLRB from its investigatory function and enforcer of federal labor law, to serving as the litigation arm of the Union, and a co-participant in the ongoing organization effort of the Union.” Although the district court found that (i) “there is a minimal or no relationship between the Subpoenas and the underlying unfair labor practice charges”; (ii) “the unfair labor practices are being used, under the guise of the ‘single employer’ rubric, to attempt to legitimize a massive document request”; and (iii) compliance with the subpoenas “would be an expensive, time-consuming, and potentially disruptive of the daily business activities” of the Appellants, the court nonetheless granted the NLRB’s application to enforce the subpoenas. According to the court, the “practical effect” of the Third Circuit’s “case law as to enforcement of subpoenas of federal government agencies is that [the district court] is constrained to essentially ‘rubber stamp’ the enforcement of the Subpoenas at hand.”

The NAM brief argued that the NLRB lacks the authority to compel an employer to produce information, such as documents demanded by an administrative subpoena. Instead, that authority, which necessarily requires impartial evaluation of an employer’s objections to the subpoena, is vested exclusively in Article III courts. This structural limitation on the NLRB’s authority, emanating from the Constitution’s separation of powers and due process requirements, protects against abuse of subpoena power.


Related Documents:
NAM brief  (April 14, 2015)

 


OSHA -- active



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 reply brief  (September 2, 2016)
NAM preliminary injunction memorandum  (July 12, 2016)
NAM preliminary injunction  (July 12, 2016)
NAM complaint  (July 8, 2016)
Press release  (July 8, 2016)

 


Patents, Copyrights and Trademarks -- active



Australia - Certain Measures Concerning Trademarks   (World Trade Organization)

Challenging Australia's Plain Packaging Law

The NAM and 7 other business organizations 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 in that country. This is the first time the NAM has filed a formal statement with a WTO panel.

The cases, consolidated before one panel of judges, are an effort by 5 countries to have Australia's law declared inconsistent with international trade agreements. The NAM's letter noted that Australia's law provides that no trademark may appear anywhere on the retail packaging of tobacco products, but that only the name of the brand is allowed, in a specific font, size, color and placement. The law prohibits all distinctive elements of packaging.

The NAM argued that such restrictions will have serious consequences for the export and competition strategies for many producers of a wide variety of products. Trademarks are important to enable the public to identify and recognize goods or services, helping companies to associate their reputations with their products and to promise a consistent level of quality. They are an effective mechanism to protect against counterfeiting and consumer deception. Product labeling laws generally add information to a label, but this law takes information away from the consumer and limits the communicative value of the label.

The dispute involves an interpretation of the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which provides detailed obligations to protect trademarks, building on the extensive protections already provided in the Paris Convention for the Protection of Industrial Property. The Australia law undermines the strength and value of a trademark by prohibiting its use. Moreover, the protection of trademarks cannot be based on the nature of the goods or services to which the trademarks are applied..

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.


Related Documents:
NAM Letter to WTO  (August 21, 2014)

 


Preemption -- active



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

Preemption of private restoration plans by CERCLA

The NAM filed an amicus brief in the U.S. Supreme Court supporting Atlantic Richfield’s petition seeking review of a recent decision from the Montana Supreme Court. In the decision below, the Montana Supreme Court created a new Superfund regime in which EPA’s generally binding remediation decisions are viewed as mere suggestions, with any jury having the power to order other remediation efforts—even ones that EPA specifically considered and rejected. That approach destroys the stability the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) promises to the business community and imperils EPA’s ability to achieve CERCLA’s central purpose—the prompt cleanup of sites based on sound science. This is an important case for the future of EPA’s authority over CERCLA/Superfund cleanups, which impact many manufacturers.

Companies could face unlimited liability because the lower court’s decision would revoke the EPA’s power to enter into settlements to fix remediation obligations. That violates the purpose of CERCLA, which aims to encourage orderly, efficient cleanup of superfund sites. Reversing the Montana Supreme Court’s decision would also ensure that the CERCLA mechanism for public comment is continued in the way Congress designed, instead of allowing private parties to affect the remediation process by litigating for their preferred remediation techniques.


Related Documents:
NAM amicus brief  (May 31, 2018)

 


Product Liability -- active



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 even contain asbestos. Individual plaintiffs who worked on ocean vessels sued manufacturers of metal parts used in the ship. The 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.


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.

 

California v. ConAgra Grocery Products   (U.S. Supreme Court)

"Public nuisance" liability

The NAM filed an amicus brief on behalf of paint manufacturers to oppose an overbroad "public nuisance" theory of liabilty. The case involves lawsuits by several California counties against companies that previously manufacturerd lead paint. The California Court of Appeals concluded that the plaintiffs could establish over $1 billion in economic damages based on 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 amicus brief explains why the U.S. Supreme Court should review this case and reverse the California court's overbroad theory of liability. On October 15, 2018, the Court denied certiorari.

 

City of Modesto v. The Dow Chemical Company   (California Supreme Court)

Concerns of generalized causation over direct evidence

The NAM, along with the Chamber of Commerce and American Chemistry Council, 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 raises 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. 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.


Related Documents:
NAM amicus brief  (March 12, 2018)

 

Juni v. A.O. Smith Water Prods. Co.   (New York Court of Appeals)

Opposing any exposure theory of causation in asbestos case

This is another in a series of cases involving how much exposure to asbestos is enough to cause injury. The trial court and an appeals court in New York rejected plaintiffs' argument that any exposure is enough. 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.

However, empirical studies take into account the amount of exposure and have determined that, in most cases, mechanical workers were not exposed to enough asbestos for it to be harmful.

The case was appealed to New York's highest court. The NAM, in coalition with others, filed a joint amicus brief asking the court to agree that the plaintiffs would have to show that workers were exposed to enough chrysotile asbestos to actually cause harm in order to prevail in their case.


Related Documents:
NAM amicus brief  (January 24, 2018)

 

Quisenberry v. Borgwarner Morse Tec, Inc.   (Virginia Supreme Court)

Liability for take-home exposure to asbestos

The NAM filed an amicus brief with other groups asking the Virginia Supreme Court to reject plaintiff’s attempt to greatly expand the universe of people to whom employers owe a duty of care. This issue was put before the court as a certified question on 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, 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) would lead to potentially limitless and indefinite liability. Such a duty would substantially burden the still-solvent but increasingly remote defendants in the asbestos litigation. The litigation has already bankrupted over 100 companies. Recently, even some attenuated asbestos defendants have filed bankruptcy. A duty finding here also could open the door to lawsuits against employers over any number of hazards that workers carry off-site.


Related Documents:
NAM amicus brief  (February 23, 2018)

 

Ramsey v. Georgia Southern Univ. Advanced Dev. Center   (Del.)

Manufacturer liability for take-home exposure to asbestos

The Delaware Supreme Court is considering a case claiming that the manufacturer of asbestos should be responsible for warning about the dangers of take-home exposure to the wife of a man who worked with the substance. We filed an amicus brief urging the court the affirm the lower court's ruling that manufacturers are too far removed to impose a duty to warn such remote parties, particularly since the employers using the substance owe no such duty. Allowing such a claim would allow a flood of claims, and manufacturers would be unable to actually carry out the proposed duty to warn.


Related Documents:
NAM amicus brief  (December 15, 2017)

 

Torres v. BNSF   (New Mexico Court of Appeals)

Asbestos take-home exposure

The NAM along with other groups, 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.


Related Documents:
NAM amicus brief  (February 12, 2018)

 


Punitive Damages -- active



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.

 


Securities Regulation -- active



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 of 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.

 


Taxation and State Taxation -- active



Altera v. Commissioner of IRS   (9th Circuit)

IRS rule change threatens double taxation on cross border transactions.

On 09/23/2016, the NAM and a coalition of associations filed an amicus brief in support of the Altera Corporation, urging the Ninth Circuit to uphold a Tax Court ruling relating to the IRS “arm’s length” standard. Under the standard, a cross-border transaction is judged by analyzing how the transaction would have been priced if the parties were independent, unrelated entities. International agreements incorporate this consistent approach to help avoid double taxation on cross-border transactions.

The Commissioner of the IRS attempted to depart from this longstanding approach, thus destroying the established precedent, reducing its effectiveness. This policy shift, included in the IRS’ 2003 Final Rule, was struck down by the Tax Court in a 15-0 opinion. The court stated the agency failed to sufficiently explain its belief that the rule was consistent with the current arm’s-length standard and ignored significant evidence that it was not.

The government argued that a congressional amendment changed the arms-length standard and the 2003 Rule is consistent with that change.

The case was argued on October 11, 2017. We are awaiting a decision from the court.


Related Documents:
NAM amicus brief  (September 23, 2016)

 

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

IRS tax advice

This case involves the protection of confidential communications between taxpayers and their non-attorney tax advisors. Federal law (the "Tax Privilege") generally makes such communications confidential, but there is an exception for communications relating to "the promotion of the direct or indirect participation" in a "tax shelter." While a tax shelter is extremely broadly defined, "promotion" is nott. The government wants the court to define it broadly, which could result in removing routine tax advice and common tax planning from the protections of the Tax Privilege.

The NAM filed an amicus brief 10/27/16 arguing that Congress did not intend such a broad interpretation, and tax policy favors the free flow of information between taxpayers and their advisors. Such routine advice should not make a tax advisor a "promoter" of a tax shelter. Instead, something more is required, such as where an advisor has a financial interest in the advice given other than what he typically bills. We provided a list of factors for a court to consider when determining whether a tax consultant is actually promoting a tax shelter.


Related Documents:
NAM amicus brief  (November 22, 2016)

 


Antitrust -- 2018



Pfizer Inc. v. Rite Aid   (U.S. Supreme Court)

Antitrust scrutiny for pharmaceutical reverse payments

The NAM along with the American Tort Reform Association and Pharmaceutical Research and Manufacturers of America filed an amicus brief in the U.S. Supreme Court urging it to review a decision by the Third Circuit accusing Pfizer of making an illegal reverse payment to keep a generic version of the cholesterol drug Lipitor off the market. The Supreme Court’s ruling in FTC v. Actavis Inc. determined that 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 Third Circuit’s decision extends this scrutiny to “commonplace” and “traditional” settlements by focusing on just one aspect of the agreement.

Pharmaceutical patent laws facilitate litigation between innovator and generic drug manufacturers, the ability of the parties to settle these disputes is highly beneficial to the public and speculative antitrust challenges to them will needlessly chill such settlements. Our brief also urges the 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 will 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.

On February 20, 2018, the U.S. Supreme Court issued a brief order declining to review.


Related Documents:
amicus brief  (December 22, 2017)

 


Arbitration -- 2018



Epic Systems Corp. v. Lewis   (U.S. Supreme Court)

Permissibility of class-action waivers and mandatory arbitration provisions

This case asks the Supreme Court of the United States to resolve a lower court split regarding the permissibility of class-action waivers and mandatory arbitration provisions in employment contracts. The class-action waiver allows employers to resolve disputes with individual employees on particular issues without having to address an entire class of plaintiffs in a given case. The mandatory arbitration provision allows informal and efficient dispute resolution.

One circuit court (the Fifth) found that class-action waiver and arbitration provisions are permissible under the Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA) as long as the agreement explains that employees can file grievance claims to the National Labor Relations Board (NLRB), whereas others (the Seventh and Ninth) found that the two provisions violate employees’ rights under the NLRA.

The NAM filed two amicus briefs in this appeal, which was combined with the similar Ernst & Young, LLP v. Morris case, arguing that the provisions are valuable to employment and are not governed by the NLRA. They encourage efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. Additionally, our briefs argued that these agreements are governed under the FAA and the courts should not defer to interpretations of that law by the NLRB.

Oral arguments were held Oct. 2, 2017. On May 21, 2018, the U.S. Supreme 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 amicus brief on the merits  (June 16, 2017)
NAM amicus brief supporting review  (October 3, 2016)

 

Ernst & Young, LLP v. Morris   (U.S. Supreme Court)

Permissibility of class-action waivers and mandatory arbitration provisions

The Supreme Court will resolve a lower court split regarding the permissibility of class-action waivers and mandatory arbitration provisions in employment contracts. The class-action waiver allows employers to resolve disputes with individual employees on particular issues without having to address an entire class of plaintiffs in a given case. The mandatory arbitration provision allows informal and efficient dispute resolution.

The lower circuit courts are split because the Fifth Circuit found that class-action waiver and arbitration provisions are permissible under the Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA) so long as the agreement explains that employees can file grievance claims to the National Labor Relations Board (NLRB), whereas the Seventh Circuit and the Ninth Circuit found that the two provisions violate employees’ rights under the NLRA.

The NAM filed two amicus briefs on this appeal arguing that the provisions are valuable to employment and are not governed by the NLRA. They encourage efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation. Additionally, our briefs argued that these agreements are governed under the FAA and the courts should not defer to interpretations of that law by the NLRB.

Oral arguments were held Oct. 2, 2017. On May 21, 2018, the U.S. Supreme 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 amicus brief on the merits  (June 16, 2017)
NAM amicus brief supporting review  (October 3, 2016)

 


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 to retirees. The issue in the case is whether a collective bargaining agreement (CBA) that does not expressly provide for lifetime vesting of such benefits nonetheless can be interpreted to include them. While the Supreme Court has already addressed this issue in the Tackett case in 2015, the Sixth Circuit has struggled to properly implement that ruling, and improperly tipped the scales in favor of employees.

The NAM urged the Supreme Court to reverse the Sixth Circuit in order to prevent plaintiffs from flocking to that favorable jurisdiction. We sought a ruling that would reaffirm uniform and fair contract interpretation principles. Several similar cases involving the same issue are also in litigation, and could use guidance from the Supreme Court on how to interpret these ambiguous CBA provisions.

On February 20, 2018, 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. The Court reasoned that CBAs are subject to ordinary principles of contract law, and that the only reasonable interpretation of the CBA in this case is that the health care benefits expired when the CBA itself expired.


Related Documents:
NAM brief  (November 6, 2017)

 


Class Actions -- 2018



Grayson v. General Electric Co.   (2nd Circuit)

Class certification without harm

This is a class action suit alleging misrepresentations about microwave ovens. The disputed class of plaintiffs includes individuals whose ovens allegedly were defective because some of the glass doors broke after 9 years of use. The trial judge certified a large class of plaintiffs, 99% of which never experienced the problem alleged and 98% of which never will. That order is on appeal.

The NAM and Association of Home Appliance Manufacturers filed an amicus brief supporting the appeal. We argued that hearing the appeal is important to resolve whether it is proper to certify a class that includes predominantly unharmed purchasers. Certification decisions early in a case are critical to fairness for manufacturers, since improperly certified classes place tremendous pressure on companies to settle cases for much more than they would otherwise merit. Most of the class members who have suffered no injury do not have standing to sue, and it is unconstitutional to provide a judicial remedy.

We also argued that the court should have considered whether a variety of issues, such as reliance, injury, damages and defenses required so much individual consideration that it would be improper to allow the class action to be certified to determine liability only. A court should consider all factual or legal issues to determine whether issues subject to generalized proof are more substantial than those subject to individual inquiry.

On May 23, 2017, the 2nd Circuit denied the petitioner leave to appeal the District Court's certification of the class and disposed the case to the District of Connecticut, where the judge administratively closed the case on May 11, 2018 pending successful mediation.


Related Documents:
NAM amicus brief  (March 28, 2017)

 

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

In the preliminary stage of a class action case, a jury found that some cigarettes made by many companies over four decades were defectively designed. A design defect is an essential element in this kind of product liability case. However, the class was later decertified, and individual suits began. Those plaintiffs relied on the finding of design defect in the first case, and the 11th Circuit ruled that they could.

The NAM and other groups filed a brief urging the Supreme Court to review and reverse this ruling, arguing that it violates due process. We argued that the original determination was so broad and general that it would be unfair to hold companies liable for design defects without looking at each individual product. The companies should not be barred from contesting the 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 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. This strips defendants of their due process right to contest the core basis of their liability in each individual case.

On January 8, the Supreme Court denied the petition for certiorari.


Related Documents:
NAM amicus brief  (October 19, 2017)

 

Scharfstein v. BP West Coast Products   (Ore. Ct. App.)

Class action statutory damages award

This case concerns a statutory damages award that was grossly excessive and disproportionate to actual damages. In 2013, an action was brought against BP West Coast Products in Oregon state court, on behalf of a class of consumers who purchased gasoline at ARCO stations in Oregon between 2011 and August 2013. The central allegation is that BP violated Oregon’s Unlawful Trade Practices Act by failing to display a 35-cent charge the stations imposed on all debit card purchases (not just gas). 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. Plaintiffs sought statutory “damages” in the amount of $200 per class member. BP had numerous defenses, including that the pricing rule – which requires posting of the lowest cash price and conditions for such cash price – did not apply in this case about debit cards.

The jury returned a verdict finding that BP violated the Rule and that the violations were reckless. The same jury concluded that BP’s conduct did not warrant punitive damages. Following the verdict, the court awarded Plaintiff’s lawyer $68 million in fees and costs. Under the class action procedural rules in place at the time of the verdict, the court directed a notice and claims process that identified about 1.7 million class members, which at $200 per member, added up to around $340 million in damages. Following a retroactive change in law before the court issued its final judgment, the court identified an additional 33,000 class members with “unclaimed damages,” resulting in an extra $66 million in damages. BP immediately appealed.

The NAM filed an amicus brief in the Oregon Court of Appeals arguing 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.

On May 31, 2018, the Court of Appeals affirmed the trial court's decision, rejecting the challenge to excessive statutory damages as untimely.


Related Documents:
NAM Amicus Brief  (November 22, 2016)

 


Discovery -- 2018



Cooper Tire & Rubber Co. v. Koch   (Georgia Supreme Court)

Less strict standard for sanctions against spoliation for plaintiffs

This is a product liability case alleging a tire tread separation. However, 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. This is called spoliation of evidence, and a court can impose sanctions against a party that does so, perhaps even as much as dismissing the case. The issue on appeal to the Georgia Supreme Court relates to the duty of care that the plaintiff must take to preserve the evidence for the law suit.

The lower court ruled that a plaintiff has a duty to prevent spoliation of evidence in anticipated litigation when a reasonable person in the same circumstances would do so. The defendant wants the court to hold plaintiffs to the same standard as defendants.

The Manufacturers' Center for Legal Action filed an amicus brief supporting review of this case by the Georgia Supreme Court. We argued that objective spoliation standards should be applied equally to plaintiffs and defendants, and that defendants are held to a standard that requires preservation of evidence whenever it can be anticipated that a person could be contemplating litigation. Allowing a plaintiff to be held to a far more lenient standard improperly skews the scales of justice, and allows a plaintiff to make his or her burden of proof easier by destroying evidence after litigation is reasonably foreseeable to an objective person.

This will make product defect claims impossible to prove or defend, It could also lead to false findings of defect that can lead to redesigns of products in ways that are less safe.

On May 15, 2017, the Court agreed to hear this appeal. On March 15, 2018, the Georgia Supreme Court upheld the trial and appeals courts, stating 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. This unequal standard will make product defect claims must harder to defend because of the heightened duty to preserve evidence.


Related Documents:
NAM amicus brief  (January 17, 2017)

 


Environmental -- 2018



Airborn, Inc. v. OSHA   (8th Circuit)

Challenging OSHA's beryllium standard

On January 9, 2017, OSHA promulgated a final rule adopting three new standards regulating beryllium. The NAM and allied associations filed a petition with OSHA for an administrative stay of the rule and to reopen the rulemaking record. This and other challenges to the rule were consolidated in the U.S. Court of Appeals for the Eighth Circuit for further proceedings.

Additionally, the NAM requested that the effective date of the standards be delayed for six months, and that the agency 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 new policy to freeze and review all holdover regulations.

On April 24, 2018, OSHA settled the NAM's legal challenge by agreeing 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)
NAM petition  (February 9, 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 10th Circuit on July 8, 2016 supporting an appeal of a judge's ruling that challenges to the EPA's rule establishing jurisdiction over waters of the United States should be heard in appellate courts. This 10th Circuit case was placed in abeyance pending the Supreme Court’s consideration of NAM v. U.S. Dep't of Defense. On January 22, 2018, the Supreme Court ruled in the NAM's favor in that case that challenges to the rule must be brought in federal district courts. The 10th Circuit thereafter remanded the case back to the district court.


Related Documents:
NAM amicus brief  (July 8, 2016)

 

Constitution Pipeline Company v. New York   (U.S. Supreme Court)

State veto authority over interstate natural gas pipelines

On February 20, 2018, the NAM filed an amicus brief in the United States Supreme Court in support of the Constitution Pipeline Company's authority to construct a new natural gas pipeline from Pennsylvania to New York State. New York previously rejected the proposed pipeline because the state disagreed with the pipeline's proposed route. Routing decisions for natural gas pipelines come within the power of the Federal Energy Regulatory Commission (FERC), however, not states. New York's denial therefore improperly encroaches on FERC's siting authority. The NAM's amicus brief argues that the Supreme Court should hear this case because New York's rejection violates the law and would harm manufacturers. The NAM's brief highlights the significant economic, environmental, and national security benefits of natural gas. We also argue that Congress empowered FERC to be the key decisionmaker in approving interstate pipelines, and that New York's denial distorts the congressional design and threatens to deprive the nation and other states of the significant benefits of natural gas. On April 30, 2018, 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:
Motion to dismiss  (November 3, 2015)
NAM amicus brief  (September 21, 2015)

 

Hawaii Wildlife Fund v. County of Maui   (9th Circuit)

Opposing conduit theory under Clean Water Act

This case involves whether a county needs to get a permit from the Environmental Protection Agency (EPA) for its injection of treated wastewater into underground injection control wells. The NAM and other groups filed an amicus brief supporting the county, and arguing that this activity is regulated under the Clean Water Act by the state of Hawaii, not the federal government. The issue is important because federal permits can be expensive and violations can subject the county, or other parties that must get permits, to fines and citizen suits.

At issue in the case is whether the emission is from a "point source." A point source is "any discernible, confined and discrete conveyance," and the trial court applied the so-called "conduit" theory to impose liability, holding that the unconfined groundwater around the well and ultimately reaching the Pacific Ocean acted as a conduit or conveyance.

Our brief argued that the Clean Water Act clearly distinguishes between point sources and nonpoint sources, and the conduit theory impermissibly extends the EPA's authority. If the theory is adopted, the National Pollutant Discharge Elimination Program (NPDES) could grow to an unworkable scale, and applying it to features that would require permits under the conduit theory simply would not work. Hawaii already has a nonpoint source management plan to address these kinds of issues at the state and local level.

On February 1, 2018, the Ninth Circuit affirmed the district court on the basis that the injection wells are the functional equivalent to discharging to the Pacific Ocean itself. It is possible that the County will ask the Supreme Court to hear an appeal of this decision, at which point the NAM would consider filing an amicus brief in support of that request.


Related Documents:
NAM amicus brief  (March 28, 2016)

 

Murray Energy Corp. v. EPA   (6th Circuit)

Rule broadening definition of "waters of the United States"

The NAM moved to intervene in these consolidated cases in which various environmental and business organizations, as well as states, challenge a final rule from the EPA defining its jurisdiction over navigable waters of the United States under the Clean Water Act. Quite a few other cases challenging the same rule were filed in federal district courts around the country, in this one in which the NAM joined with more than a dozen other organizations challenging the rule in federal court in Texas. The courts have not resolved whether these challenges should be heard in district court or the court of appeals in the first instance.

Our intervention in these appellate cases is to allow us to move to dismiss the cases, as we believe the statute that provides appellate jurisdiction for certain challenges to EPA regulations does not apply to this challenge under the Clean Water Act. That motion was filed Oct. 2, 2015.

Meanwhile, various states asked the court for a stay of enforcement of the rule pending resolution of the litigation over it, and on Oct. 9, the court agreed. It issued a nationwide stay at least until the court could determine whether it had jurisdiction.

In order to issue the stay, the court decided that keeping the status quo (the EPA's enforcement jurisdiction prior to the new rule) is the best course of action because of "the sheer breadth of the ripple effects caused by the Rule's definitional changes." It also concluded that the petitioners "have demonstrated a substantial possibility of success on the merits of their claims," finding that the rule's new distance limitations are not clearly harmonious with Supreme Court precedent. It found that those limitations are likely to be found not to be the logical outgrowth of the EPA's proposed rule and therefore the agency failed to provide adequate notice and an opportunity to comment on the distance limitations.

While the court did not find irreparable harm had it allowed the new rule to stay in effect, it found that there was likewise no imminent injury to the nation's waters by staying the rule pending resolution of the litigation.

The NAM and others filed a motion to dismiss 10/2/2015, arguing that federal appeals courts are limited by statute to hearing only certain kinds of appeals from agency rulemakings under the Clean Water Act, and this is not one of them. Prompt resolution of this jurisdictional issue is important so that the case can proceed expeditiously through the courts, and presumably ultimately to the Supreme Court, without be delayed by this procedural question.

On Feb. 22, 2016, the court issued a splintered ruling that it has jurisdiction to hear this challenge, and kept the stay in place while it proceeds to hear arguments on the merits of the case. Our coalition filed a petition for rehearing en banc, arguing that the ruling raises more questions than it answers and casts doubt and uncertainty on the future course of many challenges to the rule. It is important to get a more definitive ruling now on the jurisdictional question than waste party and judicial resources to litigate the merits of the case only to find out later that the court did not actually have jurisdiction to hear it. The full court declined to rehear the case, meaning that the judges will now turn to the merits of the dispute. The NAM appealed the jurisdictional issue to the Supreme Court in the interim.

Industry and state petitioners filed their main briefs on the merits on November 1. The industry brief contains textbook examples of arguments that are all too frequently made about government regulations: the rule was promulgated in violation of basic principles of notice-and-comment rulemaking, the agencies failed to comply with the Regulatory Flexibility Act, the rule is inconsistent with the statutory language of the statute (the Clean Water Act), the rule is unconstitutionally vague, and it violates the Commerce Clause and federalism principles. There are also more unusual arguments arising from the EPA’s “covert propaganda” efforts in support of the rule.

On Jan. 23, 2017, the NAM and 17 co-petitioners filed a motion to hold the briefing schedule in abeyance pending the Supreme Court's decision in NAM v. Dep't of Defense, involving which courts have jurisdiction to hear the Waters cases. The Sixth Circuit granted our motion on Jan. 25, 2017. On January 22, 2018, the U.S. Supreme Court ruled that jurisdiction rests in the federal district courts. The Sixth Circcuit thereafter dismissed the case.


Related Documents:
Industry brief on the merits  (November 1, 2016)
NAM petition for rehearing en banc  (February 29, 2016)
Shopfloor blog on petition for rehearing  (February 29, 2016)
NAM motion to dismiss  (October 2, 2015)
NAM motion to intervene  (August 11, 2015)

 

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

On January 22, 2018, the United States Supreme Court reversed a splintered federal appeals court decision concerning where the NAM's lawsuit against the Environmental Protection Agency and the U.S. Army Corps of Engineers should be heard. 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. Those few types are limited in scope, and we argued that they do not include the NAM’s challenge to the agencies' new rule defining how far their authority goes in regulating the "waters of the United States" (WOTUS).

Our petition asked the Supreme Court to review a decision from the U.S. Court of Appeals for the Sixth Circuit, where many suits challenging the WOTUS rule had been consolidated. The Sixth Circuit had previously ruled that the various challenges to the WOTUS rule belonged in the Sixth Circuit rather than the district courts. The Sixth Circuit was divided in its reasoning for that conclusion, however, and its holding conflicts with similar cases decided by other appellate courts.

In our briefs before the Supreme Court, we explained why legal challenges such as this belong in the federal district courts. The Sixth Circuit's decision put challengers to the WOTUS rule in an untenable position -- if that court does not actually have jurisdiction to hear the case, any action it takes could thereafter be overturned on appeal, without even considering the merits of the challenge, and we would have to start the case over at the trial court level. This is a tremendous waste of resources for manufacturers and other parties affected by the rule, the Administration, and the courts. Delaying review of the jurisdictional question, which must ultimately be resolved in any case, makes no sense.

In March of 2017, the agencies asked the Supreme Court to hold briefing in abeyance pending the agencies’ reconsideration of the WOTUS rule, but the Court declined. We therefore filed our opening brief on the merits on April 27, 2017, and gave oral argument on October 11. Our merits brief argued that the Sixth Circuit did not have statutory authority to review the rule under a statutory provision that applies only when an agency "issues or denies" a permit, which it has not done. The court also did not have judicial authority because the rule is not a "limitation" under a separate statutory provision, since it does not by its terms limit any action. Legislative history and policy considerations also bolster these text-based conclusions.

On September 11, 2017, we filed our reply brief arguing that the plain statutory language support district court jurisdiction, and policy considerations favor interpreting the statute according to its textual language.

On January 22, 2018, the Supreme Court issued a unanimous decision holding that the Sixth Circuit lacked jurisdiction to hear the various challenges to the WOTUS rule and that jurisdiction properly belongs in the federal district courts. The Court concluded that the plain text of the Clean Water Act supports jurisdiction in the district courts. This ruling will provide needed clarity on where legal challenges to future WOTUS rulemakings (and other rulemakings arising under the Clean Water Act) should proceed, saving manufacturers significant uncertainty, delay, and expense.


Related Documents:
NAM press release  (January 22, 2018)
NAM merits reply brief  (September 11, 2017)
NAM merits brief  (April 27, 2017)
NAM reply brief  (December 20, 2016)
NAM petition  (September 2, 2016)

 

Sierra Club v. EPA   (D.C. Circuit)

Boiler MACT reconsideration rule

The EPA granted a petition from the Sierra Club and others to reconsider parts of its rule for new and existing industrial, commercial, and institutional boilers and process heaters. The rule was written to require the maximum degree of reduction in emissions of hazardous air pollutants that is achievable, taking into consideration the cost of achieving such reductions. Thus, the rule requires “maximum achievable control technology” (MACT) for such equipment. However, the rule does not require a numerical standard during boiler startup and shutdown given the fact that is not “feasible” to determine pollution levels during these times.

The EPA issued final revisions in its 2015 Boiler Rule, and the Sierra Club sued. Manufacturers would bear a large burden and financial hardship if the Sierra Club prevails in its challenge to this rule.

The NAM was granted leave to intervene in support of the EPA and the 2015 Rule. 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.

The court ruled on March 16, 2018. First, the court found that the limit of 130 ppm for carbon monoxide as a proxy for hazardous air pollutants is not reasonable because the EPA’s own data contradicts EPA’s conclusion that no further emissions reductions are possible below that amount. In support of the 130 ppm limit, EPA relied on data that it had previously criticized as inaccurate. Significantly, however, EPA remanded but did not vacate this aspect of the rule. EPA should be able to substantiate this limit on remand with better support.

Second, the court held that the rule’s flexibility on emissions during startup and shutdown of the boilers is reasonable and consistent with the Clean Air Act because there is significant variability in the time and emissions profiles of boilers during startup/shutdown and the rule still requires controls "as expeditiously as possible" during startup and shutdown.

The plaintiffs filed a petition for rehearing with the court, which the NAM opposed. On July 5, 2018, 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)

 

Upstate Forever v. Kinder Morgan   (4th Circuit)

"Conduit theory" of liability under the Clean Water Act

The NAM filed an amicus brief to oppose a lawsuit by environmental groups that seeks to expand the scope of liability under the Clean Water Act. The lawsuit involves a pipeline’s release of gasoline to dry land in South Carolina. After the release, some gasoline migrated through groundwater to a nearby stream protected by the Clean Water Act. The plaintiffs allege that the gasoline seepage to the stream is an unpermitted point source discharge under the Clean Water Act. This case has significant implications for manufacturers because the plaintiffs' theory would impose massive liability for any pollution (no matter how insignificant) that migrates from a pipeline, factory site, or other source into groundwater connected to nearby rivers, streams, or other waters.

A federal district court ruled against the plaintiffs, finding a lack of direct connection between the pipeline release and the stream. The Fourth Circuit Court of Appeals reversed, concluding that the groundwater constituted a direct hydrological connection between the pipeline rupture and the stream. The defendant asked the court to rehear the case. The NAM filed an amicus brief in support of the rehearing request. Our brief argues that the court’s decision conflicts with the Supreme Court and other appellate court decisions.

On May 30, 2018, the court denied the petitions for rehearing and rehearing en banc.


Related Documents:
NAM brief  (May 3, 2018)

 


Free Speech -- 2018



CTIA - The Wireless Association v. City of Berkeley   (U.S. Supreme Court)

Government-compelled speech about speculative hazards from cell phones

The city of Berkeley, California, sought to require cellular phone retailers to post in-store signs that warn of the risks of cellular phone radiation. A trade association representing the cellular industry challenged the requirement, arguing that it unconstitutionally compels speech in violation of the First Amendment. The Ninth Circuit Court of Appeals concluded that all compelled commercial speech is subject to only "rational basis review" (minor judicial scrutiny). The wireless association then asked the U.S. Supreme Court to grant discretionary review to hear the case and reverse the Ninth Circuit's ruling. The NAM's amicus brief in support of review identifies the significance of this issue for manufacturers and argues that courts should strictly scrutinize such government requirements unless the compelled speech is necessary to combat misleading commercial speech and the disclosure consists only of purely factual and uncontroversial information.

This case presents an unsettled but vital First Amendment issue that implicates serious issues of government power to compel manufacturers and other businesses to speak: Under what circumstances can the government impose "disclosure" regimes that force sellers to speak either to disparage their own products or participate in a public policy debate, and what criteria must the government satisfy before compelling speech?

In a victory for manufacturers, on June 28, 2018, the Court granted certiorari and vacated and remanded the case for reconsideration.


Related Documents:
NAM brief  (February 9, 2018)

 


Government Regulation -- 2018



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. If allowed to stand, the state's actions have dangerous implications for the power of individual states to interfere with interstate and international trade to satisfy local political constituencies. The NAM's amicus brief argues that this interference is unconstitutional and harms the national economy.

In a victory for manufacturers, on May 31, 2018, the court denied Washington's motion to dismiss, which allows the case to proceed to the trial stage.


Related Documents:
NAM brief  (May 3, 2018)
Press release  (May 2, 2018)

 


International -- 2018



United States v. Microsoft Corp.   (U.S. Supreme Court)

Search warrant issued under the Stored Communications Act

This case is about a U.S. Government warrant for access to e-mail that is stored by Microsoft on a server in Ireland. In 2014, a federal judge ruled 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.

On appeal to the Second Circuit, the NAM filed an amicus brief. We are troubled by the government's demands to seize such personal emails without following the proper legal procedures. The government’s position in this case is that prosecutors are free to ignore the laws of other nations and require production of data of non-U.S citizens. The Second Circuit ruled that the Stored Communications Act does not authorize courts to enforce the warrant, and that the government should follow the Mutual Legal Assistance Treat adopted by Ireland the United States in 2001.

That ruling was appealed to the Supreme Court, which agreed on Oct. 16, 2017, to hear the appeal. On Apr. 17, 2018, after the passage of the Clarifying Lawful Overseas Use of Data Act, commonly known as the CLOUD Act, the 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

This case involves the fundamental question of whether a manufacturer may be sued in a state in which the manufacturer has no operations or business presence. Align Corp. is a Taiwanese manufacturer of toy helicopters. It has no physical presence or operations in the United States. Align sells its toys to a U.S.-based distributor which then sells the toys to retailers throughout the United States. A Colorado man who purchased one of the toy helicopters sued Align for damages when a rotor blade allegedly detached from the toy and struck the man's eye. Align moved to dismiss the case, arguing that the Colorado state court did not have jurisdiction over Align. Both a Colorado trial court and the Colorado Supreme Court found jurisdiction over Align because the company sold its products to a distributor who Align knew would sell the toys in Colorado.

Align petitioned the U.S. Supreme Court to review the case. The NAM filed a coalition amicus brief in support of the petition. In our brief, the NAM argues that the legal questions have importance for not only foreign corporations, but for domestic manufacturers as well (such as those that might only sell products in a particular state or region and should not be sued in far-flung jurisdictions just because their product somehow made its way there). The NAM also argued that the legal test articulated by the Colorado Supreme Court is wrong and would impose significant uncertainty on manufacturers.

On June 11, 2018, 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

This case involves the question of how federal courts should interpret split decisions from the United States Supreme Court where fewer than five justices agree on a common rationale for deciding the case. One example of such a decision of importance to manufacturers and other regulated industries is the Court's 4-1-4 decision in Rapanos v. United States. Rapanos involves the scope of federal jurisdiction over "waters of the United States" under the Clean Water Act. In that case, a four-justice plurality offered one rationale in support of the holding, a single justice concurred in the holding but offered a different rationale, and four justices dissented, providing yet another holding. Lower courts have taken divergent approaches to interpreting such split decisions, which has caused confusion and chaos under the Clean Water Act and numerous other federal statutes and programs.

Hughes provides an opportunity for the Supreme Court to clarify the governing standard for lower courts to interpret split decisions from the Supreme Court. That clarity will help make any new "Waters of the United States" rule less susceptible to legal challenge, and will provide needed clarity in other areas of the law, thereby fostering regulatory and legal certainty for manufacturers. The NAM's coalition amicus brief highlights Rapanos as the poster child for why the Court must resolve this judicial confusion, and also supplies the Court with arguments that will help protect the validity of the upcoming "Waters of the United States" rule.

On June 4, 2018, the Court resolved the sentencing issue in the case, but did so without addressing the interpretive questions from Marks. This missed opportunity 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

This case concerns whether Dart Container used the proper method for calculating overtime pay after a bonus. Dart Container used the federal formula for calculating overtime pay due after the bonus. A former employee brought suit, arguing that the proper computation method was the California method.

The lower court held that Dart Container was correct to use the federal formula because, although the federal law did not preempt state law, there was no valid state law specifying a formula to calculate overtime. The state overtime regulations relied upon by the plaintiff also violated the Administrative Procedure Act. The case was accepted for review by the California Supreme Court.

The NAM filed an amicus brief in support of Dart Container, arguing 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. Employers trying to pay their employees fairly should not be penalized because of the ambiguity of state 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. It held that the proper rate of pay for overtime hours is to factor the flat sum bonus into the hourly wage of the employee by dividing the amount of the bonus by the hours of non-overtime hours worked and using 1.5 as the multiplier for determining the employee’s overtime pay rate. This increases the amount employers will be legally obligated to pay their employees for overtime.


Related Documents:
NAM amicus brief  (September 28, 2016)

 

Associated Builders & Contractors v. Perez   (E.D. Ark.)

DOL Persuader Rule chills employer and employee communications

In 2016, the NAM led a coalition of associations in challenging the Department of Labor's (DOL) Persuader Rule in federal court in Arkansas. Our complaint argued that the rule violates manufacturers’ First Amendment rights of free speech and association. We argued the new rule is also void for vagueness and prohibited by the Fifth Amendment's due process clause.

The rule requires employers, third-party lawyers and other labor consultants to disclose their relationships more frequently than under the 50-year-old "bright line" standard. Under that standard employers and their consultants filed reports only when consultants communicated directly with workers. Under the new rule, employers must file reports if consultants are providing guidance to employers without contacting employees directly. Guidance includes conducting union-avoidance seminars or providing materials to distribute to and persuade workers. The government’s expansion of what constitutes “advice” vastly broadens the persuader definition and restricts manufacturers’ ability to communicate with their workforce. Further, the rule expands possible criminal liability related to disclosure and will result in employers not seeking out important counsel for guidance on employer and employee related questions.

The NAM also filed a reply brief in support of a preliminary injunction. Our brief argued that, contrary to DOL’s opposition, plaintiffs are likely to succeed on the merits of their claims that the new rule is unlawful. Further, our brief argued that we established irreparable harm, that the DOL failed to show maintaining the fifty-year status quo will harm the agency and that the public interest would be furthered by granting injunctive relief. Meanwhile, on November 16, 2016, a judge in the Northern District of Texas entered an order for a permanent nationwide injunction against the rule.

After that decision, we filed a motion to stay the proceedings in the Arkansas court, which the judge granted the next day.

The DOL proposed to rescind the persuader rule in June, 2017. In July 2018, the DOL officially rescinded the rule.


Related Documents:
NAM Motion to Stay Brief  (December 12, 2016)
NAM Summary Judgment Brief  (August 19, 2016)
NAM Memorandum  (April 2, 2016)
NAM Motion  (April 1, 2016)
NAM Complaint  (March 30, 2016)

 

Cooper Tire & Rubber Co. v. NLRB   (8th Circuit)

Challenging NLRB ruling that racist statements are not grounds for firing

The NAM filed a brief in support of Cooper Tire & Rubber Company in their employment termination appeal before the U.S. Court of Appeals for the Eighth Circuit. This case appeals a National Labor Relations Board (NLRB) decision upholding a finding that the dismissal of a Cooper employee for using racial epithets toward a replacement worker on the picket line was repugnant of the National Labor Relations Act (NLRA).

The NLRB cannot and should not protect discriminatory comments, regardless of where or when these comments were made. The decision forces employers to violate other federal statutes because they are unable to apply their legitimate anti-discrimination and anti-harassment policies. Employers have a moral and legal obligation to protect the employees' right to be free from discrimination and harassment in the workplace. Federal law forbids employer behavior that discriminates against any individual and allows an employer to terminate an employee for a clear non-discriminatory purpose.

The NAM urged the Eighth Circuit to reverse the NLRB decision and establish that there is no statutory protection for racist or discriminatory statements made on the picket line. Protecting these statements is contrary to federal policies against discrimination and harassment.

On August 8, the court deferred to the NLRB's decision because the harassment took place in the context of picket-line activities during a strike. It did not single out a particular individual, and did not involve any threat or violence. Apparently, obscene language, gestures and racial slurs not directed to a particular individual are acceptable on picket lines.

The court also ruled that the company did not need to fire the offending employee to comply with federal anti-discrimination law. Instead, it could "take prompt remedial action reasonably calculated to end the harassment." Thus, picketers have greater protection from disciplinary action.

A strong dissent by one of the three judges pointed to the NAM's brief, which said that requiring an employer to continue to employ the offending striker "is tantamount to requiring that Cooper Tire violate federal anti-discrimination and harassment laws . . . ." He thought that the right to picket, even in a rough and tumble manner, does not permit outright racial insults and bigotry.


Related Documents:
NAM amicus brief  (September 29, 2017)
NAM amicus brief  (September 6, 2016)

 

DirecTV v. Hall   (U.S. Supreme Court)

Joint employer liability under FLSA

On July 6, 2017, the NAM, along with the Chamber of Commerce of the United States of America, the HR Policy Association, The National Retail Federation, and The Retail Litigation Center, filed a 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).

At issue in this case is the Fourth Circuit’s new rule that radically alters the law governing FLSA joint employer claims and the scope of the FLSA. This rule treats any business as an FLSA joint-employer if it is “not completely disassociated” from a worker’s direct employer with respect to the terms of the worker’s employment. Furthermore, the test applies even if a business has no direct relationship with the employee, and if the business has only a limited relationship, which standing alone would not itself support a finding of employer status. The Fourth Circuit’s test conflicts with those used by eight courts of appeals and threatens a flood of nationwide collective action lawsuits.

The NAM urged the U.S. Supreme Court to hear this 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. Additionally, the brief argues that the Fourth Circuit’s decision promises to penalize and deter economically sensible business arrangements.

On December 14, 2017, the NLRB overturned the Browning-Ferris case, which was the ruling that broadened the definition of a joint employer.

The petition for certiorari was denied by the Supreme Court on January 8, 2018.


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 to support Emerson Electric’s petition for the U.S. Supreme Court to review a California Supreme Court decision which would allow state law to circumvent the federal Occupational Safety and Health Act (OSH Act). The California Supreme Court allowed penalties under California’s Unfair Competition Law (UCL) that are inconsistent with California’s federally approved occupational safety law. States are permitted to regulate and enforce workplace safety, but only pursuant to a federally-approved plan that avoids duplicative and counterproductive regulations.

The NAM’s amicus brief requests that the Supreme Court grant Emerson Electric’s petition for writ of certiorari. The NAM also filed an amicus brief in the California Supreme court, arguing (1) the County’s lawsuit, which applied the UCL, 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 state should be required to obtain pre-approval under the state occupational safety plan before any county can pursue a UCL claim for workplace safety violations. On October 15, 2018, the U.S. Supreme Court declined to review the case, which could mean that manufacturers who conduct business in California may be subject to penalties under both the state’s approved occupational plan and the UCL.


Related Documents:
NAM amicus 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 suspend an employee for conduct that violates the employment contract between the employee and employer. The NAM's brief argues 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, that courts should not disrupt that process. On July 6, 2018, 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

This case involves a motion for en banc review of a decision by a panel of the Ninth Circuit Court of Appeals that held that workers employed on drilling platforms on the outer continental shelf (OCS) may bring claims under state wage and hour laws. In so holding, the Ninth Circuit expressly rejected the Fifth Circuit's contrary approach applying federal law and created a circuit split concerning the Outer Continental Shelf Lands Act's (OCSLA) choice-of-law provision. 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 defendant company seeks rehearing en banc by the full Ninth Circuit. The NAM filed a coalition amicus brief in support of rehearing en banc. Our brief argues that the panel opinion disrupts existing employer-employee relationships formed in reliance on longstanding interpretations of OCSLA, 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.

On April 27, 2018, 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 United States 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

Enforcement of state occupational safety laws must be consistent with the federal Occupational Safety and Health Act (OSH Act). The question in this case is whether the federal OSH Act preempted a district attorney’s enforcement action under California's Unfair Competition Law (UCL) when the action sought civil penalties inconsistent with California’s federally approved occupational safety law. Federal law subjects employers and employees to one set of workplace safety regulations. It imposes uniform, deliberate, and predictable health and safety requirements. States may regulate and enforce workplace safety, but only pursuant to a federally approved plan that avoids duplicative and counterproductive regulation. California has such a state plan.

The California Division of Occupational Safety and Health (Cal/OSHA), with approval of federal OSHA, has designed a civil penalty structure to promote fair and consistent enforcement, encourage employers to adopt safety programs, and provide incentives for companies to quickly and voluntarily address violations. The district attorney’s use of a separate California law, the UCL, to circumvent Cal/OSHA and increase civil penalties against a manufacturer on top of those already imposed by Cal/OSHA violates this lawful balance.

The NAM filed an amicus brief arguing the following: (1) the County’s lawsuit is preempted by federal law, which determines the regulations and enforcement methods for workplace safety standards in California, (2) the unfair competition law is inconsistent with California’s approved penalty structure for workplace safety violations, and (3) the court should require pre-approval under the state plan before any county can pursue a unfair competition claim for workplace safety violations. The NAM asked the court to uphold the Court of Appeal’s ruling and find that the OSH Act preempts the county’s UCL action.

On February 8, 2018, the California Supreme Court held that the UCL was not preempted by the federal OSH Act.


Related Documents:
NAM brief  (May 28, 2015)

 


OSHA -- 2018



National Association of Manufacturers v. OSHA   (D.C. Circuit)

To review OSHA's beryllium standard

The NAM filed a petition to review OSHA's rule, issued Jan. 9, 2017, regulating the use of beryllium in the workplace. The rule differs significantly from the proposed rule and poses significant challenges for manufacturers.

This case was consolidated with EEI v. OSHA on 3/10/17 and transferred to the Eighth Circuit for consolidation with Airborne v. OSHA. For further updates, click here.

This consolidated case was settled on April 24, 2018. OSHA settled the NAM's legal challenge by agreeing to undertake a new rulemaking to propose and implement sweeping changes to the regulation that will benefit companies that manufacture and use beryllium. See also Airborn v. OSHA .

 


Product Liability -- 2018



General Motors LLC v. Bavlsik   (U.S. Supreme Court)

Opposing damages-only retrial after impermissible compromise verdict

This case involves the standards a court must apply to require a new trial when the previous trial ended in a "compromise verdict." Compromise verdicts arise when the jury cannot agree on the defendant's liability, but out of sympathy for the plaintiff or antipathy for the defendant the jury awards the plaintiff a small monetary damages award. That situation arose in this case, where a motorist ran a stop sign and was rendered a quadriplegic in the ensuing car accident. The motorist sued General Motors, alleging car defects that contributed to the motorist's injuries. The jury awarded the motorist a very small damages award, which clearly indicated that the jury was split on the question of GM's liability for the driver's injuries but agreed to "compromise" by finding GM liable but awarding the plaintiff a low monetary award.

After the verdict, the court ordered a new trial, but only on the question of damages. The U.S. Court of Appeals for the Eighth Circuit affirmed. GM petitioned the U.S. Supreme Court for review. The NAM filed a coalition amicus brief in support of GM. In it, the NAM argued that damages-only retrials in circumstances such as this violate the constitutional rights of manufacturers to fair trials. We also asked the Supreme Court to clarify the narrow set of circumstances under which damages-only retrials are permissible.

On May 14, 2018, the Supreme Court denied certiorari.


Related Documents:
NAM brief  (April 2, 2018)

 

Condon v. Advance Thermal Hydronics, Inc.   (N.J. Super. Ct. App. Div.)

Allowing non-settling defendants to present cross-claim proofs

This case is about apportioning liability for asbestos exposure between multiple defendants. The plaintiff here sought to recover from multiple defendants, some of whom settled and some of whom went to trial. The trial defendant filed cross-claims that allege that the settling defendants were responsible for most of the injury. Against the plaintiff’s objection, the trial court allowed proof of cross-claims to be assessed by the jury, and the plaintiff appealed. 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 NAM filed an amicus brief in support of the trial court’s decision to allow cross-claim proofs. Cross-claim proofs should be allowed as a matter of fairness and sound public policy. 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.

Furthermore, this is essential as a matter of basic fairness, particularly given the attenuated connection of many of today’s asbestos defendants to plaintiffs’ exposures, and the fact that New Jersey asbestos defendants are already severely prejudiced by their inability to apportion fault to most companies that historically had primary responsibility for plaintiffs’ asbestos exposures but are now immune as a result of bankruptcy reorganization. In addition, assets needed to compensate future asbestos plaintiffs could be threatened if plaintiffs are allowed to obtain windfall super-recoveries in the tort system.

In a win for the manufacturers, on July 9, 2018, the appellate court vacated the jury verdict against one of the remaining defendants, though the court’s decision did not reach the issue we briefed.


Related Documents:
NAM amicus brief  (November 24, 2015)

 

Alcon Laboratories v. Cottrell   (U.S. Supreme Court)

Fighting class-action abuse over "wasted" medication

Individuals brought a class action lawsuit against manufacturers of eye droppers that dispense glaucoma medication. The suit alleges 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 filed an amicus brief on behalf of the defendant manufacturers in support of a petition for certiorari to the United States Supreme Court. Our brief argues 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. On May 21, 2018, the Court denied certiorari.


Related Documents:
NAM brief  (April 23, 2018)

 

Dolin v. GlaxoSmithKline LLC   (7th Circuit)

Brand manufacturer's "innovator" liability

The issue in the case is whether a pharmaceutical manufacturer can be held liable for not warning consumers of the dangers of a pharmaceutical product it had no part in manufacturing or selling if the manufacturer sells the same type of product.

The district court below agreed with the plaintiffs and held GlaxoSmithKline (GSK) liable for tort damages for an allegedly harmful product, simply because GSK sells the name brand of the generic drug that injured the plaintiff’s husband.

On January 29, 2018, the NAM and other business groups filed an amicus brief supporting GSK. We asked the court to reverse the lower court’s decision and rule, consistent with a long line of cases, that companies can only be held liable for failing to warn about dangerous products if were the actual manufacturers or sellers of the product. Plaintiffs argue that despite this long-held rule in the Seventh Circuit, that the court should make a carve-out exception in the case of pharmaceuticals.

Imposing liability in cases like this will deter innovation and stunt the growth of the pharmaceutical industry. Pharmaceutical manufacturers would have to take into account a higher level of risk when innovating, which inevitably will increase drug prices, making them less accessible.

In August 2018, 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 and other groups filed an amicus brief concerning the application of the statute of repose to those involved with improvements to real property and the constitutionality of applying a 1991 exception for “manufacturers” of asbestos-containing products, exempting them from the protection of repose. The “absolute bar” to a claimant’s legal action established under a statute of repose has been upheld by the vast majority of courts, including challenges based on access to courts provisions of state constitutions.

Legislatures adopt statutes of repose to draw a balance between (1) the interests of the minority of consumers who suffer an injury caused by another; (2) the need for all consumers to have access to affordable goods and services; (3) the need for businesses to operate under fair and predictable liability law rules; and (4) the state’s interest in stimulating investment and economic growth. Statutes of repose for improvements to real property, such as the law at issue, represent an important component of a balanced liability system. They provide stability and predictability in the law, fostering construction and economic development.

The Maryland Court of Appeals overturned the lower court’s decision, holding 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. Maryland’s tort system should reflect sound public policy and not add indefinite burdens to manufacturers, and this decision contradicts that goal.


Related Documents:
NAM brief  (November 7, 2017)

 

Evans v. NACCO Materials Handling Group, Inc.   (Virginia Supreme Court)

Admissibility of expert evidence

On June 27, 2017, 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. In particular, this case concerns the trial court’s admission of expert testimony despite this expert testifying to an opinion without having conducted any testing or independent analysis, and admitting that the product at issue (Hyster lift truck parking brake) met government and industry standards for operation.

The NAM 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 as NACCO did demonstrate 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.

Expert testimony and contributory negligence standards must be applied equally to both plaintiffs and defendants, to do otherwise would result in unjust punishment to manufacturers.

On March 22, 2018, 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

Individuals brought a class action lawsuit against manufacturers of eye droppers that dispense glaucoma medication. The suit alleges 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 filed an amicus brief on behalf of the defendant manufacturers in the U.S. Court of Appeals for the First Circuit. Our brief argues 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. On August 27, 2018, 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)

 

Miller v. Ford Motor Co.   (Oregon Supreme Court)

Court undermining statute of repose

The NAM and the Oregon Business & Industry filed an amicus brief supporting Ford Motor Company in a lawsuit brought by a 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, the 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. 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.

Plaintiff and her amici urge the Court to focus on the competitive advantage that an exclusive repose period would give to Oregon manufacturers. Any such benefit, though, would be more than counteracted by the enormous incentive that ruling for plaintiff would give Oregon consumers to purchase their durable goods from out-of-state manufacturers. Their period for suing over late developing product failures, even from normal wear and tear, would be endless.

The Court unfortunately ruled that that when the state of manufacture did not have a statute of repose, then there is no governing statute of repose at all, which makes doing business in Oregon much less attractive for manufacturers.


Related Documents:
NAM brief  (November 16, 2017)

 

People v. Conagra Grocery Products Co.   (California Supreme Court)

Validity of public nuisance claims

This case was appealed to the California Supreme Court on the issue of whether manufacturers that sold lead paint more than 65 years ago face liability under a public nuisance theory for promoting their product 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 to children years later.

The NAM filed an amicus letter urging the court to review the lower court's ruling, and require plaintiffs to prove unreasonable interference and causation to prevail on their public nuisance claim. We asked the court not to apply knowledge we have now to the actions of manufacturers decades ago when the information was not available. Further, 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 denied to review this case, so the decision of the lower court stands for now.


Related Documents:
NAM amicus letter  (January 19, 2018)

 

Rafferty v. Merck & Co.   (Massachusetts Supreme Judicial Court)

Innovator liability

This is an innovator liability case. Merck developed and marketed Proscar® for enlarged prostate conditions, and was sued for failure to warn of hazards by a consumer who used a generic version the drug made and sold by another company. The issue is whether the original manufacturer, who did not sell the drug to the plaintiff and did not profit from the sale by a competitor, nevertheless is liable to the plaintiff.

The trial court dismissed all the claims against Merck, relying on the well-established legal principles that a defendant is not liable when it did not make the product that caused injury, and that a defendant has no duty to warn about risks of products made by another company. When the plaintiff appealed to an intermediate court, the Massachusetts Supreme Court stepped in and asked for briefing on the issue.

The NAM joined with the Pharmaceutical Research and Manufacturers of America and the American Tort Reform Association in an amicus brief arguing 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 overwhelming majority of courts that have addressed this issue have rejected innovator liability, and making innovators liable for injuries alleged to occur from the consumption of generics would expose them to limitless liability. Tremendous resources are consumed developing new medicines, and generic manufacturers bear almost none of those costs. Imposing the costs of litigation over the drugs they make and sell would unfairly make innovators the guarantors of their competitors' products.

On March 16, 2018, 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 amicus brief  (August 25, 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

BNSF and Union Pacific Railroads filed a complaint on 7/29/16 against California for imposing a $45 per car fee for transportation of hazardous materials. The new law (SB 84) requires railroads to collect the fee from their customers and turn it over to the state, with the proceeds proposed to be used for hazmat training and equipment. The law applies only to rail shipments, not trucks or other conveyances.

The railroads claim that the law is preempted by federal law, which established the Surface Transportation Board as the exclusive regulator of rail carriers and shippers. They also raise a fundamental argument that the fee interferes with interstate commerce under the Commerce Clause, since widespread adoption of such fees by states around the country would impermissibly interfere with interstate trade. Furthermore, they say that the fee violates the federal Hazardous Materials Transportation Act by imposing an unfair fee. Discriminatory taxation of railroads and rail activity also violates the Railroad Revitalization and Regulatory Reform Act of 1976, which was designed to remove the temptation to excessively tax railroads.

The fee currently applies to 25 listed hazardous materials, and will affect more than 150 shippers of industrial products, in addition to many additional shippers of agricultural commodities and consumer products. Some shippers have no ready alternative to rail, and will be forced to absorb the cost or become less competitive with other modes of shipment that may be less safe for hazardous material.

The NAM supported this challenge with a declaration from Robyn Boerstling, our Vice President of Infrastructure, Innovation and Human Resources Policy, who described the disadvantages to shippers, customers and railroads from the new charge. She also explained how the charge runs contrary to the long-standing benefits of federal preemption of transportation-related state statutes, which help manufacturers by keeping transportation costs affordable and competitive.

The court granted a preliminary injunction against the fee, then issued a stay of the case. The California State Board of Equalization appealed the preliminary injunction to the Ninth Circuit on November 22, 2016. In 2018, the Ninth Circuit affirmed, and the opinion should leave no doubt that final judgment should be entered invalidating the charge. The precedent here should be helpful moving forward to all manufacturers wanting to compete fairly across state lines.


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

This case involves whether a class action brought by users of Wesson oil was properly certified as a class. The class includes purchasers over a ten-year span, across eleven states, but there was no feasible plan for identifying class members. Federal courts are divided on whether a class action may be certified if there is no reliable way to find class members, short of specific fact finding and a series of mini-trials. Four circuits have held there must be an administrable method for determining the makeup of a class before it can be certified. In the Ninth Circuit's view, it is unnecessary for a plaintiff to make this demonstration before class certification.

The NAM filed an amicus brief arguing that this stark conflict should not be allowed to persist: class certification—the most critical question in these lawsuits—should not turn on the location of the litigation. Additionally, plaintiffs’ lawyers will likely seek to circumvent ascertainability requirements adopted in four circuits by filing nationwide or multi-state class actions in the Ninth Circuit.

On October 10, 2017, the US Supreme Court denied certiorari.


Related Documents:
NAM amicus brief  (May 12, 2017)

 

Cottrell v. Alcon Laboratories, Inc.   (3rd Circuit)

Class action to recover for "wasted" medication

This is a class action suit against a manufacturer of glaucoma medication because the eye-droppers were alleged to dispense more liquid than was required for treatment. The trial court dismissed the claim without reaching the merits, saying the plaintiffs did not have standing because the alleged injury was too speculative.

The NAM, joined by other business groups, filed an amicus brief on appeal supporting this result. The plaintiffs claimed that they might have paid less for the medication if it were packaged more efficiently. However, we argued that federal law prohibits changing the packaging without approval from the Food & Drug Administration, and that the company could have priced its medication based on number of doses without changing the total price to the consumer. Thus, there was no injury in fact.

Allowing this kind of no-injury class action would encourage a variety of speculative and novel injury theories based on such things as inefficient packaging, suboptimal manufacturing techniques, or ineffective advertising. We emphasized the substantial costs of such class actions, particularly to small businesses and consumers as well.

In 2017, the court reversed the lower court’s dismissal, stating that the lower court failed to correctly analyze the specific facts claimed by the defendant. The court substituted its own “proper” analysis in place of the lower court’s and determined the decision to dismiss the case at this point was premature. It sent the case back to the lower court for further deliberation.


Related Documents:
NAM amicus 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 11th 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. That decision created the possibility of enormous liability flowing from proceedings unlike the normal trials guaranteed by due process, in which a plaintiff must prove each of the elements of his or her claims. More broadly, the decision poses a grave risk of similarly unjustified liability being sought against other product manufacturers. If allowed to stand, the ruling has the potential to dramatically transform the law of preclusion and improperly increase the liability exposure of manufacturers doing business in the United States by relieving countless plaintiffs of the burden of proving fundamental elements of their causes of action.

The 11th Circuit unfortunately replaced this unorthodox approach to claim preclusion with an even more fundamental error. It reimagined the jury’s verdict to have 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. This case is being appealed to the U.S. Supreme Court.


Related Documents:
NAM amicus brief  (April 22, 2016)

 

In re Flonase Antitrust Litigation   (3rd Circuit)

Sovereign immunity and duplicative state government suits

The Manufacturers’ Center for Legal Action filed an amicus brief in the U.S. Court of Appeals for the Third Circuit opposing Louisiana's attempt to file a lawsuit against GSK over Flonase marketing. The state had already received benefits from a separate class action -- in which it was a class member -- and filed this second suit addressing the same issues.

At issue in this appeal was whether the state can be bound by the settlement agreement when it claims sovereign immunity from litigation under the Eleventh Amendment.

The NAM and the Washington Legal Foundation joined in an amicus brief arguing two points: first, the Eleventh Amendment protection is limited to actions filed against the state. In this case, Louisiana was a member of the plaintiff class and the plaintiff in its own separate suit, making sovereign immunity inapplicable. Second, even if Louisiana possessed an Eleventh Amendment right to object to federal jurisdiction as a plaintiff, it was waived. The state did not opt out of the settlement, and received compensation from it.

Unfortunately, the Third Circuit ruled Dec. 22, 2017, that the settlement of the original class action suit did not apply to Louisiana because a court does not have jurisdiction over a state unless the state waives its sovereign immunity under the Eleventh Amendment. The class action settlement was deemed a suit against Louisiana to the extent it sought to prevent the state from suing in its own court. The state did not waive its rights because it did not make a "clear declaration" to that effect -- receiving notice fo the suit and failing to oppose the settlement is not such a declaration.

This result means that broad settlement agreements will not finally settle claims involving state governments unless those states actually agree to them. The ruling will allow more litigation against manufacturers that thought they were resolving all the claims against them in a class action case.


Related Documents:
NAM amicus brief  (November 1, 2016)

 

International Paper Co. v. Kleen Products LLC   (U.S. Supreme Court)

Presumption of classwide antitrust impact

On February 3, 2017, the NAM filed an amicus brief in the U.S. Supreme Court urging the court to consider the class action issues raised in this case. The Seventh Circuit departed from U.S. Supreme Court case law when it approved a presumption of classwide antitrust impact based on allegations of a coordinated cardboard packaging industry price increase. Courts should comply with Supreme Court precedents, including undertaking the rigorous analysis required by Federal Rule of Civil Procedure 23 before permitting a case to proceed as a class action. Many industries, such as the one at issue here, feature price indexes that help set standard prices, and this case raises concerns that manufacturers will be exposed to expansive class action antitrust liability. The lower courts failed to consider the realities of the market, which is made up of sophisticated players that negotiate prices based on a variety of market inputs that are often reflected in a price index for particular goods.

We argued for review because the case raised a recurring question of federal class action law that has divided the lower courts and is extraordinarily important to the Nation’s businesses: When may a court apply a presumption of classwide injury to avoid individualized inquiries that would otherwise preclude class certification? In the proceedings below, the district court applied, and the Seventh Circuit approved, a presumption of classwide antitrust injury based on alleged price increases that occurred in an unrepresentative price index. They then made that presumption irrebuttable, deeming the class action requirements of Rule 23 satisfied despite extensive evidence showing that the index price did not reflect the prices that individual class members actually paid, which were frequently individually negotiated and driven by a variety of market inputs, of which only one was price.

On April 17, 2017, the Supreme Court denied review, declining to correct the lower court's errors. As a result, the ruling threatens to expand antitrust liability well beyond the scope of anything Congress intended.


Related Documents:
NAM amicus brief  (February 3, 2017)

 

Microsoft Corp. v. Baker   (U.S. Supreme Court)

Class certification

On November 11, 2015 the NAM, Washington Legal Foundation and International Association of Defense Counsel filed a joint amicus brief in support of petition before the Supreme Court. The petition presents a question of exceptional importance regarding the subject-matter jurisdiction of the federal appeals courts. Congress has granted the courts of appeals “jurisdiction of appeals from all final decisions of the district courts of the United States,” subject to limited exceptions. 28 U.S.C. § 1291. At issue here is whether §1291 provided the Ninth Circuit with appellate jurisdiction to review the district court’s order striking respondents’ class allegations from the complaint. The brief argues for the faithful adherence to the jurisdictional statutes Congress enacted to prevent multiple, piecemeal appeals from a single district court proceeding. By strictly limiting the occasions in which a party may appeal an adverse ruling, those federal appellate rules prevent the debilitating effect on judicial administration caused by piecemeal appeal disposition of what is, in practical consequence, but a single controversy.

The Court agreed to review the Ninth Circuit decision, and the NAM filed another amicus brief, this time on the merits in this matter.

The Court issued its ruling on June 12, 2017, ruling 8-0 that federal courts of appeals lack jurisdiction under §1291to review an order denying class certficiation (or, as here, an order striking class allegations) afer the named plaintiffs have voluntarily dismised their claims with prejudice.


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

This is an appeal to the Eighth Circuit of a jail sentence for two corporate officers under the Responsible Corporate Officer Doctrine for a strict liability crime about which the officers were unaware and in which they did not participate. 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.

The DeCosters were subject to criminal liability solely as a result of their jobs because they had, “by reason of [their] position[s] in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct” the FDCA violations. The DeCosters were each sentenced to three months imprisonment, one year of supervised release, and a $100,000 fine. The corporation was separately fined $6.79 million and placed on probation for three years.

The NAM filed an amicus brief on July 27, 2015, urging the Eight Circuit to reject this dangerous encroachment of strict criminal liability into the C-suite. There are over 300,000 regulations that can trigger criminal sanctions, and if this decision is allowed to stand, every corporate executive could potentially be liable for any employee’s unwitting violation of any one of those regulations. Our brief argued that this sentence undermines the deterrence justification of imprisonment because an executive cannot weigh the punishment for and choose to avoid or prevent illegal conduct of which he is not aware. Longstanding principles of criminal law require the limitation of strict liability, and this case not only stacks two strict liability doctrines on top of one another but goes so far as to impose a prison sentence as a result. Prison for an offense that requires no particular mental state (strict liability) or even participation in the underlying forbidden act violates the Fifth Amendment’s Due Process Clause and the Eighth Amendment’s ban on cruel and unusual punishment.

A panel of the Eighth Circuit ruled 2-1 on 7/6/2016 to uphold the convictions. It rejected a due process claim, saying that no mens rea, or guilty mind, need be proven "where the penalty is 'relatively small,' [and] the conviction does not gravely damage the defendant's reputation . . . ." The three-month prison sentence in this case was short and was not a felony. The court also rejected the argument that the punishment is disproportional to the severity of the crime under the Eighth Amendment.

The NAM filed an amicus brief on 2/10/2017 urging the Supreme Court to accept review of the case. The NAM brief argued that argued that the time has come for this Court to reconsider this rule altogether or, at a minimum, to resolve the division among lower courts as to whether conviction for a vicarious liability offense alone permits a court to impose a sentence of imprisonment.

On 5/22/2017 the Supreme Court declined to hear 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

This case is about how big a penalty to impose on a company for misconduct by their lawyers during the discovery phase of a case. The Ninth Circuit upheld a $2.7 million award imposed against Goodyear to sanction it for failing to turn over a document in discovery. The award was supposed to be for the amount of legal fees incurred by the opposing party from the misconduct, however, the case settled. The parties sought to recover fees they did not actually incur from the misconduct.

The NAM filed an amicus brief arguing that failure to require a direct causal link between a litigant’s alleged discovery violations and compensatory damages to other parties can lead to abusive sanctions. The question will have far-reaching implications for businesses and their in-house counsel.

On April 18, 2017, a unanimous (8-0) Supreme Court found in favor of Goodyear, holding that, when a court sanctions conduct by ordering the litigant to pay the opposing party's legal fees, the award must be limited to fees incurred solely because of the misconduct at issue. 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 amicus brief  (November 21, 2016)

 


Environmental -- 2017



American Petroleum Institute v. EPA   (D.C. Circuit)

Challenging EPA's new rules on definition of solid waste

This case again calls for clear statutory limits on EPA’s Resource Conservation and Recovery Act (RCRA) jurisdiction to regulate “solid waste,” a term Congress defined to mean “discarded” material. The statute defines “hazardous waste” as “solid waste” that may pose a danger to human health or the environment. Hazardous waste is subject to a range of stringent regulatory obligations, governing generation, treatment, storage, disposal, and permitting. Because by statute hazardous waste is a subset of solid waste, EPA’s jurisdiction is limited to those materials that constitute solid waste.

The NAM and the American Chemistry Council filed a petition in federal court 4/13/15 to review new rules that define hazardous solid waste. The definition is important to manufacturers that reuse materials in the manufacturing process, as well as for disposal and recycling procedures. Hazardous solid waste is regulated with stricter requirements, and EPA imposes new documentation and certification requirements on facilities that reclaim hazardous secondary materials for reuse.

Our suit was consolidated with one filed in 2009 by the American Petroleum Institute. On 5/11/15, we moved to intervene in a challenge to the solid waste rule by California Communities Against Toxics, which was also consolidated into this case.

The NAM filed its main brief on the merits in 2015. The rule exceeds the agency's authority, and our principal concerns relate to new affirmative duties and conditions on in-process materials that are not discarded. RCRA allows the EPA to regulate solid waste, but it is trying to regulate materials that are not yet waste; that is, they are not disposed of, abandoned, or thrown away. The rule affects the primary metals sector, recycling, petroleum production, chemicals and many other sectors.

On April 18, 2016, we filed a brief responding to a challenge by environmental groups to some of EPA's decisions. They argued that the Verified Recycler Exclusion (VRE) is unlawful because it was made without notice-and-comment and because it violates the RCRA and APA because it excludes certain materials from the definition of solid waste. We argued that the VRE fit the definition of a logical outgrowth of the earlier 2011 plan the EPA put out, the petitioners engaged in the notice-and-comment process at that time, and that any new challenges must be waived because they were not addressed to the EPA during rulemaking.

On July 7, 2017, the Court issued a split decision, but agreed with industry arguments that one of EPA's factors for determining whether a recycler is legitimate went too far by requring procedures for documentation and notification that went beyond its statutory authority. The Court ruled that recyclers must abide by EPA requirements for emergency preparedness, but that requiring that they have RCRA permits or waivers goes too far. The EPA rule improperly treated materials destined for reuse as discarded, and failed to justify tough standards for recyclers of low-value materials. The agency exceeded its authority by assuming that materials are discarded when paperwork requirements are not met.

The ruling is another significant example of the courts reining in EPA decisions that go beyond their statutory authority. For business that uses third parties to help them recycle certain materials, it provides a more workable and efficient solution while still protecting the environment from recognized hazards.


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   (Cal. Ct. App.)

Challenging CARB cap-and-trade auction allowance revenues

In November, 2013, a California judge ruled that the California Air Resources Board (CARB) has the discretion to raise revenues by auctioning and selling allowances under the state's greenhouse gas cap-and-trade program. The NAM had intervened in this suit to bring to the court's attention the extraordinary revenues generated by the auction and reserve sale provisions adopted by the CARB, which we said were far beyond what the law required for administering the program. We also argued that the fees constituted a new tax that must be approved by the legislature, an issue that the judge considered a close call.

On March 7, 2014, the NAM appealed the case to an intermediate California appeals court. Our opening brief was filed Oct. 20, 2014, and our reply brief on May 4, 2015, making these same arguments.

We argued that AB 32 does not authorize the Board to generate billions of dollars in revenues over and above the regulatory fees separately authorized to implement and enforce the law. These revenues are the largest of any environmental program in the United States. Moreover, the revenues vastly exceed the amount necessary to implement AB 32, which is already full funded through a separate statutory provision expressly authorizing the collection of regulatory fees. There has been no showing that those revenues have a reasonable relationship to the regulatory burden imposed on manufacturers, and the funds have been set aside to fund programs that have not yet been identified.

Moreover, if raising such large sums through auctions and reserve sales is authorized, then that revenue-raising authority is a tax that violates the California Constitution because the law was not adopted by a two-thirds majority of the legislature.

On its own initiative, the appellate court issued a set of questions to the parties in preparation for upcoming oral arguments. The NAM filed a supplemental brief in May arguing that (1) allowances are taxes, not property rights, (2) there is no relationship between environmental impacts and the billions of dollars in excess revenue generated by the auctions and reserve sales, (3)allowance charges are not development fees, (4) they cannot be upheld on the ground that they confer the "privilege to pollute," (5) fees generated in excess of the amount needed to run the program are taxes, (6) the purchase of allowances is not in any practical sense voluntary, and (7) the relief that should be granted is elimination of the tax. Oral arguments in the case were held on Jan. 24, 2017.

On April 6, 2017, the Court decided 2 to 1 to uphold the allowance auction system. The majority felt that AB32 authorized the State Air Resources Board to adopt the cap-and-trade system, and left the development of the details to the Board. It also found that the money paid by companies that buy allowances in the auction do not constitute a tax because, unlike a tax, (1) they are not compulsory, and (2) purchasers receive something of value in return. Click here for a summary of the trial court proceedings.


Related Documents:
NAM supplemental brief  (May 23, 2016)
NAM reply brief  (May 4, 2015)
NAM's opening brief  (October 20, 2014)

 

California Chamber of Commerce v. California Air Resources Board   (California Supreme Court)

Challenging CARB cap-and-trade auction allowance revenues

In 2013, the NAM intervened in a case challenging a greenhouse gas cap-and-trade auction system created by California's Air Resources Board (ARB). The system generates extraordinary revenues, far beyond what is needed for administering the program. In the lower courts, we argued that the fees constitute a tax that must be approved by a two-thirds majority of the legislature.

The trial judge upheld the auction system, but said it was a close call. His ruling was affirmed 2-1 on appeal, and, on May 16, 2017, the NAM appealed to the California Supreme Court.

We argued that the lower court should have used the controlling legal precedent to assess whether a charge imposed for regulatory purposes is a tax. By rejecting that precedent, the court provided "a roadmap for the evasion of Proposition 13," which requires a two-thirds vote of the legislature to increase taxes.

"ARB purposely designed the allowance auctions to raise billions in excess revenue that could be used for general public benefit purposes," we argued. The Board endorsed the view that the auction revenue could "reduce the extent of the government's reliance on ordinary taxes for financing expenditures." We urged the court to review the ruling, which "concerns the constitutionality of a multi-billion dollar transfer of wealth from California businesses to the State." The ruling "effectively grants ARB a blank check to raise unlimited revenue, free and clear of any meaningful restraint."

We also challenged the appellate court's view that auction allowances are voluntary because a company is free to "choose to leave the state." We argued that that "holding defies precedent, the record evidence, and common sense, and taken to its logical conclusion, would mean that virtually all taxes are 'voluntary.'" The idea that business in California are simply "volunteering" to pay billions of dollars to the State out of the goodness of their hearts is nonsensical. Every tax can be avoided by leaving the state, but that does not make the tax voluntary. Moreover, while the auction allowances may be a valuable asset, that is true for other taxes that are paid to acquire valuable assets (sales taxes) or to engage in a valuable activity (income taxes).

On June 28, the Court declined to hear this appeal.


Related Documents:
NAM reply brief  (June 26, 2017)
NAM petition for review  (May 16, 2017)

 

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 supporting Constitution Pipeline in the U.S. Court of Appeals for the Second Circuit. After extensive environmental, safety and economic review, the Federal Energy Regulatory Commission (FERC) approved the critical energy infrastructure project. However, the state of New York attempted to block the project by denying a Clean Water Act permit, undermining the collaborative approval process. Constitution is challenging New York’s denial of its Section 401 water permit for construction of the new natural gas pipeline.

For manufacturers, who use one-third of our nation’s energy, access to abundant and reliable energy sources are essential to our continued growth and ability to compete globally. While states play an important role under the Clean Water Act, they should not be allowed to use their permitting processes, including the issuance of water quality certificates, to unreasonably delay, exact concessions from, or scuttle federally approved projects.

Certification denials like this one on the development of much-needed natural gas infrastructure raise broad concerns. Total natural gas demand, driven in particular by manufacturing and power generation, is poised to increase by 40 percent over the next decade, and the U.S. supply is expected to increase by 48 percent over the same period. Further, explosive growth in shale gas requires the construction of new pipeline capacity.

On August 18, 2017, the Second Circuit dismissed the appeal, ruling that only the D.C. Circuit has the statutory authority to decide whether New York failed to act on the application in a timely manner. It also ruled that New York's review of the application under its own environmental laws on water quality is not preempted by the Natural Gas Act or statutory requirements governing FERC procedures. Thus, states have the power to veto pipeline projects that have secured approvals from a host of other federal and state agencies. Because there was sufficient evidence in the record to provide rational support for the choice made by the agency, it was upheld. The court rejected the argument that compliance with an industry-recognized standard for stream-crossing methods should have been sufficient.


Related Documents:
NAM amicus 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 4th Circuit arguing that courts should not apply new conditions to an existing water discharge permit when the regulatory agency has already considered those conditions and did not require them in the permit. The company had a West Virginia permit with boilerplate language prohibiting discharges that cause violations of state water quality standards, and the court used this to convert those water quality standards into enforceable effluent limits in the permit. This was done even though the agency had decided not to include a specific numeric limit and the legislature said that water quality standards themselves should not be considered effluent standards that are independently enforced. Allowing this kind of suit could eliminate the permit shield and subject manufacturers to numerous citizen suits under the Clean Water Act even when they are in compliance with their permits.

Our brief argued that nothing in the permit should be interpreted to allow this kind of challenge. Suits like this upend the process for setting and implementing water quality standards by second-guessing the interpretations of the responsible permitting authorities, and create a serious fair notice issue for companies that must comply with their permits. Permittees must be able to rely on the permitting agencies' direction on how to comply with permits, and courts should not change the permit requirements after the fact.

On Jan. 4, 2017, the court ruled that an NPDES permit to discharge into streams incorporates into it a requirement prohiting degradation of water quality standards. The result means that NPDES permit holders may be liable for discharges that are otherwise permitted. The ruling elmiinates the permit shield when companies violate water quality standards that are incorporated by reference into a permit, and threatens manufacturers with numerous citizen suits under the Clean Water Act.


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

For over three-and a-half decades since the Hazardous Substance Account Act (“HSAA”) was enacted, California businesses have been able to rely on state agency direction and expertise in remediating contaminated sites with the goal of eventually obtaining “No Further Action” letters signifying that their sites are safe for productive economic use and that, in all but the exceedingly rare case, they will not face liability for additional remediation. The Court of Appeal’s decision below destroys this cooperative relationship between businesses and expert government regulators and creates perverse incentives contrary to their shared interests. Under the Court of Appeal’s decision and two related decisions from the same court, private parties have now been granted a private right of action to seek to impose liability for remediation irrespective of prior remediation and regulatory action.

The NAM filed an amicus letter supporting review of this erroneous decision because both individually and collectively, these new rules adopted by the Court of Appeal undermine businesses’ and regulators’ cooperative partnership to address contamination on their sites by discouraging both voluntary remediation and swift compliance with regulators’ Remedial Action Plans. As a result, remediation may not commence, if at all, for years or decades following a site’s initial contamination, thereby preventing effective cleanup. And where cooperative remediation does occur, the efforts of businesses and government regulators may be second-guessed and undone by subsequent private litigation that can occur many years after the fact. Unfortunately, the California Supreme Court denied review of this important case.


Related Documents:
NAM amicus letter  (October 13, 2017)

 

Sciscoe v. Enbridge Gathering (North Texas), L.P.   (Texas Supreme Court)

Preemption of tort claims for permitted emissions

Residents near four natural-gas compressor stations and a metering station alleged that the stations interfere with their rights by creating noise and fumes. However, no equipment produces sounds audible offsite and there is no record evidence of any emissions violations. The district court granted a series of summary judgment motions and found in favor of the defendants. Plaintiffs appealed, and the court of appeals improperly revived the claims.

Plaintiffs seek to impose liability under vague common law tort theories as a method to control otherwise lawful activities, such as emissions already expressly permitted by federal and state regulatory agencies. The issue is whether the federal Clean Air Act and the Texas Clean Air Act preempt state tort claims for damages against facilities which lawfully operate in compliance with issued permits. Using state tort remedies as an alternative means to control air pollution creates liabilities that adversely influence investment, operations, and industrial growth.

The NAM submitted an amicus letter urging the court to grant review and clarify the respective roles of federal and state environmental authorities. Denying review would subject businesses to uncertain, unpredictable, unforeseeable and potentially unbearable liabilities which arise on a case-by-case basis in state tort suits, rather than specific regulatory requirements which permit rational and reliable business planning.

In May, 2016, the court asked the parties to filed briefs on the merits, although it had not granted the petition for review. On Jan. 20, 2017, the court agreed to hear this case.

On May 19, 2017, the court ruled that the case was barred by the two-year statute of limitations, The plaintiffs knew of the noise and odor as early as 2006, and any legal injury begain in 2008, but they did not sue until 2011. The court did not rule on the preemption issue.


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 is a member of the NAAQS Implementation Coalition, which joined in a motion to intervene 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 regulation of the rest of the country in separate regulations in the future. The Sierra Club sued, and is expected to argue that the EPA should use computer modeling to estimate which areas of the country are in "nonattainment" now, rather than waiting for actual monitoring data.

Our intervention is intended to allow us to argue that the modeling predictions urged by the Sierra Club will allow areas to be designated as nonattainment when in fact they are not. That will increase the number of such areas, and manufacturers will 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.

On 3/2/15, a federal judge approved a consent decree requiring the EPA to publish SO2 NAAQS within 16 months and take further action thereafter on all areas of the country that have not yet been designated for a primary SO2 NAAQS. The areas to be designated include any areas with stationary sources that emitted more than 16,000 tons of SO2 in 2012 or emitted more than 2,600 tons and had an annual average emission rate of 0.45 lbs. SO2/Mmbtu or higher in 2012.

The consent decree was appealed to the Ninth Circuit, which affirmed the district court's approval of it on August 28, 2017. The consent decree extends the timeline for the EPA to promulgate a new rule. The deadline is now December 31, 2020, and 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.


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

In 2017, the NAM and other industry associations filed an amicus brief with the D.C. District Court supporting the continuance of Dakota Access Pipeline (DAPL) operations. The question in this case relates to whether the District Court should vacate the U.S. Army Corps of Engineers’ (Corps) approvals for DAPL and order DAPL to cease operations following a procedural error in the Corps’ Environmental Assessment.

The brief argued that vacating the approvals and ordering DAPL to cease operations now would be incredibly harmful and would not lead to additional benefits in safety. The brief explains that ordering DAPL to cease operations while the Corps conducts an additional environmental review would not lead to any changes in DAPL’s safety and integrity operations. Furthermore, court precedent demonstrates that DAPL operations do not legally need to stop due to a procedural error, particularly when the consequences of cessation are severe and far-reaching.

The court ruled in DAPL's favor, allowing the pipeline to continue operation while the Corps resolves the NEPA deficiencies.


Related Documents:
NAM amicus brief  (July 17, 2017)

 

TransCanada Keystone XL Pipeline, LP v. Kerry   (S.D. Texas)

Challenge to Executive authority to block Keystone XL Pipeline

The State Department’s prohibition of the Keystone XL pipeline violated the constitutional separation of powers. That's the message the NAM provided to a federal judge in Texas in this case challenging the Obama Administration's decision to reject the proposed pipeline.

The Constitution clearly grants to Congress the authority to regulate foreign commerce. While the Executive branch possesses the implied authority to regulate foreign affairs, it does not have the authority to usurp the power of Congress to regulate commerce on the basis of an attenuated, unrelated foreign affairs concern, particularly when Congress has clearly and repeatedly acted to demonstrate its support for construction of the pipeline. While the President has noted that the pipeline crosses an international border, the justification offered for regulating the pipeline has nothing to do with border crossing, relations with Canada, or national security. Rather, the President wishes to impinge on congressional authority to regulate commerce in this case to create a helpful bargaining chip in the unrelated matter of the Paris Climate Change talks. This is not a permissible exercise of the foreign affairs power. The case was dismissed on 3/31/2017 following approval of the pipeline permit by the Trump administration.


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 and coalition associations filed an amicus brief in support of Ford Motor Company. The issue is whether Indiana Rule of Evidence 702 treats testimony from engineers as “scientific testimony.” That rule applies different standards to expert “scientific” testimony as opposed to testimony based on “technical” or “other specialized knowledge.” If testimony is deemed “scientific,” the testimony may only be admitted if it “rests upon reliable scientific principles.” If the testimony is not scientific, it must be admitted if it may “help the trier of fact understand the evidence or to determine a fact in issue.” Indiana courts have ruled on either side of this issue.

The NAM’s argued (1) the court of appeals’ decision to subject engineering experts to less scrutiny than “scientific” experts departs from the well-reasoned practice of the vast majority of states across the country, (2) as “gatekeepers”, courts must scrutinize expert engineering testimony to ensure it is valid, well founded testimony that may be fairly relied upon by lay jurors in reaching a verdict, and (3) that the court of appeals’ failure to test the reliability of engineers has significant adverse economic implications for Indiana’s business climate.

The court denied the NAM’s and Ford’s argument that the experts in question should be excluded because their testimony was “scientific” and was not rooted in reliable principles. Specifically, the court disagreed with the contention that the lower court had misapplied Rule 702 when it determined that the testimony offered by engineers was allowable and rested upon reliable “engineering” principles. The court dismissed Ford’s motion to exclude the engineer’s expert testimony stating that just because an expert’s opinion may not be accepted by a fact finder does not provide a basis for rendering it inadmissible.

The case was later settled with Ford assuming no responsibility or liability.


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

On June 22, 2017, the NAM filed an amicus brief in the U.S. Supreme Court urging the Court to consider a decision out of the Third Circuit involving pleading standards for the False Claims Act (FCA). In particular, this case concerns Rule 9(b) pleading requirements for a qui tam relator filing a reverse false claim. Under Rule 9(b), a party pleading fraud is required to “state with particularity the circumstances constituting fraud. . . ”

Eleven courts of appeals have adopted conflicting tests to evaluate the sufficiency of a relator’s complaint under 9(b). The Third Circuit’s standard is the most lenient of those adopted, requiring relators to show nothing more than the opportunity for fraud – effectively eliminating Rule 9(b)’s particularity requirement.

The NAM argued that the Third Circuit’s lenient standard will increase abusive, unfounded FCA qui tam litigation against manufacturers harming those businesses, their employees, their owners, shareholders, the public at large, and even the Government. Furthermore, the NAM reasoned that resolving the circuit split would ensure consistent and appropriate application of Rule 9(b) and prevent speculation and forum shopping by outsider relators.

On October 2, 2017, the Supreme Court denied the petition for certiorari.


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

Relying on the Electronic Communications Privacy Act of 1986, the Department of Justice (DOJ) sought to search Microsoft customers’ data. Microsoft pushed back, alleging that the DOJ’s orders violate its customers’ privacy and infringe on its right to free speech. Many of these demands prohibit Microsoft from informing customers that their information is being investigated.

The NAM filed an amicus brief arguing that the DOJ's actions violate the First and Fourth Amendments to the Constitution. Specifically, the privacy and free speech implications of the government’s actions have significant consequences for the greater business community and the innovation economy. When the government treats those who store their information at home differently than those who use the cloud, individuals are less inclined to use this potentially transformative new technology to protect their privacy. When individuals forgo cloud computing services, innovative manufacturers will lose customers.

On October 25, 2017, the Court granted Microsoft's motion to dismiss without prejudice or costs.


Related Documents:
NAM amicus brief  (September 2, 2016)

 


Government Contracting -- 2017



United States ex rel. Harman v. Trinity Industries, Inc.   (5th Circuit)

FCA liability despite compliance with federal requirements

This case is about whether the False Claims Act (“FCA”) allows for private regulatory violation suits that allege false or fraudulent claims by manufacturers despite clear assurances from the government that the manufacturer was in full compliance with the requirements for reimbursement.

The NAM filed an amicus brief arguing that the lower court's decision distorts the FCA and nullifies even express, authoritative assurance of compliance from the government. In this case, the government disagreed with the substance of the private party's claim, concluding at each stage of its review that the highway guard rails in question complied with an array of intricate technical standards. Consequently, the trial court should not have allowed a claim for fraud to proceed, especially when the government, the allegedly defrauded party, has determined that the fraud was never committed.

Our brief also outlined the devastating consequences for businesses both in terms of financial costs and in reputational harm from unwarranted FCA suits. This case alone involves potential liability of $663 million in damages and penalties, the largest FCA judgment in the law's century-and-a-half-long history. It also deepens businesses' regulatory insecurity, and even makes companies that do not sell directly to the government liable for damages under the False Claims Act. .

The Fifth Circuit agreed with our position and reversed the lower court’s ruling against Trinity. The court determined that no fraud occurred due to a lack of materiality, an essential element of fraud. Without a finding of fraud, damages should not have been awarded. To show materiality in an FCA action, plaintiffs are required to show that the government received something other than what they were promised. Damages are then determined by comparing the value of what was promised with what was received. As a matter of law, materiality cannot be found when noncompliance with what was promised is determined to be minor or unsubstantial. When the government has determined noncompliance is immaterial, a jury cannot reverse that decision absent a showing of a reason to doubt that the government’s decision was genuine. The government thoroughly inspected and approved each installation of guard rails by Trinity, rendering noncompliance as unsubstantial. Due to this, there was no fraud, and damages could not be awarded.


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

In this lawsuit, the Natural Resources Defense Counsel has sued the Consumer Product Safety Commission to force them to move forward with a final rulemaking process to ban certain phthalates from the market. While the rulemaking is pending, a temporary ban is in place on certain phthalates. The NAM filed a motion to intervene and a motion to dismiss the case because we believe the NRDC does not have standing to bring the lawsuit.

On August 18, 2017, the parties settled the case by signing a consent decree that requires 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

This case is about venue, or which court is the proper court to hear the case. It is complicated by the fact that the plaintiff brought suit in a court where venue was improper, but she joined her claim with those of other plaintiffs who were properly before the court. It arises out of a claim of damages from allegedly inadequate warnings on an FDA-approved prescription drug used to treat epilepsy, and a jury in the city of St. Louis awarded damages totalling $38 million.

The company appealed, claiming that her case should not have been heard by a St. Louis jury. While it is appropriate to consolidate cases involving common questions of fact or law, those cases must also satisfy statutory venue requirements. Only 2 plaintiffs actually lived in St. Louis, while 20 others were from out-of-state. The statute provides that, when a plaintiff is injured outside of Missouri, venue is proper in Missouri where the corporate defendant' registered agent is located. The trial court allowed all the cases to be joined together, even though most of the plaintiffs did not satisfy the venue requirement.

The NAM filed an amicus brief on appeal arguing that this ruling was incorrect. Just because a court may join cases together doesn't mean that the judge can ignore the express requirements of the venue statute. The purpose of the statute is in part to reduce forum shopping by plaintiffs. Ignoring the venue statute would encourage plaintiffs' lawyers "to shop aggressively for plaintiff-friendly forums and bring as many claims as possible in such venues." It would also create great uncertainty for businesses, dramatically reducing their ability to predict where they will be subjected to mass actions, Forum shopping also imposes serious burdens on the courts in St. Louis by flooding them with claims that have no ties to the city.

The 2016/2017 Judicial Hellholes report cites the City of St. Louis as the #1 judicial hellhole in the country. Because of weak venue requirements, fast trials, lax evidentiary standards, and big awards, the city has attracted many out-of-state plaintiffs.

The Missouri Supreme Court ducked the question whether venue was proper and found that even if it were improper, the defendant failed to show any event or action in the trial court that would support the conclusion that that court was less fair than the alternate jurisdiction. It affirmed the 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

This case addresses the State of Montana exercising jurisdiction on parties which are not “at home” in the state of Montana. The Montana Supreme Court held that the “at home” language in previous U.S. Supreme Court decisions such as Daimler AG v. Bauman only applied to foreign companies and not to U.S. companies located outside Montana.

The NAM filed an amicus brief in the U.S. Supreme Court asking the Court to accept the case and arguing that the Montana Supreme Court’s application of the “at home” provision for jurisdiction was incorrect. After the Supreme Court agreed to hear the case, the NAM filed a second brief on the merits. On May 30, 2017, the Court ruled in favor of BNSF and held that Montana's exercise jurisdiction does not comport with the Fourteenth Amendment's Due Process Clause.

If the Court did not address this issue, it could have resulted in state courts around the country narrowly applying this provision, thus expanding their jurisdiction and subjecting American companies to additional burdensome lawsuits. This is particularly important as manufacturers continue to expand their distribution chains and change the ways they operate in the modern economy.


Related Documents:
NAM amicus brief  (March 6, 2017)
NAM amicus brief  (October 28, 2016)

 


Labor Law -- 2017



Banner Health Sys. v. NLRB   (D.C. Circuit)

Challenging NLRB decision undermining confidentiality of investigatory interviews

In 2013, the NAM filed an amicus brief in Banner Health Systems’ appeal of an earlier NLRB decision to the D.C. Circuit. The NLRB had ruled that Banner had violated employees' National Labor Relations Act (NLRA) rights to engage in concerted activity due to a blanket policy requesting that employees maintain confidentiality regarding ongoing investigations of employee misconduct. The D.C. Circuit sent the case back to the NLRB which again ruled the confidentially policy violated the NLRA, the blanket policy was improper, and employers must make specific determinations before asking employees to keep complaints confidential. Banner appealed again.

The NAM filed an amicus brief supporting the company, arguing that the NLRB was incorrect because it failed to account for potential challenges employers would face when conducting investigations and ignored its own precedent relating to investigations. 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. The court ruled in favor of Banner deciding that the company did not have a blanket policy and did not reach the question of whether a blanket confidentiality policy was in fact a violation of the NLRA. The NAM’s amicus brief supported Banner and states that the NLRB was incorrect in its decision because it failed to take into account the challenges employers will now face when conducting an investigation. For example, with the NLRB’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 points out the NRLB ignored its previous decisions on investigations and overturned decades of its own precedent on the matter. The NLRB’s decision placed an enormous burden on employers to justify the confidentiality of their investigations prior to interviewing all the witnesses or even assessing the situation. We urged the Court to reject the NLRB’s novel and impractical standard narrowing the business reasons for requesting confidentiality in workplace investigations.

On March 31, 2017, the DC Circuit reversed the NLRB’s decision in Banner Health.


Related Documents:
NAM amicus brief  (January 21, 2016)

 

Browning-Ferris Indus. v. NLRB   (D.C. Circuit)

What constitutes a "joint-employer"

On August 27, 2015 in a 3-2 decision, the National Labor Relations Board ("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 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.

On June 14, 2016, the NAM filed a joint amicus brief in the D.C. Circuit Court of Appeals to support Browning-Ferris in its appeal. The NAM argued that the longstanding “direct control” standard should remain the means for determining joint employment. The Board’s loosened standard subjects companies to unmerited liability, without providing the same benefits as the old rule.

Oral argument was held on March 9, 2017, and while the case was pending, the NLRB reconsidered its views on joint employers. Because it issued a revised ruling in another case (Hy-Brand Industrial Contractors, Ltd.), the D.C. Circuit remanded this case back to the Board for reconsideration.

The NAM was also involved in the original NLRB decision on Browning-Ferris, which can be found here.


Related Documents:
NAM amicus brief  (June 14, 2016)

 

EEOC v. Day & Zimmermann NPS, Inc.   (D. Conn.)

EEOC interference with employer free speech

This case concerns the Equal Employment Opportunity Commission (EEOC) filing prosecutorial claims against an employer for retaliation and interference under the Americans with Disabilities Act (ADA). The claim is based on a letter the employer sent to employees regarding employees’ rights during such investigation.

The NAM filed an amicus curiae brief arguing that the EEOC’s action was unlawful. First, the letter did not violate the ADA because it neither constitutes an “adverse action” within the meaning of section 503(a) nor violates any rights secured in section 503(b). Second, the EEOC is interfering with the employer’s First Amendment right to communicate with its employees. The EEOC is offering an unreasonable interpretation of the letter, and permitting this EEOC claim would negatively impact the employer/employee relationship and violate public policy. The ability of manufacturers to communicate freely with their employees is important for productive workplaces, and the EEOC should not interfere First Amendment rights to communicate.

The parties settled the case on November 30, 2017, which the court approved and executed by administratively closing the case.


Related Documents:
NAM amicus brief  (October 28, 2016)

 

FedEx Home Delivery v. NLRB   (D.C. Circuit)

Delivery service contractors as employees

The NAM and coalition associations filed an amicus brief on behalf of FedEx Home Delivery. The case concerns a decision from the National Labor Relations Board (NLRB) which stated delivery service contractors working for FedEx were not independent contractors but employees of FedEx. Previously, the appeals court determined that a group of delivery service contractors were not FedEx employees, but independent contractors for purposes of Section 2(3) of the NLRA. FedEx Home Delivery v. NLRB, 563 F.3d 492, 495 (D.C. Cir. 2009) (“FedEx I”).

The court here faced the same legal question, applied to a set of facts “virtually identical” to FedEx I. Congress has not amended the NLRA since the court issued FedEx I. The NAM’s brief argued that the court faced with the same issue presented in a later case in the same court should reach the same result, especially when the parties are the same. The court agreed, finding that the NLRB could not nullify the decision issued in FedEx I by asking a second panel of the court to apply the same law to the same material facts and provide a different outcome. The court dismissed the case in favor of FedEx.


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, along with a group of other associations, filed a brief concerning the California WARN Act, which requires employers to provide 60 days’ notice before any “mass layoff, relocation, or termination.” An employer who fails to provide notice is liable to each affected employee for back pay and lost benefits, and for civil penalties. 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.

As way of background, the federal WARN Act (on which the California Act is based) imposes similar notice requirements but only on employers whose actions affect 100 or more employees before a “plant closing or mass layoff.” This appeal raises a question about the application of the California WARN Act to employees who would not be covered by the federal WARN Act. This is an important case for all California manufacturers, particularly those with cyclical employees or staffing requirements that ebb and flow.

Unfortunately, the California Court of Appeal affirmed the superior 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 amicus brief  (May 1, 2017)

 

Mendoza v. Nordstrom, Inc.   (California Supreme Court)

Understanding California's Day-of-Rest law

This case involves the interpretation of a California statute that provides for “one day’s rest in seven.” The plaintiff wanted the law interpreted to require one day off for every six days in a row worked. Nordstrom argued that the one-in-seven provision applies to each workweek block, so that an employee is able to work more than six days in a row without violating the law.

An employee’s right to take a day’s rest is not the issue in dispute; it is whether employees should have the ability to choose whether they exercise that right. The NAM believes they should. Most California employees will be harmed—not helped—if the plaintiff’s arguments for abandoning the workweek framework and supporting a mandatory day-off policy prevail. Employers will no longer be able to provide the degree of flexibility and autonomy that employees deserve in managing their work schedules if a mandatory day off is required. The NAM filed an amicus brief contending that the statute must be interpreted in a way that is reasonable, practical, and that confers the most benefit on both employees and employers. Specifically, the NAM’s brief argued (1) that the workweek is the proper and most reasonable framework for calculating the required day of rest and (2) the law should be interpreted to encourage employee flexibility and autonomy in scheduling.

In May, 2017, the court decided, in agreement with the NAM’s arguments, that (1) a day’s rest in seven is guaranteed and that the workweek framework is proper, meaning periods of six or more consecutive workdays spanning more than one week are not facially prohibited and (2) an employee can agree to work more than six days in a week if the employer does not induce that decision.


Related Documents:
NAM brief  (November 30, 2015)

 

Nevada v. U.S. Dept. of Labor   (5th Circuit)

Appeal of DOL's new overtime rule

This case is about whether the lower court properly issued a temporary nationwide injunction preventing enforcement of the Department of Labor’s (DOL) new overtime rule. More information relating to the lower court case can be found here.

The DOL appealed the injunction. The NAM, along with a group of sixty business associations, filed an amicus brief asking the court to keep the preliminary injunction in place. Our brief argued that the DOL failed to acknowledge that its new rule radically upends decades of regulations, failed to consider whether the new rule would impermissibly sweep in employees who should have been exempt, and failed to give any consideration to the business community’s legitimate interests.

The court granted a motion by the DOL to dismiss the appeal on September 6, 2017 and the DOL has reopened the rulemaking process.


Related Documents:
NAM amicus brief  (January 24, 2017)

 

NLRB v. CNN America, Inc.   (D.C. Circuit)

Joint employer status

For over thirty years, the NLRB found separate businesses to be joint employers only when they shared "direct and immediate control over essential terms and conditions of employment" of a group of employees. In the present case, without explicitly overruling any of its longstanding precedent, the Board infused new “indirect” control factors into its decision, including whether the employer could reimburse overall labor costs or supervise employees, and found CNN to be a joint employer. The result is that CNN now faces extensive liability for charges filed on behalf of employees of another separate and independent company. This outcome is inconsistent with previously settled principles of law and threatens the entire business community with similar arbitrary actions jeopardizing longstanding business relationships.

The NAM filed a brief arguing that the NLRB’s decision represents a significant unexplained departure from longstanding precedent on the issue of joint employer status. By retroactively imposing a joint employer finding on CNN, under circumstances which have long been held not to justify such a finding, the Board has in effect created a new, but unacknowledged standard that threatens many other businesses and industries with significant burdens and uncertainties, and is contrary to the intent of Congress. The joint employer finding is arbitrary and capricious and should be denied enforcement.

The court ruled in favor of CNN in this case in August, 2017. It stated that the NLRB had not explained how the television companies satisfied the traditional “direct and immediate” test for determining joint-employer status. It remanded the case for reconsideration, allowing it to develop a different standard with sufficient explanation to overcome existing precedents. This decision is favorable to manufacturers and helps to limit the expansion of joint employment liability.


Related Documents:
NAM amicus brief  (February 2, 2016)

 

Plano Chamber of Commerce v. Perez   (E.D. Tex.)

Challenging DOL's new overtime rule

The Department of Labor’s (“DOL”) new overtime rule drastically alters minimum salary exemption thresholds —increasing the minimum by 100%, from $23,660 to $47,476 annually — imposing new overtime costs on businesses of all sizes, including those who employ millions of individuals who have historically been exempt from overtime. This effectively eliminated the statutory exemption for those employed in an executive, administrative, or professional capacity (the “EAP Exemption”) below the $47,476 threshold. The rule also includes an escalator provision automatically updating the minimum salary requirements to even higher levels every three years.

In 2016, the NAM sued DOL to block the rule, and a federal judge issued a nationwide injunction preventing implementation of the rule, finding that the DOL’s actions likely exceeded its statutory authority.

While the DOL appealed to the Fifth Circuit and sought to pause all further proceedings in the district court the AFL-CIO sought to intervene in the district court. We opposed the motion to stay the proceedings pending appeal, and the judge agreed.

On August 31, 2017, the judge ruled in our favor and granted summary judgment. The judge applied a two-pronged test when reviewing the DOL regulation, namely, (1) whether Congress has directly and unambiguously spoken to the precise issue at question and (2) if it hasn’t, whether the agency’s interpretation is based on a permissible construction of the statute. Congress satisfied the first prong of the test by expressly stating that a duty-based (not salary-based) determination qualifies individuals for the EAP exemption. After reaching this determination, the court found that the DOL’s new overtime rule violated its authority by contradicting the express will of Congress by eliminating the duty-based EAP exemption test in favor of a salary-based determination, making it unlawful. Additionally, in dictum, the court stated that even if Congress had failed to meet the first prong of the test, the DOL’s rule would still have failed because it was not based on a permissible construction of the statute.


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)
Press Release  (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 Ninth Circuit in response to a National Labor Relations Board's ("Board") holding that prohibits employers from recommending employee confidentiality during workplace investigations. Despite Boeing’s recommendation to employees being free of any coercion, threat, or penalty, the Board prohibited such communication absent a case by case balancing test.

According to the Board, employers may not recommend confidentiality of ongoing investigatory interviews unless they “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.” Unless an employer can make such a determination, recommending any investigatory confidentiality is now per se unlawful.

The NAM’s brief argued that the Board’s ruling infringes upon the free speech rights of employers while impeding employers’ right to conduct effective workplace investigations under other federal employment laws.

Additionally, the NAM argued that the Board’s ruling is impracticable considering the realities of workplace investigations. This ruling requires employers to make a determination on the investigation before they know the substance of what that investigation might produce. Requiring upfront, uninformed decision-making from employers in conducting workplace violations makes maintaining confidentiality impossible.

On January 18, 2017, the Court remanded this matter to the National Labor Relations Board for further consideration based on Board rules that were established after this case was filed. The Board's decision to overrule precedent established a new, two-part test to determine whether employer work rules are lawful. If the rule is not explicitly unlawful, the Board will evaluate (1) the rule's potential impact on protected concerted activity, and (2) the employer's legitimate business justifications for maintaining the rule. The new test means that if the justifications for the rule outweigh potential impacts on employee rights, the rule is lawful.


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

On February 2, 2017, the NAM filed an amicus brief supporting Volkswagen in its dispute against the United Auto Workers (UAW). The UAW brought a complaint against Volkswagen for refusing to bargain with a group of maintenance employees at the automaker's Tennessee plant. The main issue is the application of the Specialty Healthcare case, which was decided in 2011 and overturned 70 years of precedent, and which established a new standard for determining the composition of a proposed bargaining unit. Volkswagen opposed the creation of a micro-bargaining unit exclusively for the maintenance employees. It argued that the bargaining unit should include all the employees in the plant because the plant is a highly integrated manufacturing operation in which all the employees work in concert to produce a finished product.

On December 15, 2017, the NLRB reinstated the traditional community-of-interest standard in a case called PCC Structurals, Inc., overturning Specialty Healthcare. Consequently, the court remanded this case to the NLRB for reconsideration in light of the PCC Structurals decision.

For more information, see the National Labor Relations Board case here.


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 plaintiff was employed at a Marshalls store in California for a little more than one year before bringing a lawsuit against Marshalls under the California’s Private Attorneys General Act (PAGA), The plaintiff alleged 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.

PAGA allows plaintiffs to discover the names and contact information of other "aggrieved employees" at the beginning of the proceedings if the plaintiff first shows good cause, since employees have a protectable privacy interest.

The NAM filed a brief urging the court to uphold longstanding discovery rules and to limit the delegation of state enforcement power to private plaintiffs. A plaintiff must have specific facts showing good cause to justify expensive and intrusive discovery, and the court appropriately exercised its discretion to allow only incremental discovery.

The court did not agree with the NAM’s position. Instead, it stated that it is sufficient for the plaintiff to allege (1) that a violation occurred, (2) that the plaintiff was harmed, and (3) that a defendant employer had a systematic policy causing injury to employees across the state. This new standard lowers the bar to discovery in PAGA claims.


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

On May 2, 2016, the NAM joined with the American Foundry Society to challenge the Occupational and Health Administration’s (OSHA) new crystalline silica rule, which cuts the current permissible exposure limit in half and requires employers to implement costly engineering controls. The rule attempts to limit exposure to silica-containing materials such as concrete and stone in industries such as brick manufacturing, foundries and hydraulic fracturing. We fought this rule on all fronts by both petitioning for review of the final rule and intervening to address the union filings directly.

Manufacturers are committed to safe, productive and modern workplaces. This rule, however, relies on out-of-date economic data and drastically underestimates the costs that will be inflicted on manufacturers and the entire economy. As a result, some manufacturers could be forced to close their doors while others will be saddled with crushing regulations. Manufacturers tried to work with OSHA to make this a feasible, effective rule and have long stressed the need for flexibility, clear justification and reliable, current data in the rulemaking process. Our suggestions, however, were ignored. Employers have worked for decades to achieve compliance with the current exposure limits and, through these efforts, have adopted the best possible and most cost-effective ways to keep all their employees safe. Because of OSHA’s failure to work with industry in setting reasonably achievable exposure limits, we were forced to take our fight to the courts.

On Dec. 22, 2017, the D.C. Circuit upheld OSHA's rule. It found that OSHA had substantial evidence to support setting the silica threshold at 50 μg/m3. It considered that there was evidence of harm at lower levels and that OSHA's decision not to use a dose-rate model for risk assessment of cumulative exposure was within a "zone of reasonableness." It found that OSHA had substantial evidence supporting its conclusions on adverse health effects of silica, and adequately responded to criticisms of the studies it relied on. OSHA could rely on the "cumulative evidence . . . [e]ven if a reasonable person could also draw the opposite conclusion . . . ."

On technological feasibility, the court used a highly deferential standard of review, approving rules if there is a "reasonable possibility that the typical firm will be able to develop and install engineering and work practice controls that can meet the [standard] in most of its operations." Under this test, it upheld the standard for three industries: foundries, hydraulic fracturing, and construction. Even if sufficient controls do not exist in an industry, OSHA can force the industry to develop and diffuse new technology to meet the standard if they can do so in a reasonable amount of time.

Likewise the court upheld OSHA's economic feasibility finding, since the rule did not "threaten massive dislocation to, or imperil the existence of, the industry." It is reasonable, according to the court, for OSHA to consider a rule exonomically feasible if annualized costs of compliance are less than one percent of revenue or ten percent of profit. It also rejected challenges to the rule's requirements relating to medical surveillance of certain employees, and limitations on dry sweeping, dry brushing and the use of compressed air around silica.


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)
NAM press release  (April 4, 2016)

 


Patents, Copyrights and Trademarks -- 2017



In re Wellbutrin XL Antitrust Litigation   (3rd Circuit)

Antitrust scrutiny of patent litigation settlements

This is another in a series of cases in the pharmaceutical industry in which patent litigation settlement agreements are challenged as being anticompetitive under the antitrust laws. The Supreme Court has indicated that large cash payments from brand owners to generic challengers to settle patent challenges may be anticompetitive, so manufacturers have been seeking other ways to settle expensive litigation that will not raise such concerns.

The NAM weighed in with an amicus brief generally supporting the settlement process, arguing that patent cases are extraordinarily costly and complex, and courts should encourage flexibility in the terms needed to settle such litigation. Here, the agreement allowed the patent litigation to proceed but enabled competition to begin, benefiting both the manufacturers and consumers. Moreover, an agreement by the brand manufarcturer not to compete with the authorized generic manufacturer for a limited time is nothing more than a routine patent license, which is perfectly legal. Subjecting such an agreement to antitrust scrutiny would harm consumers and manufacturers.

On 8/17/17, the Third Circuit affirmed the dismissal of the antitrust claims. It ruled that while these reverse payments cases are analyzed under the rule of reason, 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. The Third Circuit also denied the panel rehearing and designated the opinion precedential, so this case provides good law for pharmaceutical manufacturers to use in the future against these questionable reverse payment antitrust claims.


Related Documents:
NAM amicus brief  (May 10, 2016)

 

Eli Lilly and Co. v. Canada   (ICSID)

NAFTA challenge of Canada’s promise-utility doctrine for patents

Eli Lilly brought an investment treaty dispute against the Government of Canada pursuant to the North American Free Trade Agreement (NAFTA) before the International Centre for the Settlement of Investment Disputes (ICSID). Lilly’s claims relate to the expropriation of its property, namely Lilly’s patent rights, as a result of the application of a new patentability requirement under Canadian law (the promise utility doctrine) that is inconsistent with Canada’s international obligation s in NAFTA and is out of step with the practices of its NAFTA partners. As a result of the application of the promise utility doctrine, Canada has revoked over 22 pharmaceutical patents in 25 cases over the past decade on the ground that these patents lack utility. Canada’s additional utility requirement undermines the predictability of intellectual property rights and discriminates against the innovative pharmaceutical industry.

The NAM filed a brief in support of Eli Lilly’s challenge to Canada’s promise utility doctrine. Out of the many groups that asked to file a brief, the NAM was one of only a handful, and the only U.S. association, to have a brief accepted by the ICSID tribunal. Manufacturers of all sizes depend on patents to spur investment and foster innovation, and the NAM will continue to fight policies that unfairly deprive manufacturers of longstanding and basic intellectual property rights through all available channels, including domestic courts and international arbitration tribunals. Canada’s patent invalidations discourage innovation and investment in pharmaceuticals and potentially many other industries. Canada is one of the United States’ largest trading partners, and adequate protection of intellectual property is critical to ensuring the success of that relationship. The success of U.S.-Canada trade relations is a model for the rest of the world, and no party wants to see that relationship weakened through the disregard of a fundamental right of patent protection.

The tribunal unfortunately ruled in Canada’s favor purely on a threshold issue, sidestepping core investment and intellectual property (IP) issues at the heart of the case. In so doing, the tribunal failed to provide relief from Canada’s actions that undermine innovation and IP protection to the detriment of U.S. manufacturing and jobs. This decision does not resolve the significant uncertainty for investors in Canada, which has chilled Canada’s ability to promote growth and investment for innovative manufacturers that rely on strong IP protections. The NAM is continuing to examine other avenues to address this significant challenge, including through the Special 301 process and direct engagement with the Canadian government.


Related Documents:
NAM press release  (February 24, 2016)
NAM amicus brief  (February 12, 2016)

 


Product Liability -- 2017



California v. Conagra Grocery Products Co.   (Cal. Ct. App.)

Validity of public nuisance claims

This is a case brought by 10 California cities and counties to sue lead pigment manufacturers in what is essentially a class action on behalf of California residents using a public nuisance theory. In 2006, the case raising essentially private claims was allowed to proceed without proof of an affected public right. The court found that the governments needed to prove that the companies unreasonably interfered with a public right in a way that caused a public nuisance.

Subsequently, the trial judge required neither unreasonable interference nor causation, and ordered the defendants to pay $1.1 billion to replace or contain lead paint in millions of homes. That ruling was appealed.

The NAM and other business groups filed an amicus brief 2/23/15 highlighting several problems with the court's ruling. The court watered down the government's burden of proof, allowing suits against companies based solely on the fact that the products had foreseeable risks of harm, regardless of whether the companies knew of the harm, that it was caused by consumer misuse, that a competitor made the product, or that the product was sold decades ago. We argued that this version of public nuisance strips away traditional product liability elements and defenses. The ruling does not satisfy the standards established earlier by the appeals court, and several other states have properly rejected comparable attempts to turn public nuisance into a "super tort."

On 11/14/17, the court largely affirmed the trial court, ruling that the companies are liable for remediation. It limited the remediation requirement to houses built before 1951, since the defendant companies did not promote the use of lead paint after that. It held the companies liable not for selling the paint, but for promoting it in advertisements and industry association promotional campaigns. Because all the companies participated in the advertising, they are liable regardless of their share of the market. The court ruled that a public nuisance is anything that substantially and unreasonably interferes with "the comfortable enjoyment of life or property" affecting an entire community or neighborhood. The companies were considered to have knowledge of the hazards of lead exposure to children as early as 1910, since a lawyer for their trade association attended congressional hearings and lobbied on the subject.

The NAM believes the court erred by expanding the law of public nuisance. Several other states have soundly rejected this legal theory with respect to lead pigment. The ruling is of great concern to manufacturers because it opens the door to litigation against any industry, with a malleable and unbounded notion of tort law.


Related Documents:
NAM amicus brief  (February 23, 2015)

 

Cerveny v. Aventis, Inc.   (10th Circuit)

Preemption of drug labeling challenge

The NAM filed an amicus brief 9/19/16 in the Tenth Circuit supporting Aventis, Inc. in the defense of suit claiming that the drug Clomid for infertility should have been labeled with an additional warning about use before pregnancy. We filed an amicus brief arguing that the Food, Drug & Cosmetic Act has strict requirements for changes to FDA-approved labels, and the Act preempts any state-law requirement that would require a company to change a label without complying with federal law.

FDA's regulation of drug labeling requires that companies may add or strengthen a warning only if there is sufficient evidence of a causal association between the drug and risks of a different type or greater severity or frequency than already addressed in the label. The FDA rejected efforts to change the labels at issue in this case, and until there is sufficient evidence, it is illegal for a company to change the label as demanded in the law suit.

Joining in the brief were Chamber of Commerce of the U.S. and the American Tort Reform Association.

On May 2, 2017, the Tenth Circuit reversed the lower court’s grant of summary judgment to Aventis. While the court determined that the claims regarding the failure to warn are preempted by federal law, the court remanded that case to further address claims related to the FDA’s prior language on Clomid’s risks. The court also determined that the lower court needed to directly address preemption relating to the claims involving fraud, negligent misrepresentation, and breach of an implied warranty.


Related Documents:
NAM amicus 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 an important legal test in complex product design liability litigation involving a rollover accident. The NAM’s brief opposed using a “consumer expectations” test, which is more appropriate to address manufacturing flaws, and urged the court to instead support a “reasonable alternative design” test with a risk-utility component. When designing complex products like cars, manufacturers must take into account safety considerations for many different situations and customers, and must consider available technology as well as the usefulness, desirability and affordability of the product to consumers. This holistic approach allows companies to design optimally safer products.

In complex product design liability cases, it is essential to have a showing (1) that a product could have been designed to avoid or reduce the plaintiff’s injury; (2) that the modification would not have increased the risk of harm to others; and (3) that the product, as modified, would not have made it undesirable or unaffordable to consumers. The alternative is to impose liability on a manufacturer that did all it could to create a safe product. This would reduce incentives to design safe products, needlessly raise prices, and result in a lack of consumer choice.

It is also sound public policy for courts to require a showing of a reasonable alternative design in claims alleging that a complex product is defective. This risk-utility test for evaluating whether a product is defective in design provides an objective standard; one that ensures consumers are able to purchase the types of products that they desire. It encourages manufacturers to design products in a manner that optimizes safety based on available technology without compromising the utility of the product or rendering it unaffordable for consumers.

Unfortunately, the court upheld the lower court's ruling and allowed the consumer expectation test to stand. It felt that the risk utility analysis was a substantial departure from the state's existing law, and that a plaintiff should not have to show that the defendant could have used an alternative design. It found that a negligence standard should not be used when considering strict products liability claims. This outcome makes it easier for consumers to sue manufacturers, particularly those who make complex products with many safety factors to consider when making design and manufacturing decisions.


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 a joint amicus brief, along with the Coalition for Litigation Justice, the Chamber of Commerce, and the Business Council of New York, in this case, urging the court to uphold the district court’s rejection of the plaintiff’s cumulative exposure theory, otherwise known as the "any exposure" theory, which has been often rejected.

Plaintiff argued that mechanics who worked with brakes, clutches and gaskets, as well as their family members, suffered harm because these contain small amounts of chrysotile asbestos. The trial court rejected that any amount of exposure was enough to relieve the plaintiff of having to prove causation or harm. Rather, it found that plaintiff would have to show that the amount the worker was exposed to was enough to cause the harm.

We argued that dose assessment is critical to all toxins, including asbestos, and that zero exposure is not necessary to protect against asbestos diseases. In addition we pointed out that the trial court’s decision was consistent with many other courts, state and federal, and that the court was correct in finding that the plaintiff did not meet the requirements to show adequate evidence of causation. Finally, we highlighted the trial court’s arguments that the plaintiff’s causation theory was illogical and unscientific because it is not sufficient to rely on the general proposition that asbestos causes mesothelioma, that risk is not a substitute for competent causation testimony, that experts should not be relieved of causation proof because dust was present, that experts cannot rely on governmental publication about ‘no-safe dose’ in lieu of actual proof of causation, and that the plaintiff’s experts cannot credibly discount epidemiology studies of mechanics.

The plaintiff filed a response brief to our amicus brief and asked the court to reject our brief. The plaintiff's lengthy brief attacked our amicus brief and claimed it was "irresponsible" and full of "misstatements." We filed a reply to plaintiff's brief, and we used facts to rebut the plaintiff's unusual attack. In our reply, we provided the court with scientific evidence and the experts' actual testimony to rebut the unsupported claims of the plaintiff. Plaintiff's response brief did not address the central issues in the case and made arguments that would carve out a large exception to the leading case law. We urged the court to uphold well-reasoned law and the science, and reject plaintiff's arguments.

The court ruled in our favor and held that proof of exposure must be established. This is a significant ruling because this NY court makes it difficult for manufacturers and other businesses to prevail. In any other type of litigation, the idea that you have to show causation would be obvious, but, for asbestos lawsuits, this is huge.


Related Documents:
NAM reply brief  (July 15, 2016)
NAM amicus brief  (March 30, 2016)

 

T.H., a Minor v. Novartis Pharm.   (California Supreme Court)

Brand name manufacturer liability after divestiture

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. That would 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. This theory for liability, dubbed “innovator liability,” has been widely rejected in federal and state courts around the country, even when the defendant is still manufacturing its own version of the product. The lower court’s innovator liability approach in this case may be highly detrimental not only to pharmaceutical companies but to the manufacturing industry overall.

The NAM filed an amicus brief with the California Supreme Court detailing why innovator liability should not be upheld in California and why tort theories do not allow courts to circumvent fundamental principles of liability law against product manufacturers. Future plaintiffs will undoubtedly argue that there is no principle limiting the lower court's assertion that, when an innovator makes, markets and sells its own products, it is “foreseeable” that years later someone will be harmed by a comparable product made by someone else. The practical complications of requiring a manufacturer to retain liability over the design and warnings of products it no longer sells are vast. The net result would be to punish innovation and interfere with the common practice of manufacturers of divesting and purchasing product lines, which are essential to enhancing efficiencies to the benefit of consumers, investors and employees.

On December 21, 2017, the California Supreme Court ruled 5-3 to impose liability on the original manufacturer. It justified imposing innovator liability by separating its obligation to warn about the product it used to make from its obligation to warn when others make and sell the drug. It found that it was foreseeable that the branded drug company's label would be used by others, and that it had a greater incentive to update the warning labels when the drug went generic.


Related Documents:
NAM amicus brief  (December 7, 2016)

 

Taylor v. Intuitive Surgical, Inc.   (Washington State Supreme Court)

Learned intermediary duty to warn

This case involves Intuitive Surgical's duty to warn about risks from its robotic surgical device call the "da Vinci System," used for laparoscopic surgeries. The intermediate appeals court ruled that the company did not need to notify the hospital that bought its device about risks, but that it properly notified the doctor who used it. The patient's estate appealed to the Washington Supreme Court.

The NAM filed an amicus brief arguing against expanding the learned intermediary duty to warn. Plaintiffs want manufacturers to warn not only the physician, but also the hospitals, and want liability against the manufacturer when a doctor makes a mistake while using the manufacturer’s medical device. Our brief argued that not only is that outside the scope of the health care rules, it’s out of line with the rest of the country, and that there are strong policy reasons to reject the plaintiff’s theory.

On Feb. 9, 2017, the Washington Supreme Court ruled against the company. If said that the company has a duty to warn the hospital as that bought the device, as well as the doctor who used it. If found that a Washington law requires warnings "with the product," meaning when delivered to the hospital, and that the learned intermediary doctrine only applies to warnings that are owed to patients, not hospitals.

The ruling expands the liability for medical device manufacturers, who will now need to expand their efforts to warn about risks to hospitals as well as physicians.


Related Documents:
NAM amicus brief  (April 22, 2016)

 


RICO Act -- 2017



Sidney Hillman Health Ctr. v. Abbott Labs., Inc.   (7th Circuit)

RICO drug pricing case -- proximate cause issue

On June 12, 2017, the NAM filed an amicus brief in the 7th Circuit arguing that pharmaceutical companies should not be subject to treble damage litigation under the Racketeer Influenced and Corrupt Organizations Act (RICO) for alleged misrepresentations to doctors about the efficacy of a prescription drug (Depakote). Our brief reasons that RICO liability requires a direct connection between a misrepresentation and an injury, and there are simply too many intervening factors between the company and the ultimate use of the drug, including the physicians’ independent judgment in prescribing the drug, to satisfy the directness requirement.

Imposing liability in cases like this will chill medically important communications between manufacturers and physicians depriving physicians of truthful, beneficial scientific information, and ultimately denying patients the advantage of informed medical treatment. Furthermore, the imposition of liability will open an abusively lucrative new avenue for litigation by third-party payors in the health-care system.

On Oct. 12, 2017, the 7th Circuit ruled that any connection between misrepresentations to doctors and claims for damages by third-party payors is too remote to prove causation -- an essential element in a RICO case. Too many other factors may have affected the ultimate decision to use the drug, as well as purported damages attributable to the cost of the drug or alternatives that a patient might have used. The company was already convicted and fined for off-label marketing, and additional claims from third-party payors are too remote for RICO claims.


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

On April 21, 2017, the NAM filed an amicus brief with the Sixth Circuit in support of Cooper-Standard. The NAM brief supports the conclusion of the District Court in this case that the statutory definition of “whistleblower” in Dodd-Frank, set forth at 15 U.S.C. § 78u-6(a)(6), must be applied across all provisions of Dodd-Frank, including that law’s anti-retaliation provisions. That conclusion aligns logically with the structure of Dodd-Frank’s whistleblower reward scheme, and is consistent with this Court’s approach to statutory construction. It also is consistent with the policy choices Congress made when it added Dodd-Frank to the SEC’s anti-fraud toolkit.

On July 17, the Court granted the appellee's stipulation to voluntarily dismiss the case before oral arguments were held.


Related Documents:
NAM amicus brief  (April 21, 2017)

 

Leidos, Inc. v. Indiana Pub. Ret. Sys.   (U.S. Supreme Court)

Liability for securities fraud under Section 10(b)

This case concerns 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. Contrary to earlier Supreme Court decisions, the Second Circuit’s holding in this case subject issuers to securities fraud liability for omitting disclosures, even when the “omitted” information is not necessary to make any affirmative statement not misleading. This represents a dangerous precedent and exposes issuers to ever-increasing litigation. This hindsight problem is exacerbated by the fact that Item 303 concerns disclosures of “soft information” which is often not susceptible to objective verification.

The NAM filed an amicus brief supporting Supreme Court review of the case, arguing that this issue is a slippery slope where manufacturers may be subject to private suits for securities fraud for failing to disclose information that may not be material. Issuers 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, including knowledge of “soft information.”

The Court agreed to hear this case, and the NAM filed another amicus brief supporting the merits of the issue. We argued that the Second Circuit's ruling expands the private right-of-action under Rule 10b-5, creating new dangers from having to comply with a vague standard that requires predicting the future. Expanding rights of private parties to sue is unnecessary in light of the other remedies that are available.

Oral arguments scheduled for November 6, 2017 were removed from the Court's calendar because the case settled.


Related Documents:
NAM amicus brief on the merits  (June 28, 2017)
NAM amicus brief supporting review  (November 30, 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'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. While the trial judge upheld all aspects of the rule, the D.C. Circuit reversed on First Amendment grounds. The case was remanded to the district court, and on April 3, 2017, it entered final judgment declaring Sec. 1502 of the Dodd-Frank Act and the SEC regulations on conflict minerals unconstitutional "to the extent that the Statute and the Rule require regulated entities to report to the Commission and to state on their websites that any of their products “have not been found to be ‘DRC conflict free.’” Click here for a summary of the appeal to the D.C. Circuit.

 


Settlement Agreements and Consent Decrees -- 2017



Automated Industrial Machinery, Inc. v. Christofilis   (Ill. App. Ct.)

Illinois courts refuse to enforce restrictive covenants

AIM Inc., a.k.a. Automated Industrial Machinery, Inc., manufactures 2-dimensional and 3-dimensional CNC bending machinery. The company is an active machinery exporter via its two manufacturing facilities in North America and Europe. Founded in 1992 by Constantine Grapsas, AIM Inc. has grown to become the premier CNC bending machine supplier serving customers worldwide.

However, the courts of Illinois have decided to punish Mr. Grapsas for his achievement. The AIM VP of engineering, a company board member, officer, and shareholder, after 13 years decided to quit and began directly competing with AIM, although there was a non-compete agreement in place. AIM filed suit. An Illinois 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 result is that manufacturers in Illinois will have to wait for two years before they expose key employees to trade secrets. This does not make manufacturing in the USA more competitive, and the National Association of Manufacturers and other organizations are working to help right this wrong.

AIM appealed the lower court's ruling, and the NAM filed an amicus brief in the Illinois appellate court in support of AIM. Illinois is the only state that imposes a bright-line two year rule for a restrictive covenant, which makes Illinois more expensive, and less attractive, for manufacturers to do business. In each of the states surrounding Illinois, an employer can hire an employee and expose that employee to proprietary trade secrets immediately, confident that the restrictive covenant securing its trade secrets will be enforced.

In an unpublished non-precedential opinion heard without oral argument, the Illinois Appellate Court affirmed the circuit court’s judgment. The Appellate Court acknowledged that there is a possibility that the Illinois Supreme Court would reject a two-year rule in favor of a more fact-specific approach. As a last resort, AIM will now be appealing to the Illinois Supreme Court, but the Court can choose which cases it accepts for review. Hopefully, the Supreme Court will review this important case and employ a fact-specific, totality of the circumstances test when examining a postemployment restrictive covenant.


Related Documents:
NAM amicus brief  (March 22, 2017)

 

General Motors LLC v. Elliott   (U.S. Supreme Court)

Validity of bankruptcy sale of assets "free and clear"

The General Motors bankruptcy filing in 2009 was a dramatic effort to save the company and the hundreds of thousands of jobs, businesses and communities that depended on it. It resulted in the sale of the company's assets to a new government-owned entity. The price paid for those assets was substantial, and allowed the new company to start fresh, "free and clear" of old liens, claims and liability from activities of the old company.

This case involves whether the new company is still responsible, 5 years later, for claims against the old one -- specifically for accident claims and economic loss claims arising from an ignition switch defect. The appeals court ruled 7/13/16 that the new company may be responsible for claims from claimants that did not receive adequate notice of the sale order in the bankruptcy proceeding. The lower court had found that the claimants were not prejudiced by the bankruptcy decision, but the appeals court thought that if they were involved, they might have been able to secure a different outcome in the bankruptcy proceeding.

The new company has appealed to the Supreme Court. On Jan. 17, 2017, the NAM supported this appeal with an amicus brief, arguing that disallowing the "free and clear" sale provision undermines the integrity of asset sales under Section 363 of the Bankruptcy Code, negatively impacting debtors, creditors and buyers. 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. Moreover, it contradicts the basic principle of imposing liability on the party at fault, rather than on a good-faith purchaser of assets.

The Court declined to review this appeal on April 24, 2017.


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 Chamber filed a lawsuit challenging the Department of the Treasury’s (Treasury) and the IRS’s Temporary “multiple domestic entity acquisition rule” (Final Rule). The rule imposes higher costs on certain “inversions”, which occur when an American company conducts a cross-border merger with a foreign company and becomes the foreign company’s subsidiary.

By making the Final Rule effective immediately, the Treasury and the IRS prevented the affected industry from commenting on the new rule, disregarding Administrative Procedure Act (APA) language that requires parties be given the opportunity to comment. Manufacturers must have the ability to comment because the rule exacerbates uncertainty in tax law and undermines the ability to compete and succeed in the global marketplace.

The suit argues that the Final Rule should be set aside under the APA because it (1) exceeds Treasury’s authority, (2) is arbitrary and capricious in failing to address or explain the agency’s position change, and (3) was made immediately effective without notice and comment. The Treasury seeks insulation from judicial review of the Final Rule, claiming that the Anti-Injunction Act (AIA) bars pre-enforcement challenges.

The NAM filed an amicus brief arguing that (1) the United States cannot insulate itself from a pre-enforcement review under the AIA, (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 ruled that: (1) the claims were not barred by the AIA because the plaintiffs were not seeking to restrain the assessment or collection of tax; instead, plaintiffs were merely challenging the Final Rule to enable informed decisions to be made on future business transactions; (2) Congress provided the Treasury and the IRS broad authority to issue regulations, thus determining that the agencies had not violated their authority; and (3) the Treasury and the IRS violated the APA by not providing industries affected with notice and opportunity to comment on the proposed regulation. The court interpreted the language of the APA to mandate that even temporary rules, like the Final Rule, are subject to notice and comment requirements.


Related Documents:
NAM amicus brief  (November 8, 2016)

 

ETC Marketing, Ltd. v. Harris County Appraisal Dist.   (U.S. Supreme Court)

State taxation of temporarily stored natural gas

The issue in this case is whether temporarily stored natural gas can be taxed while in interstate transit to consumers. Natural gas is a cornerstone of the national energy infrastructure and requires an intricate system of cross-border pipeline networks connecting suppliers with end users. Lower courts have approved many state and local practices of taxing natural gas as it is temporarily stored within this pipeline network. By taxing natural gas in this way, state and local authorities are levying costs on consumers thousands of miles away, many of whom often have no other substitute for natural gas. These taxes violate the “in-transit” principle of the Commerce Clause. The principle states that goods that remain in the transit process cannot be locally taxed.

The NAM filed a brief in October 2017 asking the Supreme Court to review this case to resolve a split between lower court rulings, some of which abide by the older and binding “in-transit” precedent and newer decisions which have unlawfully and unconstitutionally departed from this standard. The NAM requests that the Court use this case as an opportunity to reaffirm the “in-transit” standard and issue clear guidance to the states that taxes should not be levied in a manner that harms interstate commerce.

On December 11, 2017, the Supreme Court denied the petition for certiorari.


Related Documents:
NAM amicus brief  (October 20, 2017)

 

Naifeh v. Oklahoma   (Oklahoma Supreme Court)

Whether a regulatory fee is actually a new tax

On July 7, the MCLA filed an application and was granted permission to file a brief in the Oklahoma Supreme Court in support of a challenge to new law that imposes a $1.50 fee on each pack of cigarettes sold in the state. In our brief, which was submitted on July 21, 2017, we argued that the fee is actually a tax that was enacted in violation of a constitutional guarantee that new taxes will originate in the state House of Representatives, be passed before the last five days of the legislative session and be approved by a 3/4 supermajority of the legislature. We are seeing more states use purported regulatory programs as a way of raising revenues for nonregulatory purposes -- in this case, raising $257 million in annual revenues, the largest revenue bill in 2017.

On August 10, the Court ruled that the primary purpose of the fee is to raise revenue, and that it must be enacted following the tax-enactment procedures mandated by the Oklahoma Constitution. The court agreed with much of the reasoning in our brief.

We are concerned that taxes like this are being disguised by state legislatures as regulatory fees, in an attempt to avoid the strict legal requirements of a constitutional amendment that protect citizens from excessive taxation. Serious budget shortfalls are forcing states to find innovative ways to collect money, and it is important that they use fair procedures both to ensure public support and to prevent rash decisions with bare majorities at the end of a legislative session.

This is an important decision that will help prevent the adoption of taxes without the necessary three-fourths majority of the legislature. There are many ways in which a state might want to impose “user fees” that are in fact taxes, and this ruling will help ensure that the legislature stays within the bounds set by the 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

Five cases from Michigan were appealed to the Supreme Court challenging Michigan's system of taxing companies that do business in multiple states. These cases come on the heels of 2 other cases from California and Minnesota raising similar challenges, but which were declined review by the Court.

Once again, the NAM urged the Court to hear the issue, involving whether a state can deny companies the opition of using a common three-factor, equal-weighted formula for calculating taxes under the Multistate Tax Compact. The Compact is intended to create a uniform system of taxation for interstate companies, but several states are reneging on their obligations under the agreement.

Like any contract, the Multistate Tax Compact places some obligations on states along with the Compact’s many benefits. It was developed as an alternative to forestall congressional intervention with federal legislation, and was intended to establish a baseline level of uniformity to facilitate job growth and state tax collections.

However, Michigan passed legislation that denies the option to use the standard formula, and applied its new policy retroactively for almost seven years. Our amicus brief argues that the Compact is a binding contract, and that the retroactive denial of use of the standard formula undermines reasonable reliance interests and removes predictability and the rule of law, both violations of the Due Process clause. The change also targets unpopular groups, such as out-of-state businesses who are often without a vote.

On May 22, 2017, the Court declined to hear this appeal.


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 and other groups filed an amicus brief 10/21/2015 urging the U.S. Supreme Court to clarify the reach of the Alien Tort Statute. The appeal involves three critical issues arising in ATS cases: (1) whether U.S. courts should entertain extraterritorial litigation—lawsuits involving foreign parties and activities largely occurring abroad, (2) whether there is a well-defined consensus that corporations can be sued for violations of the Law of Nations, and (3) the extent of knowledge or intent that a business must have to be liable for the acts of others. A victory on any of these issues would be of substantial help to the many companies that have faced this kind of litigation.

We also filed an amicus brief in the Ninth Circuit, which issued the problematic rulings now on appeal. For details, click here.

On Jan. 9, 2016, the Court denied the petition for review. These issues will continue to be contentious in the lower courts until the Supreme Court agrees to decide them.


Related Documents:
NAM brief  (October 21, 2015)

 


Antitrust -- 2016



McWane, Inc. v. FTC   (U.S. Supreme Court)

Antitrust legal standards that apply to exclusive dealing arrangements

Manufacturers often enter into exclusive-dealing agreements with distributors, and the courts have generally considered them to be legitimate business decisions. However, the antitrust laws prohibit any contract "in restraint of trade," without providing any guidance on what that means. Every contract restrains trade to some extent, but banning contracts was not the intent of the Sherman Act. Consequently, the courts have had to create a large body of law to define what is a reasonable contract. These interpretations are critical to business planning, as violations are subject to treble damages and attorneys' fees.

This case involves an announcement by a manufacturer of ductile iron pipe fittings that it might temporarily suspend its traditional 8% rebate to any distributors who sold products from other manufacturers. Despite the announcement, a key competitor was able to enter the market and gain almost a 10% share. Nevertheless, the Federal Trade Commission sued. Ultimately, the a federal appeals court left standing an FTC decision that the rebate policy amounted to an "unlawful exclusive dealing policy." McWane appealed to the Supreme Court.

The NAM filed an amicus brief urging the Court to review the case. We highlighted the importance of exclusive dealing arrangements and their pro-competitive traits, including (1) providing stability and the ability for long-term planning, (2) lower prices, (3) brand presentation, (4) an inexpensive alternative to vertical integration, and other efficiencies.

We also outlined a variety of questions raised by this case that deserve clarification from the Court. Confusion has reigned in the lower courts on many of these issues, including: how to weigh factors such as market power, the duration of the arrangement, pro-competitive effects, harm to consumers or competition, and who bears the burden of proof. The Supreme Court has not weighed in on exclusivity contracts since 1961, and it is time for it to provide further guidance to the lower courts in this area.

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

In 1985, Mayne Pharmaceuticals introduced a capsule form of a delayed-release antibiotic. Over time, Mayne developed new and improved versions as a tablet in response to competitive market forces and difficulties with the capsule form. Mayne patented these incremental, innovative forms. As Mayne continued to develop new formulations, The plaintiff, Warner Chilcott, attempted to produce generic versions, hoping to benefit from state laws that allow or, in some cases, require pharmacies to substitute a branded drug with its bioequivalent generic counterpart.

Despite the profits that plaintiff was able to reap by producing generics, it brought this antitrust lawsuit alleging “product hopping” that ostensibly provided no significant improvements but prevented filling prescriptions automatically with generics. The theory advanced by the plaintiff would impose a duty upon Mayne to market older drug formulations—in order to help plaintiff take advantage of state generic-substitution laws—unless Mayne can demonstrate that its older drug formulations are “sufficiently” innovative. If accepted, this theory would create a rule that is unadministrable in practice, counter to basic principles of antitrust law, and a hindrance to innovation.

The NAM filed an amicus brief supporting Mayne and arguing that a robust intellectual property (IP) regime is critical to creative activity. Manufacturers must constantly make business judgments regarding whether, and to what extent, they should invest capital in the development of new and improved products. The investments necessary to innovate and to develop IP often are substantial, and holders of capital will make the necessary investments only if they are able to recover the costs. Our IP system is intended to promote innovation, and thus affords protections for IP that provide the financial incentive for manufacturers to undertake the research and development costs necessary to foster innovation.

On Sept. 28, 2016, the court ruledin favor of the defendant. It defined the product market to include not just the drug at issue, but also other similar drugs used to treat acne, and ruled that an 18% market share in that market was insufficient to support a monopolization claim. It also ruled that the plaintiff failed to produce evidence of anticompetitive conduct that would allow a claim for product hopping. The plaintiff was not foreclosed from the market, and it received 180 days of exclusive rights to market a generic version of the drug. Moreover, the defendant provided strong evidence that its product changes were made for safety reasons and to respond to competitive pressures from others.

This is a significant victory for innovation and the companies that innovate. The decision warned against turning courts into "tribunals over innovation sufficiency."


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 and other groups filed an amicus brief Feb. 29, 2016, urging the highest court in New York to join the clear trend of other courts to substantially curb the consolidations of asbestos cases. Where individual cases are not legally and factually similar, combining them is unlikely to increase efficiency, and are highly prejudicial to the defendants.

The consolidated cases here were dramatically different, involving different worksites, different occupations, different products, different types and durations of exposure, different diseases, different plaintiff health statuses, different legal liability theories, and different defendants, counsel and witnesses. The lower court concluded there was sufficient commonality merely because both plaintiffs were "exposed to asbestos in a similar manner, which was by being in the immediate presence of dust" while working.

Joining together dissimilar cases leads to guilt by association with inflammatory facts that are not present in all the cases. It can bolster weak claims because juries may assume that if multiple plaintiffs allege injuries then the claims must have merit, even when they lack objective support. Jurors have difficulty differentiating the different kinds of asbestos fibers. Recent data suggests that consolidated trials create administrative and jury biases that result in more verdicts at abnormally large amounts.

The NAM brief outlined a variety of other factors during trial that are affected when multiple parties are lumped together for litigation. These raise serious due process concerns, and produce few, if any, efficiencies in the process.

On 6/29/16, the court rejected this challenge, holding that the issue was not properly brought up on appeal. This move is likely to further prejudice the remaining defendants.


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

On July 9, 2015, the NAM and coalition associations filed a Supreme Court amicus brief urging reversal of a Ninth Circuit decision that erroneously conflates injury-in-law with injury-in-fact for purposes of Article III standing. This case arises from an alleged violation of the Fair Credit Reporting Act (FCRA). Spokeo published inaccurate information on its website that portrayed Robins as having more education and a higher income than was true. Robins sued under the FCRA which provides that “any person who wilfully fails to comply with [the statute’s reporting requirements] is liable to [the] consumer” for any actual damages or for statutory damages of $100 to $1,000.

A plaintiff must have standing to sue under Article III of the Constitution by demonstrating that he: (1) has suffered or is imminently threatened with a concrete and particularized ‘injury in fact’ that is (2) fairly traceable to the defendant’s action and (3) likely to be remedied by a favorable court decision. The trial court dismissed Robin’s suit for failure to establish an injury-in-fact; however, the Ninth Circuit reversed, holding that violation of the statute (injury-in-law) was a sufficient injury-in-fact. The NAM’s brief argued that statutory injury-in-law is no substitute for Article III injury-in-fact because Congress does not have the ability to abrogate the Constitutional standing requirements. If injury-in-law were sufficient, the three-part requirement for standing would be collapsed to a mere single question test of whether a statutory violation (even a minute one) had occurred.

The NAM also pointed out that abandoning the Article III injury-in-fact requirement would 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. Accepting injury-in-law as injury-in-fact would also practically render the typical class certification analysis defunct. Such a decision would allow plaintiffs’ attorneys to hold companies liable for innocuous actions to the tune of $1,000 per plaintiff in class action suits of virtually limitless size.

The Court should read the statutory damages provision of the FCRA as just that, a substitute measure of damages when actual damages are de minimis or too difficult to determine. Supreme Court precedent requires that when a statute has more than one acceptable interpretation and one of those interpretations raises a potential Constitutional conflict, courts must construe the statute in the manner that avoids the Constitutional issue unless it is clear Congress intended such a construction.

On May 16, 2016, the Court, by a 6-2 majority in an opinion by Justice Alito, vacated and remanded the decision of the Ninth Circuit below. The Court reaffirmed that, in order to establish injury-in-fact under Article III of the Constitution, a plaintiff must show an invasion of a legally protected interest that is both particularized and concrete—and held that, in this particular case, an alleged violation of a statutory right, standing alone, does not meet the second of these requirements.


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 joined with the Chamber of Commerce and the Association of Home Appliance Manufacturers in an amicus brief filed June 22, 2015 in the 11th Circuit supporting Electrolux’s appeal of an improper class action certification regarding front-loading clothes washers. The company is a defendant in a class-action suit alleging that the washers are more likely than top-loading washers to develop mold and odors. Our brief urges the Court to reverse a trial judge’s ruling that allowed the case to proceed as a class action that included purchasers who never experienced or may never experience any manifestation of the alleged defect.

The plaintiffs presented no evidence of classwide injury, and the court ignored evidence 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 moldy odors, many knew of the widely publicized potential prior to purchase, and many received a free warranty replacement of the allegedly defective part. Our amicus brief argues that the trial court improperly took the position that all doubts about certifying a class should be resolved in favor of certification. Instead, it should follow the 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.”

The NAM is concerned that the improper certification of cases as class actions puts undue pressure on companies to settle otherwise meritless cases, and acts to replace satisfactory warranty programs with litigation by a few dissatisfied customers. Research shows these class action suits ultimately harm consumers.

On March 21, 2016, the 11th Circuit ruled that class certification was improperly granted. It agreed with our argument that doubts about certification should not favor the party seeking to have a case certified. It also ruled that because proving causation may require so much individual proof that common issues of this element of the case do not predominate among members of the class. It sent the case back to the trial court to determine whether there were sufficient common issues of causation. Many members of the class may never have seen any advertisements that allegedly constituted unfair or fraudulent business practices under the relevant California statute, nor were any shown to have relied on advertisements as required under the relevant Texas statute.

On the issue of classwide damages, the court said that individual damages do not always defeat a predominance determination. There is an exception if computing individual damages will be "so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable." The court left it to the trial court to decide whether this exception applies in this case.


Related Documents:
NAM brief  (June 22, 2015)

 

Dow Chemical Co. v. Industrial Polymers, Inc.   (U.S. Supreme Court)

Commonality of damages suffered by purchasers in antitrust class actions

NAM joined with the US Chamber of Commerce, Business Roundtable, American Tort Reform Association and National Council of Farmer Cooperatives in an amicus brief urging the U.S. Supreme Court to review a decision out of the Tenth Circuit involving an antitrust class action. At issue in the case is whether the court properly denied the defendant, Dow Chemical, 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. Even if some buyers were injured, others were not. The Tenth Circuit certified the class anyway, reasoning that, by definition, “price-fixing affects all market Participants.”

Our brief argues that the Tenth Circuit’s decision conflicts with both historical and contemporary understanding of due process, as well as Rule 23 and the Rules Enabling Act. In class actions, parties have the right to raise any claim or defense specific to the individual class members. The “inference of class-wide impact” adopted by the Tenth Circuit, however, deprives class action defendants of the right to prove that individual plaintiffs were not harmed. Applying this “inference,” or using “extrapolation” to calculate classwide damages, does violence to the principles that have undergirded the class suit for generations.

We also argue that the decision threatens 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 13, 2015)

 

Terrill v. Electrolux Home Prods., Inc.   (11th Circuit)

Class action certification without injury

The NAM joined with the Chamber of Commerce and the Association of Home Appliance Manufacturers in an amicus brief 11/1/2013 in the 11th Circuit supporting an appeal by a company that makes front-loading clothes washers. The company is a defendant in a class-action suit alleging that the washers are more likely than top-loading washers to have mold and odors. Our brief questions the ruling of a trial judge who allowed the case to proceed as a class action that included purchasers who may never have experienced or will experience any manifestation of the alleged defect.

Our amicus brief argues that the trial court improperly took the position that all doubts about certifying a class should be resolved in favor of certification. Instead, it should follow the 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.”

The court also 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, many knew of the widely publicized potential prior to purchase, and many received a free warranty replacement of the allegedly defective part. The court also did not recognize the legal standard that eliminates claims based on alleged malfunctions that might never happen.

The NAM is concerned that the improper certification of cases as class actions puts undue pressure on companies to settle otherwise meritless cases, and acts to replace satisfactory warranty programs with litigation by a few dissatisfied customers.

On March 21, 2016, the 11th Circuit ruled that class certification was improperly granted. It agreed with our argument that doubts about certification should not favor the party seeking to have a case certified. It also ruled that because proving causation may require so much individual proof that common issues of this element of the case do not predominate among members of the class. It sent the case back to the trial court to determine whether there were sufficient common issues of causation. Many members of the class may never have seen any advertisements that allegedly constituted unfair or fraudulent business practices under the relevant California statute, nor were any shown to have relied on advertisements as required under the relevant Texas statute.

On the issue of classwide damages, the court said that individual damages do not always defeat a predominance determination. There is an exception if computing individual damages will be "so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable." The court left it to the trial court to decide whether this exception applies in this case.


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’s Manufacturers’ Center for Legal Action leads a business community coalition on the Federal Communications Commission’s (FCC) Open Internet Order. The coalition, which includes the Business Roundtable and the U.S. Chamber of Commerce, supported the telecommunications industry’s challenge, in the U.S. Court of Appeals for the District of Columbia, arguing that the FCC’s reclassification must be set aside because it is contrary to the Communications Act of 1934 and was promulgated in violation of the Administrative Procedure Act.

The D.C. Circuit has previously found that the Communications Act of 1934 gives the FCC the authority to limit private companies from charging different amounts of money for different internet speed types. Currently the FCC treats broadband internet as a “telecommunications service” subjecting providers to a host of new costs and fees for access to poles, conduits, rights of way; state and local taxes and fees; and related fees estimated at $11 billion per year. The NAM amicus brief articulated the broad cross-industry impact of the FCC’s net neutrality rulemaking on innovation and spectrum access and asked the appeals court to reverse the lower court’s ruling. Specifically, the brief argued that under the FCC’s Order, thousands of broadband providers will find their “rates” and “practices” subject to the broad and ambiguous standards and will decrease the variety and quality of internet services.

On June 14, 2016, the D.C. Circuit rejected the challenges to the FCC's rules. It found that the Commission has the authority to classify broadband as a telecommunications service. It also rejected a variety of other challenges to the rules as well.


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 9/25/2015 in this case involving exploratory drilling by Shell Gulf of Mexico, Inc. in the Chukchi Sea in Alaska. Environmental groups challenged the issuance of a permit by the Bureau of Ocean Energy Management (BOEM). Our 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 an environmental assessment.

While this case was pending, Shell announced that it was terminating its exploratory efforts in this area. It withdrew its exploration plan and the court granted the parties' request to dismiss the case as moot.


Related Documents:
NAM amicus brief  (September 25, 2015)

 

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

Challenging EPA regulation of boilers for area sources (boiler GACT)

The NAM and other industry organizations filed a petition with a federal appeals court to review a final rule on hazardous air pollutants issued by EPA on Feb. 1, 2013, entitled “National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial, and Institutional Boilers.” The rule was written to require "generally available control technologies" (GACT) or management practices to reduce emissions of hazardous air pollutants, taking into consideration the cost of achieving such reductions. Our petition, styled Council of Industrial Boiler Owners v. EPA, was consolidated by the court into the Louisiana Envtl. Action Network case and then into the American Chemistry Council v. EPA case.

Our group also filed a petition with EPA for administrative reconsideration of this regulation, along with two related rules involving air pollutants for major sources (boiler MACT, or maximum achievable control technologies) and commercial and solid waste incineration (CISWI) units.

On 4/17/2014, the NAM and others filed a reply brief in support of our motion that the court vacate all MACT standards that were developed using the Upper Prediction Limit (UPL) methodology in the Area Source Boiler Rules because all such standards were based on nine or fewer data points. The problem with EPA”s approach stems from the statutory requirement that it set emissions limits based on the best performing 12% of combustions units. EPA did not have sufficient data to property calculate an emissions standard based on this 12% requirement. Instead, it used the UPL methodology to estimate the emissions limits based on data gathered from only 9 units rather than a total of at least 26 units that it should have used to satisfy the 12% requirement. By asking for a voluntary remand, EPA is effectively conceding that the methodology used to calculate the UPL standards is flawed. EPA has conceded that its standards based on 9 or fewer data points are indefensible on the current record, and we argued that industry will be harmed if the standards are not vacated. We argued that pending EPA’s reconsideration, the rule should not remain in effect. Otherwise, companies will have to satisfy costly compliance obligations that may become obsolete at the conclusion of EPA’s reconsideration process.

On May 15, 2014, the D.C. Circuit denied our motion for affirmative relief but granted EPA’s motion to remand the emissions standards based on the UPL methodology. According to the remand, EPA had 60 days to provide further explanation of its use of the UPL methodology.

Full briefing in the case began with our main brief filed Aug. 26, 2014. In it, we argued that the EPA's energy assessment requirement is beyond the scope of its authority for several reasons. One is that the requirement reaches far beyond boilers to regulate virtually every piece of equipment at all affected facilities, including "process heating; compressed air systems; machine drive (motors, pumps, fans); process cooling; facility heating, ventilation, and air-conditioning systems; hot water systems; building envelope; and lighting; or other systems that use steam, hot water, process heat, or electricity provided by the affected boiler."

We also argued that EPA unlawfully failed to account for malfunctions when setting the rule's emission standards. The courts have repeatedly required EPA to account for malfunctions when setting technology-based standards, and EPA's standard is not reflective of what is achieved in practice by the best-performing existing sources.

We filed an additional brief 12/23/14 in support of some of EPA's decisions in this rulemaking. The agency appropriately set standards for certain sources, temporary boilers were properly excluded, it properly set generally available rather than maximum-achievable standards, and it reasonably exempted synthetic area sources with controls and federal limits.

On 1/21/15, we filed a brief replying to EPA and environmental group arguments. We reiterated that the energy assessment requirement is unlawful and that EPA has a duty to account for malfunctions when determining what the best performing sources can achieve. Its standards must apply to all phases of operation: startup, normal operations, shutdown, and malfunctions. Leaving malfunctions out of the analysis leads to unreasonably strict standards.

On July 29, 2016, the court rejected all industry arguments, finding that the EPA's approach was reasonable. It agreed with several challenges raised by environmental groups, and ordered EPA to issue a regulation for cyclonic burn barrels and determine whether regulation is required for 4 other categories of incinerators. It also ordered the agency to provide further justification for some of its decisions.


Related Documents:
Reply Brief of Industry Petitioners  (January 21, 2015)
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)
NAM Statement of Issues  (May 1, 2013)
Petition for Review  (April 2, 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

On April 29, 2011, the NAM joined with 10 other associations asking a federal court to review EPA's new regulations on commercial and industrial solid waste incineration (CISWI) units. The rules have the potential to impose additional costs on key industrial sectors. We filed formal petitions in federal court challenging the rules to ensure that, if EPA fails to reconsider its actions, an appeals court panel will have a chance to consider whether EPA acted within the law.

On the same day, we filed a suit challenging EPA's rules establishing stricter emissions limits on industrial, commercial and institutional boilers. For details, see U.S. Sugar Corp. v. EPA (D.C. Cir.).

On May 16, 2011, EPA announced that it was reconsidering and delaying the effective dates for the Boiler MACT and CISWI rules, and the court suspended the legal proceedings. EPA proposed a new rule on Dec. 23, 2011, and issued the final rule on Feb. 7, 2013.

The NAM and other groups challenged this new rule in a case styled Portland Cement Ass'n v. EPA. That case, along with other business and environmental group challenges, have been consolidated into this case. The NAM also intervened in challenges to the rule by environmental groups.

On 4/17/14, the NAM filed a reply brief in support of a motion that the court vacate all MACT standards that were developed using the Upper Prediction Limit (UPL) methodology and nine or fewer data points. The problem with EPA”s approach stems from the statutory requirement that it set emissions limits based on the best performing 12% of combustions units. EPA did not have sufficient data to property calculate an emissions standard based on this 12% requirement. Instead, it used the UPL methodology to estimate the emissions limits based on data gathered from only 9 units rather than a total of at least 26 units that it should have used to satisfy the 12% requirement. By asking for a voluntary remand, EPA is effectively conceding that the methodology used to calculate the UPL standards is flawed. We argued that pending EPA’s reconsideration, the rule should not remain in effect. Otherwise, companies will have to satisfy costly compliance obligations that may become obsolete at the conclusion of EPA’s reconsideration process. We also asked the court to order briefing on all the other issues remaining in this case.

On May 15, 2014, the D.C. Circuit denied our motion for affirmative relief but granted EPA’s motion to remand the emissions standards based on the UPL methodology. EPA completed its work in July. In September, the court assigned to another case claims relating to the affirmative defense provision of the CISWI rule and issues relating to fuel variability for solid fuels in the coal-fired energy recovery units subcategory.

We filed our main brief October 2 seeking review of emission standards for the small remote incinerator subcategory because EPA failed to account for variability in waste materials when classifying best-performing units, and EPA improperly tested on a pollutant-by-pollutant basis. We also argued that EPA should take into account emissions occurring during startups, shutdowns and malfunctions when determining whether emissions limits are achievable. We also urged allowance of emissions averaging, and argued that EPA could not impose recordkeeping requirements through the CISWI rule on operators that combust non-hazardous secondary materials that are not waste.

On Feb. 9, 2015, the industry coalition filed its main brief as intervenors opposing environmental group arguments against some of EPA's decisions. We supported EPA's decision to defer regulation of burn-off ovens, cyclonic burn barrels, foundry sand reclamation units, soil treatment units and space heaters. We also supported EPA's statistical techniques -- Upper Limit and Upper Prediction Limit -- to calculate emissions standards while taking into account variability. In addition, EPA's use of 30-day averaging for continuous monitoring systems takes into account variable conditions, and the agency properly decided not to impose stricter regulations for various categories of pollutants already regulated.

On July 29, the court rejected all industry arguments, finding that the EPA's approach was reasonable. It agreed with several challenges raised by environmental groups, and ordered EPA to issue a regulation for cyclonic burn barrels and determine whether regulation is required for 4 other categories of incinerators. It also ordered the agency to provide further justification for some of its decisions.


Related Documents:
NAM intervenor brief  (February 9, 2015)
NAM Reply Brief in support of motion for affirmative relief  (April 17, 2014)
NAM motion for affirmative relief  (March 13, 2014)
Shopfloor Blog  (May 9, 2011)
NAM Petition for Review  (April 29, 2011)
NAM Petition for Administrative Stay  (April 27, 2011)

 

American Petroleum Institute v. EPA   (D.C. Circuit)

Challenging EPA greenhouse gas regulation (tailoring Step 3)

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 interpret its authority with its Tailoring Rule -- tailoring the impact of the rule to only hit the largest emitters of greenhouse gases. That rule was necessary to prevent absurd consequences from the EPA's earlier interpretations of its authority. The NAM has argued that EPA could have adopted a more reasonable interpretation of its power so as to avoid the absurdities it is now trying to ameliorate. This latest rule (the Tailoring Step 3 rule) was issued on July 12, 2012. The case has been held in abeyance while EPA and other parties sort out the requirements laid down by the Supreme Court in UARG v. EPA.

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 and the U.S. Chamber of Commerce filed an amicus brief urging the Supreme Court of Texas to overturn a lower court ruling that allows the City of Houston to run its own clean air enforcement office. Our brief argued that such local enforcement is preempted under provisions of the Texas Constitution by the Texas Clean Air Act. Principles of federal preemption law can be used to analyze the validity of the city ordinance.

Preemption is required because the Houston ordinance is inconsistent with the state's chosen method of regulating the air in Texas, making an end-run around the Texas Clean Air Act's delegation of authority to the Texas Commission on Environmental Quality (TCEQ). It also upsets the law's requirement that TCEQ balance environmental and economic interests. Even though Houston claims to use the same underlying environmental laws in its enforcement efforts, "a conflict in technique can be fully as disruptive to the system Congress enacted as a conflict in overt policy," according to the Supreme Court. There are legitimate roles for the city in environmental enforcement within the Clean Air Act's statutory structure, but establishing its own enforcement office is not one of them. Houston's goal was to disrupt existing environmental enforcement in the state, and that violates the law's balance in giving prosecutorial discretion to TCEQ.

The ordinance threatens to balkanize air quality enforcement around the state, and is part of a growing trend by home-rule cities to go beyond state environmental restrictions. Home-rule powers determine whether some localities may ban fracking or other projects with environmental implications.

On 4/29/16, the court found that Houston's enforcement provisions are inconsistent with the statutory enforcement requirements, and the ordinance's registration requirement makes unlawful what the Texas Clean Air Act approves. The Houston ordinance allows criminal prosecutions without following the procedures required by the Texas Water Code, which is inconsistent with the code, converting "what is primarily an administrative and civil enforcement regime under state law into a primarily criminal enforcement regime . . . ." The state legislature clearly intended that TCEQ determine the appropriate remedy in every case. The court also rejected Houston's effort to require that all facilities be registered with the city, since that makes unlawful the operation of a facility that otherwise complies with the Clean Air Act and the TCEQ rules. This decision will help streamline the permitting process by keeping that responsibility at the state level only.


Related Documents:
NAM amicus brief  (January 12, 2015)

 

In re Deepwater Horizon   (5th Circuit)

Standard for punitive damages in Clean Water Act litigation

On June 8, 2015, the NAM filed an amicus brief in this appeal supporting BP’s challenge to a district court’s improper findings regarding punitive damages under the Clean Water Act and other law for the Deepwater Horizon accident. Under a procedure known as multidistrict litigation (MDL), most cases in federal courts involving the accident were sent to a single district court in Louisiana for consolidated pretrial proceedings to ensure the most efficient use of the parties’ and the judicial system’s resources as well as fairness and uniformity in the application of federal law across every case. If a case is not dismissed or resolved in the pretrial proceedings, it returns to its original district court for trial.

Under general maritime law a court may impose punitive damages for reckless, willful, and wanton conduct. The Fifth Circuit requires that to qualify the conduct must be the result of corporate policy or a corporate official with policy-making authority. The MDL trial judge in this case correctly determined that under the Fifth Circuit’s standard BP is not liable for punitive damages, but then went on to find that BP would be liable in the First or Ninth Circuits (in which some of the cases consolidated in the MDL originated and to which they may ultimately return for trial).

The NAM’s brief supports BP’s argument that the MDL judge wrongly opined on the availability of punitive damages under standards applied by the other circuits and should have focused only on the law of the Fifth Circuit. The MDL judge must decide pretrial issues only by the rules of the circuit in which he or she sits. Allowing the court to do otherwise would undermine the efficiency and fairness that Congress established by creating the MDL procedure.

This case was dismissed by stipulation of the parties in October, 2016.


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 and other industry organizations filed a petition with a federal appeals court to review a final rule on hazardous air pollutants issued by EPA on Jan. 31, 2013, entitled “National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters.” The rule was written to require the maximum degree of reduction in emissions of hazardous air pollutants that is achievable, taking into consideration the cost of achieving such reductions. Thus, the rule requires “maximum achievable control technology” (MACT) for such equipment. Our challenge was consolidated with those of other industry and environmental groups, under the caption above. Details about the legal claims in this litigation were filed on May 2.

At the same time, these groups filed a petition with EPA for administrative reconsideration of this regulation, along with two related rules involving air pollutants for area sources (boiler GACT, or generally available control technology) and commercial and solid waste incineration (CISWI) units.

This petition to EPA identified several problems that make the rules burdensome and unsupported by the facts or the law. For example, there are concerns about the definition of startup and shutdown, and startup work practices were incorporated into the new rules without giving key stakeholders adequate opportunity to comment. Important safety considerations for the regulated community were overlooked in the definitions. Additionally, the new rules fail to take account of the importance of encouraging efficient and cost effective use of resources. The fuel requirements in the rules do not incorporate national goals of safeguarding fuel diversity and the list of clean fuels is unduly narrow. Particular parameters used to measure compliance with the new rules need further clarification to insure consistency across the operating parameters. The petition also points out that EPA does not have legal authority to impose the energy assessment requirement included in the rules and that, in any event, the requirement is not supported by the record.

This case has been consolidated with U.S. Sugar Corp. v. EPA, a similar challenge to EPA's boiler MACT regulations pending since 2011. Click here to follow developments in this case since the consolidation.


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 Fifth Circuit granted the NAM and the Chamber of Commerce an opportunity to file an amicus brief in this case, challenging a new energy-efficiency standard from the Department of Energy for walk-in coolers and freezers. We filed a brief on April 17 focusing on the department's use of a calculation of the "social cost of carbon" when aggregating purported benefits of the rules. The Department estimated the present monetary value of the hoped-for reduction in the emission of carbon dioxide from these coolers at up to $16.3 billion, based on a 3% assumed discount rate. This rate is lower than the rate prescribed by the Office of Management and Budget (7%), and produces substantially higher purported benefits. This decision was not subject to peer review, making it harder to ensure the quality and accuracy of the data.

Moreover, the social cost of carbon estimates were developed by an ad hoc Interagency Working Group operating behind close doors and outside the purview of notice-and-comment rulemaking or other meaningful public scrutiny. This process violates well established requirements that critical information be developed through a transparent process.

The case was settled and dismissed in 2016.


Related Documents:
NAM amicus brief  (April 17, 2015)

 

National Association of Manufacturers v. EPA   (EPA)

Petition for stay of EPA's Clean Power Plan Rule

On Oct. 2, 2015, the NAM and 14 other associations petitioned the EPA to issue an administrative stay of its newly signed regulation of the U.S. energy sector until the courts can sort out the rule's legality. The rule, nominally issued as a regulation of greenhouse gases from electric utility generating units, goes much farther than regulation of electric power plants. The massive scope of the rule has already prompted lawsuits seeking extraordinary relief (here), and more are expected after the rule in formally published in the Federal Register shortly.

The NAM's administrative petition argued that the rule is 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. Manufacturers will see their costs increase, and some trade-exposed industries may be forced to relocate production overseas.

The petition also argued 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 units under Sec. 111(d). We also argued that the rule imposes standards of performance for the entire energy sector, rather than only for the individual sources of greenhouse gases from the power plants themselves.

EPA denied our petition, but the Supreme Court issued a nationwide stay of the rule on Feb. 9, 2016, until all of the litigation over the rule is completed.

Further developments in this case can be found here.


Related Documents:
NAM Petition for Administrative Stay  (October 2, 2015)

 

North Dakota v. Heydinger   (8th Circuit)

Challenge to Minnesota's Next General Energy Act restricting out-of-state electricity

This suit challenges Minnesota’s Next Generation Energy Act (NGEA), which, in an effort to combat climate change, sought to regulate and impose its energy and environmental policies on electricity generated in other states. The NGEA prohibits importing electricity into Minnesota from “new large energy facility that would contribute to statewide power sector carbon dioxide emissions,” while exempting certain facilities that use natural gas as a fuel, effectively putting the burden of the restriction on coal-fueled facilities. Statewide power sector carbon dioxide emissions include emissions from facilities in other states.

We filed an amicus brief arguing that this law will substantially impede the interstate market for electricity and potentially spur other states to adopt similar laws. This 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.

Our brief argued that the Commerce Clause of the Constitution forbids states from regulating commerce outside their borders, and Minnesota’s law applies to out-of-state facilities as well as wholly out-of-state transactions, since there is no way to ensure that electric power generated for another entity outside of Minnesota will not, in fact, be introduced into Minnesota. The law is unconstitutional because it purports to allow a state to ban imported products based solely on how they were produced in other states. The Supreme Court has ruled that such a limitation is prohibited; a state may not put pressure on others to reform their economic standards by imposing obstructions to the normal flow of commerce between the states.

On June 15, 2016, the Eighth Circuit affirmed the lower court's ruling, holding that the law was preempted by the Federal Power Act, which gives exclusive jurisdiction to regulate the sale of electricity in interstate commerce to the Federal Energy Regulatory Commission. A concurring judge also found the law preempted by the Clean Air Act, which prevents one state from encroaching on another state's authority to govern emissions from sources within its borders. A third judge ruled that the challenged statute restricts interstate commerce by forcing a merchant to seek regulatory approval in one state before undertaking a transaction in another, thus as a practical matter controlling conduct beyond the boundaries of Minnesota. The judges agreed that the law caused hardship by interfering with the abilitiy of electric supply companies to plan, invest in, and conduct their business operations.

The decision is an important reminder of the national nature of electricity distribution, leaving to each state the power to regulate generation within its boundaries but preventing actions by one state that would prevent others from carrying out their responsibilities independently.


Related Documents:
NAM amicus brief  (January 27, 2015)

 

Pakootas v. Teck Cominco Metals, Ltd.   (9th Circuit)

Expansive interpretation of CERCLA

This case involves the definition of a person who arranges for the disposal of hazardous waste under CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act. Representatives of the tribes of the Colville Reservation sued a Canadian company alleging that airborne particles from its mining operations landed on the earth and water of the United States, and that the company was liable as an "arranger" of the "disposal" of the hazardous materials under CERCLA.

The trial judge agreed, in a way that eliminated the first element of arranger liability: the disposal. That ruling was appealed to the Ninth Circuit, and the NAM joined with others in an amicus brief challenging the ruling and warning of the extraordinarily broad scope of liability it would create.

We argued that both the plain text of CERCLA and controlling precedent make 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. The district court conflated the “disposal” requirement with the next step of the analysis: “com[ing] to be located at” a “facility.” It essentially concluded that emission into the air, rather than “into or on any land or water,” still results in a “disposal” so long as the hazardous substance eventually makes its way to land or water. The judge’s interpretation would literally leave arranger liability without any limit: wherever an air emission lands, a CERCLA facility is formed. Under that interpretation any air emitter might be threatened with a broad and disproportionate form of liability that Congress never intended.

On July 27, 2016, the court reversed the trial judge and sent the case back for further consideration of any remaining claims. It held that the owner did not arrange for the "disposal" of hazardous substances that were emitted by the smelter into the air, and could therefore not be held liable for cleanup costs under the provision governing disposal. The court relied on previous cases interpreting the disposal language to mean depositing material, such as by putting it down, and not including chemical or geologic processes or passive migration, such as through the air.

The NAM sought this result to allow manufacturers that safely follow current emission standards not to have to worry about potential CERCLA liability for emissions that land miles away.


Related Documents:
NAM amicus brief  (August 11, 2015)

 

Portland Cement Ass'n v. EPA   (D.C. Circuit)

Challenging EPA regulation of CISWI

The NAM and other industry organizations filed a petition with a federal appeals court to review a final rule, issued by EPA on Feb. 7, 2013, on Commercial and Industrial Solid Waste Incineration (CISWI) units. The rule amends rules issued in 2011 relating to restrictions on materials that are used as fuels or ingredients in combustion units. Our petition, styled American Wood Council v. EPA, was consolidated by the court into the Portland Cement Association case. On April 1, 2013, we joined other business groups in a petition to EPA for administrative reconsideration of this regulation, along with two related rules involving air pollutants for area sources (boiler GACT, or generally available control technology) and major sources (boiler MACT, or maximum achievable control technologies).

The court consolidated this case into a challenge to the 2011 rule on CISWI units, styled American Forest & Paper Ass'n v. EPA. Click here for further details on this combined litigation.


Related Documents:
NAM Petition for Review  (April 1, 2013)

 

U.S. Army Corps of Engineers v. Hawkes Co.   (U.S. Supreme Court)

When courts may review CWA jurisdictional decisions

Whether a parcel of land contains waters of the United States that are subject to federal regulatory jurisdiction under the Clean Water Act (CWA) is a question of great practical importance to those who own, use or improve the land. When land is found to be jurisdictional, a host of regulatory obligations are triggered, including the requirement to obtain a permit from the U.S. Army Corps of Engineers before discharging any dredged or fill material into those jurisdictional waters. The Corps has broadly construed the CWA to prohibit any productive use, improvement, alteration, or repair of property without first obtaining a permit.

Using the land without a permit risks draconian criminal and civil penalties in government enforcement actions, or private enforcement litigation from environmental or neighborhood activists. The precise scope of the CWA, and the land to which it applies, depend on statutory terms that agencies and courts have found difficult to interpret. The resulting uncertainty over the scope of the CWA has unfairly exposed manufacturers to the risk of civil and criminal liability under the CWA, and the federal government’s broad jurisdictional theory sweeps millions of landowners and operators into the agencies’ jurisdiction.

The NAM filed a brief explaining that the regulated community must be afforded a way to respond, at a definitive but still early point in the process, to overly aggressive jurisdictional determinations. Any determination that such property contains jurisdictional waters of the United States significantly impacts how the land may be used and dramatically raises the cost, and often reduces the feasibility, of constructing critical infrastructure.

On May 31, the Court ruled that the Corps' approved jurisdictional determination is final agency action that is judicially reviewable. The determination ended the agency's decisionmaking process, and legal consequences flow from it. A jurisdictional statement stating that property is not subject to the Corps' jurisdiction gives the property owner a five-year safe harbor from civil enforcement proceedings and limits Clean Water Act liability. Conversely, an affirmative finding of jurisdiction deprives owners of that safe harbor. This is a positive development for manufacturers who want to challenge Corps' decisions that claim jurisdiction to require Clean Water Act permits for development or other uses of their property.


Related Documents:
NAM amicus brief  (March 1, 2016)

 

U.S. Sugar Corp. v. EPA   (D.C. Circuit)

Challenging EPA's boiler MACT regulations

On April 29, 2011, the NAM joined with 12 other associations asking a federal court to review EPA's Boiler MACT (Maximum Achievable Control Technology) standard. These rules regulate emissions of hazardous air pollutants generated by boilers. They have the potential to dramatically impact the U.S. economy and impose enormous costs on key industrial sectors. We challenged the rules to ensure that, if EPA fails to reconsider its actions, a court can review its actions. The lawsuit, filed by a coalition of associations including the NAM, was consolidated with U.S. Sugar Corp. v. EPA (D.C. Cir.). A statement of legal issues in the case were filed on July 8. On August 3, the D.C. Circuit ordered this case to be held in abeyance indefinitely.

We also filed a suit challenging EPA's rule establishing stricter emissions limits on commercial and industrial solid waste incineration (CISWI) units. For details, see American Forest & Paper Ass'n v. EPA (D.C. Cir.).

On May 18, 2011, EPA announced that it was reconsidering and delaying the effective dates for the Boiler MACT and CISWI rules. It published its final rule on Jan. 31, 2013, effective as of April 1, 2013, which prompted further lawsuits from both the business and environmental communities. Those suits were consolidated into this one.

The NAM and other business groups moved to vacate EPA's MACT standards developed using the Upper Prediction Limit (UPL) methodology and nine or fewer data points. The problem with EPA's approach stems from the statutory requirement that it set emissions limits based on the best performing 12% of combustion units. EPA did not have sufficient data to properly calculate an emissions standard based on this 12% requirement. Instead, it used the UPL methodology to estimate the emissions limits based on data gathered from only 9 units rather than a total of at least 26 units that it should have used to satisfy the 12% requirement. By asking for a voluntary remand, EPA is effectively conceding that the methodology used to calculate the UPL standards is flawed. We argued that pending EPA's reconsideration, the rule should not remain in effect. Otherwise, companies will have to satisfy costly compliance obligations that may become obsolete at the conclusion of EPA's reconsideration process.

We also asked that EPA supplement the record regarding this methodology, and that we proceed to briefing on the remaining issues in this case. On May 15, 2014, the D.C. Circuit denied our motion for affirmative relief but granted EPA’s motion to remand the MACT standards based on the UPL methodology. According to the remand, EPA has 60 days to provide further explanation of its use of the UPL methodology.

On August 12, the NAM and other industry petitioners filed our main brief on the merits of the remaining issues in the case. We challenged 5 flaws in the rule: (1) that 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.

On Dec. 17, 2014, the NAM joined in an industry brief with 24 other organizations in support of EPA's defense of its rules against 3 issues raised by environmental groups. First, we supported EPA's "Upper Prediction Limit" methodology to determine the proper value for best performing sources to meet over the full range of foreseeable operating conditions. Second, we supported the use of carbon monoxide as an appropriate surrogate for organic HAP emissions to determine combustion efficiency. Third, EPA appropriately subcategorized units based on the type of fuel burned and corresponding differences in boiler operation and design.

Oral arguments were held Dec. 3, 2015, in this and two companion cases involving boiler MACT and CISWI standards. A significant portion of the argument concerned EPA's failure to provide for malfunctions in the MACT and GACT rules.

On July 29, 2016, the court rejected all industry arguments, finding that the EPA's approach was reasonable. It agreed with several challenges raised by environmental groups, and ordered EPA to issue a regulation for cyclonic burn barrels and determine whether regulation is required for 4 other categories of incinerators. It also ordered the agency to provide further justification for some of its decisions.


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)
Shopfloor Blog  (May 9, 2011)
NAM Petition for Review  (April 29, 2011)
NAM Petition for Administrative Stay  (April 27, 2011)
Press Release  (February 23, 2011)

 

West Virginia v. EPA   (U.S. Supreme Court)

Supreme Court grants stay pending litigation of EPA's Clean Power Plan

The NAM and other members of our coalition challenging EPA's Clean Power Plan for existing sources filed an application to Chief Justice Roberts for an immediate stay of the final rule for existing electric utility generatng units pending litigation over the rule in the federal appeals court in the District of Columbia. Although the D.C. Circuit rejected a similar request earlier in January, 29 states and state agencies sought the Chief Justice's review, and we followed suit with our own request.

Requests for stays at the Supreme Court are not common, but the EPA's attempt to aggressively transform the domestic energy industry will require states and industry to "begin now to overhaul the power sector, including passing new laws to ensure the permitting, construction, and funding of EPA's preferred power sources, as well as shuttering existing disfavored plants that would otherwise be dispatched to meet demand." We argued that the rule is far in excess of EPA's statutory authority under the Clean Air Act and will cause irreparable harms to our members if a stay is not granted.

On Feb. 9, the Supreme Court voted 5 to 4 to grant the stay. This unusual action puts EPA enforcement of the rule on hold until the D.C. Circuit completes action in the challenges and all appeals are finished. This is a tremendous victory for our efforts to convince the Court of the problems with the rule, and signals that a majority of the Court believes there is a substantial likelihood that we will ultimately prevail on the merits of the challenge.


Related Documents:
Press release after stay granted  (February 9, 2016)
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

On February 22, 2016, NAM and allied trade associations filed an amicus brief urging the U.S. Supreme Court to review a water pollution decision from New Hampshire. That state's Supreme Court departed from well-settled due process principles by upholding the $236 million damage award that the state had obtained against Exxon Mobil Corporation. The trial court permitted the state to establish that Exxon was 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.

Our brief addresses the unconstitutionality of “trial by formula" in state court parens patriae lawsuits for money damages, an important issue for corporate defendants. Specifically our brief argued that the lower court’s decision cannot be reconciled with principles of due process that protect defendants at trial, that the case provides an opportunity for the Court to clarify that the due process clause forbids “trial by formula”, and that “trial by formula” distorts outcomes and encourages speculative litigation.

On May 16, 2016, the 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

This case involves the admissibility of expert testimony. The NAM, along with the U.S. Chamber of Commerce, the International Association of Defense Counsel, and the National Federation of Independent Business, filed a brief with the District of Columbia Court of Appeals asking that the District of Columbia adopt the Daubert standard for determining the admissibility of expert testimony, rather than the Frye test, which focuses almost entirely on the general acceptance of the science being proffered rather than case-specific applications and the broader scientific validity.

The underlying action is the lead case in a group of cases alleging that exposure to radiofrequency emissions from cell phones cause brain cancer. The Superior Court judge issued an order admitting some, but not all, of the plaintiff’s expert testimony. The District of Columbia is one of only three jurisdictions that still uses the less rigorous unmodified Frye test to determine the admissibility of expert testimony instead of Federal Rules of Evidence 702 and the Daubert standard. As a result, Judge Weisberg became the first judge in America to allow expert testimony that cell phones are more likely than not to cause brain cancer. He felt he was compelled to admit the testimony even though he concluded it was unreliable and inadmissible under Daubert. However, he granted leave for an immediate appeal.

In our brief, we first argued that the Daubert standard is more in line with current D.C. law, with the Supreme Court having decided the Daubert case more recently and the Court of Appeals already having adopted much of the Federal Rules of Evidence concerning opinion and expert testimony. Second, adoption of the updated standard would position D.C. courts to be better gatekeepers against unreliable expert testimony. And lastly, we pointed out that moving to the Daubert standard will level the playing field for D.C.-based businesses, who are at a competitive disadvantage by being subject to the Frye standard. In short, we urged the court to adopt the Daubert standard because it is a more fair and realistic test of expert testimony and is being used in a vast majority of jurisdictions already.

Our brief urged the court to take up the appeal and update its standard for evaluating expert testimony to reflect modern norms and jurisprudence. The court agreed to do so, and 2/23/2015, we filed an additional brief, also joined by the Business Roundtable, Pharmaceutical Research and Manufacturers of America, the Association of Corporate Counsel, the Medical Society of the District of Columbia, and the American Medical Association. This time we explained how the gatekeeping function set forth in Rule 702 and Daubert fits within the broader context of D.C. courts' well-established role as gatekeepers against the admission of all types of unreliable evidence. The function is particularly important in the context of expert testimony because expert opinions may not be based on first-hand knowledge or observation, may rely on evidence that is not admissible in court, and are harder for jurors to assess.

On Oct. 20, 2016, the court agreed to adopt Daubert and Rule 702 as the proper standard. That means that courts will assess not only the reliability of scientific principles and methods, but also their application to the particular facts of each case by proposed experts. This will lead, according to the court, "to better decision-making by juries and trial judges alike." This is a significant victory for all defendants that want decisions to be made on credible and reliable evidence.


Related Documents:
NAM amicus brief on the merits  (February 23, 2015)
NAM amicus 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

This is a False Claims Act (FCA) case where a whistleblower, known as a “relator” under the FCA, operated a telecommunications auditing firm and claimed that he became aware of fraudulent acts and practices through his “audits.” Yet, there were no allegations that the relator audited any AT&T invoice, and the relator pled no facts about any express or implied false claim submitted by AT&T or its subsidiaries to the government. The relator also did not allege any personal knowledge of the supposed improper billing scheme. The allegations of fraud rested upon innuendo and supposition, not facts or specific allegations of false claims.

The NAM filed an amicus brief supporting AT&T’s appeal to the Supreme Court. The issue is whether relators filing FCA claims must include specific allegations of false claims in their pleadings. There is currently a split among the federal circuits as to whether the Federal Rules of Civil Procedure require such particularized pleading in FCA cases. The NAM’s brief argues that this circuit split encourages speculative claims and forum shopping, and urges 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.

NAM members, along with other companies that do business with the government, often are the targets of whistleblower complaints under the FCA. Companies incur substantial costs and suffer reputational harm from these allegations. If these cases are permitted to proceed with no more than generalized accusations of fraudulent schemes and unspecified false claims for payment, these businesses must also bear the expense and disruption of burdensome discovery and protracted litigation.

Our brief warned the court that abusive FCA litigation harms manufacturers, and the growing volume of unmeritorious FCA suits threatens the legitimate business activities of the NAM’s members.

On June 27, 2016, the Court refused to review this appeal.


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

Manufacturers are very concerned that the False Claims Act (FCA), governing fraudulent claims submitted by government contractors to the government, is turning into an all-purpose fraud statute, particularly since the FCA gives plaintiffs huge incentives to sue. The potential for abuse of this statute is great, with the opportunity for almost boundless liability in the form of treble damages, civil penalties and attorneys' fees.

The NAM filed an amicus brief on the merits of this case now before the Supreme Court involving an FCA claim based on "implied false certifications." The plaintiff's legal theory, accepted by a federal court of appeals, is that each time a company submits a bill to the government for goods or services, it implicitly communicates that it has conformed to every statutory, regulatory and contractual provision to which the transaction is subject.

In our brief, we opposed this theory, arguing that there is a sharp distinction between regulatory or contractual violations and false or fraudulent claims. Congress did not intend for such violations to be considered fraud under the FCA, and there are other sanctions available. The Supreme Court should end this creative legal overreach, which has helped fuel a doubling of FCA litigation over the past decade. False certification litigation is a blunt instrument that is prone to abuse, and the statute should remain one for fighting fraud, not for private enforcement of regulations or government contract provisions.

Joining in the NAM's brief were the American Medical Association, the National Association of Chain Drug Stores, the American Tort Reform Association, and the NFIB Small Business Legal Center.

On June 6, 2016, the Court ruled unanimously that the lower court went too far. The Justices outlined the factors a court should use to determine whether there has been a violation of the False Claims Act, and sent this case back to the lower courts for further deliberations using these new guidelines. It ruled that "the implied false certification theory can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory or contractual requirements makes those representations half-truths." It also held that that FCA liability "for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment. . . [N]ot every violation of such a requirement gives rise to liability."

Determining whether an action is material is intended to be a "rigorous" and "demanding" inquiry. The fact that the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated "is very strong evidence that those requirements are not material." The FCA "is not a means of imposing treble damages and other penalties for insignificant regulatory or contractual violations."

Thus, future litigation will require an extensive case-by-case analysis of whether the defendant knowingly violated a requirement that they knew was material to the government's payment decision.


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 joined the Grocery Manufacturers Association, the Snack Food Association, and the International Dairy Foods Association to challenge a Vermont statute (Act 120) that requires manufacturers to disclose when food has been produced with genetically engineered (GE) ingredients by labeling them as either produced, partially produced, or which may be produced with GE ingredients. Act 120 also prohibits labeling any food produced with GE ingredients as “natural,” “naturally made,” or “all natural.” In contrast, Act 120 provides an exemption for the same foods that are served in restaurants.

The NAM argued that labeling food with these disclosures will stigmatize certain foods over others, potentially hurting sales. This compelled speech violates the First Amendment guarantee of freedom to speak and freedom to not speak. Any such requirement must accomplish a compelling government interest and be the least restrictive means possible, but the Vermont government lacks such an interest because the FDA has found that GE foods cause no harmful effects. Furthermore, Act 120 does not implement the least restrictive means since labeling systems such as the USDA’s “Certified Organic” program or the Non-GMO Project are already in place. The NAM presented a similar argument in the case American Meat Institute v. USDA (D.C. Cir., No. 13-5281), in which a USDA regulation requires country-of-origin labeling of meat.

We also argued that Act 120 violates the Commerce Clause by unfairly targeting out-of-state food manufacturers. Virtually no major food manufacturer is based in Vermont, while local restaurants and dairy producers are all exempted from the law. This places an undue burden on interstate commerce by requiring companies to create costly labeling and advertising procedures specific to Vermont.

Lastly, federal law and FDA jurisdiction should preempt Act 120. Congress has authorized the FDA to regulate food safety and labeling. The FDA has approved all of the legally manufactured GE foods targeted by Act 120 and has repeatedly rejected efforts to require special labeling for them. The Vermont law directly conflicts with Congress’ intent and the regulations already implemented by the FDA.

After Vermont moved to dismiss our litigation, we filed a detailed brief in opposition, along with a Motion for a Preliminary Injunction. We outlined the reasons our law suit states valid claims under the First Amendment and Commerce Clause of the Constitution. Our motion for an injunction is supported by 9 declarations from various industry experts about the practical effect of the Vermont statute. We asked the judge to enjoin enforcement of the law for the duration of this litigation because manufacturers will suffer severe, irreparable and unavoidable injury without an injunction.

Manufacturers do not segregate products according to the state's mandate, and they will now have to create a separate labelling system, a separate stock-keeping unit, and a Vermont-specific distribution chain for Vermont-bound products. They must also comply with upcoming label changes from the Food and Drug Administration. Moreover the compliance lead times are is too short, particularly since Vermont is not expected to issue rules until July 2015. Since retailers are immune from the law, manufacturers bear the responsibility to ensure that products with current labels are swapped out in time. A manufacturer with 100 products could face over $5 million in potential penalties and liability because the retailer left the products on the shelf for ten days too long.

Oral arguments on our Motion for a Preliminary Injunction and the state's Motion to Dismiss were held on January 7, 2015. On April 20, 2015, the Vermont Attorney General's Office adopted regulations implenting the law. On April 27, the judge partially granted and partially denied the state's motion to dismiss the case, and refused to apply strict scrutiny to the mandated speech requirements, making it easier for the state to justify the law as the case proceeds. The judge also rejected our arguments that the law interferes with interstate commerce. However, the court found that we were likely to prevail on certain aspects of our First Amendment claim relating to the use of the term "natural."

On May 6, we notified the court that we are appealing the decision to the U.S. Court of Appeals for the Second Circuit. Click here for further information about the appeal.

Congress passed, and President Obama signed on July 29, 2016, a law which establishes a "National Bioengineered Food Disclosure Standard," and which contains a preemption provision prohibiting any state from continuing in effect "as to any food or seed in interstate commerce any requirement relating to the labeling of whether a food . . . or seed in genetically engineered." The Governor of Vermont also announced that the state would no longer be enforcing the state law. The parties concluded the case with a stipulated dismissal.


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)
Press Release  (June 13, 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 joined the Grocery Manufacturers Association, the Snack Food Association, and the International Dairy Foods Association to file an appeal in the U.S. Court of Appeals for the Second Circuit on 6/24/2015, challenging a district court’s refusal to grant a preliminary injunction in a constitutional challenge to Vermont’s genetically engineered food labeling law. The plaintiffs challenged Vermont’s Act 210 which requires labels on products that contain genetically engineered (GE) plants and prohibits such products from being labeled as natural. The issue in this appeal is whether a district court erred in denying the plaintiffs’ request for a preliminary injunction to prevent the law from going into effect in July 2016.

On the mandatory labeling requirement, we argued that the district court incorrectly concluded that Act 210 compels only “purely factual and uncontroversial information” and therefore was subject to lesser judicial scrutiny. To the contrary, the debate around GE foods is highly controversial, and intermediate scrutiny should apply. Additionally, the law does not serve a substantial government interest because consumer curiosity alone is not a sufficient justification. The law further does not directly advance Vermont’s asserted interests because it is exceedingly vague and replete with exemptions, including food sold at restaurants, food sold for immediate consumption, and all animal products.

On the speech restriction issue (prohibition on labeling products as natural when they contain GE ingredients), the lower court agreed that the plaintiffs are likely to succeed on the merits. However, we argued that it erroneously found that we had not sufficiently shown that our members would be irreparably harmed by the restriction. The loss of a First Amendment right is per se irreparable harm.

The NAM urged the Second Circuit to reverse the district court’s ruling.

Amicus, or friend-of-the-court, briefs were filed July 1 by (1) the American Chemistry Council and American Beverage Association, (2) the Biotechnology Industry Organization, (3) the U.S. Chamber of Commerce, (4) American Soybean Ass'n, Corn Refiners Ass'n, National Corn Growers Ass'n, National Cotton Council and National Council of Farmer Cooperatives, and (5) Washington Legal Foundation.

On July 14, the House of Representatives passed S. 764, previously passed by the Senate, that provides a national mandatory disclosure standard for bioengineeered foods and preempts state genetic-engineering labeling requirements. The bill was signed by President Obama, and we filed a stipulation dismissing the appeal on Aug. 4.


Related Documents:
NAM Reply Brief  (September 8, 2015)
NAM Brief  (June 24, 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.

On 10/03/2016 the Supreme Court denied Deere's request for cert.


Related Documents:
NAM amicus 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

Courts routinely defer to federal agency interpretations of their own regulations. The cases in which this policy was adopted were Auer v. Robbins (1997) and Bowles v. Seminole Rock & Sand Co. (1945). Unfortunately, agency interpretations can be made in ways other than notice-and-comment rulemaking without input from the public or the regulated community. In this case, an agency interpreted one of its regulations in an amicus brief in response to a request from a judge. A set of federal appellate judges divided on how to interpret the regulation, and the deciding vote deferred to the agency. The losing party appealed to the Supreme Court, asking it to overturn Auer deference and let the courts decide for themselves whether an agency interpretation is reasonable.

The NAM filed an amicus brief urging the Court to review this case. We argued that courts were established to say what the law is, and the Administrative Procedure Act reserves to the courts the power to exercise ultimate interpretive authority. 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.

Allowing agencies this power may actually provide disincentives for regulatory clarity, thereby sacrificing notice and predictability in rulemaking. It also violates due process rights by turning conduct that complied with prior interpretations into a "federal felony and the basis of severe penalties in light of the Department's revised interpretation announced while the case was on appeal."

Unfortunately, on 5/16/16, the Court declined to hear this appeal.


Related Documents:
NAM amicus brief  (February 3, 2016)

 


International -- 2016



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

Search warrant issued under the Stored Communications Act

This case is about a U.S. Government warrant for access to e-mail that is stored by Microsoft on a server in Ireland. On July 31, 2014, Chief U.S. District Judge Loretta A. Preska of the Southern District of New York ruled 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.

On appeal the Second Circuit, the NAM filed an amicus brief. We are troubled by the government's demands to seize such personal emails without following the proper legal procedures. The government’s position in this case is that prosecutors are free to ignore the laws of other nations and require production of data of non-U.S citizens.

On July 14, 2016, the Second Circuit ruled that the Stored Communications Act does not authorize courts to enforce the warrant. Instead the government should follow the Mutual Legal Assistance Treat adopted by Ireland the United States in 2001.

A different result would have had an immediate chilling effect on the ability of U.S. companies to compete internationally. Asserting extraterritorial reach with a U.S. warrant violates fundamental principles of international comity and the plain language of U.S. law.

The Supreme Court agreed on Oct. 16, 2017, to hear the appeal of this decision.


Related Documents:
NAM brief  (December 15, 2014)

 


Jurisdiction -- 2016



Bristol-Myers Squibb Company v. Superior Court (Anderson)   (U.S. Supreme Court)

Business and industry opposes finding of California jurisdiction

The NAM and coalition associations filed a merits amicus brief in the California Supreme Court on June 10, 2015. The question before the court is whether California can extend specific jurisdiction over a non-resident corporate defendant. A group of resident plaintiffs had been established, and a separate group of non-resident plaintiffs with identical claims sought to bring their claims before the Californian courts. Bristol-Myers Squibb’s (BMS) moved to quash the service of the summons on the basis that California lacked jurisdiction. The trial court denied the motion, saying that California had general jurisdiction over BMS without addressing specific jurisdiction.

The Court of Appeals decided that California did not in fact have general jurisdiction over BMS in light of the recently decided Daimler AG v. Bauman (2014). However, ostensibly applying the “substantial contacts” test of International Shoe, the court of appeals found that BMS had engaged in “substantial, continuous economic activity” in California, and that was enough to warrant the extension of specific jurisdiction. The Court held that because BMS did business in California and the claims of the non-residents were similar to the claims of the resident plaintiffs, specific jurisdiction was appropriate.

This decision has broad implications for entities doing any business in California. It will dramatically increase their exposure to liability, opening them up to legal actions in California from classes of non-resident plaintiffs. The NAM and its allies argued in an amicus letter that this ruling would place a great burden on manufacturers and any other businesses in California. It is unreasonable and unlawful to extend jurisdiction to the California court system when neither the plaintiffs nor defendants are residents of the state. It goes against the notion of jurisdictional fairness and it is unreasonable to defendant corporations.

The NAM filed a brief in support of the California Supreme Court hearing this appeal, and we filed a merits brief after review was granted. On 8/29/16, the California Supreme Court ruled 4-3, with a strong dissent, that a state court may exercise specific personal jurisdiction over an out-of-state drug company based on claims filed by non-residents whose claim lacks any contact with California, so long as the drug company has extensive contacts in the State and provides the same drug to California residents who raise similar claims.

The case was later appealred to the U.S. Supreme Court, which held 9-1 that the California court did not have jurisdiction over the plaintiffs simply because they had suffered the same injuries as California plaintiffs. Justice Sotomayor was the lone dissenter because she feared the holding would lead to fragmented, piecemeal litigation and eliminate the ability to have a nationwide mass action.


Related Documents:
NAM brief  (June 10, 2015)
NAM amicus 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 amicus brief  (July 15, 2016)

 


Labor Law -- 2016



Augustus v. ABM Sec. Serv., Inc.   (California Supreme Court)

Prohibiting on-call rest periods

Unfortunately, the California Supreme Court has denied the petition for rehearing by defendant ABM Security Services. The Supreme Court modified its opinion only to clarify that the matter is remanded to the Court of Appeal for further proceedings consistent with the Supreme Court's opinion. The effect of this modification is to allow the Court of Appeal to address alternative grounds that ABM had raised in the Court of Appeal for reversal of the judgment but that the Court of Appeal had not needed to reach. The Supreme Court did not change any of its analysis regarding on-duty and on-call rest periods. A link to the Supreme Court docket is here. California law requires the vast majority of California employers to authorize and permit paid rest periods every workday. Businesses that do not comply can face crushing financial liability, as exemplified by the nearly $90 million awarded to plaintiffs in this case where a security services employer required employees to remain on-call during rest breaks in case of an emergency.

The trial court concluded that every on-call rest break policy in California is unlawful. Upholding such a ruling would force employers to ensure that their employees’ rest breaks could never be interrupted, even in emergencies. The Court of Appeal correctly held that requiring employees to remain on-call during rest breaks does not violate prohibitions on performing “work” during rest breaks. The term “work,” by its plain meaning, requires physical or mental exertion on an employer’s behalf and on-call status does not entail such exertion. The California Supreme Court now has the opportunity to clarify whether on-call rest periods are permitted.

The NAM filed an amicus brief urging the California Supreme Court to uphold the Court of Appeal and explaining that the interpretation of the law governing rest breaks could have broad implications. Whether the employee is a security guard, a nurse, a medical technician, a power plant mechanic, or a control room operator, the skills of particular employees may be needed at a moment’s notice to prevent serious injury to life and property. As a matter of public policy, such employees should be permitted to remain available to respond in an emergency, rather than having their responsiveness limited by on-call rest break prohibitions.

On 12/22/16, the Court ruled that "state law prohibits on-duty and on-call rest periods. During required rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time." This is a loss for manufacturers who need to summon workers who are on rest breaks to help with emergencies. It also ruled that a Wage Order for guards and other professional, clerical, technical or similar occupations requires employers to provide 10-minutes off-duty rest periods every 4 hours. Companies that fail to provide these rest periods must pay an additional hour of wages for each missed rest period to the affected employees.

The NAM filed an amicus letter with the court on Jan. 12, 2017, seeking clarification of the court's decision, and a ruling that it applies prospectively only. Unfortunately, the California Supreme Court has denied the petition for rehearing by defendant ABM Security Services. The Supreme Court modified its opinion only to clarify that the matter is remanded to the Court of Appeal for further proceedings consistent with the Supreme Court's opinion. The effect of this modification is to allow the Court of Appeal to address alternative grounds that ABM had raised in the Court of Appeal for reversal of the judgment but that the Court of Appeal had not needed to reach. The Supreme Court did not change any of its analysis regarding on-duty and on-call rest periods.


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 previously filed an amicus brief with the National Labor Relations Board (NLRB) objecting to the NLRB’s application of its decision in the Specialty Healthcare allowing employees to create a bargaining unit that is small and under inclusive. In this case, 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.” The NLRB rejected Constellation Brands’ argument that similarly situated production and maintenance employees who worked alongside the cellar employees shared common interests with them and should be included in the unit. Constellation Brands refused to bargain with the union, intending to challenge the NLRB’s unit determination, but the NLRB issued a decision finding that Constellation Brands’ refusal to bargain constituted an unfair labor practice.

The NLRB decision was appealed to a federal appeals court, and the NAM and others filed an amicus brief on 12/17/2015. The amicus brief continues our argument that the NLRB wrongly decided Specialty Healthcare and that the Board’s decision on that ruling should be overruled for three reasons. First, the Specialty Healthcare rule violates the plain terms of the NLRA by granting too much deference to the union’s proposed unit in violation. Second, Specialty Healthcare represents a radical departure from the Board’s longstanding precedent and encourages a multiplicity of fractured units within workplaces throughout the country. Third, in deciding Specialty Healthcare, the NLRB violated the Administrative Procedure Act. On 11/21/2016 the US Court of Appeals for the Second Circuit issued a decision in the Constellation Brand micro-union case. While the court upheld the Specialty Healthcare standard, it found the Regional Director did not apply the standard correctly. This case is part of a recent trend by the courts limiting the Specialty Healthcare micro union standard. In this case, the court required the Board to show that they analyzed the unit and found evidence that the employees in the proposed unit are sufficiently distinct from other similar employees that were not included.


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

On March 11, 2015 the NAM filed a brief with the D.C. Court of Appeals asking that order and judgment of the District Court be affirmed in DC and CCDC Office, LLC v. DOL, et al. As way of background, in June 2011, the Department of Labor ruled that the City Center DC project is subject to the 1931 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. The District of Columbia appealed, arguing that the development, led by Hines Interests LP, is being privately built, financed, and operated, and that the ruling could cost the city $20 million in unanticipated wages, since D.C. would be required to reimburse the developers for the extra costs. But the Labor Department's Administrative Review Board upheld the earlier decision on April 30, 2013. DC filed suit against the Department of Labor and CCDC Office LLC, representing the developers, followed with a similar suit.

In general, the NAM views the DOL’s attempt to apply the Act to the Project as an unprecedented effort to impose the requirements of the Act far beyond the public works, government construction contracts that it was meant to regulate, and into the context of private construction projects that are not funded by the government, not constructed by or for the government, not owned by the government, nor occupied in any respect by the government. The NAM brief argued four main points. First, the Department of Labor’s attempt to apply the Davis Bacon Act to a private construction project is fundamentally flawed and contrary to the plain language and intent of the Act. Second, if unchecked, the Department of Labor is poised to continue its unprecedented attempt to expand the scope of the Davis Bacon Act into the private construction industry. Third, if unchecked, the Department of Labor’s attempt to apply the Davis Bacon Act to the private construction industry would have a significant and potentially negative impact on private industry, the government and the economy. Fourth, the Department of Labor’s methods for calculating the prevailing wage are unreliable and should not be applied to the private construction market. On April 5, 2016 the DC Circuit upheld the District Court’s previous ruling that Davis-Bacon did not apply to the CityCenterDC project.


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 on behalf of petitioners Cooper Tire & Rubber Company in their employment termination appeal before the National Labor Relations Board. This case concerns an Administrative Law Judge (ALJ) decision finding that the company violated Sections 89(a)(1) and 8(a)(3) of the National Labor Relations Act (NLRA) for discharging an employee for racist statements made on a picket line. The ALJ found that the employee’s “statements most certainly were racist, offensive and reprehensible” but they did not forfeit the protection of the NLRA.

The NAM argued that this decision cannot stand because the NLRA cannot and should not protect racist comments, regardless of where or when the comments are made. The Board cannot force employers to violate other federal statutes through its protection of racist speech used on a picket line, and employers need to be able to rely on and apply their legitimate anti-discrimination and anti-harassment policies.

The NAM advocated that the Board recognize the important purposes underlying federal anti-discrimination and anti-harassment statutes enacted by Congress and acknowledge employers’ obligations, both legal and moral, in order to protect employees’ right to be free from discrimination and harassment in the workplace. The ALJ decision failed to consider any other federal anti-discrimination and harassment laws, including Title VII and Section 1981, as well as numerous other similar state and local laws. Under Section 1981, “[a]ll persons within the jurisdiction of the United States shall have the same right ... to the full and equal benefit of all laws.” 42 U.S.C. § 1981. Moreover, Title VII renders it “an unlawful employment practice for an employer ... to discriminate against any individual with respect to compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e–2(a)(1). Title VII and Section 1981 embody federal policies prohibiting discrimination and harassment on many bases, including race. These laws allow for an employer to terminate an employee upon their violation for a clear non-discriminatory purpose.

The NAM asked that the court reverse the ALJ’s decision and establish that there should be no statutory protection for racist statements made on a picket line. Further, protecting such statements is contrary to the clear federal policy against discrimination and harassment. On May 17, 2016 the NRLB ruled against Cooper Tire, upholding the ALJ decision ordering reinstatement of a picketer who made racial epithets. On August 8, 2017 the Eighth Circuit Court of Appeals also ruled against Cooper Tire, holding that the company was not required by Title VII to fire the employee for racist comments on the picket line, so that law was not inconsistent with the ruling protecting the employee's picketing rights. In addition, it found that the arbitrator improperly called the racist comments more serious on the picket line. Instead, it found that established precedent allows this kind of "rough and tumble" atmosphere on picket lines.


Related Documents:
NAM brief  (August 20, 2015)

 

In re Kellogg Brown & Root, Inc.   (D.C. Circuit)

Privilege for investigations supervised by in-house lawyers

Companies usually conduct internal investigations when they hear allegations of misconduct, such as potential violations of labor, discrimination, anti-bribery or other laws. In-house lawyers often supervise the investigations, because they anticipate that litigation against the company could occur if the allegations are not handled properly. Usually such investigations are protected by attorney-client privilege.

This case involves an in-house investigation of tips alleging potential False Claims Act violations. The company provided 100,000 pages of documents during the discovery phase of the case, but identified 89 documents that were privileged. Nevertheless, the trial judge ordered that they be disclosed, holding that communications are not privileged unless they would not have been made but for the fact that legal advice was sought. Here, the court held that the investigation was "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." As a result, it appears that investigations conducted under regulations that require government contractors to investigate, even if the investigations are part of the company's legal effort to minimize legal exposure, are not protected from disclosure.

On appeal, the NAM and other associations filed an amicus brief calling the judge's ruling incorrect, unprecedented, and unwarranted. As long as the predominant or primary purpose of a communication with counsel is for securing legal advice, it should be protected. It need not be the sole purpose of the communication. The trial court's ruling penalizes companies for adopting internal compliance programs and forces them to either risk a waiver of attorney-client privilege or to forego legal advice.

Moreover, were such communications to lose their privilege if they are part of a compliance investigation "required by regulatory law," many regulatory programs would be frustrated. Compliance programs are required or strongly encouraged under the Sarbanes-Oxley Act for accounting matters, the Federal Bank Act, the Bank Secrecy Act, Medicare regulations, the Foreign Corrupt Practices Act and others.

On June 27, 2014, the D.C. Circuit vacated the trial court decision and ruled that the communications were protected by the attorney-client privilege. Adhering to a Supreme Court decision, Upjohn Co. v. United States (1981), the court reiterated that so long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, those communications are privileged. Therefore, the court rejected the trial judge’s but-for analysis and determined that privileged communications can have purposes other than purely legal advice. The court also found that Kellogg Brown and Root was entitled to a writ of mandamus (an order immediately overruling the lower court’s order requiring production of the communications) because the lower court’s error was clear and indisputable. To grant such a writ, three conditions must be satisfied: 1) the petitioner must have no other avenue of relief, 2) the petitioner’s right to the writ must be “clear and indisputable, and 3) the writ must be appropriate under the circumstances. All three conditions were met here.

This is an important win for manufacturers that protects sensitive communications. Quoting KBR’s petition brief, the court agreed that the trial court’s decision “would [have] disable[d] most public companies from undertaking confidential internal investigations.”

The D.C. District Court ruled that the privilege does not apply to investigators’ factual reports made to inform legal advice. The NAM believes this ruling contradicts the judgment of the Appeals Court. On 1/30/15 the NAM filed a brief in support of mandamus.


Related Documents:
NAM brief  (January 30, 2015)
NAM brief  (March 19, 2014)

 

In re Miller & Anderson   (NLRB)

Defining multi-employer bargaining units

On 09/18/2015, the NAM and coalition associations filed an amicus brief with the NLRB in In re Miller & Anderson. The union in the case filed a petition seeking to represent a “multi-employer" bargaining unit consisting of employees from Miller & Anderson, a mechanical contractor, and temporary employees provided to Miller & Anderson by the staffing company Tradesman International. In the Bush-era decision Oakwood Care Center, the Board held that multi-employer units are only appropriate where both employers consent to that arrangement. The employers did not do so in Miller & Anderson, so the petition was dismissed by the regional director. The union appealed to the Board, which granted review to reconsider the Oakwood decision.

The NAM’s brief argued that any bargaining unit seeking to include employees employed solely by one of the constituent entities that comprise the joint employer is, of necessity, a multi-employer unit. In a similar vein, any construction of the statutory bargaining obligation that imposes a duty to bargain with respect to a unit of jointly employed and singly employed employees constitutes, by definition, an obligation to bargain on a multi-employer basis. The Board recognized these fundamental realities and the statutory limits they impose in Oakwood.

On 7/11/2016, the NLRB decided that the union was not required to obtain consent from both employers. It stated that it would apply traditional community-of-interest factors to determine if such a joint union is appropriate. This ruling will make it easier for unions to organize workers in such joint-employer situations.


Related Documents:
NAM brief  (September 18, 2015)

 

In re The Boeing Company   (NLRB)

Camera-enabled devices in non-restricted areas

The union complaint alleges that The Boeing Company (Respondent/Employer),violated Section 8(a)(1) of the National Labor Relations Act (NLRA/the Act) when on four separate dates it engaged in surveillance or created an impression of surveillance and photographed Engineers’ Union employees at Respondent’s facilities in Everett and Renton, Washington, and Portland, Oregon. The complaint also alleges that Boeing violated Section 8(a)(1) of the Act when it promulgated and maintained a procedure prohibiting employees’ personal camera-enabled devices (the policy permits possession of camera-enabled devices like smart phones on site, but prohibits their use without a valid camera permit approved by Security.)

Boeing contends that these policies are necessary to maintain intellectual property and security and that such policies do not violate the Act in any way.

Hearings were held in September, 2013 in Region 19, and the ALJ ordered that “Boeing violated section 8(a)(1) of the NLRA by videotaping employee marches within the production facilities on four separate occasions. Boeing is Ordered to cease and desist from photographing and videotaping workplace marches on or near its property or creating the impression of doing so. The Company policy unlawfully restricts employee’s section 7 rights. Boeing is ordered to revise or rescind the policy to expressly “allow employees to use their personal camera enabled device in non-restricted areas” within Boeing facilities. The Order limits “restricted areas” only to those housing classified work.

In so ruling, the ALJ finds that Boeing has no credible business need to protect its manufacturing processes because of a marketing video including shots of a Boeing plant, and the availability of public facility tours. He states: “Respondent argues that its [policy] is necessary to protect the valid business need of protecting its valuable manufacturing process. I find Respondent’s argument non-credible based on its contrary practice of allowing free access to its manufacturing process both in the form of its DVD . . . And its VIP tours that allow unfettered photography to the general public. I find that Respondent’s manufacturing process is no more in need of protection than an automobile assembly line.” Boeing is also ordered to rescind any policies or procedures requiring Security personnel to videotape employee marches on or near its property.

On June 12, 2014 the NAM filed an amicus brief with the NLRB supporting Boeing's position.


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

NAM and allied association filed an amicus brief on 09/02/2015 with the Nevada Supreme Court in Great Wash Park, d/b/a Tivoli Village v. IUPAT, Local 159. The issue in this case concerns the fundamental right of property owners to access state courts in order to secure their right to be free of third-party trespass. Contrary to the claims of the Appellant, this case does not concern itself with federal labor law. The fact that the trespasser happens to be a labor union is immaterial. The NAM brief argues that by intentionally projecting an illuminated image onto various prominent and highly visible parts of a building and other physical structures, the “photobombers”, in this case - a labor organization, effectively takes control of the physical space on which the image is displayed. Such misappropriation interferes with the private property rights of the owner. The owner is entitled to dominion and control of the façade of its own buildings, and should not be subject to the trespass of any third party. Specifically, the NAM argues that state law property claims are not preempted by Section 303 of the LMRA, nor do they conflict with the policies of Section 8(b)(4) of the NLRA. Second, labor speech is not privileged over other types of speech. And third, projection on private property not only constitutes trespass but also takes property owners’ fundamental ownership rights. The 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 and coalition associations filed an amicus brief with the 5th Circuit on April 27, 2015 in Macy’s Inc. v. NLRB. The brief argued that the NLRB’s decision in Specialty Healthcare is erroneous. The new standard, as applied by a majority of the Board in Macy’s, provides that where the employees in the petitioned-for unit are a readily identifiable group who share a community of interest, they constitute a statutorily appropriate unit unless it can be demonstrated that other excluded employees share an “overwhelming community of interest” with the petitioned-for group. This new standard for determining the propriety of initial bargaining units flies in the face of the National Labor Relations Act’s statutory presumption in favor of broader bargaining units and departs from the standard consistently used by the Board for decades. The decision in Macy’s further encourages unions to engage in incremental organizing in the smallest units possible. The Board's new standards mean 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. Because of these reasons, the NAM brief asked the Court to grant the petition for review and deny enforcement of the Board’s Order.

On June 2, 2016, the Fifth Circuit Court of Appeals upheld the NLRB's ruling, affirming the Specialty Healthcare standard for determining appropriate units in representation elections. On June 20, 2017, the Supreme Court denied Macy’s petition for a writ of certiorari after Macy’s asked the Supreme Court to consider whether the NLRB must explain the distinctions between employees when considering what constitutes a unit appropriate for collective bargaining. On June 20, 2017, the Supreme Court denied Macy’s petition for a writ of cert. after Macy’s asked the Supreme Court to consider whether the NLRB must explain the distinctions between employees when considering what constitutes a unit appropriate for collective bargaining.


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

On 1/13/2015 the NAM filed an amicus brief with the Fourth Circuit Court of Appeals in Nestle Dreyer's Ice Cream Co v. NLRB. We argued that the Court should reverse the Board’s decision that Dreyer’s technical refusal to bargain violates Section 8(a)(5) of the Act because by certifying the petitioned-for unit of maintenance employees, the Board erroneously: (1) failed to give proper consideration to the bargaining history that included a broader unit of maintenance and production employees; (2) made the extent of organization a controlling factor in the unit determination, which is in direct contravention of Section 9(c)(5) of the Act; (3) relied on the “overwhelming community of interest” test announced in Specialty Healthcare, which this Court explicitly rejected in Lundy Packing Co., 68 F.3d 1577 (4th Cir. 1995); and (4) ignored long-standing Board precedent that production and maintenance units are presumptively appropriate.

According to our brief, "To simply allow the instant certification of a maintenance-only unit to stand in contravention of Section 9(c)(5) of the Act, bargaining history, the Board’s long-standing recognition that production and maintenance units are presumptively appropriate, and this Court’s clear precedent in Lundy Packing Co., would be a disservice to employees, employers, orderly collective bargaining, and national labor policy."


Related Documents:
NAM brief  (January 13, 2015)

 

Tyson Foods, Inc. v. Bouaphakeo   (U.S. Supreme Court)

Uninjured class members should be excluded

The National Association of Manufacturers filed an amicus curiae brief on August 14, 2015 in a class action that the Supreme Court of the United States will consider in the 2015-2016 term. The case involves the use of statistical sampling and the creation of an “average” employee to determine both injury and damages under the Fair Labor Standards Act (FLSA) in a case seeking overtime wages for the time it took employees to put on and take off protective gear. Many of the class members were fully compensated and had no FLSA injury, yet they were included in the class and were set to receive compensation under the aggregate award.

The amicus brief urged the Supreme Court to set a bright-line rule against the inclusion of uninjured class members. Individuals with no injuries have no claim, under both substantive law and Article III standing, and the brief explained that the class action mechanism is not to be “manipulated in ways that convert deficient claims into viable ones. A plaintiff without an injury cannot be permitted to hide among those who may. . . . The class action short cut works only when it leads to the same place as individually filed claims.” Finally, the brief discussed the development of “no injury” class actions, as demonstrated in recent product manufacturing, product labeling and data privacy class actions.

NAM was joined by the Alliance of Automobile Manufacturers, Association of Home Appliance Manufacturers, American Tort Reform Association, American Petroleum Institute and Metals Service Center Institute.

On March 22, 2016 the Supreme Court affirmed the lower court’s rulings against Tyson, but did so on narrow grounds and did not reach the issue that was central to the NAM’s amicus brief: whether classes can included uninjured claimants. The Court stated that “As petitioner and its amici stress, the question whether uninjured class members may recover is one of great importance. It is not, however, a question yet fairly presented by this case, because the damages award has not yet been disbursed, nor does the record indicate how it will be disbursed.” The Court then continued that “Petitioner may raise a challenge to the proposed method of allocation when the case returns to the District Court for disbursal of the award.” In his concurring opinion, Chief Justice Roberts cautions that “if there is no way to ensure that the jury’s damages award goes only to injured class members, that award cannot stand.”

The NAM will continue to advocate for the exclusion of uninjured class members in class action litigation. The presence of injured class members, regardless of how many, increase pressure on defendants to settle meritless claims, result in uninjured class members receiving windfall awards, and likely undercompensate individuals with actual losses because they have to share recovery with undeserving class members. Further, permitting certification of such no injury classes facilitates unwise regulation through litigation and litigation gamesmanship.


Related Documents:
NAM amicus brief  (August 14, 2015)
NAM amicus 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

On May 5, 2016 the NAM filed an amicus brief supporting Volkswagen in their dispute against the United Auto Workers (UAW). The UAW brought a complaint against Volkswagen for refusing to bargain with a group of maintenance employees at the automaker's Tennessee plant. Volkswagen opposed the creation of a bargaining unit for employees who are responsible for repairing and maintaining machinery and robots because the plant is a highly integrated manufacturing operation in which all of the employees in the plant work in concert to produce a finished product. The maintenance employees are fully integrated into that process, and they do not have their own, separate department. Instead, maintenance employees are assigned to, and work within, each of Volkswagen’s individual production shops.

This is yet another case where the NAM has filed an amicus brief objecting to the National Labor Relations Board’s (NLRB) decision in Specialty Healthcare allowing employees to create a bargaining unit that is small and under inclusive. In this case, the NAM filed an amicus brief explaining the substantial impact this case will have on employers, particularly in the manufacturing industry, and urging the NLRB to use it as an opportunity to re-examine the Specialty Healthcare standard. Job titles, departmental lines and the like simply are not a valid proxy for the NLRB’s careful consideration of the proper grouping of workers for bargaining unit purposes, particularly in a highly integrated manufacturing process such as that at Volkswagen.

The NLRB’s wrongly decided Specialty Healthcare decision should be overruled for three reasons. First, the Specialty Healthcare rule violates the plain terms of the National Labor Relations Act by granting too much deference to the union’s proposed unit. Second, Specialty Healthcare represents a radical departure from the NLRB’s longstanding precedent and encourages a multiplicity of fractured units within workplaces throughout the country. Third, in deciding Specialty Healthcare, the NLRB violated the Administrative Procedure Act.

Notwithstanding the continuing questions regarding the legality and application of Specialty Healthcare generally, the decision in this case fails to even comply with the standard as set forth in Specialty Healthcare. Our national labor policy is not to foster industrial peace through collective bargaining while at the same time making that bargaining difficult and ineffective through the application of Specialty Healthcare. We urge the NLRB to take the opportunity presented by this case not only to correct the flawed decision, but in a broader sense to consider anew its Specialty Healthcare decision and, in particular, its application to manufacturing enterprises. On April 13, 2016, the NLRB rejected the NAM's petition.


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

It takes a tremendous amount of time and resources to develop and secure a patent for a new pharmaceutical, but issues regarding patentability often arise. This case involves an effort by class action plaintiffs to challenge a patent litigation settlement agreement between a brand manufacturer and two generic pharmaceutical manufacturers. The plaintiffs say that the settlement agreement violates the antitrust laws, and they want triple damages, even through the agreement allowed the generic manufacturers to enter the market before the patent expired.

The NAM filed an amicus brief urging the appeals court to affirm a district court ruling that allowed the settlement agreement between the companies. We highlighted the expensive and uncertain nature of patent litigation, the importance of flexibility in settling patent disputes, the validity of short-term limited exclusive licenses, and the propriety of certain collaborative marketing arrangements. Against this backdrop, courts must use the more lenient "rule of reason" standard of review in antitrust cases, and must make sure that a challenge to a settlement agreement is actually plausible before allowing the case to proceed. Plaintiffs must allege enough facts to make an overall anticompetitive effect plausible.

Agreements like the one in this case are lawful, procompetitive and common, and should not be discouraged. Limited exclusive licenses from patent holders are procompetitive, as is commercial cooperation. 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.

This case is another in the line of cases since the U.S. Supreme Court decision in FTC v. Actavis, Inc., where the Court ruled that such settlement agreements should be analyzed under the "rule of reason," allowing the parties to argue that there were legitimate business justifications for the agreements.


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

On March 31, 2016, the NAM filed an amicus brief urging the U.S. Supreme Court to hear an appeal of this case to clear up uncertainty about what kinds of settlements can trigger lawsuits. 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 Supreme Court unfortunately declined to hear this appeal on November 7, 2016. This is the second time the NAM has filed an amicus brief in this case. The first was on June 3, 2014, when the NAM filed an amicus brief in the US Court of Appeals for the Third Circuit 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.

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. 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 amicus 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 submitted an amicus brief November 9, 2015, urging the U.S. Supreme Court to reverse the Second Circuit’s affirmation of the dismissal of claims against Connecticut’s protectionist automobile dealer state legislation. The issue 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. Laws such as Connecticut’s warranty reimbursement mandate and cost recovery ban impose artificially high costs on out-of-state manufacturers and consumers, solely for the benefit of in-state dealers, and bar recovery of those costs in the state that imposed them. This case presented an opportunity for the Supreme Court to ensure that state statutes burdening interstate commerce are meaningfully reviewed to assess the merits of alleged public benefits against the harms of economic restrictions. Unfortunately, the Supreme Court declined to hear the case on 3/7/16, and great concerns remain regarding the unprecedented intrusion of protectionist state legislation into the private contractual relationships between motor vehicle manufacturers and their dealers.

Because the auto industry comprises a large segment of American manufacturing, there is a looming threat of parallel state protectionism in other industries. Such measures are anticompetitive, inconsistent with innovation and advancement, and harmful to consumers.


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

In the 2014 case Tincher v. Omega Flex, Inc., the Pennsylvania Supreme Court altered product liability law in the state but left many questions unanswered. The NAM filed an amicus brief in Tincher urging the court to adopt the modern product liability standards followed by a majority of state courts, but the court declined to completely adopt modern laws.

The combined cases of Amato v. Crane Co. and Vinciguerra v. Crane Co. were decided before Tincher was decided. These cases were appealed in light of the Tincher decision. The issue was what legal standard applies to determine liability in failure-to-warn cases. We argued that the jury or judge should decide whether a product is "unreasonably dangerous." The 2014 Tincher case changed Pennsylvania law so that the jury must balance the risks and the benefits of a product, but it did not specifically say the same reasoning applies to cases asserting a defendant’s failure to warn about hazards of a product, which includes all asbestos tort litigation. In the Pennsylvania appeals court, Crane Co. argued that after the Tincher decision, the cases should have been retried because the trial court rejected a proposed instruction asking the jury to determine whether the asbestos was “unreasonably dangerous,” but the court declined to overturn the two verdicts.

The NAM filed an amicus brief in the Pennsylvania Supreme Court explaining the history of tort law in Pennsylvania and arguing that juries should be permitted to consider what a manufacturer knew or should have known about a particular danger in strict liability claims based upon a failure to warn. Overall, the question now really is how Tincher might be transformed into a framework for the litigation of product liability cases. Manufacturers were hoping that the Pennsylvania Supreme Court would adopt a more modern burden of proof, but the court dismissed the appeal without any explanation. Therefore, the lower court's decision stands, which stated a defendant may raise the state of the art defense if they concede the product was defective but could not have known it was defective in light of the current science. However, the defendant in this case was prohibited from raising the defense because they argued the product was not defective, so future defendants may raise this defense in limited circumstances. The Pennsylvania Supreme Court’s decision not to issue a decision still leaves this issue open for future litigation.


Related Documents:
NAM amicus 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

Workers injured by asbestos exposure at work typically have been compensated for their injuries by worker's compensation systems. They also sued asbestos product manufacturers, and as a result, most of the manufacturers filed for bankruptcy. They then sued peripheral defendants such as premises owners. More recenltly, peripheral plaintiffs, family members of workers, have brought suits against premises owners and employers, claiming nonoccupational, offsite exposure to asbestos through contact with a worker's clothes. Most of the courts which been asked to recognize a duty to warn household members of the risks associated with exposure to asbestos conclude that no such duty exists.

This case goes one step further in asserting a duty to warn. The plaintiffs wanted to hold manufacturers liable for failing to warn about asbestos risks to the household members of workers at companies that use their products. The NAM filed an amicus brief arguing that if employers have no such duty to warn, certainly product manufacturers, which are even more distant from housefold members of customer employees, cannot be made liable for such a duty. The relationship between the manufacturer and such a person is simply too remote to create this duty. Imposing an expansive new duty on manufacturers to people who never purchased, used, or were in the vicinity of their products would lead to asbestos litigation that involves increasingly tenuous connections between plaintiffs and defendants.

On Nov. 30, 2016, the court ruled that the manufacturer does not have a duty to warn such remote parties, "whether those individuals be family members or simply members of the public who were exposed to asbestos-laden clothing, as the mechanism and scope of such warnings would be endless." The Georgia Supreme Court properly denied what would have been a dramatic expansion of product liability law.


Related Documents:
NAM amicus brief  (March 14, 2016)

 

Davis v. Honeywell Int'l, Inc.   (California Supreme Court)

Any exposure theory of asbestos liability

On April 29, 2016, the NAM filed a brief supporting Honeywell International in the California Supreme Court and urging that legal rules applied to asbestos and other toxic tort cases are consistent with well-established tort law, sound science, and good policy. The lower court violated these principles by permitting liability based on flimsy causation testimony that is being rejected by an increasing number of courts. "Any exposure" to asbestos is not sufficient to meet the legal requirements for exposure liability, is unfair to defendants, and encourages excessive lawsuits.

On May 25, 2016, the California Supreme Court denied Honeywell's petition for review. This was an uphill battle, and the NAM continues to fight for manufaucturers in other product liability cases.


Related Documents:
NAM amicus 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

Since 1992, New York law has not imposed liability on a manufacturer of a product that itself causes no injury when used in conjunction with another product that does. The only exceptions have been when the manufacturer controls the production of the other product, derives a benefit from its sale, or placed it in the stream of commerce. The courts have revised that proposition in the context of asbestos litigation, and those revisions are the subject of this appeal to New York's highest court.

In this case, the Crane Company made valves, which others fitted with asbestos-containing materials. A ship worker claimed exposure to asbestos and secured a judgment against Crane on the theory that Crane should have warned that asbestos was hazardous, even though the company did not require the use of asbestos to operate the valves. The plaintiff secured a $4.4 million judgment, which was appealed.

The NAM and other business groups filed an amicus brief arguing that New York law does not extend a duty to warn about hazards in other manufacturers' products, and such a policy goes against precedents in many other states and in contexts other than asbestos. Imposing such liability is unsound public policy, and would worsen the asbestos litigation problem.

Unfortunately, the highest court in New York ruled 6/28/16 that "the manufacturer of a product has a duty to warn of the danger arising from the known and reasonably foreseeable use of its product in combination with a third-party product which, as a matter of design, mechanics or economic necessity, is necessary to enable the manufacturer's product to function as intended."


Related Documents:
NAM amicus brief  (October 8, 2014)

 

Haver v. BNSF Ry. Co.   (California Supreme Court)

Liability for take-home exposure to asbestos

Over the years plaintiffs have filed law suits in many states alleging that a manufacturer has a duty of care to the families of workers who may have been exposed to a hazardous substance like asbestos in the workplace. They allege that such a duty applies to off-site contact by immediate family members as well as visitors, guests, or others that the employee may come into contact with. Two such cases are now before the California Supreme Court to decide whether that state’s tort law recognizes such liability. Most states do not impose such a duty, which would impose potentially limitless and indefinite liability.

The NAM filed an amicus brief March 11, 2015 advising the court that there is no need to stretch tort law to provide a remedy to remote third parties. We outlined the history of asbestos litigation, the impact of bankruptcies on tort defendants, and the status of a variety of existing plaintiff compensation and asbestos trusts that collectively hold billions of dollars in assets to pay claims involving products that used asbestos.

In the current wave of lawsuits, the connection between plaintiffs and asbestos-containing products has become increasingly remote, first targeting peripheral defendants (companies that did not make asbestos or include in in their products), and now targeting secondarily exposed “peripheral plaintiffs.”

California is a particularly problematic jurisdiction because of its highly permissive standard for asbestos causation.

On 12/1/16, the California Supreme Court ruled that employers and premises owners have a duty to prevent exposure to asbestos that is carried by the bodies and clothing of on-site workers, and that that duty extends to household members of the worker, if it is "reasonably foreseeable" that the "workers, their clothing, or persona effects will act as vectors carrying asbestos from the premises to household members. . . ." This duty only extends to household members, not guests, and the plaintiffs will still need to show causation. This is a significant expansion of liability for manufacturers, and is a principle that many other state courts have refused to adopt.


Related Documents:
Shopfloor blog  (December 20, 2016)
NAM brief  (March 11, 2015)

 

Kesner v. Superior Court   (California Supreme Court)

Liability for take-home exposure to asbestos

Over the years plaintiffs have filed law suits in many states alleging that a manufacturer has a duty of care to the families of workers who may have been exposed to a hazardous substance like asbestos in the workplace. They allege that such a duty applies to off-site contact by immediate family members as well as visitors, guests, or others that the employee may come into contact with. Two such cases are now before the California Supreme Court to decide whether that state’s tort law recognizes such liability. Most states do not impose such a duty, which would impose potentially limitless and indefinite liability.

The NAM filed an amicus brief March 11, 2015 advising the court that there is no need to stretch tort law to provide a remedy to remote third parties. We outlined the history of asbestos litigation, the impact of bankruptcies on tort defendants, and the status of a variety of existing plaintiff compensation and asbestos trusts that collectively hold billions of dollars in assets to pay claims involving products that used asbestos.

In the current wave of lawsuits, the connection between plaintiffs and asbestos-containing products has become increasingly remote, first targeting peripheral defendants (companies that did not make asbestos or include in in their products), and now targeting secondarily exposed “peripheral plaintiffs.”

On 12/1/16, the California Supreme Court ruled that employers and premises owners have a duty to prevent exposure to asbestos that is carried by the bodies and clothing of on-site workers, and that that duty extends to household members of the worker, if it is "reasonably foreseeable" that the "workers, their clothing, or persona effects will act as vectors carrying asbestos from the premises to household members. . . ." This duty only extends to household members, not guests, and the plaintiffs will still need to show causation. This is a significant expansion of liability for manufacturers, and is a principle that many other state courts have refused to adopt.


Related Documents:
Shopfloor blog  (December 20, 2016)

 

Linert v. Ford Motor Co.   (Ohio Supreme Court)

Post-sale duty to warn

This case involves the justification of a lower court upholding a state law which requires manufacturers to provide post-sale warnings of “any known risk” for products they have made. In this case a police officer was harmed by a car accident attributable to a reckless driver crashing into him. His police vehicle was found to have met all federal safety standards and the jury found it to be non-defective. The jury rejected three theories of tort liability against Ford, the maker of the officer’s vehicle, but was allowed to decide if Ford violated the law by not warning the officer post-sale of hazards that could possibly harm him. Ohio imposes on manufacturers a duty to act as would a reasonable manufacturer in the same circumstance, but the appeals court decision requires manufacturers to warn consumers post-sale of any known risk in using a product, even if the product is not defective, even where the risk of harm from using the product is unlikely and insubstantial, and even when the asserted risk in the product is merely the difference between that product and a newer product model that includes a manufacturer’s improvement.

The NAM and other business groups filed an amicus brief to reverse this aberrant appellate court precedent. We 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. Manufacturers generally have no duty to warn consumers based on post-sale safety improvements. The decision to penalize manufacturers with mandatory warnings for product improvements also amounts to a court-crafted “innovation tax”. This will create disincentives for manufacturers improving their products if the cost of warning people about minor improvements will outweigh the benefits.

This expansion of consumer remedies is unnecessary because of existing product liability legal standards, as well as federal protections from both the National Highway Traffic Safety Administration and the Consumer Product Safety Commission.

On Dec. 29, 2016, the court interpreted the Ohio law at issue to apply a duty to warn in two situations: when the manufacturer knows of a hazard at the time of sale, and when the manufacturer learns after a sale of other risks. It ruled that evidence that the company knew prior to the sale is not relevant to a claim based on a failure to warn after the sale. It also ruled that whether there is a post-sale duty depends on the likelihood of the risk of harm to consumers and the seriousness of the harm that the risk presents. In this case there was insufficient evidence on the likelihood that the car posed the risk claimed.


Related Documents:
NAM amicus brief  (August 17, 2015)

 

Occidental Chemical Corporation v. Jenkins   (Texas Supreme Court)

Forever liability for improvements to real estate

On 01/08/2016, in a 9-0 decision, the Texas Supreme Court issued an opinion reversing the judgment of the Houston court of appeals and rendering a take-nothing judgment against Jason Jenkins. In its opinion, the Texas Supreme Court concluded that Occidental breached no duty of care to Jenkins. As a result, the court never reached the statute of repose issues in the case. The NAM had filed two briefs with the Texas Supreme Court in this matter arguing that the lower court’s decision breaks from clearly established Texas law and sets a dangerous precedent that weakens Texas’ robust manufacturing economy. Manufacturers across Texas were facing unforeseeable and expensive liability created by the decision.

As way of background, a Texas court imposed forever liability on a previous owner of real property for improvements designed by licensed engineers and constructed by the plant owner, notwithstanding two statutes of repose that require that any claims be brought within 10 years following design or construction. This case presents the concern that prior owners of realty who make permanent improvements are retroactively held liable, but are powerless to maintain, update or remove the improvements or to train third parties on how to properly use them. In this case, Occidental Chemical Corporation constructed a new mechanical system for its chemical manufacturing plant to replace a manual process. The system was used safely for 14 years. Meanwhile, the plant was sold to a new owner. An employee of the new plant owner was injured while operating the machinery and won a jury verdict against the prior owner. However, the trial court applied the statutes of repose and ordered that the plaintiff “take nothing,” and awarded zero damages. The Texas Court of Appeals overturned the take-nothing verdict, imposed liability on the prior owner, and reinstated nearly $10 million in damages.


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 and 3 other associations filed an amicus brief in the Pennsylvania Supreme Court urging it to reverse a trial court ruling that allowed expert testimony on causation without requiring an assessment of the dose required to cause injury or identifying how much exposure occurred here. We argued that it is not enough for experts to speculate that any exposure is enough to find liability. Instead, experts have a scientific obligation to help the jury sort out impactful occupational exposures from those will little effect. In this case, a maintenance worker doing non-asbestos work thirty feet from brake repair work over a three-month period was sufficient causation evidence.

Evidence that "any exposure" is sufficient to find liability results in "speculative causation determinations that time and again have proven to be wrong and have caused considerable harm." The asbestos docket in the courts today is rife with irrational speculation about disease causation, contrary to a variety of epidemiological studies. This is particularly true for cases involving vehicle mechanics.

The court on 11/22/16 upheld the $1 million jury verdict based on testimony that every exposure during the 3-month period cumulatively contributed to the worker's mesothelioma. The court did not reverse previous precedents that barred the "any exposure" theory of causation, but found the testimony of cumulative exposure sufficient in this case.


Related Documents:
NAM amicus brief  (January 20, 2015)

 

Scapa Dryer Fabrics, Inc. v. Knight   (Georgia Supreme Court)

"Any exposure" liability

The NAM filed another in a series of briefs challenging attempts by the trial bar to reduce or eliminate the standard legal requirement that a plaintiff prove that a defendant actually caused his or her injury. For exposure to hazardous materials, courts typically exclude unreliable expert testimony under the Daubert rule and require an expert to assess the extent of the exposure (amount, duration, toxicity). In this case, the trial court 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 the disease.

The NAM's amicus brief pointed out that Georgia intermediate courts differ in their approach to this kind of testimony, and that the exposure dose from a particular jobsite or work activity is the critical question in a case where a plaintiff has worked at multiple facilities over the course of his career. This question will recur with greater frequency in the years ahead as asbestos cases will increasingly involve this sort of speculative exposure testimony with no dose assessment. We argued that plaintiffs' experts must demonstrate, through a competent scientific assessment, that the plaintiff received a dose sufficient to cause the disease at issue.

Moreover, a trial judge should not perform the role of experts, namely assisting the jury in determining how much exposure from a particular workplace event is enough.

Loose standards relating to expert testimony will result in jury verdicts in low dose cases that are out of touch with medicine and tort principles.

On Sept. 8, 2015, the Georgia Supreme Court agreed with us to review this decision. We filed an amicus brief on the merits, arguing that the lower court allowed testimony without ever asking the witness to answer how much exposure the employee received, and was it enough to cause cancer. This failure does not allow a court to step in a decide for itself that the exposures were substantial and "not de minimis."

On July 5, 2016, the court ruled that inviting a jury to find that causation can be established by any exposure to asbestos does not fit the pertinent causation inquiry under Georgia law. The testimony should have been excluded by the trial judge because "it could only serve to confuse the jury on the issue of causation." This is a significant positive result for manufacturers in the Georgia courts. It will require more than a de minimis exposure before allowing expert testimony about it to go to the jury.


Related Documents:
NAM amicus brief on the merits  (October 21, 2015)
NAM amicus brief supporting review  (May 19, 2015)

 

Suttner v. Crane Co.   (New York Court of Appeals)

Duty to warn about hazards in products made by other manufacturers

Since 1992, New York law has not imposed liability on a manufacturer of a product that itself causes no injury when used in conjunction with another product that does. The only exceptions have been when the manufacturer controls the production of the other product, derives a benefit from its sale, or placed it in the stream of commerce. The courts have revised that proposition in the context of asbestos litigation, and those revisions are the subject of this appeal to New York's highest court.

In this case, the Crane Company made valves, which others subsequently fitted with asbestos-containing materials. A former employee of an automobile component manufacturer claimed exposure to asbestos from repairing valves and secured a judgment against Crane on the theory that Crane should have warned that asbestos was hazardous, even though the company neither installed the asbestos components nor required the use of asbestos to properly operate the valves. The plaintiff secured a $3 million judgment, which was appealed.

The NAM and other business groups filed an amicus brief on June 19, 2015 arguing that New York law does not extend a duty to warn about hazards in other manufacturers' products, and such a policy goes against precedents in many other states and in contexts other than asbestos. Imposing such liability is unsound public policy, and would worsen the asbestos litigation problem.

Unfortunately, the highest court in New York ruled 6/28/16 that "the manufacturer of a product has a duty to warn of the danger arising from the known and reasonably foreseeable use of its product in combination with a third-party product which, as a matter of design, mechanics or economic necessity, is necessary to enable the manufacturer's product to function as intended." It found that for a "durable item designed for continuous use with the other manufacturer's fungible product, which by contrast deteriorates relatively quickly and is designed to be replaced, the manufacturer of the durable product typically is in the best position to guarantee that those who use the two products together will receive a warning . . . ."


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

For several decades, legislatures and courts have been placing limits on punitive damages because the availability and size of these awards have expanded significantly. Punitive damages are, by definition, penalties awarded in addition to compensatory damages. Limiting punitive damages ensures that the civil litigation environment is balanced and respects due process. Without a statutory limit on punitive damages, businesses are at a risk of significant and unwarranted liability exposure.

In this case, the Tennessee General Assembly made a policy decision to limit punitive damage awards in ways that properly balance judicial and economic considerations. The statute is in line with punishments typical at common law; is similar to other penalties for comparable wrongdoing; is similar to statues in other states; provides proper safeguards; fosters settlement; and is supported in its constitutionality by nearly all courts to consider the issue.

The NAM and other groups filed an amicus brief on 4/15/16 urging the Tennessee Supreme Court to uphold the statutory limit on excessive punitive damages awards. Limits prevent unpredictable awards and promote public confidence in the civil justice system while encouraging sound economic policy. Most courts have upheld such limits.

On 6/23/16, the court decided not to answer the questions about punitive damages caps that it had earlier agreed to decide. It found that the jury awarded statutory bad faith damages under a Tennessee statute and punitive damages under common law. It left open the question whether punitive damages under common law can be awarded in addition to the bad faith penalty.


Related Documents:
NAM amicus brief  (April 15, 2016)

 

Lindenberg v. Jackson Nat'l Life Ins. Co.   (W.D. Tenn.)

Limiting excessive punitive damages awards

For several decades, legislatures and courts have been placing limits on punitive damages because the availability and size of these awards have expanded significantly. Punitive damages are, by definition, penalties awarded in addition to compensatory damages. Limiting punitive damages ensures that the civil litigation environment is balanced and respects due process. Without a statutory limit on punitive damages, businesses are at a risk of significant and unwarranted liability exposure.

In this case, the Tennessee General Assembly made a policy decision to limit punitive damage awards in ways that properly balance judicial and economic considerations. The statute is in line with punishments typical at common law; is similar to other penalties for comparable wrongdoing; is similar to statues in other states; provides proper safeguards; fosters settlement; and is supported in its constitutionality by nearly all courts to consider the issue.

The NAM and other groups filed an amicus brief on 4/15/16 urging the Tennessee Supreme Court to uphold the statutory limit on excessive punitive damages awards. That information can be found here. Limits prevent unpredictable awards and promote public confidence in the civil justice system while encouraging sound economic policy. Most courts have upheld such limits.

On 6/23/16, however, the Tennessee Supreme Court opted not to decide the constitutionality of the statute and returned the case to the federal district court that had certified the question. The U.S. District Court for the Western District of Tennessee then considered the issue, including our amicus brief, and found on 9/28/16 that the law is consistent with the right to jury trial and separation of powers under the Tennessee Constitution.


Related Documents:
NAM amicus brief  (July 5, 2016)

 

Lompe v. Sunridge Partners, LLC   (10th Circuit)

Considerations of wealth of defendant when assessing punitive damages

The Supreme Court has ruled that the Constitution imposes restraints on the size of punitive damage awards to prevent multiple punishment for the same conduct, to keep awards rationally related to the actual damage caused by wrongful conduct, and to otherwise ensure that the punishment fits the offense. Part of this case is about whether a court reviewing a punitive damages award can consider the wealth of the defendant to make an otherwise unconstitutional award constitutional. It also involves the size of the award given.

The suit is against an apartment owner and manager for injuries resulting from carbon monoxide poisoning from a faulty furnace. Actual damages were $3 million, and punitive damages were assessed at $22.5 million, well above the maximum under Supreme Court precedent.

The Tenth Circuit decided 4/6/16 to allow the jury to consider the company's net worth. The NAM filed an amicus brief 4/17/15 arguing 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 case illustrates the danger of using evidence of wealth to punish a defendant. Such evidence is easily manipulated and often distorts a defendant's financial position or ability to pay an award at the time of trial. It also is more likely to impact shareholders, customers and employees that it is to harm those responsible for the harm caused to the plaintiff.

The appeals court did, however, reduce the size of the punitive damages award to $1.95 million, using the factors outlined by the Supreme Court (degree of reprehensibility, ratio to compensatory damages, and penalties in comparable cases). Net worth was not part of that analysis.


Related Documents:
NAM amicus brief  (April 17, 2015)

 


RICO Act -- 2016



In re Avandia Mktg.   (U.S. Supreme Court)

What constitutes an injury under RICO

The NAM filed a brief urging the Supreme Court to review a case involving RICO claims by third-party payors seeking reimbursement of monies spent for prescriptions of Avandia. Even though the product worked and there were no physical injuries, they claim that because certain risks were not disclosed, they should have paid less for the drug. Our brief argues that the Court must clarify whether these allegations are sufficient to constitute an injury under RICO. The courts are divided on this, and if the lower court’s decision here is upheld, this will incentivize abusive, speculative and burdensome litigation against manufacturers of all kinds.

On 6/6/16, the Supreme Court denied the petition, which was disappointing as there are a number of similar cases pending that would benefit from a clear decision from the Court.


Related Documents:
NAM amicus 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 General Motors bankruptcy filing in 2009 was a dramatic effort to save the company and the hundreds of thousands of jobs, businesses and communities that depended on it. It resulted in the sale of the company's assets to a new government-owned entity. The price paid for those assets was substantial, and allowed the new company to start fresh, "free and clear" of old liens, claims and liability from activities of the old company.

This case involves whether the new company is still responsible, 5 years later, for claims against the old one -- specifically for accident claims and economic loss claims arising from an ignition switch defect. The appeals court ruled 7/13/16 that the new company may be responsible for claims from claimants that did not receive adequate notice of the sale order in the bankruptcy proceeding. The lower court had found that the claimants were not prejudiced by the bankruptcy decision, but the appeals court thought that if they were involved, they might have been able to secure a different outcome in the bankruptcy proceeding.

The new company appealed to the full set of judges on the Second Circuit to rehear this case. The NAM supported this appeal with an amicus brief on 8/10, arguing that disallowing the "free and clear" sale provision undermines the integrity of asset sales under Section 363 of the Bankruptcy Code, negatively impacting debtors, creditors and buyers. Unless assets can be sold in bankruptcy free and clear, they will not be worth as much to the new buyer, and creditors of the bankrupt company will have less money available to pay their claims. The decision also puts good faith purchasers of a bankrupt company's assets into the position of being responsible for actions taken, or not taken, by another company. Instead, the responsibility for the failure of notice should be on the bankrupt seller, not the innocent purchaser.

Unfortunately, the court declined to rehear this case on Sept. 14, 2016.


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

For the last fifty years, a number of states have been part of the Multistate Tax Compact, which creates a uniform system of taxation for companies with business in multiple states. California signed onto this agreement and many businesses expanded into the state, relying on the promise of a reasonable, predictable tax system.

Like any contract, the Multistate Tax Compact places some obligations on states along with the Compact’s many benefits. For example, joining the Compact requires that states provide taxpayers with the option of apportioning their multistate income according to a common three-factor, equal-weighted formula. The Compact was developed as an alternative to forestall congressional intervention with federal legislation, and was intended to establish a baseline level of uniformity to facilitate job growth and state tax collections.

However, the California Franchise Tax Board tried to rid itself of its obligations under the Compact while reaping the benefits of membership in it. Companies that brought their business to California relying on a predictable, uniform system now find themselves facing complicated tax bills and double taxation. Several manufacturers challenged the state’s action, and the case was appealed to the U.S. Supreme Court. The Manufacturers’ Center for Legal Action filed an amicus brief in support of review, opposing California’s attempt to change the rules in the middle of the game. We argued that long-term tax predictability is of immense business importance, that the Multistate Tax Compact offers such predictability and uniformity, and that California should honor the agreement it joined.

On Oct. 11, 2016, the Court declined to hear this appeal.


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

For the last fifty years, a number of states have been part of the Multistate Tax Compact, which creates a uniform system of taxation for companies with business in multiple states. Minnesota signed onto this agreement and many businesses have since relied on the promise of a reasonable, predictable tax system.

Like any contract, the Multistate Tax Compact places some obligations on states along with the Compact’s many benefits. For example, joining the Compact requires that states provide taxpayers with the option of apportioning their multistate income according to a common three-factor, equally weighted formula. The Compact was developed as an alternative to forestall congressional intervention with federal legislation, and was intended to establish a baseline level of uniformity to facilitate job growth and state tax collections.

Minnesota enacted a statute in 1987 purporting to repudiate some of the Compact's provisions, including one giving taxpayers the option of using the equally weighted formula. This case involves whether the state can do that and still be part of the Compact for other purposes. The Minnesota Supreme Court held that when a state becomes a member of the Compact, it makes no “unmistakable promise” to abide by all of the Compact’s terms. That issue was appealed to the Supreme Court, but the Court declined to hear the appeal on 12/12/16.

The Manufacturers’ Center for Legal Action filed an amicus brief in support of review, opposing Minnesota’s attempt to change the rules in the middle of the game. We argued that long-term tax predictability is of immense business importance, that the Multistate Tax Compact offers such predictability and uniformity, and that Minnesota should honor the agreement it joined.


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 amicus brief in support of rehearing  (October 27, 2014)
NAM amicus 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.


Related Documents:
NAM amicus brief  (April 16, 2015)

 


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.


Related Documents:
NAM amicus brief  (December 26, 2014)

 


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.


Related Documents:
NAM motion to intervene  (August 30, 2010)

 

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.


Related Documents:
NAM amicus brief  (April 23, 2015)

 

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."


Related Documents:
Industry response to motions to govern future proceedings  (November 21, 2014)
Industry motion to govern future proceedings  (October 21, 2014)

 

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.


Related Documents:
NAM amicus brief  (March 20, 2015)

 

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.


Related Documents:
Press release  (June 29, 2015)
ShopFloor blog post  (January 28, 2015)
NAM amicus brief  (January 27, 2015)

 

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.


Related Documents:
NAM amicus brief  (December 22, 2014)

 

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 amicus 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:
DC Circuit's opinion  (August 18, 2015)
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)
Statement of Issues  (July 8, 2011)
NAM petition  (June 16, 2011)

 

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 amicus 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.


Related Documents:
NAM brief  (October 14, 2015)

 


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 Reply to Motion for Summary Judgment  (March 25, 2015)
NAM Opposition to Motion to Dismiss  (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 Motion  (May 1, 2014)
NAM brief  (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.


Related Documents:
NAM amicus brief  (February 13, 2015)

 

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."


Related Documents:
NAM amicus brief  (June 4, 2015)

 

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.


Related Documents:
NAM brief  (March 9, 2015)

 


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 amicus 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.


Related Documents:
NAM letter  (August 26, 2014)

 


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.


Related Documents:
NAM amicus brief  (November 14, 2013)

 

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 Shopfloor blog post  (January 15, 2014)
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 amicus 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 amicus 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 amicus 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 amicus 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 amicus brief  (December 16, 2013)
NAM press statement  (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 amicus 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 press release  (June 23, 2014)
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 amicus 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 amicus 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 amicus 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:
Press statement  (December 3, 2013)
NAM amicus 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 amicus 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.


Related Documents:
NAM brief  (April 3, 2014)

 


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 amicus 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 ad