WASHINGTON, D.C. – U.S. Senator Maria Cantwell, Chair of the Senate Committee on Commerce, Science, and Transportation and Richard Durbin, Chairman of the Senate Judiciary Committee today sent separate letters to Attorney General Merrick Garland and Federal Aviation Administration (FAA) Administrator Steve Dickson regarding increased incidents involving dangerous airline passengers. The senators called on the agencies to coordinate efforts to ensure that those airline passengers who commit criminal acts are prosecuted.
“Civil penalties alone are failing to deter criminal activity by airline passengers,” Sens. Cantwell and Durbin wrote to FAA Administrator Steve Dickson. “Robust and public efforts to prosecute those who endanger passengers and crewmembers are necessary to deter interference with safe air travel. The FAA plays a critical role in investigating and referring criminal incidents to federal law enforcement authorities.”
As of September 14, 2021, there have been 4,284 reports of unruly passenger incidents this year—3,123 of which were mask-related. Additionally, the FAA has initiated 755 investigations into unruly passengers, which is more than double the investigations for 2019 and 2020 combined. The FAA has initiated enforcement actions in 154 cases, levying more than one million dollars in fines.
“As you know, DOJ has ample authority to prosecute those who commit crimes while onboard an aircraft,” the senators wrote to Attorney General Merrick Garland. “It is critical that DOJ direct federal law enforcement agents and prosecutors to use these authorities to fully investigate reported incidents on aircraft, and, when supported by the evidence, prosecute those who are criminally responsible.”
According to a recent survey of flight attendants, over 85% of respondents had dealt with unruly passengers in the first half of 2021.
Cantwell and Durbin also asked for a briefing from DOJ and FAA to inform Congressional oversight of the issue no later than October 11, 2021.
A copy of today’s letter to DOJ is available here.
A copy of today’s letter to FAA is available here.
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By Scott Hazelgrove, a litigator with Ellis & Winters LLP in the firm’s Raleigh, NC office. This post originally appeared on the firm’s Best in Class blog and we reprint it here with the firm’s (much appreciated) permission.
On June 25, 2021, a divided Supreme Court issued an important decision regarding Article III standing in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021). In TransUnion, a 5-4 Court found that 6,332 members of an 8,185-member plaintiff class did not suffer a “concrete injury” from TransUnion’s violation of the Fair Credit Reporting Act (FCRA) by including erroneous information on the plaintiffs’ credit reports.
The Court reasoned that, although TransUnion technically violated the FCRA through its inaccurate reporting, thus giving rise to a statutory cause of action, it did not actually harm over 75% of the class because it did not send their credit reports to any third parties. Thus, the Court held that those class members whose credit reports remained within TransUnion lacked standing under Article III of the Constitution to sue TransUnion in federal court. As the dissent warned, however, the Court’s holding applies to federal courts only, meaning that class action defendants may find themselves defending more class actions attempting to vindicate federal statutory rights in state court.
A look at TransUnion, including its underpinnings, and a recent North Carolina analogue, helps tell this story.
Precursor to TransUnion
Writing for the majority (Chief Justice Roberts and Justices Alito, Gorsuch, Kavanaugh, and Barrett), Justice Kavanaugh leaned heavily on the Court’s most recent Article III standing case, Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). In Spokeo, the Court (Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, Alito, and Kagan in the majority) recounted the three-part test for Article III standing: (1) an injury-in-fact, (2) fairly traceable to the challenged conduct, and (3) likely to be redressed by a favorable judgment.
To establish an injury-in-fact, a plaintiff had to demonstrate “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Spokeo, 136 S. Ct. at 1548. The Court explained that a plaintiff does not automatically satisfy the injury-in-fact requirement whenever Congress codifies a cause of action. In other words, a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. at 1549. By way of example, the Court reasoned that “[i]t is difficult to imagine how the dissemination of an incorrect zip code [on a consumer’s credit report], without more, could work any concrete harm.” Id. at 1550.
On remand, the Ninth Circuit held that Robins had established a concrete injury for purposes of Article III standing because the inaccurate credit reporting had caused him “real harm” to his employment prospects at a time when he was unemployed. See Robins v. Spokeo, Inc., 867 F.3d 1108 (9th Cir. 2017). Spokeo appealed again, and the Supreme Court denied the petition for writ of certiorari. This led to circuit splits about how to interpret and apply Spokeo, thus paving the way for TransUnion a few years later.
The TransUnion Case
Sergio Ramirez was the named plaintiff on behalf of a plaintiff class that sued TransUnion in the U.S. District Court for the Northern District of California alleging various FCRA violations. Principally, Ramirez alleged that TransUnion incorrectly reported that he and others were on a federal government watchlist of “specially designated nationals” who are national security threats to the United States, with whom it is generally unlawful to conduct business.
Ramirez learned that he was on the government watchlist when a car salesman told Ramirez that he could not sell him a car because his TransUnion credit report contained a government alert that his name was on a “terrorist list.” Ramirez then asked TransUnion for a copy of his credit report, and it mailed him a copy that did not include the government watchlist alert, and then it subsequently mailed him a letter that included the alert but did not include a copy of TransUnion’s summary of rights, which the FCRA required. Ramirez sued TransUnion and was able to certify a class of 8,185 U.S. citizens who received a TransUnion mailing during a certain timeframe that was similar to the second mailing TransUnion sent Ramirez.
In the district court, Ramirez and TransUnion stipulated that TransUnion incorrectly included the government watchlist alert on all 8,185 class members but distributed reports to third parties for only 1,853 class members. TransUnion then moved to decertify the class because, under Spokeo, a plaintiff cannot establish injury-in-fact by alleging “a bare procedural violation, divorced from any concrete harm….” TransUnion, 141 S. Ct. at 2213 (quoting Spokeo, 578 U.S. at 341).
TransUnion argued that 6,332 individuals—over 75% of the class—had alleged no concrete harm and thus had no standing to assert their claims. The district court denied TransUnion’s motion, and the jury awarded the class over $60 million, including punitive damages. The Ninth Circuit affirmed but reduced the jury’s verdict to about $40 million. See Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020).
The Supreme Court reversed, reasoning that the 6,332 class members whose credit reports were not sent to any third parties did not suffer a concrete injury and thus lacked standing under Article III to bring their claims in federal court. The Court applied its reasoning in Spokeo—specifically that a plaintiff’s injury be “concrete” (i.e., “real and not abstract”) and that “Article III standing requires a concrete injury even in the context of a statutory violation.” Spokeo, 578 U.S. at 341 (emphasis added).
In further deference to Spokeo, the Court quoted a recent Sixth Circuit case citing Spokeo for the fundamental point that even though “Congress may ‘elevate’ harms that ‘exist’ in the real world before Congress recognized them to actionable legal status, it may not simply enact an injury into existence, using its lawmaking power to transform something that is not remotely harmful into something that is.” Ramirez, 141 S. Ct. at 2205 (quoting Hagy v. Demers & Adams, 882 F.3d 616, 622 (6th Cir. 2018)).
And Justice Kavanagh, with a nod to his newest colleague, Justice Barrett, put a finer point on it and quoted a recent Seventh Circuit opinion for the proposition that “Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions.” Id. (quoting Casillas v. Madison Avenue Assocs., Inc., 926 F.3d 329, 333 (7th Cir. 2019)).
The Court concluded that “[e]very class member must have Article III standing in order to recover individual damages” and that “‘Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.’” Id. at 2208 (quoting Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 466 (2016)).
Interestingly, the Court did not address the question of “whether every class member must demonstrate standing before a court certifies a class.” Id., n.4 (emphasis added). This means that absence of concrete injury alone will not preclude class certification. As a policy matter, why courts would allow certification of a class of plaintiffs not wholly made up of members who have standing to sue in federal court is unclear. As a practical matter, however, plaintiffs’ lawyers still may attempt to certify a class in federal court in attempt to increase settlement pressure on defendants who would prefer to end the litigation. Nevertheless, after TransUnion, defendants likely will be emboldened to proceed at least through a complete standing analysis to get the size of the class—and thus any total potential damages award—significantly pared back.
The TransUnion Dissent
Justices Thomas, Breyer, Sotomayor, and Kagan dissented, finding it “remarkable in both its novelty and effects” that the majority, in requiring a concrete injury in addition to a statutory right, had “relieved the legislature of its power to create and define rights.” Id. at 2221. Perhaps most importantly for future class action trends, the dissent warned that the Court’s opinion would result in more class actions being filed in state courts rather than federal courts. Id. at 2224, n.9. Writing for the dissent, Justice Thomas wrote: “Today’s decision might actually by a pyrrhic victory for TransUnion. The Court does not prohibit Congress from creating statutory rights for consumer; it simply holds that federal courts lack jurisdiction to hear some of these cases.” Id. In referring to class actions involving plaintiffs that have not demonstrated concrete injury, Justice Thomas concluded: “By declaring that federal courts lack jurisdiction, the Court has thus ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions.” Id.
The Implications on State Class Action Practice
Historically, many class action plaintiffs have brought their claims in federal court, or defendants have removed to federal court in attempt to litigate in front of a judiciary they perceived to be generally more sympathetic to corporate interests than a state court judge or jury might be. But in Spokeo, the Supreme Court started to pull the rug out from under plaintiffs attempting to stand in federal court based on a defendant’s mere procedural violations. In absence of concrete injury, plaintiffs were now precluded from suing in federal court.
Five years later, the Supreme Court in TransUnion pulled the Article III standing rug completely out from under plaintiffs who have alleged a statutory violation only. Going forward, class action defendants in federal court should emphasize that every member of a certified class must establish Article III standing, as described above, to be able to recover individual damages. The most logical result of this—as Justice Thomas pointed out in his dissent—is that class action plaintiffs alleging a federal statutory violation likely will at least attempt to turn to state courts to pursue their claims.
Many states allow standing in cases where federal courts would preclude it. North Carolina is one such state, as evidenced by a recent case decided by the Supreme Court of North Carolina.
In Committee to Elect Dan Forest v. Employees Political Action Committee, 376 N.C. 558 (N.C. 2021), the Supreme Court of North Carolina held that plaintiffs need not show an injury in fact when a statute affords a right to sue. The Court found that the North Carolina Constitution does not limit the state courts’ jurisdiction the same way Article III of the U.S. Constitution limits federal courts, including the requirement that a plaintiff show an “injury in fact.”
The Court ultimately upheld standing to sue based on the technical statutory violation at issue there, irrespective of actual injury or damages. The case appears to be at odds with TransUnion, though how broadly North Carolina courts will apply Dan Forest’s holding remains to be seen.
What’s Next for Class Action Defense in North Carolina?
Going forward, we expect that courts in states like North Carolina that have more lenient standing principles likely will find themselves adjudicating more class actions filed under federal statutes.
Defendants may be tempted to remove these class actions to federal court. But they should think carefully before doing so, as a handful of recent federal court decisions have remanded such class actions to state court, with at least one court awarding attorney fees for such maneuver. See, e.g., Mocek v. Allsaints USA Ltd., 2016 WL 7116590, at *3 (Dec. 7, 2016) (remanding to state court due to lack of subject matter jurisdiction but awarding more than $58,000 in attorney fees because defendant “tried to have it both ways by asserting, then immediately disavowing, federal jurisdiction”).
Defendants might, instead, consider seeking dismissal based on state law standing principles, including statutory standing, which focuses on the merits of the claim, including whether proof of actual injury is required, and results in dismissal with prejudice, rather than remand or dismissal without prejudice in the case of removal based on Article III standing.
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WASHINGTON – U.S. Sen. Roger Wicker, R-Miss., ranking member of the Senate Committee on Commerce, Science, and Transportation, today sent a letter requesting Federal Aviation Administrator (FAA) Steve Dickson to explain the implementation of the two-week Temporary Flight Restriction (TFR) over the international bridge into Del Rio, Texas, and to promptly process any waiver sought by the media to ensure that the First Amendment is protected.
Click here or read the letter below:
Dear Administrator Dickson:
The worsening situation on our southern border is a crisis that requires the Biden Administration’s attention. Reports suggest that the number of migrants waiting to cross the international bridge into Del Rio, Texas, has swollen precipitously in recent days, underscoring the urgent need for the Administration to respond by securing our border.
Disconcerting images showing thousands of migrants waiting under the bridge surfaced on September 16, 2021. I understand that the FAA on the same day implemented a two-week TFR over the area at the request of Customs and Border Protection, thus preventing drone imaging of the bridge by media outlets unless a waiver is granted.
To ensure that the First Amendment is protected, I expect that the FAA will promptly process any waiver sought by the media, which I understand is standard practice. Given the concerns raised by this matter, I request a briefing with an explanation for implementing this aviation restriction at the Mexican border.
I appreciate your attention to this issue.
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WASHINGTON, D.C. — U.S. Senator Maria Cantwell (D-WA), Chair of the Senate Committee on Commerce, Science, and Transportation, will convene an executive session at 10:00 a.m. on Wednesday, September 15, 2021 to consider the presidential nominations of Alexander Hoehn-Saric to be a Commissioner and Chair of the Consumer Product Safety Commission (CPSC); Mary T. Boyle to be a Commissioner of the CPSC; Richard Trumka, Jr. to be a Commissioner of the CPSC; and Grant Harris to be Assistant Secretary for Industry and Analysis at the Department of Commerce.
Immediately following the executive session, the Committee will hold a hearing to consider the presidential nominations of Victoria Marie Baecher Wassmer, to be Chief Financial Officer for the Department of Transportation (DOT); Mohsin Raza Syed, to be Assistant Secretary of Government Affairs at DOT; Amitabha Bose, to be Administrator of the Federal Railroad Administration; and Meera Joshi, to be Administrator of the Federal Motor Carrier Safety Administration.
Commerce Committee Executive Session
Wednesday, September 15, 2021
Committee Hearing Room, Russell 253
Executive Session Agenda:
- Nomination of Alexander Hoehn-Saric, to be a Commissioner and Chair of the Consumer Product Safety Commission
- Nomination of Mary T. Boyle, to be a Commissioner of the Consumer Product Safety Commission
- Richard Trumka Jr., to be a Commissioner of the Consumer Product Safety Commission
- Grant Harris, to be Assistant Secretary for Industry and Analysis, Department of Commerce
At the conclusion of the markup, the Committee will go directly into the nomination hearing.
- Victoria Marie Baecher Wassmer,?to be Chief Financial Officer, DOT
- Mohsin Raza Syed, to be Assistant Secretary of Government Affairs, DOT
- Amitabha Bose, to be Administrator of the Federal Railroad Administration, DOT
- Meera Joshi, to be Administrator of the Federal Motor Carrier Safety Administration
WATCH LIVESTREAM: www.commerce.senate.gov
Due to current limited access to the Capitol complex, the general public is encouraged to view this hearing via the live stream. Social distancing is now lifted for vaccinated members of the press who wish to attend. The Office of the Attending Physician recommends that all individuals wear masks while in interior spaces and other individuals are present.
GSA Awards $2.29 Million Contract for Edward T. Gignoux Courthouse Renovation to Laconia, N.H. Small Business
The Small Business Administration (SBA) has designated the week of September 13 as its National Small Business Week. To honor all of America’s entrepreneurs, the House Small Business Committee is honoring small businesses who showcase the American entrepreneurial spirit. Entrepreneurs from across the country will testify on their small business success stories.
To view a livestream of the hearing, please click here.
Mr. Tod Greenfield
Martin Greenfield Clothiers
Ms. Jan Haviland
Owner and President
Ms. Shelonda Stokes
Downtown Partnership of Baltimore
Ms. Natasha Hudson
Hudson’s on Mercer
Dripping Springs, TX
Mr. Peter Wanberg
Jubilee Roasting Co.
Ms. Krystal Hernandez
La Plaza F!esta
Mr. Jonathan Fink
Pasadena Sandwich Company
Mr. Mark J. Lunde
Chief Executive Officer
Lunde Auto Sales
Ms. Christine Lantinen
President and Owner
Maud Borup Inc.
Ms. Susan Shaw
Shaw Insurance Agency
Mr. Jaime Di Paulo
President and Chief Executive Officer
Illinois Hispanic Chamber of Commerce (IHCC)
Mr. Michael Sharp
Chief Executive Officer
Menomonee Falls, WI
Mr. Eric Childs
Mind’s Eye Comics
Mr. Barry Schlouch
Mr. Donald Fox
President and Chief Executive Officer
Fox Theatres, LLC
Ms. Renae Keitt
Ark Temporary Staffing
During Hispanic Heritage Month, GSA Launches Public Engagement Campaign to Raise Awareness of Spanish-Language Government Services
Upcoming Webinar—ESG Internal Communication and External Disclosure: Tackle Them Before They Tackle You
Thursday, September 30, 2021, 1:00-2:00 p.m. EST
Jurgita Ashley, Partner, Thompson Hine LLP
David Wilson, Partner, Thompson Hine LLP
Description: As companies begin to prepare year-end reports and plan shareholder meetings, our panelists will review ESG governance alternatives, disclosure risk considerations, and recent litigation and investigation examples in the ESG space.
Featured Expert Contributor—Life Sciences and Medtech Regulation
Matt Wetzel is a partner in the Washington, DC office of Goodwin Procter LLP and serves as the WLF Legal Pulse’s Featured Expert Contributor, Life Sciences and Medtech Regulation. William Jackson is a partner in the firm’s Washington, DC office, and Heath Ingram is an associate in the firm’s New York, NY office.
Recently, the U.S. Department of Health and Human Services has shifted its approach to several aspects of how drug manufacturers, not-for-profit hospitals and health care facilities, public health clinics, and pharmacies dispense drugs to some of the country’s most needy patients under the “340B Drug Pricing Program.” HHS’s changes (at best) short-circuit the formal rulemaking process and (at worst) defy it altogether. The result for the 340B Program is an ever-changing haze of informal guidance and hurriedly implemented, problematic proposed rules in order to satisfy, solve, or settle litigation filed by opposed stakeholders. Given the importance of the program and its complexities, developments to how the government oversees the 340B Program require thoughtful and pragmatic approaches and mandate that HHS undertake meaningful, proper notice-and-comment rulemaking to fully vet and validate these policy shifts.
Established by Congress in 1992, the 340B Program requires drug manufacturers participating in Medicaid to sell outpatient drugs at deep discounts to public and not-for-profit health care organizations that serve low income or rural patients. This includes federally qualified health centers, children’s hospitals, disproportionate share hospitals, certain rural facilities, hemophilia treatment centers, and other clinics that serve certain designated populations. Under the 340B Program, these facilities pay a substantially reduced 340B “ceiling price” for certain outpatient drugs, which can be as little as $0.01. Those “covered entity” facilities can purchase the medications for their patients under the 340B Program, but bill the patient’s insurance company at the insurance company’s standard rate, allowing the covered entity to keep the difference to help finance the covered entity’s operations. Congress conditioned drug makers’ ability to receive reimbursement under the Medicare Part B and Medicaid programs on their participation in the 340B Program.
Not every clinic and facility has its own pharmacy to dispense these drugs. In fact, many of these facilities rely on contract pharmacies to handle the job of physically dispensing drugs to their qualifying patients. The pharmacy dispenses the medication and receives the reimbursement, part of which is passed on to the covered entity. Because the prices of 340B medications are so low, there is a legitimate concern about so-called drug diversion. Drug diversion, for purposes of the 340B Program means selling or reselling a covered outpatient drug at the low 340B “ceiling price” to someone who is not eligible to receive lower pricing. This could involve dispensing 340B drugs at ineligible facilities or written by ineligible providers. But it could also involve dispensing 340B drugs to patients at a contract pharmacy who are not patients of the covered entity hospital.
In response to these legitimate diversion concerns, many drug manufacturers have chosen to implement policies that prohibit dispensing 340B drugs to hospitals or facilities without an in-house pharmacy, unless the hospital or other facility designates just a single contract pharmacy location to receive and dispense their 340B products. Manufacturers are also increasingly considering exercising their right to audit a covered entity to ensure compliance with 340B drug diversion and duplicate discount prohibitions. For example, Merck in 2020 audited numerous covered entities for duplicate discounts. Other manufactures such as Sanofi and Novartis have also challenged the 340B Program by requiring additional information and audits from covered entities. It is unclear how successful these manufactures will be in curbing any non-compliance by covered entities.
The government believes that these manufacturer-imposed restrictions violate the 340B statute and could subject drug makers to civil monetary penalties. Indeed, the Health Resources & Services Administration, or HRSA—the federal agency within HHS that administers the 340B program—recently found six drug makers in violation of the 340B statute, because “their policies that place restrictions on 340B Program pricing to covered entities that dispense medications through pharmacies under contract have resulted in overcharges and are in direct violation of the 340B statute.” A recent seventh drug maker has stepped forward to limit 340B sales to only one designated contract pharmacy.
The 340B program is not easy for drug manufacturers, pharmacy benefit managers, wholesalers, and pharmacies to implement. It requires not only detailed patient and product tracking, but also accurate reporting amongst multiple entities on various prices charged to patient or clinics. It involves government audits, accurate price reporting to the various federal agencies, and the exchange of detailed patient and sales information between pharmaceutical manufacturers, covered entities, and (when utilized) contract pharmacies.
Over the years, HHS (via HRSA) has faced difficulties in implementing this complex drug-pricing scheme. And its recent actions on the question of contract pharmacies reflects yet another unstable regulatory position that is not fundamentally rooted in notice-and-comment rulemaking. HHS’s statements and policies on contract pharmacy usage only add to the complexity and confusion of the regulatory landscape—not to mention the administrative burden on drug makers, covered entities, contract pharmacies, pharmacy benefit managers, and others.
Changing Guidance. HHS has not issued clear and consistent guidance on how to implement the 340B program. For example, HHS’s first guidance document from 1996, directed at covered entities, acknowledged that there were “many gaps” in the 340B statute including silence “as to permissible drug distribution systems.” With respect to contract pharmacies, the original guidance permitted covered entities to contract with one (and only one) outside pharmacy to dispense 340B drugs. Fourteen years later, in a guidance document for covered entities from 2010, HHS changed course and allowed covered entities to use an unlimited number of contract pharmacies to dispense 340B drugs. And then in late 2020, the HHS General Counsel issued an advisory opinion directed at pharmaceutical manufacturers which stated that restrictions imposed by drug makers on the distribution of 340B-covered drugs to contract pharmacies violated federal law. Unsurprisingly, litigation ensued, and a federal district judge found that the advisory opinion was not a restatement of the federal government’s long-held position, as the government had alleged, but rather a shift in policy. Ultimately, HHS withdrew its opinion to avoid confusion. But this has not stopped HHS from moving forward with threatening drug makers with civil monetary penalties if they continue to limit 340B drug dispensing to one contract pharmacy.
Actions driven by Litigation. There has likewise been litigation regarding the ADR process HHS was obligated to undertake to help referee conflicts between pharmaceutical manufacturers and covered entities over things like contract pharmacies. Although Congress directed HHS to create the ADR Rule within 6 months of the Affordable Care Act’s passage in 2010, HHS did not even propose an ADR Rule until 2016. Following the close of the notice-and-comment period, the proposed rule began appearing on the government’s unified agenda of all federal regulations under development. In early 2017, following President Trump’s inauguration, the proposed rule was apparently frozen in accordance with the January 20, 2017 regulatory-freeze memorandum. Later in 2017, however, the ADR Rule was withdrawn from that unified agenda without explanation. Several years later, in October 2020, a number of covered entities filed lawsuits against HHS regarding the 340B program demanding that the Secretary implement an ADR Rule. Within a couple months after covered entities filed those lawsuits, the Secretary implemented the ADR Rule as a final rule as if the prior proposed rule had not been withdrawn. The decision to implement the final rule, apparently in response to the litigation, was all the more curious in light of the fact that 6 months earlier in March 2020, an HHS official was quoted as saying that “[i]t would be challenging to put forth rulemaking on a dispute resolution process when many of the issues that would arise for dispute are only outlined in guidance” and therefore HHS “does not plan to move forward on issuing a regulation due to the challenges with enforcement of guidance.” Several ADR petitions have been filed to challenge drug makers’ restrictions on the distribution of 340B drugs to contract pharmacies. And other entities, including PhRMA, have sought to repeal these regulations.
Regardless of whether one agrees with HHS’s guidance on the use of contract pharmacies or believes that drug makers are entitled to limit the number of contract pharmacies to which it dispenses 340B product, and whether the particular provisions of the ADR Rule are appropriate or not (a topic not even addressed in this post), HHS’s actions—spanning across multiple administrations—leave covered entities, pharmaceutical manufacturers, and other stakeholders without a clear consistent understanding of how the complex program should be implemented. In this area, as well as others, industry participants and the public at large would be better served with clear, consistent, notice-and-comment rulemaking clarifying the relevant parties’ roles, responsibilities, and requirements.
The post Probing HHS for Consistency on the 340B Pricing Program Rules on Contract Pharmacies appeared first on Washington Legal Foundation.
“The Kentucky Supreme Court ignored the Constitution by upholding a judgment over thirty times any potential harm.”
— John Masslon, WLF Senior Litigation Counsel
Click here for WLF’s brief.
WASHINGTON, DC— Washington Legal Foundation (WLF) today urged the U.S. Supreme Court to hear a case in which the Supreme Court of Kentucky affirmed a judgment that shocks the conscious. In an amicus brief, WLF argues that the Supreme Court’s review is necessary to clarify how lower courts must evaluate Excessive Fines Clause challenges to civil penalties and whether to adopt a 1:1 cap on the ratio of punitive damages to substantial compensatory damages in all cases.
The case arises from an action filed by contingency-fee counsel for the Commonwealth of Kentucky. Seeing dollar signs after the Department of Justice seized the defendants’ website and assets, Kentucky relied on a law passed during John Adams’s administration to recover compensatory damages more than ten times the $26 million that Kentuckians lost while interacting with the defendant. Eventually, the Kentucky Supreme Court affirmed an $870 million judgment—an amount over thirty times any possible harm.
In its brief supporting the defendants, WLF argues that Supreme Court review is needed to clarify how lower courts should evaluate Excessive Fines Clause challenges to civil penalties. The decision below deepens a split on whether a statutorily authorized penalty calculated using a mathematical formula can violate the Excessive Fines Clause. And the Kentucky Supreme Court’s decision failed to evaluate relevant factors when determining if the civil penalty was grossly disproportionate.
The post WLF Urges Supreme Court To Review Outsized Judgment Unmoored From Actual Harm appeared first on Washington Legal Foundation.
Court’s Vacatur of Navigable Waters Rule Introduces New Level of Gamesmanship into Administrative Law
By Jim Wedeking, counsel with Sidley Austin LLP in the firm’s Washington, DC office. Jim is also the WLF Legal Pulse‘s Featured Expert Contributor on Environmental Law and Policy.
In the last week of August, the U.S. District Court for the District of Arizona, in Pascua Yaqui Tribe v. U.S. Environmental Protection Agency, opted to shake things up a little bit. Instead of issuing a relatively routine order granting the federal government’s request to voluntarily remand the Navigable Waters Protection Rule (“NWPR”) for reconsideration, it decided to vacate the NWPR.
Vacating a rule is nothing new; however, vacating a rule on the merits before the parties finished summary judgment briefing, and leaving the country guessing as to whether or not the order has nationwide effect, is a bit unorthodox. The court will now consider whether to reinstate the 2015 Clean Water Rule—which has already been enjoined and remanded in 28 states. The decision raises serious issues, not just about the Clean Water Act, but about administrative law. Every time the Executive Branch changes parties, there is a procession of rulemaking reversals and challenges where agencies are forced to defend their predecessor administration’s rules. The Arizona court’s ruling has now introduced the potential for additional gamesmanship in legal proceedings that are already awkward and create regulatory uncertainty.
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To watch a livestream of the markup, please click here.
Gregory A. Brower is Chief Global Compliance Officer for Wynn Resorts. He also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance.
As corporate environmental, social, and governance (“ESG”)-related obligations continue to expand under international law, U.S. federal law, and the laws of the various states, so too do the risks associated with such obligations for publicly traded companies across a broad range of industry sectors. Indeed, one sign of this growing set of risks was the SEC’s recent announcement of an ESG Task Force whose mission is to develop initiatives to proactively identify ESG-related misconduct among publicly traded companies. As the threat of ESG-related claims and enforcement actions continues to expand, companies need to be ready. Here are five things that companies can do now to mitigate the risks presented by this trend.
(1) Effectively communicate the company’s commitment to ESG. A company’s senior leadership team must very clearly communicate its ESG strategy. Companies should periodically report on their ESG impact in a way that is easy to understand, uses a standard ESG reporting framework, and includes a message from the CEO. With investors, regulators, and policymakers increasingly focused on companies’ ESG performance, transparent and useful ESG reporting can only serve to enhance a company’s credibility with each of these important constituencies.
(2) Clearly define the chief compliance officer’s role. As the focus on ESG increases, the attendant risks for any company become more significant. It therefore follows that the company’s CCO should play a central role in ensuring the company’s ESG compliance efforts. Whether it’s third-party due diligence or reviewing the accuracy of disclosures or investigating misconduct, ESG-related issues should be fully integrated into a company’s overall compliance program. As guardian of a company’s culture of compliance, and with the growing risk associated with ESG, it simply makes sense that the CCO be a partner in the overall ESG effort.
(3) Beware of enforcement and litigation risks. As noted above, the SEC clearly signaled its intention to significantly ramp up its focus on potential regulatory violations in the ESG space. So too has the plaintiffs’ bar turned its attention to ESG in three general areas—corporate operations, corporate governance, and corporate disclosures—and courts are increasingly allowing such claims. While ESG litigation has so far been mostly focused on climate change and environmental incidents, social issues are growing in prominence as potential targets for claims.
(4) Conduct risk assessments. While anticipating each and every contingency is impossible (see, e.g., COVID-19), it is possible for companies to anticipate and mitigate likely ESG risks. Indeed ESG risk analysis should be incorporated into a company’s overall enterprise risk management (“ERM”) efforts. A company should choose which risk assessment approach makes sense for its unique operational reality, but beyond identifying the right standards, the basic process should be familiar to companies from their experience with Sarbanes-Oxley or FCPA compliance.
(5) Engage with policymakers. Logical and consistent ESG standards and reporting requirements are obviously a matter of public policy, and companies should ensure that they have a seat at the table when such policies are being made. Earlier this year, the E.U. Parliament passed legislation which will allow for new regulations concerning ESG, and most observers agree that ESG policy will be a priority for the Biden Administration’s regulatory agenda. In addition, the U.S. House recently passed the ESG Disclosure Simplification Act, and several states have signaled their own interest in making ESG policy. In light of this clear interest by policy-makers, it will be important for companies and industries to get ahead of these efforts by engaging with legislators and regulators early in the law or rule making process so as to ensure that those making these decisions have the best information available about how such decisions will affect companies including their shareholders, employees, and other stakeholders.
It is now abundantly clear that ESG is a key business issue and mitigating the associated risks should be a priority for any publicly traded company. The myriad challenges presented by ESG issues are only going to grow in complexity in the months ahead. Increasingly, a company’s integrity will be evaluated and judged as much by its ESG strategy and performance as by other, more traditional measures. Companies are well-advised to embrace this new reality as ESG performance becomes ever more important to long-term growth and success.
The post Mitigating the Growing ESG Risk—A Corporate Compliance Officer’s Perspective appeared first on Washington Legal Foundation.
—John Masslon, WLF Senior Litigation Counsel
Click here for WLF’s brief.
WASHINGTON, DC—Washington Legal Foundation (WLF) today filed an amicus curiae brief urging the U.S. Supreme Court to hold that plaintiffs cannot assert disparate-impact claims under Section 504 of the Rehabilitation Act of 1973. Four courts of appeals have held that plaintiffs can pursue disparate-impact claims under Section 504. These decisions conflict with a well-reasoned Sixth Circuit opinion. WLF’s brief urges the Supreme Court to side with the Sixth Circuit and apply the Rehabilitation Act’s plain language.
The appeal arises from five AIDS patients’ lawsuit against CVS. The plaintiffs claim that CVS’s specialty-drug program has a disparate impact on those with AIDS. Under the Patient Protection and Affordable Care Act, participants in federally funded health-care plans can sue for disability discrimination. But rather than provide an independent remedy, the ACA merely incorporates Section 504’s remedy provision.
As WLF’s brief shows, the Supreme Court has held that the nondiscrimination statute with the most similar, but still broader, language does not authorize disparate-impact claims. Those statutes that allow disparate-impact claims use different language that indicates Congress’s intent to create a disparate-impact cause of action. And because the Constitution vests the power to make laws with Congress, the Court should not imply a cause of action that Congress declined to create.
WLF’s brief also explains the high costs of recognizing disparate-impact claims under Section 504. At least one court has held that businesses that received PPP loans can be sued under Section 504. If the Court allows disparate-impact claims, these businesses will face astronomical costs. Together with the Cato Institute, which joined the brief, WLF urges the Supreme Court to give Section 504 its plain-language meaning.
Celebrating its 44th 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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