Latest News

WLF Urges Ninth Circuit to Vacate Nationwide Injunction

WLF Legal Pulse - Wed, 09/23/2020 - 9:00am

“A court that issues a nationwide injunction is not resolving a judicial controversy but rather is engaged in policymaking.”
—Cory Andrews, WLF Vice President of Litigation

Click HERE for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) today asked the U.S. Court of Appeals for the Ninth Circuit to vacate a wildly overbroad district court order that blocks all new oil line and gas line projects, nationwide.

The case arises from a suit by environmental activists over the dredge and fill that companies sometimes place in navigable waters as they construct utility lines. The underlying issue is whether the U.S. Army Corps of Engineers committed a procedural violation of the Endangered Species Act when it relied on nationwide permit 12 (NWP 12)—a streamlined protocol for permitting such dredge and fill activity—to allow the construction of the Keystone XL pipeline.

But in siding with the plaintiffs, the district court took an extraordinary step. Although the plaintiffs had challenged the use of NWP 12 for only the Keystone XL project, the district court vacated NWP 12 in full and enjoined its use for any project, nationwide. In subsequent briefing, even the plaintiffs encouraged the court to narrow its remedy. While the court later limited the scope of its order to “the constriction of new oil and gas pipelines,” that sweeping relief still lacks any legal basis.

As WLF contends in its amicus brief, the plaintiffs here lacked standing to obtain nationwide relief. Under Article III, a court may only resolve the case or controversy between the parties before it. A lone district court judge has no authority to block implementation of nationwide governmental policy. Nor did the plaintiffs attempt to show—nor could they—that they are somehow injured by every new oil and gas project approved under NWP 12. Rather than vacate NWP 12 and issue a nationwide injunction, the trial court should have simply remanded to the agency and its experts to fix the supposed procedural defect.

The post WLF Urges Ninth Circuit to Vacate Nationwide Injunction appeared first on Washington Legal Foundation.

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California City Must Face Constitutional Challenge to Regulatory Blockade of Fossil-Fuel Exports

WLF Legal Pulse - Fri, 09/11/2020 - 10:07am

West-coast states and municipalities’ construction of a thin green regulatory line against the export of coal have instigated some intriguing legal challenges. We’ve written previously about two companies’ Commerce and Supremacy Clause claims against Washington state officials for blocking approval of a water-port terminal for coal shipment to Asia (Lighthouse Resources v. Inslee). And in June, we applauded a Ninth Circuit decision that found Oakland, CA broke its contract with an export terminal when the city prohibited transportation of coal to the terminal (OBOT v. City of Oakland).

Late last month, Oakland’s San Francisco Bay neighbor, Richmond, failed to terminate a lawsuit aimed at that city council’s blockade of fossil-fuel exports. Though preliminary, the ruling could inspire further doubt about the legality of export hurdles and may embolden other aggrieved businesses to take similar action elsewhere.

In Levin v. City of Richmond, an export terminal owner (Levin), a fuel-sales business (Wolverine), and Phillips 66 filed suit in the Northern District of California to enjoin Richmond’s ban on the storage of coal and petroleum coke (“petcoke”). The city council passed what it termed a public-health ordinance earlier this year, shutting down nearly 80% of Levin-Richmond Terminal’s business. The terminal is the Bay Area’s only bulk handling and shipping facility for coal and petcoke.

The plaintiffs’ complaint alleged multiple constitutional violations and also claimed that federal transportation and hazardous-waste laws preempted the Richmond ordinance. Judge Yvonne Gonzalez Rogers’ decision denied Richmond’s motion to dismiss all but one of the plaintiffs’ claims.

Constitutional Claims

Judge Rogers found each of the plaintiffs’ constitutional claims to be sufficiently plausible. She disagreed that Richmond’s ordinance was a per se violation of the Dormant Commerce Clause, but found merit in the plaintiffs’ assertion that the ban imposed an undue burden on interstate commerce that outweighed any benefits the city claimed. Judge Rogers also allowed the plaintiffs’ Foreign Commerce Clause claim—that Richmond’s ordinance undercuts a uniform federal policy on fossil-fuel exports—to proceed.

On the claimed Contracts Clause violation, the judge found the plaintiffs had adequately plead the ordinance could be a “substantial impairment to contractual relationships.” Richmond argued that the ordinance was the type of “reasonable and necessary” public-health measure that the U.S. Supreme Court has found acceptable under the Contracts Clause. Judge Rogers discussed the plaintiffs’ contrary factual allegations and held that determining reasonableness was a matter for summary judgment.

Under the Fifth Amendment, the plaintiffs claimed a substantive due-process violation and an unlawful taking of their property without just compensation. While noting the “high burden” plaintiffs ultimately face in proving Richmond used its police power arbitrarily, the court held the complaint stated a plausible due-process claim. On the Takings Clause violation, Judge Rogers rejected Richmond’s argument that the three-year amortization period available to plaintiffs constituted just compensation. She held the plaintiffs should have the opportunity to more fully develop the facts supporting their takings argument, and denied dismissal.

Finally, on the Equal Protection claim, Judge Rogers held that the plaintiffs plausibly alleged that because the Levin-Richmond terminal was the only facility affected by the ordinance, Richmond was singling out Levin, Wolverine, and Phillips 66 without a rational basis.

Preemption

On preemption, the court held that the plaintiffs made out a plausible case that the Richmond ordinance conflicted with two federal laws, the Interstate Commerce Commission Termination Act (ICTA) and the Shipping Act of 1984. Judge Rogers noted that the key question under ICTA’s express preemption clause—”whether the Ordinance in fact regulates transportation by rail carrier or simply has incidental effects on a rail system”—can only be answered after further factual development.  

The Shipping Act prohibits marine terminal operators from discriminating against a common carrier. The Act does not expressly preempt state or local shipping regulation. The Levin plaintiffs argue that because the ordinance forces the terminal owner to refuse service only to coal and petcoke shippers, the ordinance conflicts with the Shipping Act, and is thus impliedly preempted. Judge Rogers rejected Richmond’s arguments on the Shipping Act and held the implied preemption claim could proceed.

Finally, because the fossil fuels at issue are not considered “hazardous” under federal law, the city’s designation of coal and petcoke as hazardous did not conflict with a third federal law, the Hazardous Materials Transportation Act.

Conclusion

The survival of all but one of the plaintiffs’ claims is certainly a satisfying outcome for those troubled by state and local intrusion into the regulation of interstate and foreign commerce. The lawsuit’s larger implications are quite evident, given the intervention of thin-green-line enthusiasts Sierra Club and San Francisco Baykeeper (both represented by Earthjustice), as well as the motion-to-dismiss stage amicus participation of California and Utah.

The hurdles plaintiffs must traverse on their constitutional claims will be much higher, and the applicable caselaw much less supportive, in the next stage of litigation. The Dormant and Foreign Commerce Clause claims are perhaps the most promising, especially given the clear indications that fossil-fuel export is a major part of U.S. energy policy and the plaintiffs’ lack of alternative shipping avenues to Asia.

The survival of three of the plaintiffs’ four preemption claims is especially important given the tenuous chances of their constitutional claims. If Levin, Wolverine, and Phillips 66 can prevail on preemption, the court need not reach the constitutional questions. 

We will keep an eye on developments as Levin v. Richmond moves forward.

Also published by Forbes.com on WLF’s contributor page.

The post California City Must Face Constitutional Challenge to Regulatory Blockade of Fossil-Fuel Exports appeared first on Washington Legal Foundation.

Categories: Latest News

WLF Urges Supreme Court to Leave Autodialer Regulation to Congress

WLF Legal Pulse - Thu, 09/10/2020 - 11:23am

“Judges may not rewrite the law simply because they think some new technology simply must be regulated right away.”
—Corbin K. Barthold, WLF Senior Litigation Counsel

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation today filed an amicus curiae brief urging the Supreme Court to adhere to textualist principles of statutory interpretation, even when the law at issue regulates fast-moving technology. The case is Facebook, Inc. v. Duguid, No. 19-511 (U.S.).

Enacted in 1991, the Telephone Consumer Protection Act bans the use of an autodialer for making unconsented calls to cellphones. Some courts have decided that the TCPA’s definition of an autodialer requires merely that a device be able to store telephone numbers and then dial them. Those circuits have been all too quick simply to enlist the TCPA’s overall “purpose” and Congress’s general “intent” in their cause. But as the petitioner in this case, Facebook, argues, the plain words of the TCPA clearly require that an autodialer use “a random or sequential number generator.”

WLF’s brief observes that the case fits within a larger pattern of unwarrantable expansion of the TCPA. In particular, courts have expanded the TCPA to cover text messages, even though the statute plainly covers only calls. Although it might seem like a good idea for a court to try to “fix” the TCPA to keep up with the times, doing so invites Congress to put off the hard work of crafting solutions itself. Only Congress can study a matter, hold hearings, and then pass a law that draws the necessary lines between abusive junk calls (and texts) and legitimate calls (and texts). In the meantime, the courts must apply existing law as written.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Urges Supreme Court to Leave Autodialer Regulation to Congress appeared first on Washington Legal Foundation.

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Antitrust Law Must Remain Focused on Promoting Competition and Enhancing Consumer Welfare

WLF Legal Pulse - Thu, 09/10/2020 - 8:50am

By Maureen K. Ohlhausen, Co-Chair of the Antitrust and Competition Law Practice at Baker Botts L.L.P. in Washington, DC, former Acting Chairman of the Federal Trade Commission.

Concerns over a perceived lack of competition in some sectors have led to calls for sweeping new legislation, which would, among other things, focus on size of entities rather than the competitive impacts of transactions or market behavior, introduce restrictions on companies’ ability to adjust to market changes, and impose broad obligations to provide access to infrastructure and services to rivals. Other proposals would impose extensive new duties on antitrust enforcement agencies and introduce ongoing uncertainty in previously approved transactions.  When considering legislative changes, it is crucial to consider the purpose of antitrust law and that body of law’s long record of successfully promoting competition and enhancing consumer welfare.

Competition is a critical driver of economic growth and thus it is important to understand what current antitrust law can achieve. Although we may sometimes think of an antitrust offense in terms of anticompetitive effects, an antitrust offense is better understood in terms of the alleged conduct’s impact on the “competitive process” through which a firm makes its decisions on price, quality, and the need to innovate, among other terms.  Antitrust law is not designed for, nor intended to, correct a “problem” in the market wholly divorced from its impact on the competitive process. In other words, concerns over fairness, consumer privacy, or the protection of small business should be addressed by regulatory actions or consumer protection laws, not antitrust.1  Using antitrust law to address non-competition factors, which may diminish competition or conflict with each other, reduces certainty and increases the risk of antitrust being used for industrial policy or political purposes.  

This definition of antitrust closely aligns with the core premise of the Sherman Act, which is the belief that a market economy, free of private restraints and unnecessarily burdensome regulations, produces superior outcomes over time.  This interpretation comports with the Supreme Court’s long-espoused view.2 

Antitrust is intended to protect the market process, not ensure a particular market outcome at a particular time. Our free market system rests on the conclusion that markets in which firms must endure competitive pressures will produce favorable outcomes in terms of price, output, quality, and innovation in the long run. Enforcers should only intervene when there is evidence that firms are corrupting or are likely to corrupt the competitive process through means other than competition on the merits. We should proceed cautiously and reflect very carefully before asking enforcers to go beyond this well-established mission of antitrust.  

The Council of Economic Advisors’ recently released annual report largely echoes that sentiment. The Report, which offers a detailed examination of the state of competition and current antitrust law’s ability to promote and safeguard it, states that “major policy initiatives to completely rewrite antitrust rules . . . are premature.”3  In reaching this conclusion, the Report finds that such proposals are “likely to impose significant costs” and are based on flawed research.4

The Report analyzes several recent studies, including an influential 2016 policy brief issued by the previous administration’s Council of Economic Advisers.  It concludes that many of these studies rest on the flawed assumption that “if undesirable outcomes—such as higher prices, profits, and markups—are correlated with concentration, then the cause of these outcomes” must be weaker competition.5  That assumption fails to take into consideration other explanations that may nonetheless be consistent with “procompetitive behavior by firms.”6 

The Report concludes that though competition plays a vital role in economic growth and needs to be safeguarded, the best available evidence simply does not support the current push for antitrust reform. If the antitrust rules are to be rewritten in the future, those efforts “should be based on studies of properly defined markets, together with conceptual and empirical methods and data that are sufficient to distinguish between alternative explanations for rising concentration and markups.”7

By focusing on the competitive process, current antitrust law can still address many of the concerns raised by today’s commentators. As long as there is sufficient factual and economic evidence of a cognizable competitive harm, antitrust law can prevent and remediate price effects, reductions in quality, impacts on innovation, and so-called “killer acquisitions” of nascent competitors.

Notes

The post Antitrust Law Must Remain Focused on Promoting Competition and Enhancing Consumer Welfare appeared first on Washington Legal Foundation.

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USPTO Launches New Fast-Track Appeals Pilot Program

WLF Legal Pulse - Thu, 09/10/2020 - 8:49am

By Dr. Michael A. Sartori, a Partner, and Matthew Welch, an Associate, in the Washington, DC office of Baker Botts L.L.P.

On July 2, 2020, the United States Patent and Trademark Office (“USPTO”) enacted the Fast-Tack Appeals Pilot Program (“Program”) to expedite the appeal process.1  Under the Program, the Patent Trial and Appeal Board (“PTAB”) plans to issue a Decision within six months from the date the appeal is entered into the Program, thereby reducing the lengthy appeal process which may be benefit certain Applicants.  This article reviews the current appeal process, describes the Program, and explores the Program’s utilization.

Current Appeal Process

Under the current USPTO appeal process, an Applicant who receives an adverse patentability decision has the option of appealing to the PTAB if any claim has been rejected twice.2   The process begins when the Applicant files a Notice of Appeal.3  The Applicant then has a two-month period to file an Appeal Brief, and this period can be extended for up to five additional months.4  If the Examiner believes the application is not allowable, the Examiner responds with an Examiner’s Answer.5  To proceed with the appeal thereafter, the Applicant pays an Appeal Forwarding Fee, optionally files a Reply Brief, and optionally files a Request for Oral Hearing within two months of the date of the Examiner’s Answer.6  The PTAB next sends a Docketing Notice and eventually issues a Decision.7 

Because the Examiner’s Answer and the PTAB Decision are not subject to statutory time periods, the time for an application to traverse the appeal process fluctuates and typically takes a considerable amount of time.  In instituting the new Program, the USPTO acknowledged the lengthy appeal process, which has an average pendency at the PTAB of 15 months.8  Additionally, based on experience, the back-and-forth with the Examiner after filing the Notice of Appeal is approximately 9 to 15 months. Thus, the total time from filing a Notice of Appeal to receiving a PTAB Decision is approximately 24 to 30 months, or 2.0 to 2.5 years.  To expedite this process, the USPTO implemented the new Program.9  

New Fast-Track Appeals Program

Because of the success of prioritized examination,10  the USPTO enacted the Program to expedite review of appeals before the PTAB with the goal of rendering a decision on whether the appeal is accepted into the Program within one month and issuing a Decision within six months from when the appeal is entered into the Program.11  As a result, under the Program, the total time from filing a Notice of Appeal to receiving a PTAB Decision is reduced from approximately 24 to 30 months, or 2.0 to 2.5 years, to approximately 16 to 22 months, or 1.3 to 1.8 years.12

The Program went into effect on July 2, 2020, will remain active for a one-year probationary period, and is limited to 125 appeals per three-month quarter for a total of 500 appeals over this initial one-year period.  To qualify for the Program, the application must be an original utility, design, or plant nonprovisional application, and the appeal must be an ex parte appeal for which a Notice of Appeal has been filed and for which the USPTO has issued a PTAB Docketing Notice.  When filing an appeal under the Program, the Petition Fee of $400 is required, and the USPTO Form PTO/SB/451 should be used. 

Within one month of filing the Petition to enter the Program, the USPTO will decide whether to grant the Petition.  If granted, a Decision on the appeal will be made within six months from the grant date.  Like the normal appeal process, Applicants may seek an Oral Hearing or rely on briefing alone.  But once an Oral Hearing is scheduled under the Program, an Applicant may not reschedule and remain in the Program. 

Utilizing the Fast-Track Appeals Program

The Program may be useful in multiple ways.  For example, when an Applicant needs a patent decision quickly due to a short product life cycle, due to potentially infringing activity, or due to the need to secure funding.  By reducing the pendency of the appeal, a patent decision can be obtained sooner.

The Program may also be useful if the application is examined by an Examiner type that has a low allowance rate and a typically long and costly prosecution (a so-called “Red Examiner”).13  Being able to circumnavigate a Red Examiner under the Program may be beneficial, especially if the Applicant desires a quick patent decision.

Furthermore, using statistics, an Applicant can decide whether it is worth the extra cost to apply for the Program when appealing.  Based on research, applications assigned to a certain Examiner type (a so-called “Green Examiner”) have a better chance of success on appeal.14  Having a quick path to an appeal with the Program for such Examiners could be beneficial for an Applicant needing a patent sooner.

The Program may also be helpful to Applicants given the current economic conditions due to the COVID-19 pandemic.  Historically, in prior recessions, Applicants have reduced patent filings and abandoned more applications, and this can be attributed to the contraction of the economy and, hence, contraction of patent budgets.15  To capitalize on valuable applications pending, a quick result on an appeal may produce a valuable patent sooner, thereby saving the patent budget in a difficult economic time.

However, for certain inventions like pharmaceutical innovations, a delayed issue date may be desirable, negating the need to use the Program.  In this case, a longer appeal through the current appeal process may be acceptable and especially beneficial if coupled with the USPTO granting a positive Patent Term Adjustment due to the appeal delay, thereby increasing the patent term.16  Hence, before deciding whether to apply for the Program, an Applicant should consider how the patent is intended to be used.

In conclusion, the Program is a new strategic option that can help an Applicant shorten the appeal process, thereby achieving a patent decision sooner.

Notes

The post USPTO Launches New Fast-Track Appeals Pilot Program appeared first on Washington Legal Foundation.

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Upcoming Webinar—Environmental Permits in the Crucible: The Impact of Court Challenges on Energy and Infrastructure Projects

WLF Legal Pulse - Wed, 09/09/2020 - 12:14pm
Wednesday, September 30, 2020, 1:00 p.m. EST

Featuring:

Lindsay S. See, Solicitor General, State of West Virginia
Lawson Fite, General Counsel, American Forest Products Council
Thomas Jackson, Special Counsel, Baker Botts L.L.P.

REGISTER BELOW

The post Upcoming Webinar—Environmental Permits in the Crucible: The Impact of Court Challenges on Energy and Infrastructure Projects appeared first on Washington Legal Foundation.

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WLF: Clean Water Act Does Not Displace State and Federal Regulatory Regimes for Certain Groundwater Releases

WLF Legal Pulse - Wed, 09/09/2020 - 9:35am

“By refusing to expand the reach of the Clean Water Act’s general permitting provision, the district court honored Congress’s clear statutory intent.”
—Cory Andrews, WLF Vice President of Litigation

Click HERE for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) yesterday asked the U.S. Court of Appeals for the Seventh Circuit to affirm a trial court decision that refused to expand the reach of the Clean Water Act (CWA) over certain groundwater releases. WLF’s amicus brief was prepared with the pro bono assistance of Bill Brownell, Elbert Lin, Nash Long, Brent Rosser, and Melissa Romanzo with Hunton Andrews Kurth LLP.

The case arises in the wake of the Supreme Court’s recent decision in County of Maui v. Hawaii Wildlife Fund, which considered the reach of the CWA’s National Pollution Discharge Elimination System (NPDES). Adopting the “functional equivalent” test, the Supreme Court held that, if no other regulation applies, the CWA requires NPDES permits for certain discharges by “point sources” into navigable waters. Relying on that holding, the plaintiff here seeks to require an NPDES permit for the defendant’s groundwater releases of coal ash. 

But as WLF contends in its amicus brief, construing the CWA to require an NPDES permit for such releases would displace Congress’s regulation under the Resources Conservation and Recovery Act (RCRA) and the EPA’s Coal Combustion Residuals (CCR) Rule, both of which govern the very releases at issue here. It would also undermine comprehensive state regulation of groundwater, leading to the kind of broad expansion of NPDES jurisdiction that County of Maui rejected.

The post WLF: Clean Water Act Does Not Displace State and Federal Regulatory Regimes for Certain Groundwater Releases appeared first on Washington Legal Foundation.

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WLF Asks Supreme Court to Limit Reach of Liability Under the Alien Tort Statute

WLF Legal Pulse - Tue, 09/08/2020 - 10:52am

“Rather than keep playing ‘whack-a-mole’ with the lower courts, the Supreme Court should decide, once and for all, that the ATS permits no liability for aiding and abetting.”
—Cory Andrews, WLF Vice President of Litigation

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) today asked the U.S. Supreme Court to overturn an appeals court decision that would allow activists to impose liability on U.S. entities for aiding and abetting a third-party’s alleged human rights violations overseas. WLF’s amicus curiae brief was joined by the Allied Educational Foundation.

The plaintiffs, citizens of Mali who worked on Ivory Coast cocoa farms, allege mistreatment by cocoa farmers. The U.S. Court of Appeals for the Ninth Circuit held that the plaintiffs’ lawsuit could proceed under the Alien Tort Statute (ATS), which authorizes tort claims bottomed on a violation of “the law of nations.” Citing evidence that the defendants, U.S.-based cocoa processors and chocolate manufacturers, exploited the lower prices available for cocoa harvested from Ivory Coast farms, the Ninth Circuit held that the defendants must stand trial for aiding and abetting human rights abuses.

In its brief urging reversal, WLF contends that the Ninth Circuit, by permitting such suits to proceed, disregarded both the Constitution’s and the Supreme Court’s crucial limits on a federal court’s ability to imply a new cause of action under the ATS. As WLF’s brief shows, whether the ATS should supply a remedy for aiding and abetting is a decision best left to Congress, not the Judiciary.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Asks Supreme Court to Limit Reach of Liability Under the Alien Tort Statute appeared first on Washington Legal Foundation.

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WLF Urges Texas High Court To Apply Section 230 Internet Free-Speech Protection As Written

WLF Legal Pulse - Fri, 09/04/2020 - 1:24pm

“For a state high court, this is about as straightforward as it gets. The justices are being asked simply to adhere to section 230’s plain meaning, just as dozens of other courts have done.”
—Corbin K. Barthold, WLF Senior Litigation Counsel

Click here for WLF’s brief. 

(Washington, DC)—Washington Legal Foundation today filed an amicus curiae brief urging the Texas Supreme Court to faithfully apply section 230 of the Communications Decency Act. WLF’s brief was submitted pro bono by the prominent appellate attorney Scott A. Keller of Baker Botts L.L.P.

Enacted in 1996, section 230 generally protects anyone on the web from being held liable for the speech of a third party. “No provider or user of an interactive computer service,” section 230(1) states, “shall be treated as the publisher or speaker of any information provided by another information content provider.” This protection for web platforms (and all users of such platforms) is often said to have enabled the creation of the internet as we know it.

Section 230 is a straightforward immunity. It has been applied consistently across several decades and many dozens of cases. It protects free expression by ensuring that platforms are not sued out of existence because of what other people say on the internet.

WLF’s brief urges the Texas Supreme Court to apply section 230 as written in a case in which the lower courts effectively set the statute aside. The plaintiffs pointed to recent statutory amendments that allow certain federal civil claims and state criminal claims to be brought against platforms. The plaintiffs, however, bring only state civil claims that remain barred by section 230.

The case is an example of bad facts making bad law: the plaintiffs allege that they are, tragically, victims of trafficking. But as WLF’s brief explains, Congress has crafted a careful policy balance, one that contains other avenues to combat trafficking that do not curtail the vital protections that section 230 creates for platforms and their users.

WLF is grateful to Mr. Keller, his associate Jeremy Evan Maltz, and Baker Botts for their pro bono assistance with the brief.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law. 

The post WLF Urges Texas High Court To Apply Section 230 Internet Free-Speech Protection As Written appeared first on Washington Legal Foundation.

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Upcoming Virtual Briefing—U.S. Supreme Court October Term 2020: What’s in Store for Free Enterprise?

WLF Legal Pulse - Thu, 09/03/2020 - 11:48am
Tuesday, September 22, 2020, 1:00 p.m. EST

Featuring:

Catherine E. Stetson, Hogan Lovells 
Dr. Adam Feldman, Empirical SCOTUS
Jonathan F. Cohn, Sidley Austin LLP

Please register below

The post Upcoming Virtual Briefing—U.S. Supreme Court October Term 2020: What’s in Store for Free Enterprise? appeared first on Washington Legal Foundation.

Categories: Latest News

August 2020 Month in Review

WLF Legal Pulse - Tue, 09/01/2020 - 9:00am

To read more about the items below, click the link above for a PDF of the newsletter.

WLF NEW FILINGS

WLF urges the Massachusetts Supreme Judicial Court to insist upon an exacting pleading threshold in medical device cases. (Dunn v. Genzyme)

WLF asks the Missouri Supreme Court to rein in an expansive view of personal jurisdiction that would permit far-flung plaintiffs to sue in Missouri based solely on the defendant’s third-party contacts there. (Ingham v. Johnson & Johnson)

WLF CASES DECIDED

The Seventh Circuit confirms that the FAA’s “transportation worker exemption” covers only those who directly partake in the moving of goods across borders. (Wallace v. Grubhub Holdings, Inc.)

The post August 2020 Month in Review appeared first on Washington Legal Foundation.

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WLF Urges Mass. High Court to Clarify Pleading Threshold in Medical-Device Cases

WLF Legal Pulse - Tue, 08/25/2020 - 3:59pm

“State courts evaluating state-law claims involving federally approved medical devices should insist on clear and exacting pleading standards.”
—Cory Andrews, WLF Vice President of Litigation

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) today asked the Massachusetts Supreme Judicial Court to overturn a decision that would allow plaintiffs to impose burdensome and costly discovery on medical-device makers for unspecified wrongdoing.

The case arises from a lawsuit about Genzyme’s Synvisc-One®, an FDA-approved injection that supplements the knee’s own fluids to help lubricate the joint. While the plaintiff vaguely alleges that her Synvisc-One® injection was “defective” and violated unspecified “FDA regulations,” the complaint lacks factual allegations to support either of those claims. Yet Congress, in the Medical Device Amendments to the Food, Drug, and Cosmetic Act, expressly preempted all state-law claims unless they allege violation of a specific, “parallel” requirement of federal law.

As WLF’s amicus brief shows, the plaintiff’s claims are a textbook example of inadequate pleading and should be dismissed. The complaint’s allegations, even if accepted as true, fail to plausibly describe a manufacturing defect in Genzyme’s product. The complaint fails even to identify the purported defect, or to explain how it was introduced into Genzyme’s manufacturing process. And the plaintiff’s failure-to-warn claim fails to allege any facts that make plausible a deviation from the FDA-approved label, another requirement for avoiding preemption.

WLF’s brief was submitted with the pro bono assistance of David Geiger, Michael Hoven, and Stephen Stich at Foley Hoag LLP.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Urges Mass. High Court to Clarify Pleading Threshold in Medical-Device Cases appeared first on Washington Legal Foundation.

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Court Orders Federal Government to Produce Materiality-Related Discovery in False Claims Act Suit

WLF Legal Pulse - Thu, 08/20/2020 - 4:14pm

By Tirzah S. Lollar, a Partner in the Washington, DC office of Arnold & Porter.*

On July 8, 2020, a federal district court judge in ordered the government to produce discovery regarding its treatment of other Medicare providers in the so-called “mine run” of cases under Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016), when materiality is a disputed element. United States ex rel. Goodman v. Arriva Medical, LLC, et al., 2020 WL 3840446 (M.D. Tenn. July 8, 2020).

Defendant Arriva Medical, LLC (Arriva) sold diabetes supplies to Medicare beneficiaries. The government intervened in a False Claims Act case filed by an Arriva employee and alleged that the defendants submitted false claims: (1) when the defendants had waived Medicare copayments and deductibles in violation of the Anti-Kickback Statute (AKS); (2) for services provided to deceased individuals; and (3) for glucose meters in violation of the “five-year rule” because Medicare had already paid for a meter for that patient in the last five years. The defendants propounded broad discovery requests to the government, seeking that it identify and provide a significant amount of information about all diabetes-testing supply providers that have offered free supplies or products to Medicare patients. The government resisted, arguing that the discovery sought was irrelevant and disproportionate to the needs of the case, and constituted an extraordinary hardship that would essentially require the government to undertake a complex and expensive investigation of every diabetes testing supplier. The magistrate judge issued an order mostly in the defendants’ favor. The judge, however, limited the defendants’ requests to 25 Medicare suppliers. The government subsequently filed a motion for review of the order.

The district court first determined that after the 2010 amendment to the AKS under the Affordable Care Act, “there is no contestable issue of materiality with regard to the government’s AKS-based claims” and reversed the portion of the magistrate’s ruling that required the government to produce discovery of treatment of Medicare providers alleged to have waived copays and deductibles. It also did not require the government to produce discovery on treatment of claims for services provided to deceased individuals, reasoning that those claims are facially false. But when it came to the claims that allegedly violated the five-year rule, the court held that discovery was appropriate. It reasoned that Escobar had made clear that the federal program at issue’s treatment of the regulation in question is as important as the language of the relevant provisions defendants are alleged to have violated. As the court here put it, “under Escobar, materiality is better demonstrated in both the government’s words and its deeds, rather than through its words alone.”

Because the five-year rule fit “fairly neatly into the Escobar mold,” discovery into Medicare’s actual enforcement of the rule was permissible, so long as other factors did not outweigh the relevance of the information sought. Of particular interest, the court rejected the government’s argument that the materiality of the five-year rule claim was undisputed. The government argued that three Arriva executives had testified during the government’s pre-intervention investigation that they understood that Medicare does not pay claims filed in violation of the rule. The government also presented Medicare claims data indicating that Arriva’s claims were frequently denied on that basis. While the court found that both facts were relevant to materiality, it reasoned that they alone were insufficient to remove the issue from “the realm of dispute.” Even if the cited evidence suggested that the five-year rule was being treated as relevant to Arriva’s claims, it did not automatically follow that Medicare behaved the same with regard to other billers’ claims. The court pointed out that “[i]t would significantly undermine the holding of Escobar if the government could manufacture an illusion of indisputable materiality simply by being extra strict ahead of time with whichever company the government wished to sue.”

Having found that the government would need to produce discovery on the five-year rule claims, the court directed the parties to craft a discovery plan in light of its ruling. It noted that the initial discovery requests, even absent the government’s hardship concerns, were overbroad, “essentially call[ing] on the government to conduct an industry-wide audit of companies providing diabetes testing supplies to Medicare patients.” The court reminded defendants that nothing in Escobar negated the importance of weighing relevance of materiality evidence against hardship, and simultaneously warned the government that, given its lengthy pre-suit investigation of the defendants, it bore a “heavy burden” in its attempt to argue that, when “the defendants have a turn, the government’s means are too scant to cooperate.”

All in all, this is a helpful decision for FCA defendants. It confirms that the government does, in fact, have to produce discovery regarding its conduct in the so-called “mine run” of cases, while also providing some insight into how this particular court viewed requests targeting such information.

*Pamela Safirstein contributed to this Counsel’s Advisory. Ms. Safirstein is a graduate of Georgetown University Law Center and is employed at Arnold & Porter’s New York office. Ms. Safirstein is admitted only in Washington, DC. She is not admitted to the practice of law in New York.

The post Court Orders Federal Government to Produce Materiality-Related Discovery in False Claims Act Suit appeared first on Washington Legal Foundation.

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Greater Transparency Can Expose the Illusion of Medical Receivable Funding in Tort Litigation

WLF Legal Pulse - Thu, 08/20/2020 - 4:11pm

By David I. Spector, a Partner, and Caitlin F. Saladrigas, an Associate, in the West Palm Beach, FL office of Holland & Knight LLP.

Tort claims and litigation continue to represent a meaningful line item for members of the insurance, retail, manufacturing, energy, and pharmaceutical industries.  The various causes of this phenomenon and the potential remedies are the subject of frequent scholarly articles, think-tank surveys, and investigative journalism.  For example, in recent years, the impact of litigation financing on tort claims has captured headlines as well as the attention of industry leaders.1  An emerging issue that has received far less attention is the rise and impact of medical receivable funding companies which purchase “medical receivables” from medical providers who render care to personal-injury plaintiffs.

In principle, medical receivable companies widen access to medical care for underinsured personal-injury plaintiffs who would be unable to afford such care without the assistance.  Yet, some medical receivable funding companies are far from altruistic.  Instead, these companies capitalize on tort claims’ damages awards and settlements by purchasing severely discounted receivables from the treating medical providers who would otherwise be compensated for the services rendered to plaintiffs at the conclusion of a claim or litigation.  Medical receivable funders receive damages and settlement funds that derive not from what the funders paid to purchase the receivables, but rather from the full billed amount of the medical services—an amount that healthcare providers rarely receive.2   

If left unchecked, these companies could fuel a significant increase in tort claims and litigation.  COVID-19’s economic impact is expected to push more financially struggling plaintiffs toward healthcare providers backed by medical receivable funding companies.  This Legal Backgrounder discusses how medical receivable funding companies operate, their operations’ impact on the valuation of claims, and avenues that tortfeasors can pursue to mitigate their exposure.

Beware the Medical Receivable Funder: Background

In a typical personal-injury case, an individual or entity’s negligence causes a plaintiff’s injuries.  A plaintiff’s damages generally consist of economic compensatory damages, which cover medical expenses and other hard costs, non-economic compensatory damages, which cover items like pain and suffering or loss of consortium, and potentially punitive damages.  Medical expenses typically represent the majority of a plaintiff’s economic damages.  In most states, larger medical expenses lead to larger non-economic damages and form the basis for computing punitive damages.  Simply put: increased medical expenses lead to increased damages awards.

The primary challenges for personal-injury plaintiffs and the cottage industry that benefits from tort litigation are the delay in payment and the risk of non-payment.  Many months, and sometimes even years, may elapse between the triggering injury and any award of damages.  For underinsured personal-injury plaintiffs who are unable to privately pay for their medical care, this delay can create an obstacle to accessing medical care in the first place.  Similarly, medical providers who treat personal-injury plaintiffs under these circumstances face cash-flow challenges because of significantly delayed payment or, when a claim is unsuccessful, non-payment.

A vital element of medical receivable funding is letters of protection or LOPs.  Plaintiffs use LOPs to assign their right to recover the cost of their medical care to the treating provider.  In such an arrangement, the primary source of recovery for providers is the proceeds of the plaintiff’s claim.  Historically, LOPs provided access to medical care to underinsured personal-injury plaintiffs because a medical provider utilizing an LOP essentially agrees to provide services up front in exchange for delayed payment.  Personal-injury claims do not always succeed.  Thus, in agreeing to provide services pursuant to an LOP, a medical provider assumes the risk of potential non-payment as well.  To offset this risk, LOP providers frequently charge their full rate for the services rather than the discounted rate associated with private or government-sponsored health insurance—and, at times, even artificially increase their rates.3  The higher cost presented on a medical bill can in turn lead to larger payouts by tortfeasors and insurers, and ultimately a greater return for the provider.

LOPs remain a vital piece of the puzzle even when medical receivable funders are involved.  When a medical receivable funding company purchases accounts receivable from a provider, the provider further assigns their right to collect from the proceeds of the claim that originates from the LOP.  Effectively, the medical provider passes their assignment from the patient via the LOP to the medical receivable funding company.  Medical receivable funders also typically contract with the individual plaintiff, much like a provider would through an LOP.  In doing so, the medical receivable funder requires the plaintiff to personally guarantee the full amount of their medical expenses.  Thus, if the plaintiff’s claim fails, the plaintiff still owes the full amount of their medical bills to the medical receivable funder.

Although these transactions occur on a plaintiff-by-plaintiff basis, the terms of the arrangement between the medical receivable funder and the provider are generally established in advance.  One common form involves an agreement by the provider to sell their receivables from the care of personal-injury plaintiffs at a dramatic discount.  Medical receivable funders purchase receivables for as low as 20-40% of the medical bill’s stated value.  When the claim is resolved, the medical funding company receives the portion of the proceeds that are attributable to the provider with which the funding company contracted.  Depending on the amount of damages awarded, a medical funder can profit exponentially more than the amount paid to purchase the receivable.  If the claim fails, the funder, in turn, receives nothing.  In such instances, these funders will at times seek to collect the full amount of the medical receivable from the plaintiff.

What’s the Problem? Phantom Damages.

A medical receivable funding company’s involvement in litigation can lead to a spectrum of questionable and even unlawful behavior.  These arrangements suffer from a profound lack of transparency.  The healthcare provider and the funding company do not disclose the amount paid for the medical receivables to the plaintiff or the tortfeasor.  Instead, the tortfeasor receives a medical bill for the provider’s full charge either as part of a pre-suit claim or during litigation.  The tortfeasor and ultimately the jury remain unaware of the significantly discounted amount the provider has already accepted as full compensation for the treatment performed, and instead are led to believe that the full amount of the bill remains due.  The tortfeasor or the jury relies on the medical bill containing the full amount as an accurate and reasonable reflection of the provider’s charges.  As a result, the tortfeasor issues payment or a jury returns a verdict based on a medical bill for exponentially more than what the provider actually accepted as final payment.  Thus the term “phantom damages.”  What critics of tort litigation historically decried as a windfall for plaintiffs in fact becomes a windfall for medical receivable funders. 

The environment that permits the award of phantom damages also creates the following additional complications, which in turn further increase the risk of inflated damages.

Medically Unnecessary Care

First, the presence of a medical funder and the ease of access to guaranteed payment the funder provides can also lead to unnecessary medical treatment.  Depending on the type of case, this could mean the patient receives additional diagnostic testing or excessive physical therapy, but it could also mean surgery that is not medically indicated solely to drive up the total amount of medical expenses.  For example, certain pelvic-mesh class-action plaintiffs reported being lured into surgery to remove their pelvic-mesh implants, even when these procedures were later determined to be unnecessary.  M. Goldstein and J. Silver-Greenberg, How Profiteers Lure Women Into Often-Unneeded Surgery, N.Y. Times (Apr. 14, 2018).  Medically unnecessary services dovetail with the issue of phantom damages.  By performing medically unnecessary services, providers increase their compensation from medical receivable funding companies while simultaneously expanding the pool of medical expenses, thereby increasing the likelihood of larger damages awards.

Unlawful Patient Brokering

Second, medical receivable funders are uniquely positioned to drive patient referrals to the providers from whom they purchase account receivables and thus facilitate the increase of medical expenses.  Much like providers, medical receivable funders frequently have their own relationships with personal-injury lawyers from whom funders receive referrals of plaintiffs who need medical care.  Medical receivable funders also routinely engage in their own marketing efforts including web and radio advertising and distributing brochures.  Further, medical receivable funders often enter into arrangements under which providers agree to purchase receivables in advance at a discounted flat rate with an agreement to mutually refer patients.  Ultimately, funders refer patients to providers willing to accept payment at a severe discount, which in turn permits the funder to potentially recover a windfall in the eventual tort claim.  In many states such an exponential return on investment may constitute an unlawful kickback in exchange for the patient referral. 

Diminished Recovery for Tort Victims

Third, the award of phantom damages undercuts the American tort system’s core tenet, under which the negligent tortfeasor makes the tort victim whole.  Coupled with plaintiffs’ lawyers who overwhelmingly provide legal services pursuant to a contingency-fee agreement, medical receivable funding companies further restrict the plaintiff’s recovery when awarded damages do not exceed or do not sufficiently exceed the value of the hard costs.  For example, an injured plaintiff incurs $50,000 in injury-related medical expenses and, through a personal-injury lawyer working on a 30% contingency, submits a demand to the tortfeasor for $75,000 inclusive of non-economic damages like pain and suffering.  Rather than paying the full amount of the demand, the tortfeasor pays $50,000.  After subtracting the amount of the attorney’s contingency fee, the remaining proceeds are less than the total amount of the plaintiff’s medical expenses.  Assuming the plaintiff contracted with a medical receivable funder to personally guarantee their medical expenses, as is often the case, the plaintiff conceivably exits their claim receiving essentially no reimbursement for their non-economic damages and runs the risk of liability if the medical receivable funder elects to sue the plaintiff, as sometimes occurs.

Increased Transparency Can Minimize Risks

The rise of medical receivable funding companies, and the phantom damages they instigate, are expected to continue for the foreseeable future.  The challenges posed by medical receivable funding in tort litigation cannot be solved by a “one size fits all” approach.  An excellent place for tort defendants to start is by recognizing the risk medical receivable funders pose, assessing their own exposure, and then taking steps to mitigate against that risk internally, in litigation, and through collective action.

Internal Risk Assessment and Education

As a preliminary step, companies facing regular tort claims should consider and assess the extent of applicable insurance coverage for personal-injury claims.  To do so, tortfeasors must educate their personnel at various levels to identify the extent medical receivable funders impact their business.  Businesses’ awareness of funders’ propensity to increase the cost of personal-injury claims will assist decision making on insurance coverage.

Claims Management

Tortfeasors must seize opportunities to expose the involvement of a medical receivable funder at both the pre-suit and at the litigation stage.  From a claims-administration perspective, enterprises subjected to tort litigation must educate and train personnel handling tort claims on the potential involvement of medical receivable funders.  This awareness will allow tort defendants to more diligently defend claims.  During the pre-suit phase, tort defendants should use this awareness to confirm whether the medical providers received payment for the services performed.  To the extent this information is obtained, tort defendants should use it to better negotiate claims payments.

At the litigation stage, tort defendants should retain counsel committed to aggressively seeking to discover whether accounts receivable were sold both through written discovery and depositions aimed at relevant parties and non-parties.  These tactics have succeeded, though such success may hinge on pursuing a motion to compel or defending a motion for protective order.4  Simply put, a tortfeasor cannot obtain this information if its lawyers are not seeking it in discovery.  Similarly, tort defendants should seek an in limine determination of the admissibility of the amount paid to purchase the medical receivable.  Several recent court decisions allowed juries to consider this information.5  Without knowledge of how much a medical receivable funder paid to purchase the receivable, juries are likely to focus on the stated amount of the service on the medical bill and award damages accordingly. 

Collective Action

State laws that mandate disclosure of the sale of any medical receivable forming the basis of a tort claim and the amount paid to purchase it can also expand transparency.  Traditional tort reform efforts have historically failed to address the root of the phantom-damages problem: the medical bill.  Only recently have states considered legislation aimed at limiting damages commensurate with amounts paid to purchase receivables.  For example, Wisconsin passed a law in 2017 that requires parties to disclose any agreement under which a non-attorney has a right to receive compensation contingent on the proceeds of the civil action.  See Wis. Stat. § 804.01(2)(bg) (2017).  Similarly, Iowa passed a law this year that prevents damages for past medical expenses from exceeding what healthcare professionals and hospitals were actually paid or may be owed for the treatment provided.  See I.C.A. §§ 622.4; 668.14 (2020).  In the past decade, Oklahoma and North Carolina enacted legislation that requires the amounts paid for medical expenses, rather than the amount billed, to be admissible at trial.  See 12 OK Stat § 12-3009.1 (2014); N.C.G.S. § 8C-1, Rule 414 (2011).  The plaintiffs’ bar and medical receivable companies will certainly push back on any broader reform effort.  Those forces were no doubt behind a 2019 Colorado bill that sought to bar discovery of the assignment of a healthcare lien from a provider to any other person or entity.  See Colo. Senate Bill 19-217 (2019). 

Conclusion

Tort-litigation defendants must educate themselves and their attorneys on medical receivable funders and their impact, especially as plaintiffs’ need for this type of alternative funding for medical care increases.  Moreover, tortfeasors must manage the risk that medical receivable funders pose both internally and through litigation efforts.  Finally, businesses impacted by medical receivable funders must continue to advocate for legislative reform to ensure transparency in tort claims and litigation.

Notes

The post Greater Transparency Can Expose the Illusion of Medical Receivable Funding in Tort Litigation appeared first on Washington Legal Foundation.

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