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More Cleanups, or More Litigation?: High Court Takes on Conflict Between CERCLA and State Tort Law

WLF Legal Pulse - Wed, 06/26/2019 - 12:48pm

Samuel B. Boxerman is a Partner with Sidley Austin LLP in the firm’s Washington, DC office and is the WLF Legal Pulse’s Featured Expert Contributor on Environmental Law and Policy.

On June 10, the Supreme Court granted certiorari in Atlantic Richfield Co. v. Christian to consider whether the federal Superfund law bars common-law claims to restore property to a cleanup level beyond what EPA has decided is sufficient to protect the public—or whether state common law provides an avenue to seek a more protective cleanup outside the process established under CERCLA. The Court will hear arguments in the case during its October Term 2019.

The case concerns the former Anaconda Co. Smelter, a 300+ acre copper ore smelting and processing operation that started up back in 1884.  Atlantic Richfield (ARCO) purchased the facility in 1977 and then closed the site in 1980.  EPA placed the property on its National Priorities List in 1983 and substantial cleanup from the historic operations has been completed, with the remaining remedial work in process. As part of the cleanup, EPA directed the company to remediate residential yards and drinking water wells within the Site to a defined cleanup level for arsenic that EPA determined would be protective of human health and the environment.  ARCO has reportedly spent more than $400 million in cleanup costs to date.

The plaintiffs are property owners who claim the Smelter has damaged their property, and they brought various state-law claims against ARCO including (1) injury to and loss of use and enjoyment of real and personal property; (2) loss of the value of real property; (3) incidental and consequential damages, including relocation expenses and loss of rental income and/or value; (4) annoyance, inconvenience, and discomfort over the loss and prospective loss of property value; and (5) expenses for and cost of investigation and restoration of real property.

ARCO did not contest that the plaintiffs could seek money damages – thus only the last claim for “restoration damages” is at issue before the Supreme Court.  Those would be the costs to restore the properties beyond what EPA has required.  The plaintiffs had hired an expert to determine what actions would be required to “restore” their properties to pre-contamination levels, and sought to recover the expected cost of those efforts—the “restoration damages”—which would be placed in a trust account and distributed to pay for restoration work.

ARCO contended that CERCLA bars the plaintiffs’ claim for restoration damages—that as EPA has selected the remedy for the Site, a plaintiff cannot go to state court to ask a judge to impose an additional cleanup remedy beyond what EPA had established.  The Montana Supreme Court disagreed and ordered the case to proceed.

In response, ARCO sought certiorari arguing that (1) the claim is effectively a challenge to EPA’s selected remedy which CERCLA does not allow at this time, (2) the plaintiffs are themselves potentially responsible parties under CERCLA and thus cannot take a cleanup action that has not been approved by EPA, and (3) the claim otherwise conflicts with CERCLA and thus is barred by conflict preemption.  During briefing, the Court asked the federal government to weigh in—and the Solicitor General filed a brief that agreed with ARCO that the state court decision was incorrect, but still urged the Court to deny review as premature and to allow a trial court to first decide if damages were warranted.

Having taken the case notwithstanding the SG’s recommendation, it would seem more likely than not that the Court has done so in order to reverse the state court’s ruling.  If it does not, the decision could set a very unhelpful precedent under CERCLA.  CERCLA provides a stepwise, process for stakeholders to participate at each step in EPA’s remedy selection decision.  EPA considers public input and then chooses a remedy based on an administrative record, applying the criteria set forth in CERCLA and governing regulations.  That remedy is then final and is not subject to judicial review, unless and until EPA brings an action itself to enforce the remedy or recover its cleanup costs.  That certainty is crucial to private parties’ willingness to step up and agree to conduct cleanups, because if private parties implement what EPA directs, that will ensure them some measure of peace.  But, if any unhappy landowner could upset EPA’s choice in a de novo trial in state court, a private party likely will be far less willing to settle with EPA.  That would likely mean more litigation and less cleanup.

The post More Cleanups, or More Litigation?: High Court Takes on Conflict Between CERCLA and State Tort Law appeared first on Washington Legal Foundation.

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Florida Supreme Court Changes Course and Adopts the Daubert Standard for Expert Testimony

WLF Legal Pulse - Tue, 06/25/2019 - 4:28pm

Evan Tager is a Partner with Mayer Brown LLP in the firm’s Washington, DC office and is the WLF Legal Pulse‘s Featured Expert Contributor on Judicial Gatekeeping of Expert Evidence. Mr. Tager is joined on this post by Matthew Waring, an Associate with the firm.

When we reported in November 2018 on the Florida Supreme Court’s decision in DeLisle v. Crane Co., we predicted that the court’s decision to reject the “Daubert standard” for expert testimony might be “short-lived,” given that three of the Justices who had joined the majority—all of whom were generally perceived as “liberal” jurists—were about to retire and be replaced by a Republican governor. Last month, in In re Amendments to the Florida Evidence Code, the new roster of Justices proved us right and adopted Daubert. We aren’t surprised by the outcome, though we didn’t expect it to come quite so soon.

To refresh your memory about the issues here, in federal courts (and most state courts), the admissibility of expert testimony is determined under the reliability standard announced by the U.S. Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc. But a few states still apply the “Frye standard,” which looks only to whether the scientific technique used by a proposed expert witness is “sufficiently established to have gained general acceptance in the particular field in which it belongs” and does not consider the reliability of that technique in the context of the case.

Before 2013, Florida was a Frye state. But in 2013, the Florida Legislature enacted legislation amending the Florida Rules of Evidence to incorporate the Daubert standard. Since then, the legislation has been the topic of much litigation concerning whether and to what it extent it was valid.

Under the separation-of-powers principles of the Florida Constitution as construed by the Florida Supreme Court, the state legislature has the authority to adopt rules of “substantive law,” but only the court itself has the ability to determine rules of procedure. The court declined, in 2017, to adopt the Daubert legislation under the court’s authority to make procedural rules, citing “constitutional concerns”—in particular, fears that Daubert would “undermin[e] the right to a jury trial and deny[] access to the courts.” The upshot of this ruling was that the Legislature’s action could stand only if the adoption of Daubert was a “substantive” change that the Legislature was entitled to make without the Florida Supreme Court’s concurrence.

In DeLisle, the Florida Supreme Court held by a 6-3 vote that the Legislature’s attempt to adopt the Daubert standard was procedural rather than substantive, and hence unconstitutional. The DeLisle decision thus kept the Frye standard in place for litigation in Florida state courts.

Shortly after DeLisle was decided in November 2018, however, three members of the majority in the case—Justices Pariente, Lewis, and Quince—reached Florida’s judicial mandatory-retirement age and retired. We predicted that after new Republican Governor Ron DeSantis appointed replacements for these Justices, the court might either overrule DeLisle’s holding that the Legislature’s adoption of Daubert was a “procedural” change, “or, more likely, simply adopt Daubert under its own rulemaking authority.”

The court’s decision last month took the latter approach, adopting Daubert under the court’s own rulemaking authority. The decision—announced in a per curiam opinion without additional briefing or argument—explained that the “constitutional concerns” that had prompted the court to refuse to adopt Daubert in 2017 “appear unfounded.” The court noted that Daubert is the prevailing standard for expert testimony in federal courts and 36 states and that there is no sign that it has “denied parties’ rights to a jury trial and access to courts” in those court systems.

The court also held that the Daubert standard “remed[ies] deficiencies of the Frye standard”: whereas Frye excludes only novel, unaccepted scientific techniques, Daubert requires that all expert testimony be relevant and reliable, imposing more effective controls on the introduction of inappropriate testimony. And, the court noted, adopting Daubert would “create consistency between the state and federal courts” in Florida, thereby helping to “lessen forum shopping.”

The Florida Supreme Court’s ruling is welcome news for businesses that are sued in Florida state court. As the court noted, Daubert empowers trial courts to play a much more active gatekeeping role than the Frye standard, and it applies to all forms of expert testimony. The result of the decision, therefore, will be that unreliable, result-oriented expert testimony may now be excluded in Florida state courts to the same extent as in federal court—and that plaintiffs therefore will have less of an incentive to choose to litigate in state court.

One note of caution is warranted, however. The court’s opinion noted that certain other “constitutional” and “substantive concerns . . . have been raised about the amendments” adopting Daubert, but declined to address these concerns, stating that they must be “left for a proper case or controversy.” The full scope of Florida’s embrace of Daubert thus remains to be seen. But for the time being, defense counsel litigating in Florida state courts have a valuable new tool for opposing improper expert testimony.

The post Florida Supreme Court Changes Course and Adopts the <em>Daubert</em> Standard for Expert Testimony appeared first on Washington Legal Foundation.

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No Justice Kagan, the Majority Displayed Proper Respect for Precedent in Knick

WLF Legal Pulse - Tue, 06/25/2019 - 11:31am

Justices Breyer, Sotomayor, Kagan, and Ginsburg have repeatedly decried what they view as their colleagues’ inadequate respect for precedent during the Supreme Court’s October Term 2018. Justice Breyer last month wisely cautioned the Court about the dangers of reversing legal course “only because five Members of a later Court” decide that an earlier ruling was incorrect. But Justice Kagan’s vitriolic dissent last Friday in Knick v. Township of Scott was far wide of the mark when it lambasted the Court’s decision to overrule the oft-criticized Williamson County Planning v. Hamilton Bank decision. None of the factors cited as reasons to respect precedent apply to Williamson County. Justice Kagan’s harsh language may have been designed to induce cautious justices to be more reluctant to consider overruling other precedents, but it had little relevance to the case before the Court.

How Much Should Precedent Matter?

The Supreme Court has long accepted the doctrine of stare decisis, which counsels courts in most instances to adhere to a prior decision, despite its errors. The doctrine reflects a judgment that in most matters it is more important that the applicable rule of law be settled than that it be settled right.

The Court traditionally examines several factors in deciding whether to overrule a precedent that it concludes was wrongly decided. Among the factors: (1) did the precedent interpret a statute or the Constitution (the court is less likely to overturn a statutory precedent, because if the interpretation was incorrect, Congress can amend the statute); (2) the quality of the precedent’s reasoning; (3) the workability of the rule it established; (4) its consistency with other related decisions; and (5) reliance on the decision.

Writing for the Court in Knick, Chief Justice Roberts carefully considered each of those factors, and concluded, “All of these factors counsel in favor of overruling Williamson County.” Critics, of course, are entitled to take issue with Roberts’s analysis, but they cannot contend that the Court acted without considering all countervailing arguments for adhering to precedent.

The Williamson County Rule

The Fifth Amendment prohibits the government from “taking” private property without providing “just compensation.” At issue in 1985’s Williamson County was whether a property owner may sue in federal court if he believes that a local government’s regulation of his property amounts to an uncompensated taking. The Court noted that no Fifth Amendment violation can occur until the government has denied compensation, and it held that no denial has occurred even if government officials refuse compensation, so long as the property owner can seek compensation in state court.

In other words, no “taking” occurs until, after many years of litigation, the state court finally rules against the property owner. So the Court held that property owners may not sue in federal court until after they have sued and lost in state court—virtually the only class of claimants asserting violation of a federal constitutional right that is denied a federal forum.

Williamson County was heavily criticized throughout its 34-year history. Among other things, its assumption that property owners would eventually be able to bring their claims to federal court turned out to be mistaken. As the Court later determined in a 2005 decision, issue-preclusion rules bar property owners who have litigated and lost a state-law inverse-condemnation claim in state court from asserting a Takings Clause claim in federal court. Concurring with that 2005 judgment on behalf of himself and three other justices, Chief Justice Rehnquist conceded that his Williamson County opinion had not stood the test of time and recommended that the Court reconsider it.

Knick Overrules Williamson County

Friday’s Knick decision explained why Williamson County was wrongly decided.  Indeed, Chief Justice Robert said that “its reasoning was exceptionally ill founded and conflicted with much of our taking jurisprudence.”  But he also detailed at length why the doctrine of stare decisis did not counsel adherence to Williamson County.  Chief among his reasons: as noted above, it unintentionally barred Taking Clause claimants from ever bringing their claims against local governments to federal court.

Justice Kagan’s dissent disputed the majority’s analysis, labeling the Court’s opinion a “subversion of stare decisis” and complaining that “if that is the way the majority means to proceed … we may as well not have principles about precedents at all.” But she had no real response to the undisputed evidence that Williamson County had been premised on a mistaken belief that its rule would merely delay entry into federal court, not totally bar it. The best she could come up with was that Congress could re-open the federal courthouse door by legislatively overruling normally applicable issue-preclusion rules. That’s certainly a novel principle: the Court should ignore that its erroneous interpretation of the Fifth Amendment is causing an unanticipated but acknowledged injustice for an entire class of litigants because Congress has the power to correct the injustice created by the Court. Not surprisingly, Justice Kagan cites no precedents of her own for that proposition.

Moreover, as Justice Kagan concedes, overruling Williamson County does not upset any reliance interests. Governments will not be exposed to new, unanticipated liability; they will simply face claims in a new forum. Back-tracking from her endorsement of reliance (in prior decisions for the Court) as an important factor in determining whether to adhere to precedent, she stated, “The absence of reliance is not itself a reason for overruling a decision.” But, of course, absence of reliance is only one of many reasons cited by Chief Justice Roberts for not adhering to a precedent determined by the majority to be “exceptionally ill founded.”

Are Property Rights Second-Class Constitutional Rights?

Underlying Justice Kagan’s dissent, as well as dissents in other recent Takings Clause cases, is an apparent policy judgment that property rights are not entitled to the same level of protection afforded to other rights enumerated in the Bill of Rights. That policy judgment is most evident in what she describes as a “damaging consequence” of overruling Williamson County: “it will inevitably turn even well-meaning government officials into lawbreakers.”

In the past, government officials could go about their business of imposing restrictions on private property uses, secure in the knowledge that their actions would virtually never be deemed a constitutional violation. Inverse-condemnation claims would be shunted to state court, and the worst that could happen was that the property owner would be awarded “just compensation” under state law (after years of litigation). But now, Justice Kagan laments, governments that impose property restrictions in a good-faith (but mistaken) belief that no compensation to property owners is required will be called out for having violated the Constitution.

But that lament fails to explain why Takings Clause claims should be treated any differently from claims arising under other provisions of the Constitution. Federal courts routinely determine that local governments have violated First Amendment rights when they, for example, adopt good-faith policies designed to limit permissible locations for public gatherings. They routinely hold local governments responsible for Fourth Amendment violations committed by government officials acting in good faith. There is no reason to hold governments to less exacting standards for taking private property without just compensation—unless one believes that Fifth Amendment property rights are less worthy of protection by the federal courts.

The Fifth Amendment bars the taking of private property “without just compensation.” The most natural reading of that provision is that just compensation has been denied unless it is paid roughly contemporaneously with the taking. It certainly does not contemplate that the government can delay compensation for years on end while forcing property owners to endure lengthy state-court litigation, yet still claim to have complied with the Constitution. Williamson County’s rejection of a straightforward reading of the constitutional text ignored the Court’s takings jurisprudence, proved unworkable in practice, and created no reliance interests.  The decision to overrule Williamson County is no proper cause for concern among proponents of stare decisis.

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

The post No Justice Kagan, the Majority Displayed Proper Respect for Precedent in <em>Knick</em> appeared first on Washington Legal Foundation.

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WLF Urges Pennsylvania Supreme Court to Enforce Due-Process Limits on State-Court Jurisdiction

WLF Legal Pulse - Mon, 06/24/2019 - 1:20pm

“The Due Process Clause imposes strict limits on the authority of a state court to exercise personal jurisdiction over out-of-state defendants.  Pennsylvania courts have repeatedly displayed their unwillingness to enforce those limits.  The Pennsylvania Supreme Court ought to tell lower courts within the Commonwealth that they are no longer permitted to ignore constitutional limits on their authority.”
—Richard Samp, WLF Chief Counsel

Click here for WLF’s brief.

WASHINGTON, DC—Washington Legal Foundation (WLF) on June 21 urged the Pennsylvania Supreme Court to restrict the personal jurisdiction of state courts over nonresident defendants to cases in which the plaintiff’s claims are directly related to Pennsylvania.  In an amicus curiae brief filed in Hammons v. Ethicon, Inc., WLF argues that lower courts in Pennsylvania are inappropriately asserting nationwide jurisdiction over claims against nonresident businesses where the claims bear no relation to Pennsylvania.

The case involves an Indiana woman who claims to have suffered an injury when her Indiana doctor, acting in Indiana, implanted a medical device to treat a prolapsed bladder.  She sued the device manufacturer (a New Jersey-based company), claiming that the device was defectively designed and that the manufacturer provided inadequate health warnings to her and her doctor.

In several landmark decisions issued in the past five years, the U.S. Supreme Court has broadly construed the constitutional rights of defendants not to be haled into courts in States where they do not reside.  The High Court limited such suits to instances in which the plaintiff’s claim arises out of the defendant’s activities in the forum state.  But the lower Pennsylvania courts have interpreted “arises out of” very broadly.  Citing the defendant’s activities in the State, they held in this case that the Indiana plaintiff’s claims are sufficiently related to Pennsylvania, even though those activities are unconnected to the plaintiff’s claims.

A part of the defendant’s manufacturing process occurs in Pennsylvania.  But as WLF points out in its brief, the plaintiff does not argue that her injury arose from some defect in the manufacturing process.  Rather, she faults only the product design (which was undertaken in New Jersey) and the adequacy of warnings (which were provided in Indiana).  WLF argues that the U.S. Supreme Court has explicitly rejected basing personal jurisdiction on in-state activity unconnected to the plaintiff’s claims.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Urges Pennsylvania Supreme Court to Enforce Due-Process Limits on State-Court Jurisdiction appeared first on Washington Legal Foundation.

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In Win for WLF, High Court Permits Takings Clause Claimants to File Lawsuits in Federal Court

WLF Legal Pulse - Fri, 06/21/2019 - 2:00pm

Before today, only one category of individuals claiming a violation of their constitutional rights was required to assert their claims in state rather than federal court: those asserting a takings claim for just compensation under the Fifth Amendment against the government.  Such claimants rarely win in state court.  In its decision today, the Supreme Court correctly ended this discriminatory practice.”
—Richard Samp, WLF Chief Counsel

WASHINGTON, DC—The U.S. Supreme Court today overruled a 1985 precedent that prevented individuals claiming a violation of their Fifth Amendment property rights from bringing their claims in federal court.  The decision was a victory for the Washington Legal Foundation (WLF), which filed an amicus curiae brief in Knick v. Township of Scott urging that the 1985 precedent conflicted with historical understandings of the Fifth Amendment’s Takings Clause.  The Court agreed with WLF that the federal courts have traditionally been open to anyone asserting a violation of their constitutional rights and that there is no reason to deny that same privilege to property-rights claimants.  WLF’s brief was joined by the Allied Educational Foundation.                           

The plaintiff, Rose Mary Knick, owns 90 acres of land in Scott Township, Pennsylvania, where she and members of her family have lived since 1970.  The land has never been designated as a cemetery.  However, Scott Township officials recently determined that several stones on the property are the remains of 18th-century gravesites, and it has ordered Knick to provide an easement across her property to permit daily public access to the stones.  Knick responded by filing suit in federal court, asserting that the easement demand violated the Fifth Amendment prohibition against the taking of private property without providing just compensation.  But the lower federal courts dismissed her claim, citing Williamson County, the 1985 Supreme Court decision that requires property owners to assert such just-compensation demands in a state court.

The Supreme Court ruled that Williamson County was based on a misinterpretation of the Fifth Amendment.  Williamson County concluded that the Fifth Amendment does not require state and local governments to provide “just compensation” at the same time that they take private property, and thus that no Fifth Amendment violation occurs so long as the state government allows the property owner to respond to the taking by filing a lawsuit for just compensation in state court.  In today’s decision, the Court agreed with WLF that the Fifth Amendment does, in fact, require that just compensation be paid contemporaneously with the taking, and thus that the uncompensated taking of private property immediately gives rise to a constitutional violation that can be asserted in federal court.  The Court noted that requiring property owners to file their claims initially in state courts has made it extremely difficult for them ever to be heard in federal court, a result that the Court had not contemplated when it issued Williamson County in 1985.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post In Win for WLF, High Court Permits Takings Clause Claimants to File Lawsuits in Federal Court appeared first on Washington Legal Foundation.

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Frequent-Flier Plaintiff Flies Alone After New York Judge Denies Class Certification

WLF Legal Pulse - Thu, 06/20/2019 - 10:15am

Kathleen Goegel is a 2019 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering her third year at Texas Tech University School of Law in the fall.

Bowling v. Johnson & Johnson is a bit of a repeat in the realm of the “Food Court” litigation the WLF Legal Pulse routinely covers. This is yet another case with a frequent-flier plaintiff attempting to get ahead of the Food and Drug Administration’s (FDA) trans-fat fade out. However, what makes this case unique is the reasoning behind the court’s denial of class certification.

Background

Suzannah Bowling is seeking class certification under Rule 23 for her suit against Johnson & Johnson and its subsidiary, McNeil Nutritionals, LLC. Bowling claims that the defendants’ on-label “no trans-fat” representation misled her and the putative class members into paying more money for the butter substitute Benecol than the product was worth. Benecol, she argued, in fact does contain a trace amount of trans-fat. However, Benecol contained such a low percentage of trans-fat that FDA regulations compelled it to list the amount on the food label as “zero grams trans-fat.” In addition to the economic harm, Bowling alleges that she faced intestinal distress after purchasing and consuming Benecol.

This particular suit is not Bowling’ first food-labeling suit, nor is it her first suit against Johnson & Johnson or McNeil. She previously sued Johnson & Johnson and McNeil and signed a covenant not to sue it or any of its subsidiaries again in return for money.

The Issues

In order for a class to be certified, the plaintiff must meet four requirements under Rule of Civil Procedure 23(a)—numerosity, commonality, typicality, and adequate representation. U.S. District Court for the Southern District of New York Judge Allison J. Nathan found fault with Bowling’s suit on two Rule 23 grounds: typicality and adequate representation. Because two particular defenses Johnson & Johnson was likely to raise—the covenant not to sue and inaccuracies in her personal claim—had the potential to become the focus of the litigation, Judge Nathan refused to certify the class.

Because of a previous mislabeling suit against Johnson & Johnson and McNeil, Bowling signed a covenant not to sue Johnson & Johnson, McNeil, or any of their related entities. Although it was not clear to Judge Nathan how applicable this covenant would be or what remedy would be available, litigation over those questions would be a deterrent from the reason for this suit, which is to determine whether Johnson & Johnson mislabeled Benecol. Overall, the covenant not to sue was a unique defense against only Bowling and would have interfered with the claim that brought about the class.

The court focuses on two key areas of inconsistency in Bowling’s testimony. The first is Bowling’s testimony about purchasing Benecol. Bowling testified that she bought the product from a Walmart in May, June, or the second half of 2011. However, Johnson & Johnson’s records show that Walmart did not sell Benecol during that period. The second is Bowling’s testimony about contacting Johnson & Johnson to request a refund for the product. Bowling testified that she attempted to contact Johnson & Johnson by phone and in writing. However, once again, Johnson & Johnson’s records tell a different story. They have no record of Bowling reaching out to them. These testimonial inconsistencies create a class-certification issue because, as the court says, “the plaintiff’s credibility is so vulnerable to attack that the plaintiff is subject to unique defenses making [her] claim atypical and antagonistic to other members of the class.”

Class denial

Frequent-flier class representatives offer advantages not only to the lawyers that represent them, but also, ironically, to the lawyers representing the businesses they sue. When a plaintiffs’ lawyer identifies a new litigation opportunity, the frequent flier is ready and willing to sign their name to another complaint. However, frequent fliers also bring with them baggage that businesses’ attorneys can exploit. The Bowling case reflects two of those problems. Litigation settlements often include agreements by the plaintiff not to sue the defendant again. A dispute over whether such a covenant applies to bar a future suit involves issues unique to the named representative, and is thus antithetical to the concept of a class action. Frequent fliers are, by their nature, profit-motivated, so they may be more likely to embellish or modify the facts to meet the requirements of the legal claim. That, again, involves an individual inquiry. Plaintiffs’ lawyers should view Bowling as a cautionary tale. Judges presiding over class actions, especially those of the Food Court variety, should follow Judge Nathan’s example and closely scrutinize the claims of frequent-flier plaintiffs.

Of course, the plaintiffs’ lawyers who filed the suit could very well pursue another Benacol purchaser making the very same legal arguments. But at least the defense lawyers’ arguments for dismissal, and the judge’s faithful application of Rule 23, may have grounded at least one frequent flier.

The post Frequent-Flier Plaintiff Flies Alone After New York Judge Denies Class Certification appeared first on Washington Legal Foundation.

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Domino’s Pizza Seeks Supreme Court Resolution of Whether the ADA Applies to Websites

WLF Legal Pulse - Wed, 06/19/2019 - 4:48pm

By Frank Cruz-Alvarez, a Partner in the Miami, FL office of Shook, Hardy & Bacon L.L.P., with Talia M. Zucker, a Partner with Shook, Hardy & Bacon L.L.P. in its Miami, FL office. Mr. Cruz-Alvarez is the WLF Legal Pulse‘s Featured Expert Contributor on Civil Justice/Class Actions.

Enacted in 1990, Title III of the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12181 et seq., provides, in relevant part:

No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.

With specific rules governing who must comply and how, implementation of this prohibition by qualifying entities, at least in the beginning, was a relatively modest concept in practice.  Unbelievably, despite its broad coverage and specific requirements, the ADA has never discussed the Internet despite its ubiquity in the 21st century.  As a result, application of this prohibition as it relates to accessibility of websites or mobile apps has become increasingly controversial and the target for litigation.

One such piece of litigation started in 2016 when Guillermo Robles sued Domino’s Pizza LLC in the U.S. District Court for the Central District of California when he was unable to complete his custom pizza order using the Domino’s website or mobile app.  Robles, who is blind, alleged that Domino’s violated Title III because its website and mobile app were not compatible with the screen-reading software he used to access the Internet.  The district court granted Domino’s motion to dismiss finding that while the ADA applied to websites and mobile apps maintained by brick-and-mortar places of public accommodation, it would be a due process violation if Domino’s website and mobile app were required to comply with Title III when there is no guidance on how to do so.

On appeal, the Ninth Circuit reversed, holding that the Domino’s website and mobile app are subject to Title III.  In so ruling, the Ninth Circuit opined that Title III imposes isolated accessibility requirements for Domino’s website and mobile app because they  “connect customers” to the goods and services of Domino’s physical locations, which are places of public accommodation governed by the ADA.

On the heels of a ruling that extends the reach of Title III into the Internet, a feat the ADA has not yet addressed, and further worsens circuit splits on the issue, Domino’s filed a Petition for Writ of Certiorari on June 19, 2019, hoping for clarity on an issue that affects companies across every industry.  In support of its petition, Domino’s raised three points:  (1) the Ninth Circuit’s decision exacerbates a circuit split over whether website inaccessibility violates Title III, (2) the question presented is recurring and important, and (3) the Ninth Circuit’s decision is wrong.

As to the first point, the First, Second, and Seventh Circuits hold that website-only businesses are subject to Title III liability based on inaccessibility.  See Carparts Distribution Ctr., Inc. v. Auto. Wholesaler’s Ass’n of New Eng., Inc., 37 F.3d 12, 19 (1st Cir. 1994); Pallozzi v. Allstate Life Insurance Co., 198 F.3d 28 (2d Cir. 1999); Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557, 559 (7th Cir. 1999); Morgan v. Joint Admin. Bd., Ret. Plan, 268 F.3d 456, 459 (7th Cir. 2001).  Conversely, the Third, Sixth, and Ninth Circuits have ruled that website-only businesses cannot face Title III liability.  See Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006, 1010 (6th Cir. 1997); Ford v. Schering-Plough Corp., 145 F.3d 601, 614 (3d Cir. 1998); Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1114 (9th Cir. 2000).

This same line of cases are also divided on whether Title III requires websites maintained by companies that also offer their goods and services at brick-and-mortar locations to comply with accessibility requirements.  Once again, the First, Second, and Seventh Circuits hold that any company offering a good or service to the public, whether online or at a physical location, is considered a standalone public accommodation subject to Title III.  In so ruling, the Seventh Circuit explained that, “[t]he site of the sale is irrelevant to Congress’s goal of granting the disabled equal access to sellers of goods and services.  What matters is that the good or service be offered to the public.” Morgan, 268 F.3d at 459; see also Carparts, 37 F.3d at 19; Pallozzi, 198 F.3d at 32–33.

The Third, Sixth, and Eleventh Circuits, however, only impose Title III liability if the disabled individuals lack equal access to the goods or services of the physical place of public accommodation.  Ford, 145 F.3d at 613; Parker, 121 F.3d at 1011; Rendon v. Valleycrest Productions, Ltd., 294 F.3d 1279 (11th Cir. 2002).  These cases focus on whether a website, mobile app, or any specific means of access, hinder a person’s overall access to the goods and services provided by the brick-and-mortar public accommodation.  The Ninth Circuit’s decision squarely conflicts with the Third, Sixth, and Eleventh Circuits.

As Domino’s points out in its second point, the Ninth Circuit’s decision will effectively apply nationwide because as the largest circuit, nearly every national business and non-profit offers its goods and services at physical locations in the Ninth Circuit, as well as on websites and mobile apps.  If this issue lingers, web-accessibility litigation will continue to grow, particularly in the Ninth Circuit where plaintiffs know the law is on their side and companies will struggle to comply.  Furthermore, these lawsuits are expensive, as are plaintiffs’ accessibility demands.  These burdens push businesses and non-profits to settle, or worse, eliminate online offerings, a result that harms all consumers.

In support of its third point, Domino’s explains the improper basis upon which the Ninth Circuit based its opinion.  The plain text of Title III which states that it covers, “any person who owns, leases (or leases to), or operates a place of public accommodation” confines the scope of “public accommodations” to physical locations.  42 U.S.C. § 12182(a) (emphasis added).  Moreover, Title III’s definition of “public accommodation” sets forth twelve categories of places, all of which are physical locations (e.g., “inn,” restaurant,” motion picture house,” “bakery”).  It would be extremely peculiar to conclude that Congress intentionally listed twelve categories of physical locations, but overlooked intangible locations such as websites and mobile apps.

More to the point, Title III does not demand full accessibility for every means of accessing goods or services a public accommodation offers to its consumers.  Rather, Title III contemplates “the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” 42 U.S.C. § 12182(a).  This does not mean that each and every means of accessing goods and services of a public accommodation must be accessible in isolation.  It simply means that a consumer is entitled to “full and equal enjoyment” of the goods and services, whether it be, for example, in a physical location, on a website, or through a telephone hotline.  To hold otherwise would require rewriting the language of Title IIII.

The bottom line is the Ninth Circuit’s opinion misreads Title III and effectively imposes unwritten and unreasonable constraints on companies as it applies to websites and mobile apps.  If not addressed, companies, both big and small, will be forced to expend incredible amounts of money, time, and resources to try to comply with accessibility requirements in the online environment that do not exist.  Now is the time for the Court to intervene and settle a conflict that has been plaguing the circuits and districts for years.

The post Domino’s Pizza Seeks Supreme Court Resolution of Whether the ADA Applies to Websites appeared first on Washington Legal Foundation.

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WLF Urges Supreme Court to Provide FAA Guidance to California’s Courts

WLF Legal Pulse - Mon, 06/17/2019 - 11:02am

“California’s courts plainly need to be told—again—how to apply the Federal Arbitration Act.”
—Corbin K. Barthold, WLF Litigation Counsel

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation today filed an amicus curiae brief urging the U.S. Supreme Court to review a California Court of Appeal ruling inconsistent with the Federal Arbitration Act.

The FAA empowers parties to resolve legal conflicts using efficient, streamlined procedures tailored to the type of dispute. To operate properly, however, the FAA must apply consistently across the nation. California’s courts have repeatedly created inconsistency.

Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000), creates special contract defenses that govern only arbitration clauses. The federal Supreme Court has repeatedly declared that an arbitration clause must be treated like any other contract, yet the California courts have continued to apply Armendariz. The Court of Appeal here used Armendariz to void an arbitration agreement between a law firm and one of its former partners.

In its brief, WLF reviews the California courts’ history of failing to faithfully apply the Supreme Court’s FAA rulings. WLF also explores the variety of ways in which the California courts exhibit bias against arbitration clauses. WLF asks the Supreme Court both to discard Armendariz and to remind California’s courts of the FAA’s demand that neutral rules be applied neutrally.

Celebrating its 42nd 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.

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Unclear Whether Lack of Prison Time in First “Operation Varsity Blues” Sentencing Sets Precedent for Other Defendants

WLF Legal Pulse - Fri, 06/14/2019 - 1:40pm

By Gregory A. Brower, a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC, with Stanley L. Garnett, a Shareholder in the firm’s Denver, CO office. Mr. Brower also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance.

The college admissions bribery scandal that resulted in federal criminal charges against dozens of parents, coaches, school administrators and others (and on which we’ve written about previously here) saw its first sentencing this week. Former Stanford sailing team coach John Vandemoer was sentenced to one day in prison, six months of home confinement, and a $10,000 fine after pleading guilty to a single RICO conspiracy count. With credit for time served prior to his release from custody following arrest, Vandemoer will actually serve no time in prison.

U.S. District Court Judge Rya W. Zobe essentially agreed with Vandemoer’s counsel’s sentencing recommendation while rejecting the government’s request for a less-than-guidelines recommended 13-month prison term. Prosecutors had argued that this first sentence in the investigation dubbed “Varsity Blues” would set the tone for other sentences yet to be imposed on other defendants, most of whom have also pled guilty. At one point during the sentencing hearing, Judge Zobe referenced the RICO statute and suggested it is a “heavy statute” passed to “combat La Cosa Nostra,” and was apparently not convinced that there was any actual loss or victim of Vandemoer’s criminal conduct.

This particular case is unique among the some 50 charged for at least two reasons. First, while Vandemoer did agree to falsely describe three applicants as sailing recruits in exchange for three payments totaling more than $500,000 from the parents of three applicants, none of the three were actually admitted to Stanford as a result of the scheme designed by admitted mastermind William Rick Singer. One of the falsified applications was submitted too late for consideration, although that student apparently was later admitted through the regular process. The two other applicants helped by Vandemoer decided to enroll in other schools.

Second, it was undisputed that Vandemoer did not personally profit from the payments, with the money going, instead, to the Stanford sailing program. Indeed, Judge Zobe said at the sentencing hearing that of all the people involved in the scandal, she had not heard of anyone who was “less culpable.” Another unusual and interesting aspect of this sentencing was the fact that the government actually argued that the pre-sentence report prepared by U.S. Probation and Pretrial Services improperly calculated Vandemoer’s sentencing guidelines number by concluding that there was “no victim of this offense.” Prosecutors argued this defied common sense.

As nearly all of the charged defendants have now pled guilty and await sentencing, it will be very interesting to see if this first sentence is a bellwether for the others, or if the unique facts of this first defendant’s offenses make this one an outlier.

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WLF Urges Fifth Circuit to Broaden Contractors’ Rights to Remove Cases to Federal Court

WLF Legal Pulse - Fri, 06/14/2019 - 12:49pm

“The federal officer removal statute should be broadly construed to allow federal officers (and those acting under them) to remove cases to federal court.  Congress has long endorsed those defendants’ rights to a federal forum so they avoid potential bias in state court.
Mark Robertson, WLF Staff Attorney

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) today urged the U.S. Court of Appeals for the Fifth Circuit to uphold the right of federal contractors to remove cases to federal court whenever, as here, the contractors have articulated a colorable federal defense. In an amicus curiae brief filed in an en banc proceeding, Latiolais v. Huntington Ingalls, Inc., WLF argues that prior Fifth Circuit decisions have adopted an inappropriately narrow construction of the federal officer removal statute.

The initial panel decision in the case, involving a shipyard (Avondale) hired by the Navy to refurbish one of its ships, upheld a district court order remanding the case to state court. But the decision’s author, Judge Edith Jones, criticized Fifth Circuit precedent that required a narrow interpretation of the removal statute and urged the court to rehear the case en banc. The court voted in May to do so.

The plaintiff is a former Navy sailor who was assigned to a ship that Avondale refurbished in the 1960s. He contends that he developed a fatal illness as a result of exposure to the asbestos that Avondale used during the refurbishing process. He faults Avondale for failing to warn him of the dangers of asbestos. Avondale is asserting the federal-contractor defense, under which a federal contractor is immune from suit if the federal government imposes reasonably precise specifications for the installation of asbestos on one of its vessels and the contractor complies with those specifications.

The federal officer removal statute authorizes removal by any officer of the United States “or any person acting under that officer,” “for or relating to any act under color of such office.” In its brief, WLF urges the court to read the statute broadly so as to encompass removal by any federal contractor who raises a “colorable federal defense” (such as the federal-contractor defense asserted by Avondale). WLF notes that Congress broadened the scope of the removal statute in 2011 by adding the words “or relating to” so that removal is now authorized in a lawsuit “for or relating to” any act under color of federal law. WLF argues that the Fifth Circuit should eliminate its current requirement that the defendant establish a “causal nexus” between explicit federal government orders and the plaintiff’s injury.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law. 

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WLF and Antitrust Scholars Urge Second Circuit to Vacate FTC Order Misapplying Quick-Look Standard

WLF Legal Pulse - Fri, 06/14/2019 - 12:17pm

“The FTC summarily punished 1-800 Contacts for trying to protect itself from rivals free riding on its advertising. The FTC says it has thereby promoted competition. All it has really done is discourage innovation.”
—Corbin K. Barthold, WLF Litigation Counsel

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation today filed an amicus curiae brief urging the Second Circuit to vacate an FTC order misapplying the “quick look” antitrust standard. WLF filed the brief on behalf of both itself and prominent antitrust scholars Richard A. Epstein, Keith N. Hylton, Thomas A. Lambert, Geoffrey A. Manne, and Hal Singer.

1-800 Contacts pioneered the online contact lens market. And it continues to spend heavily on television, radio, and print advertising to draw new customers online. It has attracted many competitors. Some of these firms have tried to free ride on 1-800’s offline advertising by buying the advertising space at the top of internet-search results for terms like “1-800 Contacts.” 1‑800 sued or threatened to sue these firms for trademark infringement. Each dispute settled, and as part of each settlement, the allegedly infringing firm agreed not to buy advertisements keyed to 1-800’s trademark terms.

The FTC condemned these settlements as an antitrust violation. Instead of conducting an extensive analysis of the evidence, however, it applied the “quick look” standard, under which the conduct at issue is presumed anticompetitive.

The antitrust scholars and WLF contend that this was error. The quick-look standard governs only when the conduct at issue is obviously anticompetitive. Internet-search advertising is a relatively new phenomenon, so there is little that is “obvious” about its impact on competition.

Further, there are solid procompetitive factors supporting the settlements. Key among these—and the focus of the scholars’ and WLF’s brief—is the settlements’ discouragement of advertisement free riding. The settlements helped ensure that when 1‑800’s broad (and expensive) advertising attracted new customers specifically to 1‑800, competitors could not use internet-search advertising to poach those customers on the cheap. By reducing free riding, the settlements likely maximized the net amount of advertising for online contact lenses—to the benefit of consumers.

Celebrating its 42nd 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.

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WLF Asks Appeals Court to Overturn Certification of Nationwide Class of Cellphone Purchasers

WLF Legal Pulse - Tue, 06/11/2019 - 10:49am

“Nationwide class actions are inappropriate under federal court rules when the claims of class members are subject to conflicting laws from 50 different States.  The plaintiffs’ bar should not be permitted to evade those limitations by filing suit in friendly jurisdictions and then convincing the judge to apply forum law to all claims, regardless of the State in which the claims arise.”

—Richard Samp, WLF Chief Counsel

Click here for WLF’s brief.

WASHINGTON, DC—Washington Legal Foundation (WLF) last evening urged the U.S. Court of Appeals for the Ninth Circuit to reverse a district court’s nationwide class certification order in a lawsuit involving antitrust claims against Qualcomm, a computer chip manufacturer. The certified class consists of 250 million cellphone purchasers—in other words, a significant majority of all Americans. In an amicus brief filed in Stromberg v. Qualcomm Inc., WLF argued that the class action’s massive size renders it unmanageable, and that the California district court improperly applied California antitrust law to the claims of cellphone purchasers in all 50 States.

The plaintiffs allege that Qualcomm engaged in anticompetitive practices that forced cellphone manufacturers to pay inflated royalties to Qualcomm to license certain patents. They further allege that as a result of those inflated royalties, consumers paid more to purchase cellphones than they would have paid had Qualcomm charged reasonable royalties.

Federal antitrust law and the antitrust laws of 22 States provide that only those who have had direct dealings with an alleged antitrust violator may sue for damages. Cellphone purchasers have no direct dealings with Qualcomm (which does not make cellphones), and thus those 23 jurisdictions bar purchasers from filing antitrust claims against Qualcomm. But California is among the States that permits lawsuits by indirect purchasers. By directing the application of California law to the claims of purchasers nationwide, the district court enabled the filing of antitrust claims by cellphone purchasers whose claims would otherwise have been barred.

WLF’s brief argued that each State has a strong interest in applying its own consumer protection laws to product sales occurring within the State. WLF urged the appeals court to respect that strong interest by eliminating from the class action all consumers residing in one of the 22 States that bar antitrust claims by indirect purchasers. WLF also argued that class certification should be reversed because the district court failed to create a plan for managing such a massive lawsuit—by far the largest class action in U.S. history.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

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Bait-and-Switch: Federal Judge Holds that EPA Violated the APA when Defining “WOTUS”

WLF Legal Pulse - Tue, 06/11/2019 - 9:38am

Water of the United States?

By Noah Hearn, a 2019 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering his third year at Texas Tech University School of Law in the fall.

By requiring federal agencies to propose their rules to the public and mandating a method by which the public can express their concerns, the Administrative Procedure Act holds the “fourth branch” of government to a degree of public accountability that would simply not exist otherwise.  On May 28, 2019, United States District Court for the Southern District of Texas Judge George C. Hanks, Jr. recognized this procedural structure by extending an injunction against the enforcement of an EPA rule defining the Clean Water Act’s definition of “waters of the United States.”

The APA

The United States Constitution established only three branches of government: Legislative, Executive, and Judicial. However, as the U.S. grew in both complexity and size, Congress encountered a series of challenges arising from the detail-oriented job of legislating.  Federal administrative agencies presented a solution to this dilemma.  Congress created such agencies to develop regulations that effectuate a broader purpose outlined by the legislature.  Thus, those at the helm of agencies wield considerable influence over the daily lives of American citizens—notwithstanding the fact that they are unelected.  In truth, these administrative agencies are needed in order to govern both effectively and efficiently; but these ideals must be balanced against the need to hold powerful regulators accountable.

Congress’s passage of the Administrative Procedure Act (“APA”) in 1946 constituted an attempt to breathe public oversight into an otherwise undemocratic process.  The APA requires that agencies provide sufficient notice to interested parties on proposed regulations.  This obligation is satisfied when agencies publish proposed rules in the Federal Register and provide the public with a reasonable amount of time to provide feedback or “comment” on those proposed rules.  This process is designed to equip those most likely to be affected by regulatory change with an opportunity to participate in the rulemaking.

Texas v. EPA

This notice-and-comment process is straightforward, and its justification is sound; nevertheless, agencies comply grudgingly and often seek to navigate around their APA responsibilities.  The events underlying State of Texas, et al. v. United States Environmental Protection Agency, et al. provide a timely and compelling example of a federal agency’s circumvention of the APA rulemaking process to reach a desired result.  With the clock ticking on the Obama Presidency, the Environmental Protection Agency (“EPA”) conducted the regulatory equivalent of a “bait-and-switch,” proposing to adopt a Clean Water Act (CWA or Act) regulation and then abandoning the proposal in favor of an entirely different set of rules.

Congress passed the CWA in 1972 with the intention of “restor[ing] and maintain[ing] the chemical, physical, and biological integrity of the Nation’s waters.”  The Act made it “unlawful” to “discharge. . . any pollutant” into “navigable waters”; however, the precise scope of the statutory language “navigable waters” has since become the subject of hot debate.

The CWA defines navigable waters as “the waters of the United States, including territorial seas,” but this broad definition provides little, if any, technical guidance to individuals and corporations alike.  The two regulatory agencies charged with administering the CWA—the EPA and the U.S. Army Corps of Engineers—have consistently failed to clearly define “waters of the United States” (WOTUS).  This decades-old struggle came to a head in 2014 when the agencies proposed a rule that would split “waters of the United States” into three separate categories: (1) categorically covered, (2) categorically excluded, and (3) case specific. Under this proposed rule, the agencies would have jurisdiction over all waters adjacent to categorically covered waters.  Meanwhile, “adjacent” was to be defined as “bordering, contiguous or neighboring.”

As required by the APA, the proposed rule was published in the Federal Register and a three-month comment period commenced.  However, after the comment period ended the agencies issued a “Revised Connectivity Report” and—citing the report’s findings—proceeded to fundamentally alter the proposed rule before releasing the final version.  The new rule would instead define “adjacent waters” by using distance-based criteria rather than the ecologic and hydrologic criteria featured in the proposed rule.  EPA promulgated this Final Rule notwithstanding the fact that its features had never before been tested by a rigorous notice-and-comment process.

After recognizing how the agencies shamelessly executed an end run around the public’s right to comment, Texas, Louisiana, and Mississippi brought suit in Texas v. U.S. EPA and prevailed.  In his opinion, Judge Hanks explains that the EPA “depriv[ed] plaintiffs of a meaningful ‘opportunity to comment’ and possibly deconstruct the Final Connectivity Report,” an action which “violated the [APA].”  This is because the public was never given the chance to comment on the over-300-page Connectivity Report, which examined the effect of wetlands and small streams on downstream water quality. Instead, the agencies simply proposed one rule before proceeding to pass an entirely different one—a classic bait-and-switch.

Conclusion

This case is more than simply another nail in the coffin of WOTUS’s definition; indeed, it also serves as an unambiguous rebuke of agencies who defy the APA.  Here, Judge Hanks correctly held that interested parties should not be forced to “parse through . . . vague references like tea leaves to discern an agency’s regulatory intent,” or otherwise risk being blindsided by a final rule that is not a logical outgrowth of the proposed rule.  Put simply, agencies cannot opt out of transparency regardless of how time consuming notice and comment may be.  The APA contains no exception for political expediency, nor does it bless the concealment of regulatory intentions until the last possible juncture like some kind of Trojan horse.

The post Bait-and-Switch: Federal Judge Holds that EPA Violated the APA when Defining “WOTUS” appeared first on Washington Legal Foundation.

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Federal District Court Rejects OLC Opinion Reinterpreting the Wire Act

WLF Legal Pulse - Tue, 06/11/2019 - 9:00am

By Gregory A. Brower, a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC, with William E. Moschella, a Shareholder in the firm’s Washington, DC office. Mr. Brower also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance.

On February 20, we posted about a November 2018 U.S. Department of Justice (DOJ) Office of Legal Counsel (OLC) opinion that reversed a 2011 OLC opinion on the scope of the Wire Act, a law that prohibits certain gaming activities across state lines. The 2011 opinion had clarified that the statute applied to sports betting only. The new opinion reinterpreted the Wire Act to prohibit all forms of wagering activity that crosses state lines, not just sports betting. We also reported back in February that two lawsuits had been filed challenging the new opinion. Last week, that litigation was decided in favor of the plaintiffs, with a federal court effectively setting aside the new opinion with a declaration that the Wire Act applies to sports betting only.

DOJ vigorously defended the challenge to the most recent OLC opinion, raising both procedural and substantive objections, and even, on the eve of oral argument, issuing a memorandum in which it attempted to disclaim any intent at actually enforcing the opinion against the plaintiffs. Nevertheless, a federal district court in New Hampshire moved ahead with a decision. After first finding that the plaintiffs had standing and that the 2018 OLC opinion was a “final agency action” for purposes of a valid claim under the Administrative Procedure Act, U.S. District Court Judge Paul Barbadoro addressed the merits of the dispute and concluded as follows: “In sum, while the syntax employed by the Wire Act’s drafters does not suffice to answer whether Section 1084(a) is limited to sports gambling, a careful contextual reading of the Wire Act as a whole reveals that the narrower construction proposed by the 2011 OLC Opinion represents a better reading.”

Judge Barbadoro went on to conclude that the “Act’s legislative history, if anything, confirms this conclusion.” Based upon these findings, the court declared that § 1084(a) of the Wire Act “applies only to transmissions related to bets or wagers on a sporting event or contest,” and further declared that the “2018 OLC Opinion is set aside.”

This decision, while subject to appeal by DOJ, is significant for the gaming industry, which increasingly is developing online products that electronically cross state lines in some way. Because the 2011 DOJ opinion seems so logically based on the text and history of the statute, and because online products were developed in reliance on that opinion, it was a surprise to most all observers that DOJ would suddenly reinterpret the scope of the statute. With this much anticipated judicial decision, it would appear that a more logical interpretation has been restored, at least for now.


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