—Richard Samp, WLF Chief Counsel
Click here for WLF’s brief.
WASHINGTON, DC—Washington Legal Foundation (WLF) today urged the U.S. Supreme Court to affirm an appeals court’s dismissal of claims filed against administrators of a pension plan by two participants in the plan. The plaintiffs argued that the administrators acted imprudently by investing all of the pension plan’s assets in common stock, with the result that the value of plan assets decreased 27% in 2008 following the stock-market crash that year. WLF argues that the plaintiffs lack standing to sue under the Employee Retirement Income Security Act (ERISA) because they were uninjured by the alleged misconduct—their receipt of future pension benefits was never at risk.
The case involves U.S. Bank’s employee pension plan, which has more than 100,000 participants. The plan is a “defined-benefit plan,” which means that employees, upon retirement, are entitled to fixed periodic payments for the remainders of their lives. The employer bears the entire risk that plan assets may prove inadequate to cover all promised payments; it must pay into the plan the funds needed to cover any shortfall arising from an inadequate return on invested funds. If, on the other hand, a plan becomes overfunded, the employer need not make any contributions that year. Following the 2008 stock-market crash, the U.S. Bank plan was deemed somewhat “underfunded” (as measured by ERISA), and U.S. Bank made significant contributions to the plan for the next five years until the plan was once again overfunded.
WLF argues that the plaintiffs lack standing to invoke the jurisdiction of the federal courts because they were not injured by the defendants’ allegedly imprudent investment strategy. WLF notes that the plaintiffs have no ownership interest in the plan’s assets; their only interest is in receipt of their fixed pension benefits. In the absence of evidence that the alleged misconduct created any risk of nonpayment (particularly given U.S. Bank’s $87 billion in liquid assets that were available as a back-up if the plan’s assets ever proved inadequate), the plaintiffs failed to show the injury-in-fact necessary for federal-court standing.
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.
—Cory Andrews, WLF Vice President of Litigation
Click here for WLF’s brief.
WASHINGTON, DC—Washington Legal Foundation (WLF) today urged the U.S. Court of Appeals for the D.C. Circuit to affirm a decision blocking an agency rule that would allow the Secretary of Health and Human Services (HHS) to require drug makers to convey the wholesale acquisition cost, or “list price,” of any prescription drug advertised in direct-to-consumer (DTC) television ads. WLF was joined on its amicus curiae brief by the Allied Educational Foundation.
The DTC Rule is touted as part of the administration’s effort to reduce overall healthcare costs. But as WLF’s brief makes clear, no matter how well-meaning its intentions, HHS may exercise only the limited regulatory authority that Congress granted it by statute. Yet no statute authorizes the Centers for Medicare and Medicaid Services (CMS) to require disclosure of list prices in DTC television ads.
Its lack of statutory authority is not the only fatal flaw in the DTC Rule. The list-price-disclosure mandate would also violate drug makers’ First Amendment rights. The First Amendment protects a speaker’s choices about both what to say and what not to say. And by compelling drug makers to speak a particular message in their DTC ads, the proposed rule seeks to alter the content of their speech. Under Supreme Court precedent, HHS’s controversial DTC Rule violates the First Amendment because it misleads consumers about their likely out-of-pocket costs for prescription drugs.
Washington Legal Foundation preserves and defends America’s free-enterprise system by litigating, educating, and advocating for free-market principles, a limited and accountable government, individual and business civil liberties, and the rule of law.
The Committee on Small Business Subcommittee on Contracting and Infrastructure will hold a hearing titled, “Smart Construction: Increasing Opportunities for Small Businesses in Infrastructure.” The hearing is scheduled to begin at 10:00 A.M. on Tuesday, November 19, 2019 in Room 2360 of the Rayburn House Office Building.
Advanced construction technology like GPS enabled equipment, 3D digital design software like Building Information Modeling, and proptech enable construction companies, civil engineers, and developers to build infrastructure that is safer, energy efficient, and sustainable at lower costs. The hearing will explore advancements in smart construction technology and opportunities for small businesses to play a major role in improving America’s infrastructure.
To view a livestream of the hearing, please click here.
Mr. Lennart Anderssen, RA
Director of Virtual Design, Construction & Operations (VDCO), LiRo Group
Professor, Pratt Institute
New York, NY
*Testifying on behalf of the American Society of Civil Engineers (ASCE), the Construction Institute (CI), LiRo Group, and Pratt Institute
Mr. Ryan Forrestel
Cold Springs Construction
*Testifying on behalf of the GPS Innovation Alliance
Mr. Bryn Fosburgh
Senior Vice President
Mr. Phillip Ogilby
CEO and Co-founder
STACK Construction Technologies
*Witness testimony will be posted within 24 hours after the hearing’s occurrence
“The Supreme Court should direct the lower courts to reconnect their reading of the FTC Act to what the FTC Act actually says.”
—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 correct a widespread misreading of an FTC Act remedy provision.
Section 13(b) of the FTC Act empowers the FTC to sue, in federal court, to obtain an injunction against deceptive trade practices. At least seven courts of appeals have said, however, that the word “injunction” in section 13(b) unlocks the entire vault of equitable remedies.
WLF’s brief urges the Supreme Court to review two Ninth Circuit decisions that affirm restitution awards meted out under section 13(b). WLF argues that the lower courts’ rewriting of section 13(b) resembles the English common-law courts’ use of the “equity of the statute,” a doctrine that empowered a judge to enforce his subjective sense of justice rather than a law’s text. The “equity of the statute” arose in the Late Middle Ages. It gradually died out, however, as judges came to realize that it is inconsistent with democratic governance.
In the mid-twentieth century the Supreme Court briefly adopted a new version of the equity of the statute to “imply” new rights and remedies into laws. The courts of appeals relied on that mid-twentieth century jurisprudence to justify stretching section 13(b). But as WLF explains in its brief, the Supreme Court later reversed course. It came to recognize that it is solely for Congress to decide how, and by whom, its statutes are enforced.
The Supreme Court should instruct the lower courts to align their interpretation of section 13(b) with the modern and binding rules of statutory interpretation.
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.
The post WLF Urges Supreme Court to Correct Widespread Misreading of FTC Act Remedy Provision appeared first on Washington Legal Foundation.
By Andrew J. Trask, Of Counsel with Shook, Hardy & Bacon L.L.P. in its San Francisco, CA office.
Following on the heels of the U.S. Court of Appeals for the First Circuit’s groundbreaking opinion in In re Asacol Antitrust Litigation, 907 F.3d 42 (1st Cir. 2018), the District of Columbia Circuit has also held that classes that contain definite numbers of non-injured members cannot be certified, because individual questions related to injury will predominate over common issues.
In re Rail Freight Fuel Surcharge Antitrust Litigation, 934 F.3d 619 (D.C. Cir. 2019), was part of a multi-district litigation in which the plaintiffs alleged that alleged that railway companies had engaged in a price-fixing conspiracy. The alleged conspiracy concerned “fuel surcharges,” imposed above the base shipping price when the cost of fuel rises sufficiently high.
The putative class contained roughly 16,000 shippers. At certification (in the U.S. District Court for the District of Columbia), the plaintiffs had sought to show common issues would predominate over individualized issues by hiring an economics expert to perform a regression analysis. Id. at 621. Regression analysis—for those of us who went to law school to avoid taking statistics—takes different variables (like supply, demand, weather) that contribute to a result (like a price), and measures the effect of each variable. It is a common way to show relationships between causes and effects. In this case, the plaintiff’s regression model, which sought to measure the effect of the alleged conspiracy, resulted in “negative damages” for 2,000 members (an eighth, or about 12.5%) of the proposed class. “Negative damages” as a result meant that a large part of the class either were simply not damaged at all, or somehow made money on the challenged transactions.
The plaintiffs’ regression model had a checkered history: the plaintiffs had been using this model to seek certification of this class since 2012. Originally, the defendants had challenged certification because the model had serious flaws, but the district court had certified a class anyway, finding the model was both “plausible” and “workable.” In re Rail Freight Fuel Surcharge Antitrust Litig., 287 F.R.D. 1, 43 (D.D.C. 2012). The D.C. Circuit had vacated that certification on interlocutory review, because the model’s “propensity toward false positives” made it difficult to tell whether individual class members had actually been harmed. In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244. 254 (D.C. Cir. 2013). Common questions, it reasoned, “cannot predominate where there exists no reliable means of proving classwide injury in fact.” Id. at 253. As a result, Rule 23 requires a “hard look at the soundness of statistical models that purport to show predominance.” Id. at 255.
On remand from that first appeal, the district court ordered supplemental discovery. In re Rail Freight Fuel Surcharge Antitrust Litigation, 934 F.3d at 621. Then it denied certification, finding three flaws with the model: (1) it measured “highly inflated damages” for traffic with additional modes of travel (e.g., a train and a ship); (2) it erroneously measured damages for shipments under legacy contracts (a flaw the defendants had complained about since the first certification battle); and finally (3) it had measured “negative damages” for 2,000 class members. In re Rail Freight Fuel Surcharge Antitrust Litig., 292 F. Supp. 3d 1,4, 122-41 (D.D.C. 2017).
This time, the plaintiffs filed interlocutory appeal under Rule 23(f). But the existence of these uninjured class members placed the plaintiffs in a strategic bind. In briefing the issue, they launched two lines of argument. First, they attacked the credibility of their own damages model, arguing that the negative damages were a result of “normal prediction error.” In re Rail Freight Fuel Surcharge Antitrust Litigation, 934 F.3d at 624. They also argued that “predominance does not require common evidence extending to all class members.” Id.
The D.C. Circuit took the case again. Quoting Tyson Foods, Inc. v. Bouaphakeo, the panel identified an “individual question” as “one for which ‘members of a proposed class will need to present evidence that varies from member to member.’” Id. at 622, quoting 136 S. Ct. 1036, 1045 (2016). For the sake of argument, the panel assumed the damages model was sufficiently reliable—even though that was one of the most hotly contested issues at certification. Id. at 623. Then it noted that, even assuming the model was reliable, “that still leaves the plaintiffs with no common proof of those essential elements of liability for the remaining 12.7 percent” of the proposed class. Id. at 624.
The panel did not find either of plaintiffs’ arguments persuasive. It noted that the district court did not believe the model was flawed, and if it had, that would make the model too inaccurate to calculate classwide damages. Id.
The panel also rejected the plaintiffs’ argument that predominance does not need to reach all members of the proposed class as inconsistent with its prior ruling. It held that “[u]ninjured class members cannot prevail on the merits, so their claims must be winnowed away as part of the liability determination. And that prospect raises the —when does the need for individualized proof of injury and causation destroy predominance?” Id. It noted the district court’s observation that the “few reported opinions” tackling this question “suggest that 5% to 6% constitutes the outer limits of a de minimis number” of uninjured class members. Id. at 625, quoting Rail Freight II, 292 F. Supp. 3d at 137. That was a problem for certification, because “the 12.7 percent figure in this case is more than twice that approximate upper bound.” Id.
Equally important, the plaintiffs had shown no way to separate that 12.7 percent from the 87.3 percent of allegedly injured class members. “The absence of any winnowing mechanism sharply distinguishes Nexium, the plaintiffs’ best case.” Id. (In re Nexium Antitrust Litigation, 777 F. 3d 9 (1st Cir. 2015), was the case that the First Circuit distinguished when it held that a class with 10 percent uninjured members could not establish a predominance of common issues. See In re Asacol.) Since the regression analysis establishing damages was “essential” to the plaintiffs’ case, this meant they were out of luck. The panel affirmed the denial of certification.
This case, combined with the First Circuit’s In re Asacol, shows a burgeoning trend against significant no-injury cases. Two circuit courts of appeal have now held that proposed classes with significant percentages of non-injured members cannot be certified under Rule 23(b)(3), because too many individual inquiries are required to separate the actually injured from the non-injured. There is a countervailing trend, however. Jurisdictions like the Ninth Circuit still allow no-injury cases by invoking different logic, pushing off the question of whether anyone has been injured as part of a “merits” determination they refuse to engage in. Nguyen v. Nissan North America, Inc., 932 F. 3d 811 (9th Cir. 2019). However, the clear logic of In re Asacol and now In re Rail Freight Surcharge provides practitioners with powerful tools to fight no-injury cases at the certification stage. And, given the Supreme Court’s clear interest in the intersection between class certification and merits inquiries, it is likely we could see this issue resolved once and for all in the near future.
The post D.C. Circuit Fortifies Predominance Challenges in No-Injury Class Action Lawsuits appeared first on Washington Legal Foundation.
By Creighton Magid, a Partner with Dorsey & Whitney LLP in the firm’s Washington, DC office.
The plaintiffs’ bar continues to view foods and beverages containing added sugar as prime targets for litigation. The majority of the lawsuits brought to date have been labeling claims, in which plaintiffs assert that they were duped into buying products portrayed on the label as “healthy” but that, in reality, were laden with “unhealthy” amounts of added sugar. Some lawsuits have gone further, stealing a page from the tobacco litigation playbook and alleging a conspiracy to suppress evidence of the medical risks posed by excessive amounts of sugar and to elevate fat as the larger health risk. Recent judicial decisions have been a mixed bag for defendants, offering reasons for both optimism and concern. The recently proposed $20.25 million settlement of excessive-sugar claims targeting various Kellogg cereals and snack bars suggests that sugar litigation will continue to be attractive to the plaintiffs’ bar.
One of the most notable sugar-labeling cases is Krommenhock v. Post Foods, LLC, a putative class action venued in the U.S. District Court for the Northern District of California. The Krommenhock plaintiffs allege that Post labels a variety of breakfast cereals with health-and-wellness statements that “suggest its cereals are healthy food choices”—statements such as “nutritious,” “good for you,” “rich in nutrients”—but that, in fact, the cereals contain (according to the complaint), large amounts of added sugar. This sugar, plaintiffs contend, contributes to overall excess sugar consumption and a resulting increase in the risk of chronic disease. Judge William Orrick largely denied Post’s motions to dismiss on two occasions. He held that, with the exception of claims expressly permitted by federal law, whether “overconsumption of cereals with excessive added sugar is unhealthy” or “whether [Post’s] health and wellness statements are false or misleading” are “questions that cannot be resolved at motion to dismiss stage, but may be resolved under a more stringent and evidentiary-based review at summary judgment.” Krommenhock v. Post Foods, LLC, 2018 U.S. Dist. LEXIS 42938, *11 (N.D. Cal. Mar. 15, 2018). Post has since taken Judge Orrick up on the suggestion and has moved for summary judgment. The court held a hearing in early October, but it has yet to issue an opinion.
Two recent Northern District of California decisions offer hope to defendants. In Clark v. Perfect Bar, LLC, 2018 U.S. Dist. LEXIS 219487 (N.D. Cal. Dec. 21, 2018), Judge William Alsup did not mince words in rejecting plaintiff’s claims that Perfect Bar’s labeling deceived him into thinking the protein bars were “healthy”:
Defendant Perfect Bar, LLC, at all material times in question, remained in compliance with all sugar-disclosure regulations. It is true that the bars contained honey and thus sugar, but that was disclosed on the packaging as well as the amount of sugar. Plaintiffs’ grievance is that the packaging led them to believe that the bars would be ‘healthy’ when, in supposed point of fact, the added sugar rendered them unhealthy or, in the alternative, less healthy from what they otherwise had believed. This is untenable. The actual ingredients were fully disclosed. Reasonable purchasers could decide for themselves how healthy or not the sugar content would be. No consumer, on notice of the actual ingredients described on the packing including honey and sugar, could reasonably overestimate the health benefits of the bar merely because the packaging elsewhere refers to it as a health bar and describes its recipe as having been handed down from a health-nut parent. The honey/sugar content was properly disclosed — that is the end of it — period.
Clark, 2018 U.S. Dist. LEXIS 219487, *1 – *2.
Judge Jeffrey White embraced Judge Alsup’s reasoning in Truxel v. General Mills Sales, Inc., 2019 U.S. Dist. LEXIS 144871 (N.D. Cal. Aug. 13, 2019), a putative class action alleging that General Mills marketed various sweetened breakfast cereals and snacks with health-and-wellness claims despite the “compelling evidence” of sugar’s role in heart disease, diabetes, and liver disease. Judge White concluded that the plaintiffs had failed to show that the health-and-wellness claims were likely to deceive a reasonable consumer:
[T]he Court finds that Plaintiffs cannot plausibly claim to be misled about the sugar content of their cereal purchases because Defendant provided them with all truthful and required objective facts about its products, on both the side panel of ingredients and the front of the products’ labeling. . . . [T]he actual ingredients were fully disclosed and it was up to the Plaintiffs, as reasonable consumers, to come to their own conclusions about whether or not the sugar content was healthy for them.
Truxel, 2019 U.S. Dist. LEXIS 144871, *11 – *12.
Although the majority of added-sugar cases focus on product label health-and-wellness claims, some plaintiffs have attempted to replicate the litigation tactics used against the tobacco industry by arguing that consumer product companies conspired to obscure sugar’s health effects. One such case is The Praxis Project v. The Coca-Cola Co., Case No. 2017 CA 004801 B, venued in the Superior Court for the District of Columbia. There, two pastors and a non-profit organization brought suit against Coca-Cola and the American Beverage Association, alleging that the defendants “have engaged in a pattern of deception to mislead and confuse the public (and governmental entities that bear responsibility for the public health) about the scientific consensus that consumption of sugar-sweetened beverages is linked to obesity, type 2 diabetes, and cardiovascular disease” and have employed “ongoing campaigns of disinformation and misrepresentation . . . to maintain and increase the sales of sugar-sweetened beverages, and to thwart and delay efforts of government entities to regulate sugar-sweetened beverages through warning labels, taxes, and other measures designed to make consumers aware of the potential for harm.”
In an order issued October 1, 2019, Superior Court Judge Elizabeth Wingo—who had previously dismissed the claims against the American Beverage Association—first addressed standing. She held that the non-profit organization had failed to establish that its claimed financial expenditures were “beyond those normally expended to carry out their advocacy mission.” (Oct. 1, 2019, Order at 17 (quoting Nat’l Ass’n of Home Builders v. EPA, 667 F.3d 6, 12 (D.C. Cir. 2011).) Judge Wingo then found that one of the two pastors lacked standing because he had failed to allege that he had purchased one of the products at issue or that he had done so in reliance on Coca-Cola’s advertising. The other pastor, however, did allege a product purchase made in reliance on Coca-Cola’s alleged disinformation campaign. Because one plaintiff had standing, the standing of the others became immaterial. See Watt v. Energy Action Educ. Found., 454 U.S. 151, 160 (1981).
Judge Wingo, however, then held that the statute of limitations precluded plaintiffs from basing their claim on any statements made prior to July 2014. This was significant: the ruling prevents plaintiffs from presenting a tobacco-style narrative alleging a decades-long campaign to obscure the health effects of sugar.
In arguing that the discovery rule should prevent the running of the statute of limitations, plaintiffs found themselves hoist on their own petard. As Judge Wingo noted, the plaintiffs had asserted that the alleged disinformation campaign “ramped up” in 2012 as a result of “growing public perception that sugar-sweetened beverages are linked to obesity, type 2 diabetes, and cardiovascular disease.” The plaintiffs had also filled their Complaint “with citations to studies and newspaper articles that make clear that the health risks of sugar sweetened beverages was a topic that any educated individual, but in particular individuals who [like plaintiffs], as part of their profession, counsel people about health risks, were on inquiry notice well before 2014.” (Oct. 1, 2019, Order at 27-29.) Though Judge Wingo upheld the plaintiffs’ standing to sue, her statute-of-limitations ruling significantly circumscribed their claims.
Praxis Project sets forth a clear line of attack for defendants in such “sugar conspiracy” cases. At the same time, defendants should view Judge Wingo’s opinion with caution, as it provides an equally clear roadmap for sugar-conspiracy plaintiffs. For example, a relatively unsophisticated plaintiff with medical conditions arguably related to excessive sugar intake could potentially dodge the statute of limitations by asserting that a corporate disinformation campaign convinced him to discount the publicly-available information on sugar’s health effects.
The proposed settlement of Hadley v. Kellogg Sales Co., No. 5:16-cv-04955, filed on October 21, 2019 with Northern District of California Judge Lucy H. Koh, is another indication that a defense-bar declaration of victory in the sugar litigation wars is premature. In Hadley, the plaintiffs alleged that the sugar content of various Kellogg cereals and snack bars rendered health-and-wellness labeling claims misleading under California law. Judge Koh had previously certified the suit as a class action and the U.S. Court of Appeals for the Ninth Circuit had denied Kellogg’s motion for interlocutory appeal.
The proposed settlement requires Kellogg to create a $20.25 million fund from which class members may seek payment and from which attorneys’ fees will be paid. Kellogg would also agree to remove or revise health-and-wellness claims on the packaging of the allegedly offending products.
The proposed settlement is significant for several reasons. First, the process of changing product labeling and associated marketing campaigns requires an enormous amount of time and financial resources. See Martin J. Hahn and Samantha L. Dietle, State and Federal Food-Labeling Reforms Impose Unappreciated Complexities and Compliance Challenges, WLF Legal Backgrounder, May 18, 2018. Second, the settlement lends credence to the legal theory that a product’s added sugars render health-and-wellness claims printed on the product label misleading under consumer-protection laws. At a minimum, the settlement demonstrates both the high cost of fighting such claims and the difficulty defendants face in contesting sugar-related class actions. At a time when judicial decisions appeared to be tightening the screws on sugar litigation, the proposed Kellogg settlement portends continued litigation in this arena and also sets a benchmark for other plaintiffs’ settlement demands.
The law concerning health-and-wellness claims on labels of products containing added sugar continues to evolve. Will courts follow Judges Alsup and White and find such claims untenable in light of disclosures on the Nutrition Facts label? Will courts exhibit a greater willingness to determine the reasonableness of claims on motions to dismiss? Will the plaintiffs’ bar attempt to expand on Praxis Project and assert industry-wide conspiracy claims? This rapidly-developing area of law merits close attention. At the same time, as the proposed Kellogg settlement indicates, sugar litigation is not going away anytime soon.
New Jersey Supreme Court Issues Compelling Precedent Removing Hearsay Bar to Third-Party-Fault Evidence
Plaintiffs in asbestos-liability lawsuits routinely sue scores of entities whose use of the substance allegedly contributed to their injuries. Since defendants invariably drop out of such suits through settlements and pre-trial dismissals, asbestos personal-injury trials often involve only one or two of the companies. Those remaining defendants (“trial defendants”) face enormous financial risk. One tactic trial defendants can use to reduce their liability exposure is attributing fault to settled entities 1 in the hope that, where permitted, the jury will assign those absent companies a share of the liability.
When attempting to allocate responsibility to a settled or otherwise unavailable defendant, the trial defendant bears the burden of proving the settled defendant’s responsibility. 2 Trial defendants typically meet that burden by using product-exposure evidence obtained during discovery, along with the settled entities’ sworn deposition testimony and written discovery responses from prior cases. The settled defendant’s prior statements are necessary to establish largely undisputed facts regarding, among other things, (1) the asbestos content of the settled defendant’s product(s) with which or near which the plaintiff may have worked and (2) the type of warnings given for those products.
Because most courts recognize that plaintiffs’ admissions are admissible at trial for all purposes, judges commonly admit into evidence statements of product exposures made by the plaintiff or his co-workers. 3 However, particularly in New York County Asbestos Litigation (“NYCAL”) trials, trial defendants often encounter resistance in the form of hearsay objections when attempting to offer deposition testimony4 from other cases5 about the settled defendants. The resolution of those objections can significantly impact a trial defendant’s ability to argue for a fair allocation of liability.
Because the settled defendant is often beyond the subpoena power of the trial court, plaintiffs’ hearsay objections, when sustained, effectively block the trial defendant from offering essential, undisputed facts that would enable the jury to assign liability to those not present at trial. Absent evidence that another entity or other entities may be responsible for the plaintiff’s injuries, the plaintiff is able to create the legal fiction that the remaining trial defendant—often associated with a de minimis exposure product—was the lone or prevailing cause of a particular plaintiff’s disease. Ultimately, these evidentiary exclusions can lead to verdicts that disproportionately allocate fault to trial defendant(s).
Several potential exceptions to the rule against hearsay could enable trial defendants to offer settled-defendant admissions from other cases into evidence. No exception stands out more starkly, however, than the “statement-against-interest” exception in Federal Rule of Evidence 804(b)(3) and also recognized by New York common law.6 After all, in this age of runaway verdicts, no entity would concede that (1) it made or sold an asbestos-containing product or (2) it did not issue a warning about that product’s use unless the statements were absolutely true. A corporation’s admission to either effect, therefore, has an extremely high indicia of truthfulness. Nevertheless, despite the reliable nature of this evidence, NYCAL judges have repeatedly blocked trial defendants’ use of settled defendants’ deposition testimony to prove alternative liability shares.7
Recently, in Rowe v. Bell & Gossett Co., the highest court of New York City’s neighbor, New Jersey, addressed the use at trial of admissions contained in a settled defendant’s corporate deposition testimony on the asbestos content of products and/or the absence of warnings about those products. The Supreme Court of New Jersey adopted a common-sense rule that recognizes that because no corporation would make admissions of this nature unless they were true, trial defendants should be permitted to rely upon such reliable and undisputed evidence to prove the fault of settled defendants. This ruling, and the logic underlying it, should provide a platform for courts across the county, especially those in NYCAL trials, to adopt a similar approach.
The New Jersey Statement-Against-Interest Exception as Applied in Rowe
In Rowe, plaintiffs alleged that Ronald Rowe contracted mesothelioma as a result of his exposure to asbestos-containing products made or sold by more than twenty defendants during his work as an automobile mechanic and boiler repairman. Prior to trial, plaintiffs settled their claims with eight other defendants, leaving only Hilco, Inc., an alleged successor in interest to Universal Engineering Co., Inc. (which sold a dry cement product), as the lone defendant at trial. At trial, Hilco moved to admit into evidence excerpts from the settling defendants’ corporate-representative depositions and answers to interrogatories from other asbestos lawsuits; the settling defendants’ statements pertained primarily to the asbestos content of the settled defendants’ products and the warnings associated with those products.8 The trial court allowed Hilco to introduce many of those statements into evidence. Ultimately, the jury returned a verdict allocating 20% of the fault to Hilco/Universal and, over plaintiffs’ objection, 80% to the settling defendants.
Plaintiffs appealed the trial court’s ruling to the New Jersey Superior Court, Appellate Division, which reversed the trial court and remanded the case for a new trial on allocation of fault only, holding that the settling defendants’ answers to interrogatories and corporate-representative deposition testimony excerpts were inadmissible hearsay. According to the Appellate Division, the proffered evidence did not meet any exception to the general rule against hearsay, because the admission-against-interest exception did not apply when the defendant offered the statement against a party other than the one that made it. The Appellate Division also found that the statements were not against the declarants’ interests, because they “comprised only one piece of the broader picture required to establish liability.” The Appellate Division further suggested that the settling defendants’ statements were not “admissions,” because they consisted of “well-known historical facts.”
The Supreme Court of New Jersey reversed and reinstated the jury’s verdict. The Supreme Court first held that courts should analyze each statement separately when applying the statement-against-interest exception. Next, the court noted that the statements at issue were, in all but two instances, so clearly against the settling defendants’ interests as to render them admissible. Moreover, the Supreme Court rejected the Appellate Division’s suggestions that (1) a statement against interest must, in and of itself, establish a complete basis for the declarant’s liability and (2) the statement-against-interest exception applies only when the statement is offered against the declarant who made it. Rather, the Supreme Court focused on the critical point that, so long as the statement is so far contrary to the declarant’s interest that no reasonable person would have made it unless true, the statement is an admission against interest, and is admissible under the exception to the rule against hearsay.
The Application of Rowe’s Rationale in Other States
New Jersey’s statement-against-interest exception to the hearsay rule is essentially the same rule that exists under the Federal Rules of Evidence and the common law.9 The rule in all its forms essentially permits the admission of an unavailable declarant’s out-of-court statements that “a reasonable person in the declarant’s position would have been made only if the person believed it to be true because, when made, it was so contrary to the declarant’s proprietary or pecuniary interest or had so great a tendency to invalidate the declarant’s claim against someone else or to expose the declarant to civil or criminal liability.”10 As stated under New York common law, an unavailable person’s admission is admissible where “(1) the declarant is unavailable, (2) the declaration when made was against the pecuniary, proprietary or penal interest of the declarant, (3) the declarant had competent knowledge of the facts, and (4) there is no probable motive to misrepresent the facts.”11 Under the logic of Rowe, third-parties’ corporate-representative depositions from prior lawsuits unquestionably meet the requisite standard of admissibility under either of these formulations.
As a threshold matter, citizens of foreign states and corporations immune to suit are certainly “unavailable” at trial. Moreover, New York precedents correctly hold that settled defendants are no longer parties and should not be forced to testify at trial, so they, too, are unavailable.12 Accordingly, settled defendants and bankrupt entities meet the definition of “unavailable.”13 Moreover, given the substantial liability an entity faces when its corporate representative admits that the entity manufactured or sold asbestos-containing products and did not provide sufficient warnings, those statements are against the corporation’s pecuniary or proprietary interest.14 Under those circumstances, the possibility of misrepresentation is low to non-existent.
Currently, section XIII.A of the NYCAL Case Management Order (“CMO”) provides that answers to the NYCAL standard interrogatories by non-parties may be admitted into evidence in a NYCAL asbestos trial to show (1) that a product contained asbestos or was used in conjunction with asbestos and/or (2) that the answering entity failed to warn about the asbestos content of the product at issue. However, the NYCAL CMO inexplicably applies only to written discovery responses, and does not mention deposition testimony, trial testimony, or other forms of corporate admissions made in other lawsuits. Nevertheless, regardless of the form in which they are made, those statements are precisely the sort of statements against interest that the Rowe court correctly recognized fall squarely within the letter and spirit of the hearsay exception for such statements. Arbitrary restraints on the form of evidence that should be admissible to establish settled-defendant shares cannot be justified.
In many cases, hearsay objections to reliable evidence have enabled plaintiffs to unduly focus fault and causation arguments on a trial defendant, and to avoid reliable evidence pointing to myriad other potential causes of an asbestos-related injury. When sustained, those objections deprive jurors of the chance to fairly allocate fault among all potentially responsible entities. Removing arbitrary evidentiary hurdles to the admission of those important and undisputed facts—as did the Supreme Court of New Jersey in Rowe—will level the playing field and create a better opportunity for jurors to fairly allocate respective entities’ fault in future asbestos trials.
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On October 21, Judge Victor Marrero of the Southern District of New York entered a final order in a clash between federal and state financial-services regulators, Lacewell v. OCC. The order sets the stage for what could be one of financial services’ most significant courtroom disputes in 2020. In Lacewell, the New York Department of Financial Services (DFS) challenges a federal Office of the Comptroller of the Currency’s regulation under which the OCC can charter financial technology (“fintech”) companies as special purpose national banks. The case will turn on statutory interpretation and Chevron deference, but it has broader implications for the dual banking system, fintech businesses’ growth, and the sustainability of federal banking laws in the 21st century.
OCC and Fintech Chartering
The National Bank Act (NBA) authorizes OCC to issue national bank charters. In 2003, OCC amended one of the regulations it promulgated for NBA implementation, 12 C.F.R. § 520, to allow chartering of “special purpose national banks.” That type of entity, according to § 520(e)(1), “conducts activities other than fiduciary activities,” and in order to be nationally chartered, it must receive deposits, pay checks, or lend money.
In March 2016, an OCC white paper initiated a discussion over whether fintech companies that pays checks or lends money, but didn’t accept deposits, could obtain a special purpose national bank charter. On July 31, 2018, OCC issued a press release announcing that it would be accepting applications from non-depository fintech companies.
New York Department of Financial Services’ (DFS) Suit
DFS filed suit in the Southern District of New York on September 14, 2018, alleging that OCC’s fintech charter decision exceeds its authority under the Administrative Procedure Act (APA) and violates the Tenth Amendment. The plaintiff agency argues that OCC’s decision to issue national charters poses an imminent threat of harm to DFS and New York citizens. OCC’s award of a national charter to a fintech company would preempt state regulation, an outcome DFS asserts will deprive state citizens of “critical financial protections.” The state regulators informed the court that OCC’s fintech charter decision would nullify regulations for over 600 non-bank financial services firms. DFS also claims that because its operating expenses are funded by fines lodged on entities like fintech companies, it will suffer financial harm if its authority is curtailed.
May 2, 2019 District Court Ruling
On May 2, the court granted OCC’s motion to dismiss DFS’s Tenth Amendment claim, but denied the federal agency’s motion to dismiss the APA claim. Vullo v. OCC. In his analysis of the APA claim, Judge Marrero first rejected OCC’s argument that DFS lacked Article III standing to sue, and that its claim was unripe and untimely. He next turned to whether the OCC’s interpretation of the National Banking Act merits deference under Chevron U.S.A. v. NRDC.
DFS argues that OCC’s actions to nationally charter fintech entities exceeds the agency’s authority under NBA § 27(a), which limits the agency’s award of national bank charters to entities that are “lawfully entitled to commence the business of banking.” In order to be in the “business of banking,” DFS argues, the NBA unambiguously requires the charter-seeking entity to accept deposits. OCC argues that the statute is ambiguous, in part because the NBA does not explicitly mandate deposit acceptance as a condition precedent for lawful national banking.
Judge Marrero pointedly rejected OCC’s assertion that § 27(a)’s failure to specifically reference deposit acceptance rendered the “business of banking” term ambiguous. “The relevant inquiry here,” he explained, “is not whether the NBA explicitly expresses such a definition but whether it unambiguously does so.” Judge Marrero concluded that Congress clearly meant that for an entity to be lawfully engaged in the “business of banking,” it must accept deposits. He reached that conclusion after examining predecessor statutes, dictionary definitions, § 27(a) in the broader context of the overall NBA, and OCC’s history of chartering non-depository entities.
Congress’s reliance on New York’s experiences in defining and regulating the “business of banking” factored heavily in the court’s statutory analysis and conclusion on the question of ambiguity. We’d be remiss if we didn’t note that this blog’s Featured Expert Contributor on digital-asset legal issues, Daniel Alter, made some of the same points that Judge Marrero did on New York’s influence in a Yale Journal on Regulation blog post published two years ago. In drafting NBA § 27(a), Alter wrote, Congress “incorporated the phrase ‘business of banking’ into the NBA from the  New York law as a term of art.” Alter goes on to explain that the meaning of that term, through its common usage and New York state judicial interpretation, embraced acceptance of deposits as an essential banking activity.
Two other points in the court’s statutory analysis are worth noting. First, OCC has never relied upon the NBA’s general “business of banking” clause to nationally charter a non-depository institution. In past years, OCC had twice chartered non-depository institutions, but only after Congress amended the NBA to formally provide that authority.
Second, Judge Marrero applied “the cannon of construction under which the plausibility of an agency’s interpretation of statutory text that would confer new power upon that agency bears inverse relation to the size of that putative power and the belatedness of the putative discovery.” Congress first adopted § 27(a) in 1863 and 140 years later, OCC announces through a regulatory amendment that the NBA’s general chartering language empowers it to charter non-depository institutions. That delay “casts doubt on OCC’s interpretation.” The size of that power—OCC’s preemption of state laws and that action’s impact on the dual-banking system—lends further weight to the court’s conclusion. As Judge Marrero put it,
“OCC’s reading [of § 27(a)] is not so much an ‘interpretation’ as ‘a fundamental revision’ of the NBA — essentially exercise of a legislative function by administrative fiat.”
Because the court concluded that “business of banking” unambiguously includes acceptance of deposits, OCC’s contrary interpretation merits no deference under Chevron. Judge Marrero left the question of remedy, however, for later consideration.
October 21 Final Order and Judgment
The court’s final order in Lacewell followed a period of intense negotiation between OCC and DFS. The parties agreed that the order should stipulate final judgment in DFS’s favor, but they disagreed on the remedy. OCC asked Judge Marrero to set aside the 2003 regulation only as it applies to fintech applicants that are seeking a national bank charter and that have a nexus to New York. DFS sought invalidation of the rule for all non-depository fintech institutions.
Judge Marrero entered judgment for DFS and vacated OCC’s regulation in its entirety. OCC made no compelling arguments, he explained, supporting the court’s deviation from the normal remedy when a plaintiff prevails on its APA abuse-of-authority claim. While OCC accepted the decision, the final judgment stipulates that the agency reserves its right to appeal.
On to the Second Circuit?
OCC must decide within the next week whether to appeal. The importance of the fintech chartering plan and the larger implications of the district court’s interpretation of § 27(a) arguably compel an appeal. The district court’s analysis was thorough and well reasoned. But Chevron deference is a fickle legal doctrine, one open to disparate interpretation and application.
It’s possible that a Second Circuit panel could find “business of banking” to be an ambiguous term in the context of DFS’s suit, which focuses on an activity—deposit acceptance—on which § 27(a) is silent. The appeals court, under Chevron, would then assess whether OCC’s interpretation is “reasonable.” The Supreme Court has indicated that “ambiguity constitute an implicit delegation from Congress” for agencies to fill in the gaps. With that in mind, courts generally lower the government’s burden of persuasion and leave the plaintiff trying to show that the government acted unreasonably. DFS, then, could have more of an uphill battle on appeal winning a Chevron “step 2” argument than it did at the district court on the question of ambiguity.
The broader policy stakes in this case are very high. State bank regulators like New York’s DFS likely consider OCC’s action as a targeted erosion of states’ role in America’s dual banking system. On the other hand, fintech companies would much prefer the efficiency and predictability a national charter system provides. OCC, for its part, has stated that its approach can help modernize the financial system and improve consumers’ access to financial services. The agency, of course, wouldn’t mind expanding its regulatory turf in the process.
For now, all eyes will be on the Office of the Comptroller of the Currency as it determines its next move.
Also published by Forbes.com on WLF’s contributor page.
The post State vs. Federal Clash over National “Fintech Charter” Set for 2020 Appellate Showdown? appeared first on Washington Legal Foundation.
The Committee on Small Business will hold a hearing titled, “A Fair Playing Field? Investigating Big Tech’s Impact on Small Business.” The hearing is scheduled to begin at 1:00 P.M. on Thursday, November 14, 2019 in Room 2360 of the Rayburn House Office Building.
Over the last decade, digital platforms have transformed American commerce through the rapid development of innovative business solutions that have helped small businesses reach and serve new customers. However, the boundless influence of Big Tech has raised concerns about how these platforms impact small firms that have come to rely on their business models. This hearing will give Members the opportunity to hear from large tech companies and small business about their perspectives on how to ensure that main street businesses have an equitable opportunity to compete in the information age.
To view a livestream of the hearing, please click here.
The Committee on Small Business Subcommittee on Rural Development, Agriculture, Trade, and Entrepreneurship will hold a hearing titled, “Assessing the Government’s Role in Serving Rural American Small Businesses (Part One).” The hearing is scheduled to begin at 10:00 A.M. on Thursday, November 14, 2019 in Room 2360 of the Rayburn House Office Building.
Rural America, encompassing about 72% of our nation’s total land and about 46 million residents, plays a critical role in our economy. Yet, rural businesses face many unique challenges, such as access to capital, training, and technology. The hearing will examine the U.S. Department of Agriculture’s Rural Business-Cooperative Service programs and Small Business Administration’s programs, and how these agencies can work together to support entrepreneurship, economic growth and business development in rural communities.
To view a livestream of the hearing, please click here.
Ms. Michelle Christian
National Director, Office of Rural Affairs
United States Small Business Administration
Ms. Bette Brand
Rural Business-Cooperative Service
*Witness testimony will be posted within 24 hours after the hearing’s occurrence
John D. McMickle is co-founder of North South Government Strategies, a Washington, DC-based consulting firm. He was previously a Judiciary Committee Counsel for Senator Charles Grassley and a Partner with Winston & Strawn, LLP. He is the author of a September 21, 2018 WLF Legal Backgrounder, The Americans with Disabilities Act and Cyberspace: Who Will Provide Sorely Needed Guidance?
In recent years, Congress had demonstrated a continuing interest in addressing litigation abuses under Title III of the Americans with Disabilities Act (“ADA”). According to a document from the Administrative Office of the United States Courts (the administrative body of the federal judiciary which, among other things, tracks trends in federal litigation), civil rights cases filed in federal courts between 2005-2017 decreased by 12 percent while ADA cases during the same period increased by an astounding 395 percent. Much of the recent uptick in ADA litigation can be attributed to lawsuits regarding websites. As the Washington Legal Foundation has argued in a Supreme Court amicus brief, it is not clear that the ADA, enacted by Congress before the World Wide Web even existed, applies to websites. And the Supreme Court recently declined to hear an appeal from Domino’s Pizza that could have harmonized conflicting circuit court decisions.
In 2018, the House of Representatives passed legislation, the ADA Education and Reform Act. Although the Senate failed to consider this measure, which would have required potential litigants to give notice of an ADA violation before filing a lawsuit, a similar bill is expected to be introduced in late 2019 or early 2020. As the law stands now, any prudent business with a public-facing website has to guess how to make it compliant with the ADA.
Meanwhile, interested Senators have focused on the power of the Department of Justice to provide legal clarity around whether and how the ADA applies to websites. In response to a July, 2019 letter from several U.S. Senators, the Department of Justice recently reiterated its “longstanding interpretation that the ADA applies to the websites of public accommodations.”
This way of stating the issue—that the ADA applies to websites of public accommodations—could be significant. One of the issues that the Supreme Court could have resolved in the Domino’s Pizza case is whether the ADA applies to web-only business. There is currently a circuit split on this question. It is the rule in some federal circuits that the ADA applies only to websites that are related to a physical space that is also covered by Title III of the ADA. In other circuits, websites are classified as public accommodations whether or not connected to a physical place. One wonders whether DOJ intended to communicate a view on this point.
The letter is also noteworthy for stating, yet again, that absent a formal rulemaking, DOJ will not establish “specific technical requirements” for making websites compliant with the ADA. This aspect of the letter is perhaps the most disingenuous and frustrating for stakeholders. In fact, DOJ has used “specific technical requirements” to settle ADA lawsuits when DOJ is the plaintiff. In 2104, for instance, when DOJ settled a Title III ADA action against Peapod (the web grocery ordering and delivery service for Giant Foods) for failure to make its website accessible, the settlement agreement required that Peapod use a certain technical protocol known as WCAG 2.0. The settlement agreement (available here) stated that “[u]under the agreement, Peapod is required to…ensure that www.peapod.com and its mobile applications conform to, at minimum, the Web Content Accessibility Guidelines 2.0 Level AA Success Criteria (WCAG 2.0 AA), except for certain third party content.” Similarly, in 2015, the Department required the municipality of Cedar Rapids, Iowa to comply with WCAG 2.0
In other words, DOJ actually imposes a standard for website accessibility in litigation but refuses to do so through rulemaking. DOJ maintains that the failure to announce a binding regulatory standard is actually good news—website owners have flexibility to comply with the ADA in various ways. The letter does not point to any specific compliance strategy, merely stating that the “touchstone for compliance with the ADA with respect to the websites of public accommodations remains the requirements of nondiscrimination and effective communication.” Given the predatory litigation environment surrounding Title III of the ADA, the absence of any binding standard of general application leaves website operators to the tender mercies of serial plaintiffs.
An alternative approach to the issue of website accessibility could look to the standards the federal government applies to itself for its own websites. Rules issued under Section 508 of the Rehabilitation Act of 1973 use the WCAG 2.0 standard for federal websites. Further, the Section 508 rule contains several “safe harbors” to ensure that compliance with WCAG 2.0 does not unduly burden federal agency resources. Applying this regulatory approach to private sector websites covered by the ADA would promote accessibility while ensuring that the private sector benefits from similar safe harbors.
DOJ also notes that websites associated with a physical space could be considered “auxiliary aids” designed to assist the disabled in the use and enjoyment of a public accommodation. Under this view, DOJ seems to leave open the possibility that a website owner could satisfy its obligations under Title III if the owner provided access to information through an alternative means. Thus, for instance, a customer service telephone number that provides a blind customer with assistance with ordering from a retailer might satisfy the ADA.
Interestingly, the 2019 Senate letter also asked Attorney General Barr whether “the Department considered intervening in pending litigation to provide clarity on these issues, or to push back against any identified litigation abuses?” (emphasis added.) Such a federal effort would provide a much-needed supplement to state and local efforts. For instance, the Attorney General of Arizona and the District Attorney of Riverside, California have sought to dismiss apparently non-meritorious ADA lawsuits. And in August, 2019, a federal court sanctioned a Miami attorney and his client for a litigation strategy “to dishonestly line their pockets with attorney’s fees from hapless defendants under the sanctimonious guise of serving the interests of the disabled community.”
In sum, the position of the Department of Justice remains untenable. DOJ believes the ADA applies to at least some websites but will not provide guidance to stakeholders—except in the course of a specific enforcement action. Such a stance is a dereliction that could undermine public confidence in the laudable purposes of the ADA. The business community has to guess how to ensure a website complies with the ADA, and hope it guessed correctly. Surely it is more beneficial—for all involved—for businesses to spend time and resources complying with meaningful standards. Perhaps DOJ will at least target litigation abuses to mitigate the financial jeopardy that flows from the legal uncertainty that DOJ itself has created.
The post After DOJ Letter on Website Compliance, the ADA Guessing Game Continues appeared first on Washington Legal Foundation.
The Committee on Small Business will meet for a hearing titled, “Upskilling the Medical Workforce: Opportunities in Health Innovation.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, November 13, 2019 in Room 2360 of the Rayburn House Office Building.
It is predicted that America faces a doctor shortage upwards of 100,000 doctors by 2030, which could disproportionately affect rural and underserved communities. Beyond training more doctors, opportunities in innovative healthcare practices offers another method to proactively address the shortage. Telehealth and HealthIT have the potential to help many small medical practices manage patient information, be more efficient, and provide the most effective treatment. This hearing will analyze ways the health care workforce can be trained to leverage these new technologies to lower costs, incentivize start-ups, and provide quality care.
To view a livestream of the hearing, please click here.
Dr. Matthew Conti
Orthopaedic Surgery Resident
Hospital for Special Surgery (HSS)
New York, NY
*Testifying on behalf of the American Academy of Orthopaedic Surgeons (AAOS)
Dr. Ingrid Zimmer-Galler
Associate Professor of Ophthalmology
Founding Clinical Director of the Office of Telemedicine
Johns Hopkins University School of Medicine
*Testifying on behalf of the American Academy of Ophthalmology
Dr. Nancy Fahrenwald, PhD, RN, PHNA-BC, FAAN
Dean and Professor
Texas A&M University, College of Nursing
*Testifying on behalf of the American Association of Colleges of Nursing
Mr. Michael Hopkins
CEO & Founder
True Concepts Medical
*Witness testimony will be posted within 24 hours after the hearing’s occurrence
Jeffri A. Kaminski is a Partner with Venable LLP in its Washington, DC office and is the WLF Legal Pulse’s Featured Expert Contributor, Intellectual Property—Patents
On October 31, 2019, the Federal Circuit, in Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140, ruled that the current structure of the Patent & Trial Appeal Board (PTAB) violated the Appointments Clause of Article II of the U.S. Constitution. Rather than eliminate the PTAB as some feared (or hoped for), the Federal Circuit remedied this constitutional violation by divesting the more than 200 Administrative Patent Judges (APJs), who decide cases before the PTAB, from the protections of “the statutory removal provisions.” In doing so, the Federal Circuit reclassified the APJs as “inferior officers” who could be removed from their positions without cause by the Secretary of Commerce and the Director of the USPTO.
The Federal Circuit also vacated and remanded the Board’s decision without reaching the merits of the case, holding that a “new panel of APJs must be designated and a new hearing granted.” However, the Federal Circuit specifically limited this holding only to those cases where “final written decisions were issued and where litigants present an Appointment Clause challenge on appeal.” Thus, other PTAB decisions cannot be reviewed or vacated on this basis.
In Arthrex, Smith & Nephew, Inc. filed a petition to the PTAB requesting an inter partes review to challenge the patentability of certain claims of U.S. Patent No. 9,179,907, directed to a knotless suture securing assembly, which Arthrex owns. The PTAB issued a final written decision finding those specific claims of ʼ907 unpatentable. Arthrex appealed the PTAB’s decision to the Federal Circuit and raised the issue that APJs were not constitutionally appointed but were acting as principal officers, not “appointed by the President with the advice and consent of the Senate” as the Appointments Clause of the U.S. Constitution requires.
The Federal Circuit agreed with Arthrex because neither the Secretary of Commerce nor the Director—the only two presidentially-appointed officers that provide direction to the USPTO—“exercised sufficient direction and supervision over APJs to render them inferior officers.” Under the flawed structure, the Secretary of Commerce appoints the APJs to the PTAB. When a petitioner requests an inter partes review, the APJs then serve on a three-judge panel to consider the patentability of challenged claims and issue final written decisions determining the patentability of challenged claims “on behalf of the Executive Branch.” The Federal Circuit held that this significant exercise of authority along with the limitations on removal from service only for “such cause as will promote the efficiency of the service” gave the APJs status as principal officers instead of inferior officers.
Rather than eliminating the three-APJ panels or completely altering the method of appointing APJs, the Federal Circuit “partially severed” the APJs from the statutory provision that applies to other officers and employees of the USPTO—classifying APJs as “inferior officers” and subjecting them to at-will removal by the Director. The Federal Circuit thought this to be the “narrowest viable approach to remedying the violation of the Appointment Clause” and “the proper course of action and the action Congress would have undertaken.”
Now that APJs are “at-will” officers, the finality of their issued decisions is checked by the fact that the Director can dismiss them for any reason. It remains to be seen, however, if this will shape their day-to-day practices at the PTAB. Will the Director involve himself in the details of every appeal, which can be highly complex and technical, now that he can remove any APJ he disagrees with? Likely no. However, if a case is high-profile, could APJs feel compelled to rule a certain way to stay in the good graces of their Director who may have other objectives, whether political or policy-driven? Perhaps yes. Whether or not individual APJs may come and go, what is certain is that the PTAB still remains a legitimate administrative law body that will continue to review and cancel patent claims it deems unpatentable.
The post The PTAB Is Here to Stay, but Individual Administrative Patent Judges May Not Be appeared first on Washington Legal Foundation.
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.
Whether whiskey being poured from a bottle to a flask and then to a punch bowl would be regulated—whether the groceries you buy come from the store, or from your car, as that is the last place they were before you enter your house—and whether releases from one septic tank would have to be permitted, but not from a housing development with hundreds of septic tanks. These are among the analogies discussed at oral argument before the U.S. Supreme Court as the Justices questioned counsel about how to interpret the Clean Water Act (CWA) in County of Maui vs. Hawaii Wildlife Fund.
As reported here previously, the case concerns a wastewater treatment plant operated by the County of Maui. The plant is permitted to inject treated wastewater into underground injection wells—and some of that wastewater travels from the wells through groundwater to the Pacific Ocean, a half mile away. At issue is whether the County needed a permit for the injected wastewater leaving the wells and reaching the ocean: Does the CWA require a permit when pollutants originate from a point source (the wells) but are conveyed to a navigable water (the Pacific) via a nonpoint source (the groundwater). The County has argued no, a discernible, confined, and discrete conveyance must carry the pollutant to be regulated. The Ninth Circuit disagreed, holding that a permit would be required, so long as pollutants were “fairly traceable” from the wells to the ocean so that it was “the functional equivalent” of a discharge to a navigable water. The respondent environmental groups support the lower court’s approach.
At argument, Justice Breyer, in questioning Maui’s attorney, asked whether the County’s reading would provide a “road map” for avoiding regulation, as a source could “just cut off” the discharge pipe before the stream. Justice Kagan echoed that, stating that “nobody would ever have to get a permit” under petitioner’s approach. Justice Sotomayor’s questioning also appeared to support respondent, suggesting the other laws petitioner pointed to are “remedial” while the CWA is “preventative” and “that’s why we give them a permit.” Justice Ginsburg, meanwhile, asked how the respondent’s test differed from “direct hydrological connection” test adopted by the Fourth Circuit in the Upstate Forever case (also discuss previously here) that is also before the Court (but on hold for now).
Justice Kavanaugh questioned whether the County’s test was akin to the test rejected by late Justice Scalia in Rapanos, but also sought “some clear line for property owners” that would be objectively clear “up front” and not after much litigation. In questioning respondent’s counsel, Justice Alito expressed concern “whether there is any limiting principle that can be found in the text and is workable and does not lead to absurd results.” Chief Justice Roberts and Justice Gorsuch likewise each asked respondent to define a “limiting principle” on their approach, with Chief Justice Roberts noting the respondent’s “proximate cause” approach was “notoriously manipulable.”
It is often perilous to read the tea leaves of oral argument and predict how the Court might rule. This case is no different, as the Justices revealed a range of views and much uncertainty about how they might interpret the Act. The Court took the case, which often does signal an interest in reversing the lower court. Yet, if Justice Kavanaugh’s reference to Rapanos suggests some inclination to find a middle ground, it could be the case that they are headed towards a ruling that would require permitting in certain circumstances beyond the scope advanced by Maui, provided a majority can coalesce around an appropriate limiting principle. Stay tuned.
The post SCOTUS <em>County of Maui</em> Argument: Whiskey, Septic Tanks, and Limiting Principles appeared first on Washington Legal Foundation.
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The United States is currently home to over 43 million immigrants and over 3 million have started small businesses. These companies pay an estimated $126 billion in wages to six million people and generate over $65 billion in income. Recognizing their economic contributions, the hearing will focus on how the federal government can better assist immigrant entrepreneurs desiring to start a small business. Members will learn why immigrants are more likely to start new businesses but less likely to have access to traditional sources of capital, and how the Small Business Administration’s programs, such as entrepreneurial development and lending programs like the Community Advantage program can help immigrant business owners succeed.
To view a livestream of the hearing, please click here.
Ms. Rachelle Arizmendi
Vice-President and Chief Operations Officer
Pacific Asian Consortium in Employment (PACE)
Los Angeles, CA
Mr. Donald J. Loewel, MBA
Small Business Development Center
Pasadena City College
Ms. Tatiana Bonilla
Andrew Design Group, Inc.
*Witness testimony will be posted within 24 hours after the hearing’s occurrence
Comedian-turned-Hollywood-mogul Byron Allen is bringing his contract dispute with Comcast Corp. to the Supreme Court next week. To hear Allen tell it, Comcast is trying to turn back the civil-rights clock and make it harder for minorities to redress racial discrimination. But that’s a distortion of the case. Comcast is simply asking the Supreme Court to rule—in line with the vast majority of courts that have addressed the question before the justices—that proving racial discrimination in contracting requires proving that one has actually suffered an injury. The actual-injury requirement allows courts to differentiate between meritorious claims and those (such as Allen’s) filed simply to force a defendant to settle in order to avoid unwanted publicity.
Allen’s media empire includes ESN, which operates seven cable networks that are available in a limited number of U.S. media markets. Over the past decade, Comcast has declined ESN’s requests that Comcast carry the networks, citing low consumer demand for ESN’s programming. Other cable operators declined similar requests from ESN for similar reasons.
In response to the refusals to carry its programming, ESN sued Comcast as well as Charter Communications, Time Warner Cable, DirecTV, and AT&T. The suits alleged that the defendants violated the Civil Rights Act of 1866, which prohibits racial discrimination in making and enforcing contracts. Several of the defendants settled the claims by agreeing to carry ESN programming, but Comcast chose to fight—and its case is now before the Supreme Court.
There is no direct evidence of racial discrimination here. But Allen alleges that Comcast offered carriage contracts to white-owned networks that had less viewers than ESN’s networks; he asserts that racial discrimination can be inferred from that allegedly disparate treatment. Comcast denies that it treated white-owned businesses more favorably and notes that its cable offerings include many minority-owned networks. Among those offerings is the Weather Channel, which Allen himself purchased in 2018 for $300 million.
The trial court gave Allen three chances to submit a complaint that stated an adequate racial-discrimination claim. The court found each complaint insufficient and dismissed the lawsuit. It ruled that Allen failed to show that racial discrimination, not other, race-neutral reasons, motivated Comcast’s refusal to offer a carriage contract. The trial court’s ruling adopted the approach taken by every federal appeals court in analogous racial-discrimination suits; those courts held that the plaintiff must show that it would have received the desired contract “but for” the alleged discrimination.
Allen appealed, and the U.S. Court of Appeals for the Ninth Circuit reinstated his case. It ruled that under the federal law governing contract discrimination, it is enough to allege that race was “a factor” in the decision not to sign a contract, even if no contract would have been made if race had played no role. The Supreme Court last June agreed to review Allen’s case, as it often does when two or more federal appeals courts disagree about how to interpret a federal law.
The standard of proof applied by a trial court makes a difference in discrimination claims of this sort. Allen’s claim is thin at best. Nothing in his complaint suggests that Comcast considered Allen’s race when it declined to offer his networks a carriage contract. But if the Supreme Court adopts the lenient standard Allen proposes—that a plaintiff need only allege that race was “a factor” in the contracting decision—it will become extremely difficult for a defendant to win early dismissal of even the most frivolous claims. And once a plaintiff survives a motion to dismiss on the pleadings, the high cost of litigation (including the cost of responding to endless depositions and document requests) will virtually force the defendant to settle the lawsuit without regard to its merits.
That may well be what Allen is counting on. But Congress adopted the civil rights laws to eliminate racial discrimination in the making of contracts, not as a litigation tool that unhappy plaintiffs can use to browbeat others into making unwanted deals. Byron Allen should not be permitted to besmirch Comcast’s civil-rights record for the purpose of expanding his own business.
Also published by Forbes.com on WLF’s Contributor Site