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Long-Abandoned SCOTUS Precedent Improperly Used to Justify Federal Court’s Jurisdiction-by-Registration Ruling

WLF Legal Pulse - Fri, 07/05/2019 - 10:06am

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

Since the U.S. Supreme Court’s decision in Daimler AG v. Bauman, the plaintiffs’ bar has been testing general-jurisdiction theories that allow courts to navigate around the justices’ 8-1 ruling. Some lawyers have tried to invoke States’ business-registration statutes—with mixed results. They have found the most success in Pennsylvania, thanks to a broadly worded business-registration statute and state-court precedents that equate business registration with consent to general jurisdiction.

One federal court outside of Pennsylvania recently embraced the consent-by-registration argument. In Schmidt v. Navistar, Inc., the U.S. District Court for the District of New Mexico held that Navistar, an out-of-state corporation, could be sued in New Mexico. Though New Mexico’s business registration statute is not as explicit as Pennsylvania’s, the New Mexico Supreme Court in Werner v. Wal-Mart Stores, Inc. held in 1993 that by merely registering to do business in the state, out-of-state corporations consented to general jurisdiction under New Mexico Business Corporation Act, § 53-17-11. The district court reasoned that the New Mexico Supreme Court’s decision in Werner was enough to find that first, Navistar consented to general jurisdiction in New Mexico and second, New Mexico’s forced-consent requirement is constitutional under the U.S. Supreme Court’s 1917 decision in Pennsylvania Fire Ins. Co. of Philadelphia v. Gold Issue Min. & Mill. Co.

The Development of General Jurisdiction

Over the past 74 years the U.S. Supreme Court has drastically altered its jurisprudence on personal jurisdiction. Prior to International Shoe in 1945, a person could only be sued in a State if they were physically present under Pennoyer v. Neff. Of course this meant that corporations could only be sued in their state of incorporation.

In order to overcome this hurdle, States enacted statutes requiring corporations to register with the state and designate an agent who could receive service of process before the corporation could do business in that state. Originally intended to ensure corporations could be held responsible for causes of action arising from their business activities in that State, courts began to construe these statutes in a manner that would allow plaintiffs to sue corporations for alleged harm in other states unrelated to a particular corporations’ business in that state. This led to the Supreme Court’s 1917 decision in Pennsylvania Fire Ins.  There, the Court held that by complying with a state business-registration statute, a corporation consents to general jurisdiction in that State.

But, in 1945 the Supreme Court reversed course from the line of jurisprudence focused on one’s physical presence in a State. International Shoe Co. v. State of Washington Office of Unemployment Compensation and Placement split personal jurisdiction into two categories: specific jurisdiction and general jurisdiction. Under specific jurisdiction, an out-of-state defendant can be sued in a State if in the specific facts of a case, the defendant’s actions in that state gave rise to the alleged cause of action. For a State to have general jurisdiction over a corporate defendant, that defendant must have sufficient contacts with that state to be considered at home in that State.

More recently in Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler, the Supreme Court explained what it meant by sufficient contacts. Goodyear held that courts within a State can exercise general jurisdiction over a corporate defendant only when its contacts with that State are “so continuous and systematic as to render them essentially at home in the forum State.” Daimler clarified this concept even more when the Court said that except in extraordinary circumstances, a corporate defendant is only at home in the State where it is incorporated and the State where it maintains its principal place of business.

Has Pennsylvania Fire Been Overturned?

Though the District of New Mexico based its decision on Pennsylvania Fire, the court failed to thoroughly analyze whether the Supreme Court might have overturned its holding. Relying on Rodriguez de Quijas v. Shearson/Am. Exp., Inc., the court kicked the can down the road for the Tenth Circuit to decide whether the Supreme Court has overturned Pennsylvania Fire.1

Even though the Supreme Court has not explicitly overturned Pennsylvania Fire, one can reasonably conclude that at a minimum, the case is no longer “good law.” One part of the International Shoe opinion applies directly:

True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized agents.

The Supreme Court next addressed the issue of consent in 1977 in Shaffer v. Heitner. There, the Court again called the “practice of considering a foreign corporation doing business in a State to have consented to being sued in that State” a legal fiction. It concluded that “all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.” The Court reasoned:

It would not be fruitful for us to re-examine the facts of cases decided on the rationales of Pennoyer and Harris to determine whether jurisdiction might have been sustained under the standard we adopt today. To the extent that prior decisions are inconsistent with this standard, they are overruled.

The Court repeated this message again in the 1990 decision Burnham v. Superior Court of California, County of Marin:

We initially upheld these laws under the Due Process Clause on grounds that they complied with Pennoyer’s rigid requirement of either “consent,” or “presence.” As many observed, however, the consent and presence were purely fictional. Our opinion in International Shoe cast those fictions aside…

The Second Circuit believes that Daimler put an end to Pennsylvania Fire. In Brown v. Lockheed Martin, the court examined language from Daimler explaining that decisions from the Pennoyer era should not be relied on today and concluded that “Pennsylvania Fire cannot be divorced from the outdated jurisprudential assumptions of its era.”

One month later in March 2016, a judge on the Federal Circuit disagreed with the Second Circuit’s Brown decision. A three-judge panel held in Acorda Therapeutics Inc. v. Mylan Pharm. Inc. that a Delaware federal court had specific jurisdiction over a patent dispute. Judge O’Malley concurred, reasoning that the state’s business-registration law provided the court with general jurisdiction over the lawsuit. She expressed that Pennsylvania Fire was still good law. She explained, “The Supreme Court’s subsequent decisions in International Shoe and Daimler did not overrule this historic and oft-affirmed line of binding precedent.” She added, “Daimler confirms that consent to jurisdiction is an alternative to the minimum contacts analysis.”

Most would agree with her that “Daimler did not impliedly eradicate the distinction between cases involving an express consent to general jurisdiction and those analyzing general jurisdiction in the absence of consent.” But Judge O’Malley did not recognize the distinction between forced consent allowed by Pennsylvania Fire and a corporation’s knowing and voluntary consent to general jurisdiction.2

In Daimler the Supreme Court, quoting Twitchell, The Myth of General Jurisdiction, 101 Harv. L. Rev. 610, 628 (1988), said “[W]e do not need to justify broad exercises of dispute-blind jurisdiction unless our interpretation of the scope of specific jurisdiction unreasonably limits state authority over nonresident defendants.” Allowing state courts under Pennsylvania Fire to compel submission to general jurisdiction is just that: a justification for “broad exercises of dispute-blind jurisdiction.”

Conclusion

It’s uncertain whether the Tenth Circuit will uphold Navistar. The circuit’s opinions have only cited to Pennsylvania Fire three times since the Court’s 1917 ruling. Only one of those opinions came after International Shoe and none of them addressed States requiring corporations’ forced consent to general jurisdiction. The New Mexico District Court relied on Budde v. Kentron Hawaii to find that Tenth Circuit precedent allows States to force corporations to consent to general jurisdiction. There, the appeals court allowed a Louisiana plaintiff to sue corporate defendants located in Hawaii and Pennsylvania. But the court did not mention Pennsylvania Fire or its progeny. Further, the court decided that case prior to both Goodyear and Daimler, and it has not referenced Budde since it made the decision. The lack of guidance makes it hard to tell what the Tenth Circuit is likely to do. It is also just as likely that the court could use Rodriguez de Quijas v. Shearson/Am. Exp., Inc. to once again pass on making a final decision.

Despite the uncertainty of how the Tenth Circuit might rule, International Shoe and its progeny make the right choice an easy one. The Supreme Court’s decisions since International Shoe have completely changed the way lawyers approach questions of jurisdiction, and the reasoning behind Pennsylvania Fire conflicts with the modern approach. For these reasons, the Tenth Circuit should follow the Second Circuit’s decision in Lockheed Martin and conclude that the Supreme Court has overruled Pennsylvania Fire many times since 1917 and most recently in 2014 in Daimler AG v. Bauman.

Notes:

The post Long-Abandoned SCOTUS Precedent Improperly Used to Justify Federal Court’s Jurisdiction-by-Registration Ruling appeared first on Washington Legal Foundation.

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Committee Announces Markup on July 10

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene an executive session on Wednesday, July 10, 2019 at 10:00 a.m. in Hart Senate Office Building 216 to consider the following legislative measures and nominations.

UPCOMING WEBINAR—PFAS Chemicals: With Regulatory and Litigation Tides Rising, Lessons from Past Mass-Tort Battles

WLF Legal Pulse - Wed, 07/03/2019 - 9:49am

Featuring:

Ann Marie Duffy, Hollingsworth LLP

Frank Leone, Hollingsworth LLP

Description:

The numerous industrial uses and environmental persistence of per- or polyfluoroalkyl substances (PFAS) have inspired increasing interest from elected officials, regulators, special-interest activists, and plaintiffs’ lawyers. Tactics and tools sharpened in past regulatory and litigation campaigns are currently being aimed at PFAS producers and users, and additional targets may be on the horizon.

Our speakers draw upon decades of mass-tort-litigation defense work to offer insights on managing and strategically responding to the rising tide against PFAS.

The post UPCOMING WEBINAR—PFAS Chemicals: With Regulatory and Litigation Tides Rising, Lessons from Past Mass-Tort Battles appeared first on Washington Legal Foundation.

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Subcommittee to Hold Hearing Honoring Apollo 11 Mission

U.S. Sen. Ted Cruz, R-Texas, chairman of the Subcommittee on Aviation and Space, will convene a hearing titled, “NASA Exploration Plans: Where We’ve Been and Where We’re Going” at 3:00 p.m. on Tuesday, July 9, 2019. The purpose of this hearing is to honor the upcoming 50th anniversary of the National Aeronautics and Space Administration’s (NASA) Apollo 11 mission and the United States landing the first man on the moon. The hearing will examine NASA’s plans for future human spaceflight missions.

Federal Judge Reverses Convictions Finding FDA Authority Unclear

WLF Legal Pulse - Tue, 07/02/2019 - 12:25pm

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

In a bold defense of fundamental fairness in the context of a criminal prosecution, a federal district court judge in Massachusetts recently granted a motion to vacate the convictions of two defendants who argued that the Food and Drug Administration’s (“FDA”) regulatory authority over compounding pharmacies was not clearly established, and thus their convictions for conspiring to defraud the FDA were legally impossible and violated basic norms of due process. 

In United States v. Gregory Conigliaro and Sharon Carter,1 the defendants were among 14 former owners and employees of the New England Compounding Center (“NECC”), a now-defunct company in the “compounding pharmacy” business, who were indicted on federal criminal charges following a deadly outbreak of fungal meningitis attributed to contaminated batches of injectable methylprednisolone acetate (“MPA”). The gravamen of the 131-count indictment was that the defendants entered into a corrupt agreement to defraud the FDA by conspiring to hold out NECC as a conventional pharmacy regulated under Massachusetts law, when, in reality, NECC was operating as a drug manufacturer subject to federal regulation by the FDA.

The defendants charged with the so-called Klein2 conspiracy first moved to dismiss the indictment under Fed.R.Crim.P. 12(b)(3), arguing that the relevant count failed to give adequate notice of the nature of the offense and that the federal conspiracy statute, 18 U.S.C. § 371, as applied, was therefore void for vagueness. That motion was denied.

Later, following a separate trial of a co-defendant, the defendants filed a renewed motion to dismiss the Klein conspiracy arguing that the evidence presented at the just-completed trial of the co-defendant established that there was “no discernible federal law defining any clear distinction between a compounding pharmacy and a drug manufacturer,” and it was thus “legally impossible for the FDA to be defrauded in the manner the government alleged.” The court also denied that motion. The defendants’ third and fourth tries were also unsuccessful as their motions to dismiss during their own trial, first after the government’s opening statement and again after the government rested, were also denied. After the jury returned a guilty verdict, yet another motion was made, this one for acquittal pursuant to Fed.R.Crim.P. 29. As it turned out, the sixth time was a charm.

After first acknowledging that the doctrine of impossibility as applied to inchoate crimes like attempt and conspiracy remains a “murky area of the law,” the court endeavored to make it less murky by offering a detailed discussion of the difference between factual impossibility and legal impossibility. It explained that in the case of legal impossibility, while a defendant may appear worthy of punishment because he possesses the requisite mens rea, “the right of the state to impose punishment is constrained by the principle of legality, fundamental fairness, and just limits on the state’s deployment of the coercive instruments at its disposal.” The court went on to observe that the doctrine of legal impossibility “allows for a perfect defense in cases where suspect or even contemptible thoughts are unaccompanied by positive steps towards the achievement of an end that society has seen fit to criminalize.”

Turning to the case at bar, the court zeroed in on the fact that for the first 50 years or so after the enactment of the Federal Drug Control Act, the FDA generally left regulation of compounding to the states. This was true even though compounded drugs would often appear to fit within the FDA’s definition of a “new” drug. The FDA’s practice, developed over decades, was to leave regulation of “traditional pharmacy compounding” to state boards of pharmacies, while exclusively asserting its own regulatory authority over large-scale drug manufacturers. Indeed, at trial, a senior FDA official testified that “FDA has authority over all drugs in the United States; however, we didn’t have any specific regulatory scheme for this traditional pharmacy compounding. That was under the practice of pharmacy and under the state boards of pharmacies.”

Moreover, the court found that internal FDA memoranda and testimony by senior FDA officials before various congressional committees, introduced as evidence at the defendants’ trial, all revealed the image of an agency “struggling to make sense of a statutory regime that Congress had not updated since 1938 and that had been overwhelmed by the rapidity of the advances in modern medicine and pharma.”

Overall, the court found that the evidence at trial “reinforced the notion that entities like NECC did not fit neatly into the compounding-manufacturing dichotomy that had historically influenced the FDA’s enforcement strategy.” The court further found that these ambiguities extended to the FDA’s direct dealings with NECC itself. In pre-outbreak inspections of NECC, the FDA labeled the company as either a “pharmacy” or “compounding pharmacy,” but never as a drug manufacturer. Moreover, the FDA also consistently took the position that regulatory jurisdiction over NECC fell to the Massachusetts pharmacy board.

In light of that complicated regulatory history, the court found that the evidence plainly showed that “during the life of the charged conspiracy, the FDA was not, and did not believe that it should be, in the business of regulating companies like NECC.” Thus, the bottom line for the court was this: “during the critical times, these defendants (and NECC) could not have defrauded the FDA by interfering with the relevant regulatory functions because there were none to speak of.” The court went on to observe that

“the basic principle that a criminal sanction must follow a clear and positive legal prohibition, so that defendants are not punished for violating an unknowable something … has been applied by the Supreme Court before in the context of determining the scope of an alleged Klein conspiracy … and is simply too well-established and too important to ignore here. This is all the truer when bad things have happened and the thirst for accountability is most acutely felt.”

Thus, this is the rare case in which the vague nature of a federal regulatory scheme combined with the traditional rule of lenity was enough for a court to reverse convictions. Whether in the FDA context or any other, confusing statutes and regulations leave both regulators and prosecutors, as well as those subject to such laws and regulations guessing about their true meaning and proper application. Such confusion cannot fairly lead to criminal charges, regulatory enforcement efforts, or even civil lawsuits, without implicating serious due process issues. The court in this case recognized this fact, perhaps a little late, only after expensive litigation, repeated motions to dismiss, and convictions at trial. But, as Justice Felix Frankfurter astutely observed, “wisdom too often never comes, and so one ought not to reject it merely because it comes late.”

The post Federal Judge Reverses Convictions Finding FDA Authority Unclear appeared first on Washington Legal Foundation.

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June 2019 WLF Month in Review

WLF Legal Pulse - Tue, 07/02/2019 - 8:38am

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

NEW FILINGS

  • Federal regulation of alcohol labeling and advertising should respect First Amendment rights. (In re Modernization of TTB Labeling and Advertising Regulations)
  • The Department of Labor’s proposed rule on when a business can face “joint employer” liability imposes appropriate limits under the Fair Labor Standards Act. (In re Joint Employer Status under FLSA)
  • Nonresident defendants are not subject to the personal jurisdiction of a state court unless their forum activities are causally connected to the plaintiff’ claims. (Hammons v. Ethicon, Inc.)
  • California courts need a reminder that the Federal Arbitration Act prohibits States from discriminating against arbitration agreements. (Winston & Strawn LLP v. Ramos)
  • The FTC improperly assumes that agreements among competitors about internet-search advertising violate the antitrust laws. (1-800 Contacts, Inc. v. FTC)
  • Federal contractors sued in state court should be able to remove the action to federal court whenever they can articulate a plausible federal defense. (Latiolais v. Huntington Ingalls, Inc.)
  • Certification of nationwide class actions is improper when the applicable laws of the 50 States vary significantly from one another. (Stromberg v. Qualcomm Inc.)

DECISIONS

  • The U.S. Supreme Court declines to overrule the Auer deference doctrine, under which federal courts must defer to a federal agency’s reasonable interpretation of its own regulations. (Kisor v. Wilkie)
  • The U.S. Supreme Court declines to review a lower-court’s refusal to order compensation under the Takings Clause for owners whose property at a Dallas airport was rendered worthless by federal legislation. (Love Terminal Partners, L.P. v. US)
  • The U.S. Supreme Court holds that property owners may file Takings Clause claims against local governments in federal court without first seeking compensation in a state-court proceeding. (Knick v. Township of Scott)
  • The U.S. Court of Appeals for the Ninth Circuit declines to reconsider its holding that the Federal Trade Commission Act authorizes the FTC to financial penalties in a federal-court suit—by calling its request “equitable monetary relief.” (FTC v. AMG Capital Management, LLC)
  • The U.S. Supreme Court agrees to consider whether state courts may impose their own environmental clean-up plans on sites already subject to remediation under the federal “Superfund” law. (Atlantic Richfield v. Christian)
  • The U.S. Supreme Court holds that employment issues for those working on the Outer Continental Shelf are governed by federal law, not the law of the adjacent State. (Newton v. Parker Drilling Management Services, Inc.)
  • The U.S. District Court for the District of Columbia rules that human rights groups may not file claims under the Alien Tort Statute when the suit is likely to cause conflict with a foreign country’s government. (Doe I. v. Exxon Mobil Corp.)

The post June 2019 WLF Month in Review appeared first on Washington Legal Foundation.

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Virginia Uranium Reveals Justices’ Differing Views about the Role of Legislative Intent in Implied Preemption

WLF Legal Pulse - Thu, 06/27/2019 - 5:24pm

By Lawrence S. Ebner, founder of Capital Appellate Advocacy PLLC, a boutique law firm in Washington, DC that provides independent appellate advocacy for businesses and industries throughout the United States. For more than 40 years, Mr. Ebner has briefed, argued, and analyzed cases involving the subject of federal preemption.

The Supreme Court’s federal preemption jurisprudence long has been a puzzle. Most of the Court’s individual preemption decisions recite and apply what appear to be well-established principles. But from a broader perspective, attempting to piece together the Court’s ever-expanding preemption case law into a coherent whole is a continual challenge—especially when implied preemption is part of the picture. The Court’s decision in Virginia Uranium, Inc. v. Warren, No. 16-1275 (S. Ct. June 17, 2019), renews that challenge and make it even more formidable.

Supreme Court decisions that involve the scope and application of express preemption provisions are relatively straightforward because they typically rely on traditional tools of statutory interpretation. See, e.g., Nat’l Meat Ass’n v. Harris, 565 U.S. 452, 459 (2012) (“The [Act’s] preemption clause sweeps widely—and in so doing, blocks the applications of the [state law] challenged here.”). But implied preemption—field preemption and conflict preemption (the latter encompassing both “obstacle preemption” and “impossibility preemption”)—is where the Court’s Supremacy Clause jurisprudence is riddled with inconsistencies. The differing and evolving views of a succession of justices during the past eight decades on how to determine whether, or to what extent, federal law impliedly supplants state regulatory or tort law only have exacerbated the problem. 

Is State Legislative Purpose Relevant to Field Preemption? 

Virginia Uranium illustrates one of the current preemption-related divisions within the Court: the question of what role, if any, the purpose or intent of a state statute should play in determining whether field preemption applies. Perhaps more significantly, the case’s lead opinion suggests that Justice Thomas’ fierce and long-time categorical opposition to obstacle preemption (also known as “purposes and objectives preemption”) may be garnering the support of at least two other justices.

The issue addressed in Virginia Uranium is whether the Atomic Energy Act (“AEA”), 42 U.S.C. § 2011 et seq., preempts a Virginia statute that bans uranium mining on private land. Because the AEA does not contain an express preemption provision, the petitioner mining company argued that the Virginia statute is preempted under both field and obstacle preemption principles. The Court held 6 to 3 that the state law is not preempted. But the justices actually split three ways: Justice Gorsuch, joined by Justices Thomas and Kavanaugh, wrote the lead opinion, finding no preemption; Justice Ginsburg, joined by Justices Sotomayor and Kagan, filed a separate opinion concurring only in the judgment; and Chief Justice Roberts, joined by Justices Breyer and Alito, authored the dissent.

To protect the public from radiation hazards, the AEA, through the Nuclear Regulatory Commission (“NRC”), “regulates nearly every aspect of the nuclear fuel life cycle”—including uranium milling operations and tailings storage—“except mining.” Gorsuch op. at 4. An AEA section “allowing the NRC to devolve certain of its regulatory powers to the States,” id. at 5, contains what Justice Gorsuch describes as a “non-preemption clause.” Id. at 6. That clause, 42 U.S.C. § 2021(k), declares that “Nothing in this section shall be construed to affect the authority of any State . . . to regulate activities for purposes other than protection against radiation hazards” (emphasis added).

Virginia Uranium not only argued that “Virginia’s law bears just such an impermissible purpose,” but also that § 2021(k) “greatly expands the preemptive effect of the AEA . . . demand[ing] the displacement of any state law . . . enacted for the purpose of protecting the public against ‘radiation hazards.’” Gorsuch op. at 6. Indicating that “this reading nearly turns the provision on its head,” id., Justice Gorsuch rejects the idea that “inquiry into state legislative purposes” is relevant to field preemption analysis where a state statute (e.g., Virginia’s uranium mining ban) regulates a subject (e.g., uranium mining on private land) that is beyond a federal regulatory statute’s (e.g., the AEA’s) reach. Id. at 10.

Explaining that “this Court has generally treated field preemption inquiries . . . as depending on what the State did, not why it did it,” id. at 11, the lead opinion discusses “some of the costs to cooperative federalism and individual liberty we would invite by inquiring into state legislative intentions too precipitately.” Id. at 12. For example, “federal courts would have to allow depositions of state legislators and governors, and perhaps hale them into court for cross-examination at trial about their subjective motivations in passing a mining statute.” Id. Moreover, “[s]tate legislatures are composed of individuals who often pursue legislation for multiple and unexpressed purposes, so what legal rules should determine when and how to ascribe a particular intention to a particular legislator?” Id. at 13.

Justice Ginsburg’s separate opinion concurs only in the judgment. Implying that she disagrees with Justice Gorsuch’s view that state legislative purpose generally should be excluded from field preemption analysis, Justice Ginsburg asserts that his “discussion of the perils of inquiring into legislative motive . . . sweeps well beyond the confines of this case, and therefore seems . . . inappropriate in an opinion speaking for the Court, rather than for individual members of the Court.” Ginsburg op. at 1; but see Gorsuch op. at 11 n.2 (“these considerations are, to us, essential to [the case’s] resolution”).

Justice Ginsburg’s field preemption analysis focuses narrowly on § 2021(k), rejecting the dissent’s reading “to include within the preempted sphere all state laws motivated by concerns about the radiation hazards of NRC-regulated activities,” and concluding that “the better reading” of § 2021(k) is to “exclude from federal foreclosure state laws directed to activities not regulated by the NRC.” Ginsburg op. at 7. Further, Justice Ginsburg was “not persuaded by the Solicitor General’s views,” on behalf of the United States as amicus curiae, that Virginia’s “mining ban is preempted because it is a pretext for regulating the radiological safety hazards of milling and tailings storage.” Id. at 10.

Chief Justice Roberts’ dissent takes a different approach, asserting that “the lead opinion sets out to defeat an argument that no one made, reaching a conclusion with which no one disagrees.” Roberts op. at 1. More specifically, “no party disputes” that “the field of uranium mining safety is preempted under the Atomic Energy Act.” Id.

Instead, the dissent reframes the question presented: “[T]he question we agreed to address is whether a State can purport to regulate a field that is not preempted (uranium mining safety) as an indirect means of regulating other fields that are preempted (safety concerns about uranium milling and tailings).” Id.  The dissent’s answer to this question is no. “Under our AEA precedents, a state law is preempted not only when it ‘conflicts with federal law,’ but also when its purpose is to regulate within a preempted field.” Id. at 3 (citing Pacific Gas & Elec. Co. v. State Energy Res. Cons. Comm’n,  461 U.S. 190 (1983) (holding that “if the purpose of California’s ban on nuclear plant construction was to regulate radiological safety, it would be preempted”).

“For example, even though a State may generally regulate its roads, it may not shut down all of the roads to a nuclear power plant simply because it disagrees with the NRC’s nuclear safety regulations.” Id. at 4. Chief Justice Roberts explains that under the majority’s holding, however, “so long as the State is not boneheaded enough to express its real purpose in the statute, the State will have free rein to subvert Congress’s judgment.” Id. at 7. Thus, according to Chief Justice Roberts, a “purpose inquiry is most useful precisely when the challenged state law does not purport to regulate a preempted field.” Id. at 6-7. In other words, “the whole point of the purpose inquiry mandated by Pacific Gas” is that “States may try to regulate one activity by exercising their authority over another.” Id. at 6. As to “the difficulties about inquiring into legislative motive,” the dissent asserts that “the difficulty of the task does not permit us to choose an easier way.” Id. at 9.

In short, Chief Justice Roberts’ dissenting view is that “preemption cannot turn on the label a State affixes to its regulations. That approach would simply invite evasion, which is why we have rejected it in our preemption cases more generally.” Id. at 7. “Regardless of whether the state regulation is downstream . . . upstream like here . . . or entirely out of stream . . . States may not legislate with the purpose and effect of regulating a federally preempted field.” Id. at 8.  

Is Obstacle Preemption on the Way Out? 

Virginia Uranium also addresses the potentially more far-reaching issue of what role congressional purposes and objectives should play in implied preemption analysis. The Court repeatedly has stated that “[o]ur inquiry into the scope of a [federal] statute’s pre-emptive effect is guided by the rule that the purpose of Congress is the ultimate touchstone in every pre-emption case.” Altria Group, Inc. v. Good, 555 U.S. 70, 76 (2008). Along the same lines, the Court, long has indicated that one type of conflict preemption is where state law “stands as an impermissible ‘obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” Gorsuch op. at 14 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).

For more than a decade, Justice Thomas, however, has been categorically opposed to purposes and objectives (i.e., obstacle) preemption.  See Wyeth v. Levine, 555 U.S. 555, 594 (2009) (Thomas, J., concurring in the judgment) (“This Court’s entire body of ‘purposes and objectives’ pre-emption is inherently flawed. The cases improperly rely on legislative history, broad atextual notions of congressional purpose, and even congressional inaction in order to pre-empt state law.”). According to Justice Thomas, “this brand of the Court’s pre-emption jurisprudence facilitates freewheeling, extratextual, and broad evaluations of the ‘purposes and objectives’ embodied within federal law. This, in turn, leads to decisions giving improperly broad pre-emptive effect to judicially manufactured policies, rather than to the statutory text enacted by Congress pursuant to the Constitution and the agency actions authorized thereby.” Id. at 604.1 “The Court’s ‘purposes and objectives’ pre-emption jurisprudence is also problematic because it encourages an overly expansive reading of statutory text.” Id. at 601. “[S]uch a sweeping approach to pre-emption leads to the illegitimate—and thus, unconstitutional—invalidation of state laws . . . .” Id.

In Virginia Uranium, the petitioner argued, as an alternative to field preemption, that “Virginia’s [uranium mining] moratorium disrupts the delicate ‘balance’ Congress sought to achieve between” the “benefits of developing nuclear power while mitigating its safety and environmental costs.”  Gorsuch op. at 14. Justice Gorsuch (joined by Justices Thomas and Kavanaugh) opined, however, that “[a] sound preemption analysis cannot be as simplistic as that.” Id. More specifically, “[n]o more than in field preemption, can the Supremacy Clause be deployed here to elevate abstract and unenacted legislative desires above state law.” Id. “Efforts to ascribe unenacted purposes and objectives to a federal statute face many of the same challenges as inquiries into state legislative intent.” Id. at 15. “Worse yet, in piling inference upon inference about hidden legislative wishes we risk displacing the legislative compromises actually reflected in the statutory text. . . . The only thing a court can be sure of is what can be found in the law itself.” Id. at 15, 16.

These statements suggest that the Court’s two newest justices—Justices Gorsuch and Kavanaugh—may be developing the sort of skepticism about the “freewheeling” doctrine of obstacle preemption that already had led Justice Thomas to unequivocally condemn it. Taking a more restrained approach, Justice Ginsburg in her separate opinion states that “Virginia Uranium’s obstacle preemption arguments fail under existing doctrine, so there is little reason to question, as JUSTICE GORSUCH does . . . whether that doctrine should be retained.” Ginsburg op. at 1; see id. at 12-15 (discussing why none of Virginia Uranium’s or the Solicitor General’s obstacle preemption arguments “carry the day”). Chief Justice Roberts’ dissenting opinion does not directly address obstacle preemption.

Conclusion

Because federal preemption cases are statute-specific, it is reasonable to read a case like Virginia Uranium narrowly, especially where the issue is preemption of a state statute or regulation, rather displacement of a type of state tort law, such as a failure-to-warn claim. But sometimes, as in Virginia Uranium, debate over a seemingly narrow issue reveals a much wider fissure within the Court.

It appears from Virginia Uranium that a majority of the current justices believe that state legislative purpose may be relevant, if not determinative, of whether a state statute occupies a federally preempted field.  As a result, while statutory text always should be the first line of attack (or defense) in a preemption-based challenge to state law, the purpose of the state law still can be taken into account.

And at least for now, obstacle preemption continues to be a viable basis for challenging state law. In framing an obstacle preemption strategy, however, especially when an issue percolates to the Supreme Court, Justice Thomas’ opposition to obstacle preemption, and the possible support that he may garner from Justices Gorsuch and Kavanaugh, should be considered. Although it was not argued in Virginia Uranium, see Gorsuch op. at 17, impossibility preemption—arguing that congressional intent to preempt can be inferred if a state law makes it impossible to comply with a federal statute—may, at least in some cases, be a viable, closely related alternative to obstacle preemption.

Note

The post <em>Virginia Uranium</em> Reveals Justices’ Differing Views about the Role of Legislative Intent in Implied Preemption appeared first on Washington Legal Foundation.

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Merck v. Albrecht: Victories, Uncertainties, and Opportunities from Supreme Court’s Return to Branded-Drug Preemption

WLF Legal Pulse - Thu, 06/27/2019 - 4:47pm

By Jonah M. Knobler, a Partner with Patterson Belknap Webb & Tyler LLP in the firm’s New York, NY office and Co-Editor of MisbrandedBlog.com.

Last month, the Supreme Court issued its decision in Merck Sharpe & Dohme Corp. v. Albrecht, No. 17-290 (May 20, 2019), once again addressing preemption in the pharmaceutical context.  Merck makes official what the Court first suggested a decade ago: when expert scientists at the Food and Drug Administration (FDA) actually conclude that a particular safety warning is unjustified, their view must prevail, and state-law tort claims based on a manufacturer’s failure to issue that warning are preempted.  In addition to unequivocally recognizing this principle, Merck sweeps away some lower-court misconceptions that had made it unduly difficult for defendants to invoke its protection.  In these respects, Merck is a major win for pharmaceutical innovation.  At the same time, some dicta in the Court’s opinion are less clear than they could have been, and have the potential to sow unnecessary confusion. 

Merck is a follow-up to Wyeth v. Levine, 555 U.S. 555 (2009).  There, the Court considered the argument that the FDA’s approval of a prescription drug’s label—including its safety warnings—is necessarily preclusive of state-law tort claims challenging the adequacy of those warnings.  A divided Court rejected this argument, holding that the plaintiff could bring her state-law failure-to-warn claim with respect to Wyeth’s name-brand drug, Phenergan, even though the FDA had approved the drug’s label and warnings.  Importantly, however, the Wyeth majority opinion included a cursory comment suggesting that the result would have been different if there were “clear evidence that the FDA would not have approved [the label] change” that the plaintiff argued was necessary.  In that scenario, the Court suggested, a state-law failure-to-warn claim would be preempted.

In the ensuing decade, lower courts read Wyeth’s “clear evidence” passage in inconsistent ways.  Many courts viewed it as an extremely narrow exception to a general rule of non-preemption, and imposed such a high burden on defendants to invoke it that establishing preemption through this route was practically impossible.  For example, in the Merck case itself, the Third Circuit held that even a formal letter from the FDA expressly rejecting the warning is insufficient to establish preemption as a matter of law, and that a jury of laypersons must decide—applying a “clear and convincing evidence” burden of proof, no less—whether the FDA really rejected the warning on its merits, or whether its decision might instead be attributable to other factors, such as a quibble with wording.

Although the Justices produced three separate opinions in Merck, each one rejected the Third Circuit’s uncharitable gloss on Wyeth-style preemption.  For starters, the Court held, “a judge, not the jury, must decide the pre-emption question.”  This is because judges “are better equipped” than lay jurors “to evaluate the nature and scope of an agency’s determination” and to “understand and interpret agency decisions in light of the governing statutory and regulatory context.”  Importantly, this holding that the judge must decide extends beyond the ultimate legal question of whether the plaintiff’s claim is preempted; it also encompasses any “subsidiary factual disputes” relevant to the preemption question, such was “what information the FDA had before it.”  As the Court recognized, removing the preemption question—including all facts bearing on that question—from juries should result in greater uniformity in decisions.

The Court also unanimously rejected the heightened burden—“clear and convincing evidence”—that the Third Circuit had placed on defendants to show preemption.  Since preemption is a question of law, the Court explained, instead of holding the defendant to any particular evidentiary burden, “the judge must simply ask himself or herself whether the relevant federal and state laws ‘irreconcilably conflic[t].’”  As Justice Alito’s concurrence in the judgment put it, “Wyeth’s use of the phrase ‘clear evidence’ was merely a rhetorical flourish.”  Importantly, not one of the opinions in Merck mentioned the purported “presumption against preemption” that the majority had relied upon in Wyeth.  The Wyeth dissent harshly criticized that reliance, explaining that a court should merely ask “whether there is an ‘actual conflict’ between state and federal law” “without … invoking [any] ‘presumption.’”  In this respect, Merck essentially vindicates the Wyeth dissent: preemption is not a disfavored doctrine, and courts should not put a thumb on the scales when evaluating it.

In these respects, Merck should help rein in the deep-seated anti-preemption views of some lower courts.  Unfortunately, however, beyond these unanimous core holdings, Merck creates some potential for confusion.  The lead opinion—written by Justice Breyer, and joined by the other three “liberal” Justices, as well as Justices Thomas and Gorsuch—recognized that the only “determinative question before [the Court]” was who decides the preemption issue.   However, that lead opinion included a section that went beyond this “determinative question” and attempted to “elaborate Wyeth’s requirements” for preemption.  (Although the prologue of the Court’s opinion described this section as “hold[ing],” because it was not necessary to the actual judgment, it is technically dicta.)  Specifically, the Court stated that, under Wyeth, what is necessary to establish preemption “is evidence … [(1)] that the drug manufacturer fully informed the FDA of the justifications for the warning [allegedly] required by state law, and [(2)] that the FDA, in turn, informed the drug manufacturer that the FDA would not approve a change to the drug’s label to include that warning.”  Both clauses of this sentence raise significant questions.

Start with the first. Read literally, this clause suggests that preemption can occur only where “the drug manufacturer”—as opposed to someone else—brought the “justifications for the warning” to the agency’s attention.  But there is no basis in preemption doctrine for such a requirement.  In the Court’s own words, the “underlying question for this type of impossibility pre-emption defense is whether … FDA actions … prohibited the drug manufacturer from adding [the] warnings … that would satisfy state law.”  As a doctrinal matter, if the FDA was informed of the relevant science but forbade the warning, it should make no difference how the science happened to come to the agency’s attention—e.g., via a submission from the manufacturer, a submission from a competitor, a public citizen petition, or an internal literature review.  Under any of these scenarios, it is equally impossible for the manufacturer to add the warning.  See, e.g., Cerveny v. Aventis, Inc., 855 F.3d 1091, 1095 (10th Cir. 2017) (finding preemption under Wyeth where a third-party citizen petition asking FDA to alter the drug’s label had “presented arguments [that were] virtually identical to [plaintiffs’ arguments],” and the FDA rejected those arguments).

Given how sharp and unjustified a departure from the Court’s preemption principles a literal reading of this passage would require, it is best understood as mere loose language—attributable to the fact that Merck itself was a case where the manufacturer, and not a third party, had provided relevant information to the FDA.  That’s how Justice Thomas, who joined the majority opinion, reads it: “As I understand the Court’s opinion,” he explained in a separate concurrence, “if proper agency actions … ‘prohibited the drug manufacturer from … satisfy[ing] state law,’ state law would be pre-empted … regardless of whether the manufacturer ‘show[ed] that it … informed the FDA of the justifications for the warning’” (emphasis added).  Justice Alito’s concurrence in the judgment, joined by Chief Justice Roberts and Justice Kavanaugh, agrees: the preemption analysis “does not depend on whether the relevant drug manufacturer, as opposed to some other entity or individual, brought the new information to the FDA’s attention.”  Hopefully, lower courts will take these comments to heart.

The second clause of the majority’s standard is also perplexing.  It appears to require, for a finding of preemption, “that the FDA … informed the drug manufacturer that [it] would not approve [the relevant] change to the drug’s label” (emphasis added).  The majority goes on to suggest that the manner in which the FDA decision was “communicate[d]” must be one recognized by statute or duly enacted regulation, such as a notice-and-comment rulemaking or a “complete response letter” from the agency.  But it’s not clear why an affirmative communication to the manufacturer should be necessary at all.  As Justice Alito points out, a statute post-dating Wyeth, 21 U.S.C. § 355(o)(4)(A), affirmatively requires the FDA “to initiate a label change ‘[i]f [it] becomes aware of new information … that [it] determines should be included in the labeling of the drug.’”  Thus, whenever the FDA receives new information but doesn’t commence a label change, “the logical conclusion is that the FDA determined”—pursuant to this statutory command—“that a label change was unjustified.” To establish preemption, therefore, it should be enough that the FDA knew about the relevant science but took no action.

Notably, this was the position taken by the FDA itself, through the pen of the Solicitor General.   So why does the majority disagree?  It doesn’t say.  Indeed, it’s not even clear that the majority does disagree: at the end of its list of FDA “actions” capable of effecting preemption, the majority includes a catchall reference to “other agency action carrying the force of law.”  Those words are followed by this citation: “cf., e.g., 21 U.S.C. § 355(o)(4)(A).”  That is the same statutory provision that Justice Alito cites in support of his point that FDA inaction is itself preemptive.  With its Delphic “cf., e.g.” citation to that statutory provision, is the Merck majority insinuating that it agrees with Justice Alito and the FDA on the significance of FDA inaction?  Suffice it to say—as Justice Alito observed—that lower courts will now need to sort out “the effect of § 355(o)(4)(A) on the preemption issue,” since the majority did not clearly do so.

Given the likely debate over the meaning of Merck’s dicta, it is important to emphasize that the Wyeth “clear evidence” analysis (as “elaborated” by Merck) is just one of multiple ways preemption can be shown in a pharmaceutical failure-to-warn case.  Most obviously, if the case involves a generic drug—as opposed to a name-brand drug, as was true in Merck and Wyeth—failure-to-warn claims are preempted almost as a rule.  That is because FDA regulations prohibit generic manufacturers from using the unilateral label-change process (known as “Changes Being Effected” or “CBE”) that the Court analyzed in Merck and Wyeth.  Without access to the CBE process, it is inherently impossible for a generic manufacturer to bring its label into compliance with what state law purportedly requires, without either violating federal law or obtaining the FDA’s advance permission.  That results in preemption.  See PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011).

Even in a name-brand-drug case, preemption exists outside the WyethMerck framework.  The reasoning in those two cases turns on the fact that name-brand manufacturers—unlike generic manufacturers—may sometimes use the CBE process to make unilateral label changes, pending the FDA’s decision to approve or disapprove those changes.  However, as the Seventh Circuit recently noted, name-brand manufacturers may invoke the CBE process only in “narrow circumstances.”  Dolin v. GlaxoSmithKline LLC, 901 F.3d 803, 806 (7th Cir. 2018), cert. denied, No. 18-803 (May 28, 2019).  If the regulatory prerequisites for invoking that process aren’t satisfied, a name-brand manufacturer is in the exact same position as a generic manufacturer: it can’t make a unilateral change to its label, so a failure-to-warn claim is automatically preempted—whether or not the FDA considered and rejected the relevant warning and/or communicated that to the manufacturer.

Most importantly, the CBE process is available only where the proposed label change “reflect[s] newly acquired information.”  21 CFR 314.70(c)(6)(iii) (emphasis added); see Dolin, 901 F.3d at 806; In re Celexa & Lexapro Mktg. & Sales Practices Litig., 779 F.3d 34, 41-42 (1st Cir. 2015).  “Newly acquired information” is a term of art, defined as “data, analyses, or other information” (1) that were “not previously submitted to the [FDA]” and (2) that “reveal risks of a different type or greater severity or frequency than previously included in submissions to [the] FDA.”  Id. at 42 (quoting 21 C.F.R. § 314.3(b)).  Each of the three opinions in Merck recognizes that access to the CBE process—and thus, the applicability of Merck’s preemption analysis—depends on the existence of such “newly acquired information.”

Thus, if a potential label change is supported only by data already known to the FDA, there is no “newly acquired information,” and a failure-to-warn claim is preempted for that reason alone.  See Celexa, 779 F.3d at 43.  Likewise, if a potential label change is supported by “nominally ‘new’ information” that is not specifically known to the FDA, but that information “concern[s] risks of a materially similar type, severity, and frequency as those revealed in information previously evaluated by FDA.”  Brief of the United States as Amicus Curiae, Merck v. Albrecht, No. 17-290, at 28 n.11; see Utts v. Bristol-Myers Squibb Co., 251 F. Supp. 3d 644, 665 (S.D.N.Y. 2017).  In these situations, because the CBE process is categorically unavailable, a failure-to-warn claim is preempted at the threshold, independent of the Wyeth-Merck analysis.  (Merck, however, does teach that the judge, and not the jury, must make any factual determinations needed to assess whether “newly acquired information” exists.)

But that’s just one scenario where a name-brand manufacturer can invoke preemption outside the Wyeth-Merck framework.  Another involves so-called “black box” warnings: those highlighted in a black rectangle, meant to signal the most serious risks.  FDA regulations don’t allow manufacturers to unilaterally add or change “black box” warnings; they “are permitted … only when specifically required by the FDA.”  44 Fed. Reg. 37434, 37448 (Jun. 26, 1979); see also 21 C.F.R. § 201.57(e).  Thus, a state-law claim asserting that a “black box” warning should have been added or modified is automatically preempted, whether or not the manufacturer has “newly acquired information” and whether or not the FDA considered and rejected the relevant label change.  See In re Depakote, 87 F. Supp. 3d 916, 923-24 (S.D. Ill. 2015); Dopson-Troutt v. Novartis Pharms Corp., 975 F. Supp. 2d 1209, 1218-19 (M.D. Fla. 2013).  For analogous reasons, the same should be true of a state-law claim asserting that a manufacturer should have warned about the risks associated with an “off label” (FDA-unapproved) use of a drug.  See Byrd v. Janssen Pharms., Inc., 333 F. Supp. 3d 111, 117-18, 120 (N.D.N.Y. 2018) (citing 21 C.F.R. § 201.57(e)).

Because Merck mentioned the key “newly acquired information” prerequisite only in passing, and did not deal with the other scenarios discussed above, a casual reader could come away thinking that, if the test described by the majority is not satisfied, then ipso facto, a failure-to-warn claim is not preempted.  As just explained, that is decidedly not the case.  The Wyeth-Merck “clear evidence” analysis is just one piece in a much broader preemption puzzle, and nothing in the Court’s opinion says otherwise.

In sum, although Merck could have done more to clarify this vital corner of the law, its central lesson is unambiguous.  Preemption is not a disfavored defense that courts should apply grudgingly; nor is it a factual question that courts may punt to juries.  Rather, judges should objectively “evaluate the nature and scope of [the FDA’s] determination[s]” and regulations—just as they would objectively construe any other “written instruments”—and then unhesitatingly find preemption, as a matter of law, if there is any “actual conflict” with what state tort law supposedly requires.  This should come as no surprise: as the Supreme Court once noted, the very “heart of” the federal Food, Drug, and Cosmetic Act is Congress’s “grant of primary jurisdiction to [the] FDA, the expert agency it created.”  Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 627 (1973).  Respect for the FDA’s primacy, and Congress’s intent, requires nothing less.

The post <em>Merck v. Albrecht</em>: Victories, Uncertainties, and Opportunities from Supreme Court’s Return to Branded-Drug Preemption appeared first on Washington Legal Foundation.

Categories: Latest News

<p><font face="Calibri" size="3">Thank

Thank you, Mr. Chairman, and thank you for scheduling this important hearing on Amtrak, and the witnesses for being here today. I certainly consider myself a big supporter of Amtrak funding and Amtrak reauthorization, and also consider myself a big supporter of the chairman’s initiative to make sure that that expansion, or rework, of Amtrak’s Sunset Limited service to the Gulf Coast is reestablished. I know how important this is to the state of Washington in having Amtrak services and I hope that we can continue to make Amtrak a priority within this committee.

I want to thank the witnesses for being here today and to talk about Amtrak services in an era where we see an increasing pace of global commerce. More trains than ever before in my state. Our trade economy relies on these methods of transportation to our ports, which the chairman is also a big supporter, and appreciate his many years of leadership on port infrastructure financing.

These issues are what plague us every day in the state of Washington. We have communities that have Amtrak services and yet we also have freight congestion and at-grade crossings that make our challenges even more complex. One example of this is Pine Roads in Spokane Valley – 56 freight and 2 passenger trains pass through there, creating 3 hours of rail-related closures daily. That means that the challenge of moving people and moving freight in our region, as we are a gateway to the Pacific, is becoming more and more challenging. Three hours every day when traffic is interrupted, three hours every day when accidents between cars and trains are more likely, and three hours a day when emergency vehicles are blocked from getting where they need to go.

And this is a problem that is only going to get more challenging as our trade economy continues to grow. In 2014, 121 million tons of freight were shipped by Washington railroads. By 2035, that number is expected to double. So at intersections like Pine Roads, train traffic will increase. Right now 56 trains pass through Pine Roads every day, but by 2035 that will grow to 114.

So this issue of making sure that we have strong federal support for Amtrak, and also funding for freight rail infrastructure, which is instrumental in making sure passenger and freight run very safely, more efficiently, and reliable, is a big priority. We need to build on the proven federal rail initiatives, like CRISI, which just provide a grant to improve the Pine Street intersection, but we also need to make sure that in the next Surface Transportation Act, we consider other ways in which we can help communities with at-grade crossings.

And safety must remain a top priority. The need for safety was driven home by the 2017 Amtrak crash near DuPont in the state of Washington. I am concerned that we need to continue to make sure that we are having situational awareness in the challenges that come with participating in a busy transportation corridor. I know that everybody is now trying to figure out how to get these people, and products and services, to places in a timely fashion, but we need to make safety a top priority.

Obviously positive train control, which we know is being implemented, is a key component of that, and as we consider the number of freight trains coming through and the impacts on the daily lives, we need to make sure that we’ve learned the lessons from the DuPont accident and everything that comes with it.

So I hope my colleagues will continue to push the implementation of positive train control throughout the United States. I know where we are in the state of Washington, which is getting that job done, but we need to make sure that we’re doing this on a national basis as well.

So thank you, Mr. Chairman, for this important hearing.

Ranking Member Cantwell Statement On Supreme Court Census Decision: “Wilbur Ross Was Wrong”

Senator Cantwell, the Ranking Member of the Senate Committee on Commerce, Science & Transportation, today released the following statement after the Supreme Court ruled that the Department of Commerce failed to give a full and true explanation for their decision to add a question about citizenship.

“Wilbur Ross was wrong. Every person must be counted – that’s what the Constitution requires,” Ranking Member Cantwell said. “We need full participation and no communities should feel intimidated or disenfranchised. It is critical to our democracy.”

SCOTUSblog Wednesday Roundup

WLF Legal Pulse - Thu, 06/27/2019 - 10:57am
Categories: Latest News

<p><font face="Calibri" size="3">Thank

Thank you, Mr. Chairman, and thank you for scheduling this important hearing on Amtrak, and the witnesses for being here today. I certainly consider myself a big supporter of Amtrak funding and Amtrak reauthorization, and also consider myself a big supporter of the chairman’s initiative to make sure that that expansion, or rework, of Amtrak’s Sunset Limited service to the Gulf Coast is reestablished. I know how important this is to the state of Washington in having Amtrak services and I hope that we can continue to make Amtrak a priority within this committee.

I want to thank the witnesses for being here today and to talk about Amtrak services in an era where we see an increasing pace of global commerce. More trains than ever before in my state. Our trade economy relies on these methods of transportation to our ports, which the chairman is also a big supporter, and appreciate his many years of leadership on port infrastructure financing.

These issues are what plague us every day in the state of Washington. We have communities that have Amtrak services and yet we also have freight congestion and at-grade crossings that make our challenges even more complex. One example of this is Pine Roads in Spokane Valley – 56 freight and 2 passenger trains pass through there, creating 3 hours of rail-related closures daily. That means that the challenge of moving people and moving freight in our region, as we are a gateway to the Pacific, is becoming more and more challenging. Three hours every day when traffic is interrupted, three hours every day when accidents between cars and trains are more likely, and three hours a day when emergency vehicles are blocked from getting where they need to go.

And this is a problem that is only going to get more challenging as our trade economy continues to grow. In 2014, 121 million tons of freight were shipped by Washington railroads. By 2035, that number is expected to double. So at intersections like Pine Roads, train traffic will increase. Right now 56 trains pass through Pine Roads every day, but by 2035 that will grow to 114.

So this issue of making sure that we have strong federal support for Amtrak, and also funding for freight rail infrastructure, which is instrumental in making sure passenger and freight run very safely, more efficiently, and reliable, is a big priority. We need to build on the proven federal rail initiatives, like CRISI, which just provide a grant to improve the Pine Street intersection, but we also need to make sure that in the next Surface Transportation Act, we consider other ways in which we can help communities with at-grade crossings.

And safety must remain a top priority. The need for safety was driven home by the 2017 Amtrak crash near DuPont in the state of Washington. I am concerned that we need to continue to make sure that we are having situational awareness in the challenges that come with participating in a busy transportation corridor. I know that everybody is now trying to figure out how to get these people, and products and services, to places in a timely fashion, but we need to make safety a top priority.

Obviously positive train control, which we know is being implemented, is a key component of that, and as we consider the number of freight trains coming through and the impacts on the daily lives, we need to make sure that we’ve learned the lessons from the DuPont accident and everything that comes with it.

So I hope my colleagues will continue to push the implementation of positive train control throughout the United States. I know where we are in the state of Washington, which is getting that job done, but we need to make sure that we’re doing this on a national basis as well.

So thank you, Mr. Chairman, for this important hearing.

Personal Jurisdiction by “Consent” May Be on the Way Out—Even in Pennsylvania

WLF Legal Pulse - Thu, 06/27/2019 - 9:03am

Ever since the Supreme Court’s 2014 Daimler AG v. Bauman decision barred state courts from asserting “general” personal jurisdiction over nonresident corporations, plaintiffs’ lawyers have been searching for new jurisdictional theories that will permit them to continue to bring their tort suits before plaintiff-friendly courts. One theory—that a corporation consents to jurisdiction over any and all claims when it registers to do business in a State—has been accepted in only one State: Pennsylvania.

But now even Pennsylvania appears ready to reject consent jurisdiction. The Superior Court of Pennsylvania (the State’s intermediate appellate court) in December agreed to rehear the issue en banc after issuing several decisions in recent years that endorsed consent jurisdiction. And earlier this month, a federal district judge in Philadelphia broke ranks with his colleagues and held, in Sullivan v. A.W. Chesterton, Inc., that consent jurisdiction is inconsistent with the requirements of the Due Process Clause. While conceding that a 1991 U.S. Court of Appeals for the Third Circuit decision, Bane v. Netlink, Inc., endorsed consent jurisdiction over any nonresident business that registers to do business in Pennsylvania, Sullivan concluded that “Daimler effectively disassembled the legal scaffolding upon which Bane was based.”

Pennsylvania’s Registration Statute

Like many other States, Pennsylvania bars nonresident corporations from doing business in the State until they have registered with state officials. Registration includes selecting someone within the State authorized to accept service of process on behalf of the corporation in the event that the corporation is named as a party in a lawsuit. The statute imposes severe penalties on businesses that fail to register, including a prohibition against filing any lawsuits in the State.

The statute includes a provision not contained in many other States’ registration laws: it says explicitly that by registering, a nonresident corporation consents to the general jurisdiction of Pennsylvania courts over any and all claims filed against the corporation, even claims that bear no relation to Pennsylvania. 42 Pa.C.S. § 5301(a)(2)(i). That consent provision is in considerable tension with the Due Process Clause, which generally prohibits state courts from asserting personal jurisdiction over a nonresident unless the plaintiff’s claim “arises out of or relates to” the forum State.

What Does “Consent” Mean?

That due-process protection can be waived, however. A defendant can consent to the jurisdiction of a court even when it has a due-process right to resist being haled into court. And many courts hold that defendants consent to jurisdiction if they fail to object at the first available opportunity. The key question that arises in consent-jurisdiction cases is whether corporations truly “consent” to the general jurisdiction of a State’s courts when they register to do business there.

The Third Circuit (in Bane) and the many Pennsylvania courts that have adhered Bane answer that question, “Yes.” They reason that, by registering, nonresident corporations are granted the privilege of conducting a profitable business within Pennsylvania, and that they knowingly subject themselves to the general jurisdiction of Pennsylvania courts as the price of obtaining that privilege.

Sullivan: Consent Is Not Voluntary

Sullivan rejected that consensus and instead aligned itself with courts in other States that have ruled that consent jurisdiction is inconsistent with due process. The district court stated, “It is axiomatic … that consent is only valid if it is given both knowingly and voluntarily.” It concluded that the Pennsylvania registration statute “presents a foreign corporation with a Hobson’s choice”—i.e., no real choice at all. They are required to surrender a constitutional right in return for the privilege of conducting business in the State—something large companies must do to compete effectively and “a benefit generally available to others in the state.” Sullivan concluded that this requirement violates the Supreme Court’s “unconstitutional conditions” doctrine.

The court held, “Given the fundamental importance of the ability to engage in interstate commerce, this Court concludes that the mandatory nature of the statutory consent extracted by the Pa. Statutory Scheme is, in fact, functionally involuntary.” It explained that “the notion of consent implies that a party has alternatives—in particular the alternative not to consent” but that “the option of refraining from doing business in a state is not really a viable option for most corporations.”

Bane Is No Longer Good Law

Bane presented the biggest obstacle to the district court. Because it is located within the Third Circuit, the Sullivan court would normally be bound to follow Bane, even though that decision is out of step with decisions from other jurisdictions. But the court concluded that it need not adhere to Bane because that 1991 decision is inconsistent with the Supreme Court’s post-Daimler case law governing personal jurisdiction. It noted that Bane was premised on the now-discredited notion that general jurisdiction can be grounded on a nonresident defendant’s maintenance of “continuous and substantial business” within a State. It added that if Bane’s endorsement of consent jurisdiction were correct, then Daimler’s due-process restrictions on general jurisdiction would be largely nullified.

The next move is up to the Superior Court of Pennsylvania, which has agreed to re-hear the consent-jurisdiction issue en banc in Murray v. American LaFrance. If that court adheres to its previous decisions endorsing consent jurisdiction, the result will be a conflict between Pennsylvania state and federal courts on the amenability of nonresident corporations to suit in Pennsylvania. That would likely induce the U.S. Supreme Court to intercede to resolve the conflict.

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

The post Personal Jurisdiction by “Consent” May Be on the Way Out—Even in Pennsylvania appeared first on Washington Legal Foundation.

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