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Updated: 2 hours 43 min ago

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

Fri, 02/14/2020 - 12:10pm

“California’s courts plainly need to be told—again—how to apply the Federal Arbitration Act.”
—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 U.S. Supreme Court to review a California Supreme Court ruling inconsistent with the Federal Arbitration Act.

The FAA establishes a federal policy favoring arbitration. To operate properly, however, the FAA must apply consistently across the nation. The California Supreme Court has repeatedly created inconsistency. It has done so in this case by striking down an arbitration agreement that, in its view, provided the parties too much procedure. It declared the agreement unconscionable on the ground that it set forth rules that look more like ordinary civil litigation than like California’s administrative wage-dispute resolution process.

WLF’s brief argues that the California Supreme Court’s ruling is nothing more than a thinly veiled attempt to ban wage-dispute arbitration altogether, in gross defiance of the FAA. The brief also places the ruling in context, showing that it is simply the latest in a long line of recent California high court decisions that discriminate against arbitration. Finally, the brief discusses the California courts’ improper use, when looking at arbitration clauses, of a special, distorted version of the contractual unconscionability defense.

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. 

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The post WLF Urges Supreme Court to Provide FAA Guidance to California’s Courts appeared first on Washington Legal Foundation.

Categories: Latest News

Fear and Loathing at the Department of Labor: Has the OFCCP Become a Law Unto Itself?

Tue, 02/11/2020 - 4:47pm

The Framers of our Constitution elevated one historical insight above all others. Concentrating power in the hands of a single branch of government, they agreed, is the antithesis of liberty. An “accumulation of all powers, legislative, executive, and judiciary, in the same hands,” James Madison warned in Federalist 47, “may justly be pronounced the very definition of tyranny.”

The modern administrative state may be a softer form of absolutism than that of Charles I, but it is no less tyrannical. Take the phenomenon of federal agency adjudication. An agency investigates American citizens for alleged administrative offenses. Then it prosecutes and tries them for those offense, not in a court of law, but in the agency’s own administrative star chamber. Beyond allowing the agency to be the investigator, prosecutor, and judge in its own case, agency adjudication in practice often allows the agency to decide cases based on its own internal policies, not on Acts of Congress.

To appreciate the perils of administrative adjudication, one need look no further than to the Office of Federal Contract Compliance Programs. As a division of the Department of Labor, the OFCCP enforces anti-discrimination provisions in federal contracts. The OFCCP’s chief method for rooting out discrimination by contractors is a jarringly blunt statistical calculus. If a company’s workforce is off—even if by a few percentage points—from the minority composition of the available applicant pool, the OFCCP assumes the company has engaged in discrimination.

The OFCCP rarely considers whether anyone has even complained about the company’s hiring or promotion practices, much less whether the company’s hiring and promotion decisions are in fact biased. Indeed, it often proceeds against the accused contractor with zero evidence of discriminatory animus or motive. Under the OFCCP’s approach to discrimination, intent doesn’t matter. Nor does the diversity of the company’s board, or its longstanding commitment to, and investment in, an outreach plan that identifies and recruits qualified minority candidates.

The OFCCP’s stark statistical analysis has produced some curious results. In 2012, it forced FedEx into a $3 million settlement. According to the Labor Department’s own press release, “The affected workers, include men and women as well as African-American, Caucasian and Native American job seekers, as well as job seekers of Hispanic and Asian descent.” In other words, the agency claimed that FedEx discriminated against virtually every class of worker in one way or another. Who benefited from this indiscriminate discrimination? We are left only to guess.

If it suspects a federal contractor or subcontractor of violating one of the anti-discrimination provisions in a government contract, the OFCCP doesn’t refer the matter to the DOJ to sue for breach of contract in federal court. Nor does it refer the company to the EEOC for further investigation and possible action under Title VII. Instead, the OFCCP brings an administrative enforcement action against the accused before the Labor Department’s own administrative law judges. Appeals from that adjudication? The Labor Department decides the appeal, too.

Rather than pursue contractual damages, the OFCCP seeks—in a case of alleged “pay bias,” for example—individualized back pay awards and other “make whole” relief on behalf of the contractor’s employees. It may impose hiring quotas or require linkage agreements between contractors and Labor Department job-training programs to ensure that employers identify and recruit qualified workers. The ultimate sanction is debarment, the loss of a company’s federal contracts. None of these, of course, are traditional contract remedies.

Yet the most extraordinary thing about the OFCCP’s adjudication process is that Congress has never authorized it. With a straight face, the OFCCP claims an LBJ-era executive order—Executive Order 11,246—as the source of its authority to conduct administrative adjudications. But that order identifies no statutory authority for the OFCCP’s adjudicative process. It requires only that government officials include a set of anti-discrimination provisions in government contracts. And it contemplates that the Department of Labor may, after consulting with the contracting agency, sanction an offending contractor by cancelling the contract or by suspending the contractor’s ability to contract with the government. It doesn’t authorize an entire regime to bring, prosecute, and then adjudicate discrimination claims, or to obtain injunctive relief and back pay for employees of government contractors. Not even EEOC can do that without going into court.

Secretary of Labor Eugene Scalia has long criticized administrative overreach by the Labor Department. In a 2014 op-ed in the Washington Post, for example, he complained that then-President Obama’s Labor Department was wielding executive orders “to bypass Congress.” Such orders, he rightly observed, lack “the democratic pedigree of laws passed by both houses of Congress.” Yet since Secretary Scalia assumed his post in September 2019, the OFCCP has seemingly grown more strident under his watch. At the same time, Secretary Scalia has had nothing to say about OFCCP’s ultra vires enforcement regime.

To be clear, the question the OFCCP’s conduct raises is not whether claims of discrimination and contractual violations should be tried and adjudicated; they should be. The question is where and under what lawful standard. Congress rarely gives agencies broad and unfettered authority to investigate, prosecute, and adjudicate lawsuits entirely in-house. But as we have seen, that hasn’t stopped agencies like the Labor Department from asserting and exercising that authority.

And while the OFCCP’s decisions are ultimately subject to judicial review in federal court, Chevron deference allows the agency to effectively interpret the relevant law as well as enforce it. Chevron tells the judge that she must understand the law, if unclear, to mean not what she interprets its text means, but what the agency says it means. In the context of an Executive Order, this unites the powers of making, enforcing, and interpreting laws in the same hands. At best, it obliterates the Constitution’s separation of powers. At worst, it erects a modern form of tyranny.

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

The post Fear and Loathing at the Department of Labor: Has the OFCCP Become a Law Unto Itself? appeared first on Washington Legal Foundation.

Categories: Latest News

WLF Welcomes Mayer Brown LLP Partner Evan Tager to Our Legal Policy Advisory Board

Fri, 02/07/2020 - 10:02am

“Evan Tager is an accomplished appellate advocate and an influential legal-policy thought leader. WLF is honored that he has agreed to join the Board.”
—Constance Larcher, WLF President and CEO

(Washington, D.C.)—The Washington Legal Foundation (WLF) and the Chairman of its Legal Policy Advisory Board, Jay B. Stephens, are pleased to announce that Evan M. Tager, a partner with the law firm Mayer Brown LLP, has joined WLF’s Board.

Evan is a member of Mayer Brown’s highly respected Supreme Court & Appellate and Class Actions practices. He has delivered over 50 appellate arguments before the U.S. Supreme Court, state supreme courts, and federal and state courts of appeal. Notably, Evan has represented either a party or an amicus in every U.S. Supreme Court case involving punitive damages in the last two decades. In addition to shaping legal precedents on punitive damages, Evan has made a major impact on the enforceability of arbitration provisions in contracts.

In addition to his appellate acumen, Evan takes a strategic and analytical approach to shaping how legal decision makers and the public view the impact of laws and court rulings on free enterprise. He edits Mayer Brown’s Guideposts blog on punitive damages and serves as the WLF Legal Pulse’s Featured Expert Contributor on Judicial Gatekeeping of Expert Evidence. He has published extensively on punitive damages, class actions, and expert testimony. Evan was the lead author on WLF’s recently published Monograph, Admissibility of Expert Testimony: Manageable Guidance for Judicial Gatekeeping.

“We are honored that Evan has agreed to join our Advisory Board,” said WLF President and CEO Constance Larcher.  “He has brought numerous litigation opportunities to our attention, and has regularly answered the call when we’ve asked him to write a paper or blog post. Evan shares WLF’s conviction that legal victories for the cause of free enterprise can be achieved not only in court, but also through educating policy makers on the bench and in regulatory agencies.”

WLF’s Legal Policy Advisory Board includes over forty distinguished professionals from the government and the legal, academic, and public policy communities who serve on a volunteer basis. 

Celebrating its 43rd 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 Welcomes Mayer Brown LLP Partner Evan Tager to Our Legal Policy Advisory Board appeared first on Washington Legal Foundation.

Categories: Latest News

WLF Asks Ninth Circuit to Enjoin New California Law That Targets Pharmaceutical Settlements

Thu, 02/06/2020 - 10:53am

“If California had deliberately set out to stifle drug innovation and constrict America’s vital supply of affordable drugs, it could have hardly enacted a more potent law to do so.”
—Cory Andrews, WLF Vice President of Litigation

Click here for WLF’s brief

WASHINGTON, DC—Earlier today, Washington Legal Foundation (WLF) urged the U.S. Court of Appeals for the Ninth Circuit to enjoin a controversial new state law that imposes staggering liability on drug makers for merely carrying out federal policy. WLF’s amicus curiae brief was joined by the National Association of Manufacturers and the U.S. Chamber of Commerce.

For more than 35 years, patent-litigation settlement has been the chief market-entry vehicle for low-cost generic and biosimilar drugs. The U.S. Supreme Court largely blessed this practice in 2013 in FTC v. Actavis, refusing to condemn as presumptively anticompetitive patent settlements that include a so-called reverse payment.

But a new California law erects the very presumption that Actavis rejected. Under Assembly Bill 824 (AB 824), every pharmaceutical patent settlement is presumed unlawful if it gives a generic manufacturer “anything of value,” including an “exclusive license,” and postpones generic market entry for even a day. And every company that enters into such a settlement on terms found to violate the law is liable for three times “California’s share of the market for the brand drug at issue in the agreement.” Worse still, every person who merely “assists in” such a settlement must pay a civil penalty no less than $20 million.

As WLF’s brief argues, by elevating state law over federal law, California’s AB 824 erects several major obstacles to the accomplishment of federal law, frustrates the policy aims of Congress, and is thus preempted under the Supremacy Clause. In particular, the law poses discrete roadblocks to Congress’s aims under federal food-and-drug law, federal patent law, and federal antitrust law.

Celebrating its 43rd 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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The post WLF Asks Ninth Circuit to Enjoin New California Law That Targets Pharmaceutical Settlements appeared first on Washington Legal Foundation.

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FDA’s Laudable “CURE ID” Program Fatally Undermines Agency’s Censorship of Off-Label Speech

Wed, 02/05/2020 - 12:12pm

Richard A. Samp retired on December 31, 2019 after a three-decade career as Washington Legal Foundation’s Chief Counsel.

The Food and Drug Administration announced in December its launch of CURE ID, an Internet repository for information about off-label uses of FDA-approved medical products. FDA asserts that “crowdsourcing” off-label information will assist healthcare providers by offering guidance on treating difficult-to-treat diseases. But FDA’s active promotion of off-label speech fatally undermines what was left of its already shaky claim that it is entitled to suppress truthful speech by drug manufacturers.

The Supreme Court has long recognized that the First Amendment, subject only to narrow and well-understood exceptions, bars the government from imposing content-based controls on speech. FDA has nonetheless asserted authority to severely restrict what drug manufacturers can say about their products, even speech that is neither false nor misleading. In general, FDA limits manufacturer speech to information contained on a product’s FDA-approved labeling. Courts have been highly skeptical of FDA’s various rationales for its restrictions on truthful manufacturer speech. Those rationales have been rendered unintelligible by FDA’s decision to facilitate the very same off-label speech by others.

CURE ID Serves Important Health Care Functions

FDA deserves praise for its decision to launch CURE ID. As FDA acknowledges, many patients would receive sub-optimal care if their doctors were limited to prescribing drugs only for FDA-approved uses. Over the course of their medical practices, doctors routinely discover that a patient who does not respond to treatment with a drug labeled as safe and effective for his condition will nonetheless respond to other drugs not so labeled (generally referred to as “off-label” uses). In some fields such as oncology, the great majority of medically accepted treatments involves off-label uses of FDA-approved drugs and medical devices.

Doctors’ ability to effectively employ off-label uses of FDA-approved products is predicated on their access to reliable information about the effectiveness of new off-label treatments. FDA’s launch of CURE ID advances that educational process; it will provide doctors with invaluable information in deciding how to treat patients who have not responded to FDA-approved treatments. The program encourages doctors to share clinical outcomes whenever they prescribe FDA-approved drugs for off-label uses. FDA’s press release announcing the launch of CURE ID asserted, “The systematic collection of real-world experience in the app will help identify drug candidates for additional study, encourage further drug development, and may serve as a resource for practitioners making individual patient treatment decisions in the absence of established safe and effective options.”

FDA’s First Amendment Defenses

So now that FDA is in the business of promoting widespread dissemination of off-label information, how does it justify its continuing efforts to bar drug manufacturers from doing likewise? In defending its ban over the past 25 years, FDA has relied on three principal arguments: (1) the First Amendment is inapplicable because it is regulating manufacturer conduct (i.e., the marketing of a drug for an unapproved new use), not manufacturer speech; (2) the ban prevents the dissemination of false or misleading information; and (3) the ban encourages manufacturers to undertake the “well-controlled” (i.e., massively expensive) clinical studies necessary to obtain FDA approval to add the new use to its product label.

Federal courts have universally rejected FDA’s First-Amendment-is-inapplicable defense. Courts have held that FDA is, in fact, regulating speech when it relies on a manufacturer’s off-label speech as its basis for concluding that the manufacturer is marketing a drug for an unapproved new use.

Court have also been wary of FDA’s claim that the ban is necessary to prevent the dissemination of false or misleading information. Of course, the Constitution doesn’t prevent FDA from suppressing commercial claims unsupported by any reliable clinical data. But the First Amendment does not permit FDA to put a hold on manufacturers’ speech until after the agency has reviewed and has blessed the data supporting the claims.

A federal judge flatly rejected that FDA argument in Washington Legal Foundation v. Friedman, explaining, “[I]n asserting that any and all scientific claims about the safety, effectiveness, contraindications, side effects, and the like regarding prescription drugs are presumptively untruthful or misleading until FDA has had the opportunity to evaluate them, FDA exaggerates its overall place in the universe.” 13 F. Supp. 2d 51, 67 (D.D.C. 1998). That argument is even less tenable now that FDA, by launching CURE ID, is actively promoting crowd-sourced clinical data that it has not sought to verify.

What About Manufacturer Participation in CURE ID?

Conspicuously absent from those invited to contribute clinical data to CURE ID are drug manufacturers. Only “health care providers” are invited to supply off-label information to the Internet-based repository. In other words, in launching CURE ID, FDA is not signaling an intent to loosen its ban on manufacturer off-label speech.

As a scientific question, that policy makes little sense. The manufacturer of an FDA-approved product is very likely to be very familiar with all available data regarding off-label uses of its product. It is the entity best positioned to distinguish scientifically validated off-label information from off-label information that lacks solid scientific support. Thus, by preventing manufacturers from being part of the conversation, FDA is likely causing medical professionals to make worse decisions on whether to make off-label use of FDA-approved products when treating their patients.

As to the constitutional question, FDA’s launch of CURE ID undermines its remaining First Amendment defenses. FDA argues that suppressing truthful off-label speech encourages manufacturers to seek new labeling authority as a means of garnering increased sales revenue. There is little evidence that FDA’s policy has ever had that desired effect. But even if the policy once had that effect, it is far less likely to have that effect now that FDA has launched CURE ID. By facilitating the dissemination of off-label information (and thereby encouraging increased prescriptions for off-label uses), FDA greatly reduces manufacturer incentive to invest in the well-controlled studies necessary to obtain labeling authority for those uses. And in the absence of evidence that commercial speech suppression directly and substantially advances an important government interest, the First Amendment prohibits speech suppression.

The post FDA’s Laudable “CURE ID” Program Fatally Undermines Agency’s Censorship of Off-Label Speech appeared first on Washington Legal Foundation.

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Upcoming Briefing—High Court Halftime: The U.S. Supreme Court’s October Term 2019 at Midpoint

Tue, 02/04/2020 - 1:55pm

Thursday, February 13, 2020, 1:00 p.m. EST

2009 Massachusetts Ave., NW, Washington, DC or Live Online

Speakers:

Elaine J. Goldenberg, Munger, Tolles & Olson LLP
Sarah M. HarrisWilliams & Connolly, LLP
Andrew J. Pincus, Mayer Brown LLP
Jay B. Stephens, Kirkland & Ellis LLP (moderator)

The post Upcoming Briefing—High Court Halftime: The U.S. Supreme Court’s October Term 2019 at Midpoint appeared first on Washington Legal Foundation.

Categories: Latest News

A Word For Business As Usual: Now As Ever, Corporate Success Is American Success

Tue, 02/04/2020 - 1:11pm

Yamamoto Tsunetomo was a rōnin and monk of the mid-Edo period. After his death in 1719, one of his students compiled his sayings into a treatise on Bushido called Hagakure (“In the Shadow of Leaves”). Tsunetomo believed that a samurai must be quiet, selfless, rigorous, and fanatically devoted to service and duty. The highest good, Tsunetomo taught, is found in single-minded and self-effacing commitment to one’s craft. “Throughout your life advance daily,” he urged, “becoming more skillful than yesterday, more skillful than today. This is never-ending.” The master samurai never thinks he has succeeded.

Even Tsunetomo was not entirely rigid. “It is foolish,” he observed in a lighter moment, “to live within this dream of a world seeing unpleasantness and doing only things you do not like.” But “it is important never to tell this to young people,” he warned, “as it is something that would be harmful if incorrectly understood.”

Yet today the young see the message of self-indulgence everywhere. They learn that they can do as they like by simply adopting their teachers’ opinions. Want to skip class? No problem—do so in protest of gun violence or fossil fuels.

If a bright and agile youth is careful always to conform her thinking to the latest trends, she can keep at this game all her life, always pretending that gratification and decadence is discipline and sacrifice. No matter her profession—media, scholarship, law, whatever—the savvy operator can put her desires before her obligations, can even claim with a straight face that they’re the same thing, not only without fear of losing anything of substance, but confident of being showered in rewards and plaudits by all the right people.

The higher one rises, in fact, the less is one obliged to stick to one’s real job. The whole point of index investing, for instance, is to move money away from the people who think they can predict the future. But Larry Fink, who, as the head of BlackRock, oversees many of the world’s largest index funds, has wants of his own. He wants to lecture his clients about “sustainability-integrated portfolios,” so he does. He wants to use his clients’ shareholder votes to promote his environmentalism, so he does.

“A company cannot achieve long-term profits without embracing purpose,” Fink writes in a recent letter to other CEOs, “purpose” being his corporate-speak euphemism for progressive activism. A company that lacks “purpose” is bound, in his view, to “hike prices ruthlessly,” “shortchange safety,” and “fail to respect its clients.” Sure, Fink’s belief in a link between profit and progressivism is just an article of faith. Sure, his depiction of any CEO who doesn’t share that faith as a lawless, price-gouging Gordon Gecko is ridiculous. Sure, it’s not even his money to begin with. But sound index investing is not nearly as gratifying as crusading, and, more than that, being seen to crusade, for social justice.

Last year 181 members of the Business Roundtable announced their “fundamental commitment” to “all” of their “stakeholders.” The CEOs who signed this statement cannot be blamed for trying to remind a spoiled and disenchanted public that well-functioning corporations solve problems and make life better for everyone. But talking about “stakeholders” invites confusion. Had the idea been to confirm that a company should develop useful products, treat customers and employees well, obey the law, and dabble in charity, no declaration about “stakeholders” would have been needed. A company seeking to generate returns for shareholders already had good reason to do each of these things. So although it praises “the free-market system,” the Roundtable’s statement can easily be seen, perhaps mistakenly, as endorsing the notion that a corporation is owned by society as a whole.

Rest assured that “society” in this context will mean whoever shouts the loudest, and that no one shouts louder than subversive malcontents. They come in many forms. One is the proverbial protestor waving a bullhorn in a hapless barista’s face. Another is Senator Elizabeth Warren, who promptly wrote several of the Roundtable’s members, insisting that they endorse her bill to subject companies to various forms of political discipline. The common thread among the reformists, among those who claim to speak for “society” and “the people,” is a desire to get corporations out of the business of generating wealth for society and money for the many people who hold shares.

Of course, no trade strays farther from the job at hand than the movie trade. It’s understandable. If your product happens to make you famous, you might well mistake your fame for wisdom. The more prominent the actor, the more certain one may be that his Oscar speech will have nothing whatsoever to do with acting.

But at least Hollywood can, on occasion, make art. Andrew Dominik’s 2012 film Killing Them Softly is a darkly beautiful example. It is a great movie. One might even call it a great samurai movie. Jackie Cogan (Brad Pitt) is a hitman—an American samurai. He lives by a code no less than Tsunetomo did. Indeed, he, like Tsunetomo, is a kind of rōnin: he is a loner upholding the austere values of his order even as others—such as Mickey (James Gandolfini)—grow fat and careless.

Cogan completes three mob hits for $45,000. He meets a handler in a bar to collect. He learns that the bosses now intend to pay only $30,000. On a television beside the liquor, Barack Obama is giving his 2008 election victory speech. “Recession prices,” the handler says. He cautions Cogan to remember that they are in a “relationship” business. “Out of many, we are one!” Obama declares behind them. This line, the handler insists, is for Cogan.

Cogan does not buy it. “America is not a country,” he responds, his eyes narrowing. “It’s just a business.”

The viewer is meant to be repulsed by Cogan’s cynicism. But there is another way to see things. In the mob world, it’s Cogan who has played by the rules. He did the job; he did it without a fuss; he’s owed the agreed price. It’s the handler, meanwhile, who is using a false appeal to virtue to shirk responsibility.

America is just a business. Sure, it sounds harsh. But compared to what? In a fraying republic, “Stick to business” might be the soundest possible admonition.

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

The post A Word For Business As Usual: Now As Ever, Corporate Success Is American Success appeared first on Washington Legal Foundation.

Categories: Latest News

January 2020 Month in Review

Tue, 02/04/2020 - 10:30am

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

NEW FILINGS

WLF urges the Massachusetts Supreme Judicial Court to ensure that civil litigation in the Commonwealth is procedurally fair to all parties. (In re Mass. R. Civ. P. 51)

WLF urges the Fourth Circuit to vacate a trial-court order that amounted to a de facto administrative rulemaking. (In re Cigar Ass’n of America)

DECISIONS

The Department of Labor issues its final Joint Employer Rule, which sets out a narrow, four-part test for whether a business may be deemed a “joint employer” of another company’s employees. (In re Joint Employer Status under FLSA)

The U.S. Supreme Court denies certiorari to the Ninth Circuit, which held that a bare procedural harm under a state privacy statute satisfies Article III’s injury-in-fact requirement. (Facebook, Inc. v. Patel)

The Ninth Circuit denies rehearing in a decision that misconstrues the Federal Arbitration Act’s saving clause. (Tillage v. Comcast)

The Eighth Circuit holds that Missouri’s New Deal-era restrictions on the truthful commercial speech of alcohol makers, distributors, and retailers violate the First Amendment. (Mo. Broadcasters Assoc. v. Taylor)

The California Supreme Court declines to review whether, to constitute an appealable, final order, a trial court order must expressly resolve all issues and leave nothing else to be decided. (State Farm v. Lara)

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

Categories: Latest News

Ninth Circuit Shuts Down Claim that “Diet” in Diet Soda is Unlawfully Deceptive

Fri, 01/31/2020 - 5:51am

It’s already the end of January, and for those of you who resolved to lose a few pounds this year, it may be time to check on your progress. Among other changes to your eating habits, perhaps you switched to diet soda. If so, did you switch because you thought “diet” implied that the soft drink is a weight-loss or weight-management tool?

That may sound a bit far-fetched, but this impression has provided the factual and legal basis for numerous consumer-fraud class actions filed in New York and California federal courts. It’s been two years since we’ve written about this odd strain of food-labeling cases. Thanks to a December 30, 2019 Ninth Circuit ruling (yes, the Ninth Circuit) in Becerra v. Dr. Pepper/Seven Up, this should be the last post we publish on the subject.

In the Food Court

Becerra filed suit in the Food Court (Northern District of California) alleging the defendant’s use of “diet” in Diet Dr. Pepper was a false or deceptive promise that the soda “would ‘assist in weight loss’ or at least ‘not cause weight gain.'” Diet Dr. Pepper would not assist in weight loss, Becerra claimed, because it contained aspertame, a sugar substitute that some studies associate with weight gain. After allowing Becerra to amend her complaint three times, the district court ultimately ruled the lawsuit failed to state a valid claim and dismissed it with prejudice. Becerra appealed.

In the Ninth Circuit

The three-judge panel not only affirmed the Northern District’s decision, it also selected the opinion for formal publication in the Federal Reporter. Why is this significant? The Ninth Circuit has developed an unfortunate preference of not formally publishing its decisions on food-labeling consumer-fraud cases. “Unpublished” decisions don’t have precedential effect, though parties can cite them in court papers. Becerra stands as binding precedent for all district courts in the Ninth Circuit.

The opinion focuses on the reasonableness of Becerra’s belief that the term “diet” implies the product will assist in weight loss. Under California law,  plaintiffs alleging deception must establish a probability that a “significant portion” of consumers, “acting reasonably under the circumstances,” could be misled. As we’ve written previously, too many trial judges in the Ninth Circuit have held that a jury, not the court, should make the “reasonable consumer” determination in consumer-fraud cases.

Notably, the Becerra panel didn’t defer to a jury. It performed the reasonable-consumer determination and concluded as a matter of law that no reasonable consumer would be misled by “diet” the way Becerra claimed to be. The court rejected Becerra’s selective quotation of dictionary definitions, explaining that Dr. Pepper employed “diet” as an adjective, not a verb or noun as the plaintiff argued. Reasonable consumers, the court explained, understand “diet” to be a relative term in the context of soft drinks and their calorie counts.

The court also found that the ads and trade-association articles Becerra referenced in his argument either failed to support his perception of “diet” or instead substantiated Dr. Pepper’s counterargument.  And while the survey’s results he presented nominally supported Becerra’s claim, the court found that the survey was too limited in scope and too flawed in its design to “salvage” the plaintiff’s reasonableness argument.

Second Circuit Set the Stage

The Ninth Circuit isn’t the first federal circuit that seems to have grown tired of these diet-soda class actions. In the spring and summer of 2019, the Second Circuit considered appeals in three copycat consumer-fraud suits filed in New York federal courts.

First, the appeals court affirmed the lower court’s dismissal of Manuel v. Pepsi-Cola Co., a case we discussed here in May 2018.  In a March 15 Summary Order (i.e., unpublished, no precedential value), the panel agreed with the Southern District of New York that the studies Manuel cited on aspartame and weight gain could not establish a causal connection. Thus, Manuel could not “raise a plausible inference that the use of the word ‘diet’ is false, inaccurate, or misleading.”

Then, on April 17, a Second Circuit panel in Excevarria v. Dr. Pepper Snapple Group, Inc. affirmed (in a Summary Order) the Southern District’s dismissal of claims identical to Manuel’s, reasoning that the scientific studies Excevarria cited did not support his fraud claim.

Finally, on June 27, a third Second Circuit panel reviewed “substantially identical claims (from the same attorney, no less) [that we summarily rejected] in the past few months.” Frustrated by the repetition, the panel decided not to merely release another Summary Order: “Here, we employ a published opinion to reject Plaintiffs’ claims.” The court in Geffner v. Coca-Cola Co. found the plaintiff’s belief that “diet” equated with weight loss or management “implausible on [its] face.” The court found the advertising Geffner referenced in support of his claim that Diet Coke is a weight-loss device to be at most “puffery.”

The court also explained that reasonable consumers understand what “diet” means in the broader context of the product and the packaging. Finally, the court found Diet Coke’s compliance with federal labeling requirements to be “persuasive evidence of the meaning of the label ‘diet’ in the diet-soda context.”

The End (?)

Not one single court has allowed a diet-soda lawsuit to proceed to trial. Two federal appeals courts, which heretofore have been reluctant to throw out claims based on the reasonable-consumer test, have published opinions laying waste to the plaintiffs’ legal theory.

Conceivably, the law firm responsible for these class actions could track down other litigious diet-soda consumers in different parts of the country and hope for more favorable results. But it’s more likely that the lawyers will reach into their bag of tricks and move on to the next legal theory or industry target.

In the meantime, we applaud the Second and Ninth Circuit panels for establishing well-reasoned precedents in an area of litigation where good law is in short supply. When consumer-fraud defendants are before district court judges who are reluctant to make the reasonable-consumer determination as a matter of law, these companies can point to decisions like Becerra and Geffner. We also applaud the soft-drink companies for investing considerable resources to achieve these positive outcomes. They helped create precedents that other, less profitable businesses may use to defend themselves.

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

The post Ninth Circuit Shuts Down Claim that “Diet” in Diet Soda is Unlawfully Deceptive appeared first on Washington Legal Foundation.

Categories: Latest News

Circulating Opinion: Flecha v. Medicredit, Inc.

Thu, 01/30/2020 - 5:07pm

Fifth Circuit, New Orleans, LA

Digesting an opinion by The Honorable Andrew S. Oldham

U.S. Court of Appeals for the Fifth Circuit, Case No. 18-50551

Decided January 8, 2020

Judge Oldham was nominated to the Fifth Circuit on February 12, 2018 by President Donald J. Trump and confirmed on July 18, 2018.  He had no role in WLF’s selecting or editing this opinion for our Circulating Opinion feature. 

Introduction to the Opinion: In Flecha v. Medicredit Inc., 2020 WL 91267 (Jan. 8, 2020), the Fifth Circuit, per Judge Ho, reversed a class certification order. After the plaintiff failed to pay a medical bill, the medical center contracted Medicredit, which sent her a debt-collection letter. On behalf of herself and other recipients of similar letters, Flecha alleged that because Medicredit knew that the medical center would not sue over unpaid bills, the debt-collector made a false threat in violation of the Fair Debt Collection Practice Act when it warned recipients that failure to pay could result in a legal action. Flecha’s lack of any evidence of the medical center’s actual intent not to sue her or other class members deprived the class of a common issue, Judge Ho reasoned. For the same reason she could not prove commonality under FRCP 23, the plaintiff could not prove typicality or predominance.

Judge Oldham agreed that the district court erred in certifying the class. But because numerous unnamed class members would be unable to prove an injury in fact, he would have reversed the district court on jurisdictional grounds. His concurrence cogently reasons that courts should not except class actions from the “venerable principle” that plaintiffs must show Article III standing at every stage of litigation. The enormous power that judicial certification of a class bestows on a single plaintiff, Judge Oldham explains, compels courts first to be sure they have jurisdiction over the claim.

ANDREW S. OLDHAM, Circuit Judge, concurring:

I agree with the Court’s conclusion that “[c]ountless unnamed class members lack standing.” Ante, at ––––. In my view, that lack of standing is sufficient to decide the case.

I.

Standing is “an essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). With it, the Constitution empowers us to hear a case before us and decide the relevant issues of law. Without it, we can do nothing but announce the fact and dismiss the case. See Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1868). After all, “[h]ypothetical jurisdiction produces nothing more than a hypothetical judgment.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

It’s unclear to me why these venerable principles would not apply with equal force at the class-certification stage. A plaintiff must show standing at each “successive stage[ ] of the litigation.” Lujan, 504 U.S. at 561, 112 S.Ct. 2130; see also Arizonans for Official English v. Arizona, 520 U.S. 43, 64–65, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997). Nothing in Rule 23 could exempt the class-certification stage from this requirement. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (“Rule 23’s requirements must be interpreted in keeping with Article III constraints ….”); FED. R. CIV. P. 82 (“These rules do not extend … the jurisdiction of the district courts.”); accord Ortiz v. Fibreboard Corp., 527 U.S. 815, 831, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). If anything, I’d think our standing analysis would be particularly rigorous at this stage, given the transformative nature of the class-certification decision. Cf. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011) (noting certification stage requires “rigorous analysis”).

Not only can certification change the number of plaintiffs from one to one million, but it also can dramatically change the rights and obligations of the plaintiffs. Class certification is the thing that gives an Article III court the power to “render dispositive judgments” affecting unnamed class members. Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 219, 115 S.Ct. 1447, 131 L.Ed.2d 328 (1995) (quotation omitted); see also Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984) (“There is of course no dispute that under elementary principles of prior adjudication a judgment in a properly entertained class action is binding on class members in any subsequent litigation.”). That means, for example, that a post-certification judgment can prevent unnamed class members from bringing their claims again. See Taylor v. Sturgell, 553 U.S. 880, 894, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008); Cooper, 467 U.S. at 874, 104 S.Ct. 2794. It also means we must consider unnamed class members’ standing before adjudicating the merits of their claims: “The exercise of judicial power, which can so profoundly affect the lives, liberty, and property of those to whom it extends, is therefore restricted to litigants who can show ‘injury in fact’ resulting from the action which they seek to have the court adjudicate.” Valley Forge Christian Coll. v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 473, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982).

II.

It’s true that the Supreme Court in both Amchem and Ortiz avoided the Article III standing question. The Court did so, in part, by stating that certification “pertain[s] to statutory standing.” Ortiz, 527 U.S. at 831, 119 S.Ct. 2295. And at the time, the Court held statutory standing “may properly be treated before Article III standing.” Ibid. That makes sense where both questions—whether the plaintiffs can sue under Rule 23 and whether the plaintiffs have Article III standing—are jurisdictional.

But the Supreme Court subsequently told us they’re not. In Lexmark Intern., Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014), the Court emphasized that the label “statutory standing” is “misleading” because the inquiry “does not implicate subject-matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.” Id. at 128 n.4, 134 S.Ct. 1377 (quotation omitted). That suggests it’s a merits question whether the unnamed class members can sue under Rule 23—not a jurisdictional one. See id. at 128, 134 S.Ct. 1377; Steel Co., 523 U.S. at 89, 118 S.Ct. 1003. And if Steel Co. teaches us anything, it’s that we must do jurisdiction before the merits. That’s why our precedent holds that “though the certification inquiry is more straightforward, we must decide standing first, because it determines the court’s fundamental power even to hear the suit.” Rivera v. Wyeth-Ayerst Labs, 283 F.3d 315, 319 & n.6 (5th Cir. 2002).

Article III is just as important in class actions as it is in individual ones. See Tyson Foods, Inc. v. Bouaphakeo, ––– U.S. ––––, 136 S. Ct. 1036, 1053, 194 L.Ed.2d 124 (2016) (Roberts, C.J., concurring) (“Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.”). It’s why the Court has reminded us that “[i]n an era of frequent litigation, class actions, sweeping injunctions with prospective effect, and continuing jurisdiction to enforce judicial remedies, courts must be more careful to insist on the formal rules of standing, not less so.” Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125, 146, 131 S.Ct. 1436, 179 L.Ed.2d 523 (2011). I’d do so here.

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The High Court’s Benzene Decision at 40: Will it Rise if Chevron Falls?

Thu, 01/30/2020 - 5:06pm

By Christopher H. Marraro, a Partner with BakerHostetler in the firm’s Washington, DC office, and Gary C. Marfin, formerly Associate Dean of the School of Engineering at Rice University and Manager of Government Relations with Conoco.

Nearly four decades have passed since the U.S. Supreme Court set aside the Occupational Safety and Health Administration’s (OSHA) 1978 final benzene standard in Industrial Union Department, AFL-CIO v. American Petroleum Institute (Benzene).1 In Benzene, a plurality2 of the Court held that under the Occupational Safety and Health Act (OSH Act),3 OSHA must make a threshold agency finding that “a significant risk of material health impairment exists” before it promulgates a health-and-safety standard for a toxic substance. The Court reached this decision by finding a substantive “significant risk” threshold requirement in the OSH Act’s general and inexact language, namely a statutory provision dictating that regulatory standards must be “reasonably necessary or appropriate” to provide a safe place of employment. Congress has included such “reasonably necessary or appropriate” language in numerous statutes.4 From that general requirement, the Court found a precise substantive duty where even members of the Court disagreed on its meaning.

At forty, Benzene continues to exert influence in at least two areas of administrative law. First, for proponents of quantitative risk assessment, Benzene was, and remains, a landmark victory. Although it seems commonplace today in health, safety, and environmental regulation, Benzene’s significant risk requirement was fervently resisted by OSHA and not easily reached by the Court. Second, cases involving regulations with a major impact on the economy can be viewed as “linear descendants” of Benzene, and such regulations are subject to its holding.  Professor Cass Sunstein has said about Benzene, “The basic idea is that without a clear statement from Congress, the Courts will not authorize the agency to exercise that degree of (draconian) authority over the private sector.”5 Its influence notwithstanding, Benzene, like other administrative law cases, eventually fell under the shadow of Chevron USA, Inc. v. Natural Resources Defense Council, Inc. (Chevron),6 a case that may well be “the most important case in all of administrative law.”7

Benzene has yet more to offer, particularly at a time in which Chevron is coming under scrutiny, if not outright attack.8 Benzene is arguably still instructive because in its decision, the Court—consistent with its Article III powers—preserved Congressional intent by wrestling with difficult, inexact, ambiguous statutory language and by applying traditional tools of statutory construction to provide meaning.

Chevron: “You Know it Don’t Come Easy”

Justice Scalia cautioned against thinking of the Chevron doctrine as “new law.” Under the Chevron doctrine, courts should defer to federal agency interpretations of ambiguous or undefined statutory provisions, provided that (a) Congress had not already addressed the specific provision at issue and (b) the agency’s interpretation was reasonable and permissible under the statute. Justice Scalia was clearly correct in his contention; courts have long had the option of accepting as valid a regulatory agency’s reasonable interpretation of an ambiguous statute. That being said, one should not diminish Chevron’s novelty. Chevron became, over time, not simply the articulation of an option that courts had always enjoyed when the scope of regulatory power was at issue, but the presumptive, preferred option.

How did Chevron attain that status? A number of factors helps explain Chevron’s rise, but its appeal stems in no small part from the apparent simplicity of its two-step decision rule, coupled with a growing recognition that agency rulemaking had become the norm, rather than the exception.9 Chevron seemed tailor-made to adjudicate the growing volume of regulatory cases involving the scope of agency authority.10

However, a central problem, apparent in Benzene, is that Chevron’s simplicity was illusory. Justice Stevens, the author of both Benzene and Chevron, appears to have downplayed the example of the former when he crafted the latter. In Benzene, the Court confronted problems in both areas integral to Chevron: ascertaining ambiguity and deferring to an agency.

Benzene: Ambiguous or Not?

The question of whether the OSH Act is ambiguous proved quite contentious in Benzene. Several members of the Court’s plurality found that neither the statute nor its legislative history was unambiguous. Justice Powell admitted, “One might wish that Congress had spoken with greater clarity.”11 Chief Justice Burger shared the sentiment: “The statute and the legislative history give ambiguous signals as to how the Secretary is directed to operate in this area.”12 None found the statute less clear than Justice Rehnquist, who did not join the plurality’s opinion, but agreed with its judgment. Justice Rehnquist concluded the statute was an unconstitutional delegation of legislative authority in that § 6(b)(5), was “…completely precatory, admonishing the Secretary to adopt the most protective standard if he can, but excusing him from that duty if he cannot.”13 To the contrary, Justice Marshall in his dissent found § 6(b)(5) to be of “plain” meaning and would have found that the Secretary’s decision was “fully in accord with his statutory mandate ‘most adequately [to] assur[e] … that no employee will suffer material impairment of health.’”14

Interestingly, the Court focused its legislative-intent analysis on whether Congress had legislated a zero-risk statute. Since there are, the Court recognized, “literally thousands of substances used in the workplace that have been identified as carcinogens or suspect carcinogens, the Government’s theory would give OSHA power to impose enormous costs that might produce little, if any, discernible benefit.” Given the wide scope of power and impact over the American workplace that OSHA claimed in its view of § 6(b)(5), the plurality searched the statute and legislative materials for a “clear mandate” from Congress to sustain the agency’s view. Such a mandate was nowhere to be found.

Instead, the Court found that OSHA had neglected § 3(8) of the statute, which applied to all permanent standards promulgated under the Act. According to Justice Stevens, § 3(8) restricted the potential risks the Secretary might regulate to those demonstrated to be significant. Section 3(8) accomplished this, Justice Stevens reasoned, by defining an occupational safety and health standard as one “which requires conditions reasonably necessary or appropriate to provide safe or healthful employment.” What the Secretary failed to see, in the plurality’s view, is that a standard is not “reasonably necessary or appropriate” unless the risk of concern is significant. The risk has to be significant because, according to the plurality, Congress recognized that no workplace is completely risk free.

Thus, the plurality concluded that § 3(8) would not affect § 6(b)(5) if the statutory goal were zero risk:  “If the purpose of the statute were to eliminate completely and with absolute certainty any risk…, we would agree that it would be proper to interpret 3(8) and 6(b)(5) in this fashion (or under OSHA’s interpretation). … Rather both the language and structure of the Act, as well as its legislative history, indicate that it was intended to require the elimination, as far as feasible, of significant risks of harm.”15

Concluding Comments

Even if all the justices had agreed that the OSH Act was ambiguous, the Court in Benzene would not necessarily have deferred to OSHA. According to the plurality: “If the Government were correct in arguing that neither § 3(8) nor § 6 (b)(5) requires that the risk be quantified … the statute would make such a sweeping delegation of power that it might be unconstitutional under the Court’s reasoning in A.L.A. Schechter Poultry Corp. v. United States … and Panama Refining Co. v. Ryan.16

In questioning the constitutionality of Chevron “deference,” Justices Gorsuch and Kavanaugh have suggested that courts might discard the unambiguous/ambiguous dichotomy in favor of the “best reading of the statute,” a task that judges are accustomed to perform. In Benzene, “the best reading of the statute” was not OSHA’s reading, but the plurality’s reading, wherein “reasonably necessary and appropriate” mandates a substantive significant-risk threshold finding.

Perhaps “easy” cases never find their way to the Supreme Court. If, however, such a list of cases exists, Benzene is unlikely to be among them. Justice Rehnquist captured well the difficulties Benzene presented: “I believe that this litigation presents the Court with what has to be one of the most difficult issues that could confront a decision-maker: whether the statistical possibility of future deaths should ever be disregarded in light of the economic costs of preventing those deaths.”17 Still, the Court diligently worked to find statutory intent, albeit out of seemingly ambiguous language. It did so, and preserved the constitutionality of an inexact and vague statute.

In Benzene, the Court followed its Article III duty to interpret the law itself and protect against the expansion of executive power beyond that which the legislature provided. This is the real legacy of the Benzene decision. Benzene, at forty, offers a glimpse into a future world where judges, as was intended by the Framers, wrestle with inexact statutes to uncover the legislature’s intent rather than defer to the policy judgements of the executive about what the legislature did or did not intend.

Notes

The post The High Court’s <em>Benzene</em> Decision at 40: Will it Rise if <em>Chevron</em> Falls? appeared first on Washington Legal Foundation.

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The 2020 Outlook for “PFAS” Chemical Litigation: An Expanding Target Zone

Thu, 01/30/2020 - 5:04pm

By Jane C. Luxton and William J. Walsh, Partners in the Washington, DC office of Lewis Brisbois.

Per- and polyfluorinated alkyl substances (“PFAS”) are a group of 3,000 to 5,000 chemical compounds invented in the 1940s and long valued for water, grease, and heat resistant properties that proved highly useful in a large number of consumer products.1  Those products include nonstick cookware, water-repellent outerwear, food containers, carpets and textiles, fire-fighting foam, cleaning solutions, paints and coatings, and many others.  In recent years, concern over potential human-health impacts of PFAS chemicals has grown, thanks in large part to their persistence and widespread dispersion in the environment.  Scientists have conducted assessments for some PFAS compounds, most notably perflourooctanoic acid (“PFOA”) and perfluorooctane sulfonate (“PFOS”), but only a few compounds have received extensive study and little scientific consensus exists as to specific health effects.2  As 2020 begins, vigorous action to address PFAS contamination is underway on multiple fronts:  proposed legislation, federal and state regulation, and expansive litigation.3  This Legal Backgrounder focuses on the widening scope of PFAS litigation, which initially targeted PFOA and PFOS chemical producers, but increasingly is targeting downstream manufacturers, processors, and users of PFAS compounds, alleging liability for far-reaching groundwater and legacy contamination.

Early PFAS Litigation

Initial PFAS litigation took the form of individual complaints and class actions against DuPont de Nemours & Company (“DuPont”) and 3M Corporation (“3M”), which manufactured and processed PFOA and PFOS chemicals in the early days of their introduction into commerce.  In the first case filed, several individuals brought state common-law tort claims in 2001 against DuPont and the Lubeck Public Service District of West Virginia, alleging injuries from contaminated drinking water from the company’s Parkersburg, West Virginia PFOA plant.4  The plaintiffs sought damages for medical monitoring and diminution of property value, along with punitive damages and injunctive relief against further PFOA releases.5  In 2002, a court certified the case as a class action, and in 2004 the parties settled.  The settlement included an agreement to establish a scientific panel to evaluate potential links between PFOA exposure and adverse health effects.6  In 2013, the Judicial Panel on Multidistrict Litigation centralized subsequent claims in multidistrict litigation (“MDL”) in federal court in Ohio.7  Ultimately, the parties settled the MDL cases in 2017.  DuPont and the Chemours Company (“Chemours”), without conceding liability, agreed to pay $670.7 million, and to make specified additional amounts available to fund potential future payments.8 Similar federal class action litigation against the two companies is pending in North Carolina, involving another PFAS compound known as GenX.9

Litigation against 3M followed a different track, with the attorney general of Minnesota bringing natural resource damages claims brought by the Minnesota State Attorney General in 2010.10  The state sought $5 billion in damages for harm to drinking water and the environment.  The parties settled the case without admissions or findings of liability in 2018 for $850 million.11 

Subsequent Litigation:  Downstream Users Are Increasingly Attracting Attention

In contrast to the initial wave of cases, which focused specifically on PFAS chemical manufacturers, more recent litigation has widened the target zone to numerous companies that used these chemicals in production processes and products.  Examples include production of cookware, fiberglass, plastic, paper, footwear, and carpeting products, and fire-fighting foam production and use.  The discussion below summarizes principal pending litigation involving downstream users.

Hoosick Falls and Petersburgh, NY cases

Starting in 2016, residents of Hoosick Falls filed lawsuits seeking damages for remediating contaminated property, diminution of property value, punitive damages, and medical monitoring against Saint-Gobain Performance Plastics Corp. (“Saint-Gobain”) and Honeywell International (“Honeywell”) for use of PFOA in a variety of coatings applications.12  A subsequent case filed in 2019 includes DuPont and 3M in addition to the original two defendants.13  A separate series of actions involve Tonoga, Inc., which operates the Taconic Plastics facility in Petersburgh, New York.  Plaintiffs allege soil and groundwater contamination from processes that coated fabrics with PFOA-based Teflon; a state court certified the case as a class action in 2018.14  Both sites have been designated as Superfund sites under federal or state law.15 

The Wolverine cases

Wolverine Worldwide is a defendant in private class action and state litigation tied to its use of PFOA and PFOS as waterproofing chemicals in shoes made at its Michigan facility.  In addition to Wolverine, the class action complaint names 3M, Waste Management, Inc., and Waste Management of Michigan, Inc.16  The state case sought recovery of costs and fees for cleanup of tannery waste and replacement of PFAS-affected drinking water supplies.17  Wolverine notably added 3M as a defendant through a third-party complaint.18  In December 2019, Michigan’s Attorney General announced a $69.5 million settlement of the state case.19 

The fire-fighting foam cases

PFAS chemicals have been widely used in aqueous film-forming foam (“AFFF”) as a fire-fighting agent since the 1960s.  As an example of the far-reaching dimension of this application, the Department of Defense has identified 401 sites with a known or suspected release of PFAS to groundwater.20  AFFF litigation has spread to many states, and an MDL panel in Charleston, South Carolina is considering approximately 100 cases involving military and civilian air bases; the plaintiffs are governmental water districts and individuals who allege personal injury, need for medical monitoring, property damage, or other economic loss.21  A class action in federal court in Ohio names nine defendant companies and claims to represent all residents of the United States who have detectable levels of PFAS in their blood, seeking establishment of a PFAS science panel.  The case survived a motion to dismiss in September 2019.22    

In other actions, numerous states are seeking relief on behalf of their citizens or for recovery of costs.  These include New York and New Hampshire,23 which have each brought two suits against multiple fire-fighting foam producers and distributors as well as PFAS chemical manufacturers (New Hampshire is the first case to allege statewide contamination), Vermont, New Mexico (which sued the U.S. Air Force for groundwater contamination from two bases), and Washington.  The Judicial Panel on Multidistrict Litigation has consolidated many of these cases into the MDL in South Carolina. 

Other cases

Other litigation involves paper mills and carpet manufacturers, including a class action complaint alleging a paper mill’s responsibility for PFAS chemicals in a landfill in Michigan that EPA previously designated a federal Superfund site.24  Michigan regulators added PFAS chemicals to the list of contaminants already being sampled at the site.25  Alabama municipal water and sewer authorities have filed several lawsuits against more than 30 rug mills in Georgia and Alabama.26

Indications of What is To Come

The sheer number of PFAS uses, the already widening circle of PFAS litigation, and plaintiffs’ successful settlements in several high-profile cases send clear signals that more litigation can be expected against an increasing array of downstream users of these chemicals.  PFAS litigation is already being compared to high-dollar damages awards for groundwater contamination attributed to the gasoline additive MTBE.  In those cases, New Hampshire and New York won jury verdicts for $236 million and $105 million, respectively.  The U.S. Supreme Court rejected the MTBE defendants’ petitions for certiorari in those cases.27  The Court’s cert denials opened the courtroom doors wider to plaintiffs’ use of a market-share theory of liability under state tort law.  Market-share theory allows allocation of liability to multiple chemical producers where specific contributions to injury cannot be shown.28  Further, the Sixth Circuit recently affirmed a district court’s willingness to entertain a substantive due process “right of bodily integrity” against exposure to environmental toxins, in another case in which the Supreme Court denied certiorari.29  All of these factors suggest current and former users of PFAS chemicals have reason for concern, potentially extending beyond PFOA and PFOS to encompass other perfluorinated compounds as well.

PFAS is different from many other chemicals, given the still unsettled nature of the science and the lack of a “signature” illness associated with PFAS exposure.  Litigation issues will include questions not only of causation but also what knowledge users had at various points and times in the manufacturing supply chain process.  With respect to what companies can do to prepare for litigation, measures include a careful assessment of potential liability and appropriate remediation efforts, engagement in the regulatory process at the state and federal level, and proactive steps to minimize liability.

Notes

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Court Loss Should Deter Speech Restrictions on Plant-Based Product Names

Wed, 01/29/2020 - 12:36pm

In a decision you may have missed during this past holiday season, commercial speech and common sense prevailed when the U.S. District Court for the Eastern District of Arkansas held in Turtle Island Foods SPC d/b/a Tofurky Co. v. Soman that the State could not impose what it thought was the best way to name plant-based meat substitutes. An Arkansas statute would prohibit plant-based-product companies’ use of words on their labels that are “traditionally associated with animal-based meat”—think, “burger,” “chorizo style sausage,” or “deli slices.” Judge Kristine Baker issued a preliminary injunction after determining that the plaintiff, Tofurky, is likely to prevail on the merits of its First Amendment claim.

Tofurky is, as the court put it, a “social purpose corporation” that produces plant-based, vegan or vegetarian meals, often in the form of traditional meat dishes. It labels its products using meat-based terms like “Veggie Burger,” “Slow Roasted Chick’n,” and “Polish-style wheat gluten and tofu sausages.” Each label clearly identified the product as vegan or vegetarian and features the letter “V,” which is widely understood to mean the product is vegan or vegetarian. The Arkansas legislature concluded that such labels mislead consumers, and passed Act 501 to clear up the supposed confusion. It prohibits “[u]tilizing a term that is the same as or similar to a term that has been used or defined historically in reference to a specific agricultural product.” Ark. Code. Ann. § 2-1-305.

Tofurky filed a motion for declaratory and injunctive relief, arguing that Act 501’s labeling provisions infringe upon its First Amendment right to share truthful and non-misleading information about its products and would actually create more consumer confusion than alleviate it.

The District Court considered, among other factors, the likelihood that Tofurky would succeed on the merits of its First Amendment challenge. It applied the Supreme Court’s four-part Central Hudson test. Under Central Hudson, courts consider whether: (1) the commercial speech at issue concerns unlawful activity or is misleading; (2) the government has a substantial interest in regulating the speech; (3) the regulation directly and materially advances the government’s substantial interest; and (4) the regulation is not “more extensive than is necessary to serve” the asserted interest. See Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 566 (1980).

The District Court began its analysis by “considering the label as a whole” and determining whether “‘an ordinary consumer would [ ] be deceived’ as to the nature of the product.” Turtle Island Foods SPC d/b/a Tofurky Co. v. Soman, No. 4:19-cv-00514-KGB, 2019 WL 7546141, at *12 (E.D. Ark. Dec. 11, 2019). It stated that, under the first prong of Central Hudson, unless the speech is “inherently misleading” or related to “unlawful activity,” the government has limited power to restrict the speech and the court should conduct a full Central Hudson analysis. Arkansas argued that terms like “Veggie Burger” were inherently misleading and thus deserved no constitutional protection. The court disagreed, concluding that “the simple use of a word frequently used in relation to animal-based meats does not make use of that word in a different context inherently misleading.” Id. at *11.

On the second prong, the court assumed without deciding that the State does have a substantial interest in “protect[ing] consumers from being misled or confused by false or misleading labeling of agricultural products that are edible by humans.”

The third prong requires the regulation to directly advance that interest. Because the court determined that Tofurky’s labels are neither false nor misleading, the Act does not actually alleviate consumer deception and misinformation. The Act also failed the fourth prong as its “blanket restriction is far more extensive than necessary.” Id. at *13. The court noted that Tofurky pointed to several federal and state laws that already prohibit deceptive labeling and marketing of food products, but the State failed to demonstrate why those laws are inadequate. And the court found that less restrictive alternatives did exist, such as requiring “more prominent disclosures of the vegan nature of plant-based products.” Id.

Judge Baker’s decision is just the first step in Tofurky’s legal challenge, but it positively highlights the strength of plant-based-product producers’ constitutional arguments against such labeling restrictions. Unfortunately, one federal court’s preliminary ruling is unlikely to deter other States from attempting to save reasonable consumers from themselves. For instance, a Washington legislator has introduced a bill aimed at “Veggie Burger” and other meat-alternative terms he finds objectionable and misleading.

And paternalistic legislators, often egged on by industry competitors, aren’t stopping at meat alternatives. Plant-based milk alternatives, which prominently use descriptive adjectives such as “almond,” “soy,” and “hemp” in front of the work “milk,” have come under fire. In Oklahoma, a state representative introduced legislation that would limit the use of the word “milk” to only that which is “produced by mammals with hooves.” Our View: Milk-label Bill Better Suited for Compost Bin than Legislative Committee, Muskogee Phoenix (Jan. 19, 2020). A Kentucky State Senator introduced a similar bill, Senate Bill 81, which would also restrict the use of the word “milk” to only refer to that which comes from a hooved animal. See John Cheves, Don’t Call It ‘milk’ If it Doesn’t Come from a Hooved Mammal, KY Senator Says, Lexington Herald Leader (Jan. 16, 2020). These are examples of at least eleven states that have enacted similar laws in recent years targeting plant-based alternatives to meat and dairy. Id. Even a group of federal legislators have joined the chorus, signing a letter to FDA’s Commissioner that urges the agency to “ensure that dairy terms may only be used to describe products that include dairy.” Sylvan Lane, Senators Ask FDA to Crack Down on Non-Dairy Milks, Cheeses, The Hill, Jan. 24, 2020.

Legislators and regulators have the authority to combat speech that is truly misleading, though we’d prefer that unclear labeling be remedied through more speech, not less. And they certainly shouldn’t be embracing cures that are worse than the alleged disease—laws that create confusion where reasonable consumers wouldn’t be confused in the first place. Thankfully we have the First Amendment, and its faithful application by judges like Judge Baker, to help remind our elected officials and unelected regulators of those basic principles of lawmaking and regulation.

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

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WLF Urges Fourth Circuit to Vacate Trial Court’s Grab at Agency Rulemaking Power

Tue, 01/28/2020 - 12:31pm

“Having concluded that the deadline at issue here was a legislative rule, the trial court was in no position to set a new deadline, thereby assigning the legislative role to itself.”
—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 Fourth Circuit to vacate a trial-court order that amounted to a de facto administrative rulemaking.

A 2016 FDA rule ordered e-cigarette companies to apply, by 2018, for permission to continue selling their products. In part to ensure that e-cigarettes remain available to people trying to stop smoking, the FDA in 2017 issued guidance extending the application deadline to 2022. A group of doctors and public-health groups attacked the guidance in court, arguing among other things that the new deadline should have undergone notice and comment. The trial court agreed with this argument and vacated the guidance. But rather than simply remand the matter to the agency, as the law usually requires, the trial court proceeded to set a new deadline—May 2020—itself.

WLF’s brief argues that the trial court had no authority to set a new deadline. A court reviews agency action only as an appellate tribunal. After vacating an agency’s decision, therefore, a court should remand the matter to the agency for further proceedings. The trial court cited deviations from this remand-only rule, but in all of them the agency appeared to be acting in bad faith. That is not this case.

The trial court, WLF’s brief continues, dove headfirst into a policy matter that touches on deep questions of science, economics, statistics, public health, and moral principle. The court co-opted the democratic branches’ policymaking role. The court’s remedy order should be vacated, so that the trial court can remand to the FDA for a notice-and-comment rulemaking that sets a new deadline.

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.

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