La Jolla: Anatomy of a Plot
La Jolla: Anatomy of a Plot, Part I. Five years ago, at an informal gathering in an exclusive seaside community in San Diego, a small but determined group of activists hatched an ambitious plan: they would bring down some of America’s largest energy manufacturers, which also happen to be some of America’s largest employers.
Operating on hunches and guesswork, the group, comprised of activist academics, wealthy trial lawyers and public relations experts, spun a disparaging narrative about energy companies.
To prove their claims, they needed to gain access to internal energy company documents and that would mean convincing the Justice Department and state attorneys general to begin investigations.
Since that 2012 meeting in La Jolla, California, a lot has changed. What began as a series of informal discussions has evolved into a highly coordinated, far-reaching and well-funded campaign to persuade government officials to embark on taxpayer-funded fishing expeditions.
In recent years, the campaign has attracted the support of billionaires and deep-pocketed family foundations. In the coming weeks and months, Full Disclosure will chronicle the growth of this extensive web of collusion.
We’ll uncover which figures are fueling this costly effort. We’ll document how journalists whose work is funded by an explicit anti-manufacturing agenda are working to create a hostile climate for energy manufacturers and the men and women who work for them.
And we’ll expose the trial attorneys who, motivated by the prospect of colossal contingency fees, are working overtime to put American energy producers out of business and employees out of work.
On Monday, April 17, newly minted Associate Justice Neil Gorsuch took his seat as the 113th justice of the U.S. Supreme Court. Following a highly partisan and divisive Senate confirmation process, Justice Gorsuch likely found relief in the more cordial and genteel atmosphere of the court. With no time to spare on first-day jitters, the newest justice heard oral arguments on day one, waiting only 11 minutes before diving into questioning the advocates.
Justice Gorsuch is joining the Supreme Court near the end of the October 2016 term, with 13 arguments packed into the final weeks of April. Among the cases to be heard yet this term are two in which the NAM’s Manufacturers’ Center for Legal Action (MCLA) has played a role: BNSF v. Tyrrell and Bristol-Myers Squibb v. Superior Court of California. Both cases involve the issue of jurisdiction in state court when companies are based outside of that state and have no particular connection to the jurisdiction. The cases provide an opportunity for the court to clarify the reach of its 2014 holding in Daimler AG v. Bauman and to further rein in the problem of plaintiff forum shopping among state courts.
In addition to participating in oral arguments on these jurisdictional cases, Justice Gorsuch will also help to decide whether review will be granted in three cases the MCLA has supported with briefs advocating certiorari. These involve 1) whether states can alter their obligations under the Multistate Tax Compact; 2) whether courts may disrupt the “free and clear” provisions of bankruptcy law to allow claims against the bankrupt entity; and 3) whether due process is violated when jail time is imposed on corporate officers based on strict criminal liability in the absence of criminal intent.
Looking further ahead, three important manufacturing cases are already lined up for argument in the fall when the October 2017 term begins. Justice Gorsuch’s textualist approach will no doubt be felt in all three. These cases deal with the issues of 1) which court has jurisdiction for challenges to the Environmental Protection Agency’s definitions of bodies of water subject to the Clean Water Act; 2) the permissibility of class waivers in employment arbitration agreements; and 3) the scope of private rights of action under Securities and Exchange Commission disclosure rules.
The outcomes of all of these cases will benefit from consideration by a fully staffed panel of justices. While the court has done its best to keep cases moving over the past 14 months since the death of Justice Antonin Scalia, the business of the court has no doubt been hampered by the prospect of producing 4–4 ties that diminish the role of the Supreme Court by simply affirming the lower court’s holding while failing to make new law on issues important enough to have reached the court. At a time when political rancor and divisiveness are at a high point, it is a good thing for American democracy to have a full complement of justices and a fully functioning Supreme Court. Welcome Justice Gorsuch!
This afternoon, the U.S. Supreme Court granted certiorari to the National Association of Manufacturers’ (NAM) petition in the challenge to the Environmental Protection Agency’s (EPA) Waters of the United States regulation. We have asked the Supreme Court to review a decision from the U.S. Court of Appeals for the 6th Circuit, where many suits challenging the WOTUS rule have been consolidated. The panel’s decision conflicts with decisions in similar cases by other federal appeals courts, which concluded that such challenges should be heard at the district court level. The NAM outlined in detail why 33 U.S.C. Section 1369(b) does not allow courts of appeals to hear this challenge. The 6th Circuit’s decision put challengers to the EPA rule in an untenable position—if that court does not actually have jurisdiction to hear the case, any action it takes could thereafter be overturned on appeal, without even considering the merits of the challenge, and we would have to start the case over at the trial court level. This would be a tremendous waste of resources for manufacturers and other parties affected by the rule, the administration and the courts. Delaying review of the jurisdictional question, which must ultimately be resolved in any case, makes no sense, so we are very pleased that the Supreme Court decided today to resolve this issue.
A bedrock principle of tort law in this country is that the party who causes the damage is the one who should be liable for fixing the damage. Even under a standard of “strict liability” where a defendant is liable without a finding of fault, courts require a showing that the damage in question was actually caused by the defendant at the table.
A lawsuit recently filed in Rhode Island, led by the state’s Attorney General and staffed by hired-gun private plaintiff’s lawyers who stand to make a mint if the lawsuit is successful, seeks to break from this foundational principle. That should be of concern to any manufacturer that could become the target of creative plaintiffs’ lawyer lawsuits—which is to say, to every manufacturer.
The lawsuit involves the gasoline oxygenate MTBE, which was for a time blended with motor fuel in order to meet federal emissions standards. The problem with MTBE is that it is highly water soluble, and if underground storage tanks containing gasoline leak, the MTBE stored in them can contaminate groundwater. Of course, the owners of these tanks, if they can be identified, have always been, and continue to be, responsible for cleaning up such leaks. On top of that, Congress created a special trust fund to pay for cleanups when the owner or cause is unknown, or where the owner may not have the wherewithal to pay. The fund, which has been around since the mid-1980s, is paid for by a tax levied on the petroleum industry on every gallon of fuel sold.
Unfortunately, many of the states where MTBE was most heavily used are also states that have suffered poor economic growth and have faced major budget challenges in recent years. This has led many of these states, including Rhode Island, to raid their cleanup funds for other state budget priorities, thus creating the need to find alternative sources of funds to handle these cleanups. Cue the trial bar, who have shopped MTBE lawsuits to several state Attorneys General and have found fertile hunting ground in the cash-strapped northeastern states.
The Rhode Island legal filing includes a smorgasbord of legal theories intended to bypass the inconvenient need to show that the defendants in the case actually caused the damage the lawsuit seeks to remedy. The case seeks to pin liability on any company that sold reformulated fuel in the state—regardless of whose actions or whose storage tanks actually caused contamination. It is remarkably a sanction based on simply doing business in the state of Rhode Island, which the state seeks to allocate according to the market share held by industry participants during the relevant time period. Beyond the tort law implications of this case, it is remarkable that a state so badly in need of economic investment would target an industry simply for doing business there.
No matter how much money defendants have paid into the state fund to cover such cleanups and regardless of the extensive efforts they may have already gone through to prevent leaks and to remediate those that occurred under their watch, the companies are targeted in this lawsuit because they are perceived as most able to pay. This is a case about targeting deep pockets, not about remedying past wrongs, and certainly not about justice.
There’s some good news today from the U.S. Court of Appeals for the Second Circuit in Chevron’s long-running battle over a court ruling in Ecuador that was obtained through a fraudulent scheme. The court affirmed the lower court’s decision, ruling that Chevron does not have to pay billions of dollars in damages because the original verdict was the product of fraud and racketeering activity.
If you’re a regular Shopfloor reader, you will recall many of the details of this case against Chevron, which has been referred to as the “legal fraud of the century.” You can read more about the Second Circuit’s verdict and the long, drawn-out court battle here.
The case involves an American plaintiffs’ lawyer drumming up a lawsuit against Chevron for environmental damage in Ecuador, even though Chevron has never operated in Ecuador. As the case unraveled in a very public battle, it turned into a saga of fabricated evidence, intimidation and bribery—or unscrupulous lawyers and corrupt government officials conspiring to make billions they did not deserve.
In short, this case is a reminder that bad actors do try to pervert the justice system for their own financial gain—and that we must remain vigilant against such fraud and corruption. The Second Circuit’s ruling is a victory for Chevron and the people they employ, but more importantly for the rule of the law.
Yesterday, the Manufacturers’ Center for Legal Action (MCLA), the legal arm of the National Association of Manufacturers (NAM), along with eight other business and manufacturing trade groups, filed an amicus brief supporting Constitution Pipeline in the U.S. Court of Appeals for the Second Circuit. After extensive environmental, safety and economic review, the Federal Energy Regulatory Commission (FERC) had approved the critical energy infrastructure project. However, the state of New York attempted to block the project, undermining the collaborative approval process. Constitution is challenging New York’s denial of its Section 401 water permit for construction of the new natural gas pipeline.
For manufacturers, who use one-third of our nation’s energy, access to abundant and reliable energy sources is essential to our continued growth and ability to compete globally. While states play an important role under the Clean Water Act, they should not be allowed to use their permitting processes, including the issuance of water quality certificates, to unreasonably delay, exact concessions from, or scuttle federally approved projects.
“As some of the largest producers, transporters and users of natural gas in the country, many of amici’s members are directly affected by the decision under review, which denied a certification necessary for the construction of an important interstate pipeline,” said parties in the brief. “Furthermore, amici are concerned by the broader impacts of certification denials like this one on the development of much-needed natural gas infrastructure. Total natural gas demand, driven in particular by manufacturing and power generation, is poised to increase by 40 percent over the next decade, and the U.S. supply is expected to increase by 48 percent over the same period. Furthermore, explosive growth in shale gas requires the construction of new pipeline capacity. Amici thus have a strong interest in the effectuation of Congress’ policy for the efficient, transparent and predictable approval of natural gas pipelines.”
Earlier this year, the NAM released a new comprehensive study that reveals how natural gas has strengthened manufacturing and encouraged U.S. manufacturing growth and employment. This study underscores the need for critical energy infrastructure.
“Over the next decade, our nation’s demand for natural gas is only going to grow, and much of that growth is from manufacturing,” said NAM President and CEO Jay Timmons. “Our study unequivocally shows that if our growing demand is not taken seriously by policymakers, we will have a serious lack of infrastructure that will jeopardize our growth. Natural gas is responsible for millions of jobs, tens of thousands in manufacturing alone. We can’t afford to let misguided policies rob us of this valuable domestic resource.”
The MCLA serves as the leading voice of manufacturers in the courts, representing the more than 12 million men and women who make things in the United States. The MCLA strategically engages in litigation as a direct party, intervenes in litigation important to manufacturers and weighs in as amicus curiae on important cases. To learn more about the MCLA, visit our website.
The tortured, roundabout, drawn-out process that led last fall to the final disapproval of the Keystone XL pipeline project was equal parts astonishing and frustrating. After a seven-year process, in the wake of determinations clearly to the contrary by the State Department, and in the face of unambiguous Congressional support, the Administration finally disapproved of the pipeline, finding that it was not in the national interest to approve the project. Supporters of the pipeline wondered how it could be possible that the Executive branch could have such sweeping authority to kill a private commercial project that enjoyed strong bipartisan Congressional support and which the Administration had previously supported. The decision clearly appeared to be one based on politics, but was it also one based on legitimate Constitutional authority? In a brief recently filed by the Manufacturers’ Center for Legal Action in the US District Court for the Southern District of Texas, we join TransCanada in arguing that it was not.
In our amicus brief in TransCanada v. Kerry, we argue that the State Department’s prohibition of the pipeline violated the Constitutional separation of powers. The Constitution explicitly grants to Congress the authority to regulate foreign commerce. A cross-border pipeline clearly falls in the domain of foreign commerce. While the Executive branch possesses the implied authority to regulate foreign affairs, which is oftentimes exercised collaboratively with Congress, and has relied upon that authority in this case, it does not have the authority to usurp the power of Congress to regulate commerce, particularly when Congress has clearly and repeatedly acted to demonstrate its support for construction of the pipeline.
While the President has noted that the pipeline crosses an international border, thereby implicating foreign affairs interests that fall within the realm of the implied power of the Executive, the justification offered for regulating the pipeline has nothing to do with border crossing, relations with Canada, or national security. Rather, the President encroached on Congressional authority to regulate commerce in this case to create a helpful bargaining chip in the unrelated matter of the Paris Climate Change talks. While this may be a legitimate political concern, it is not a permissible exercise of the foreign affairs power.
Stay tuned as this case progresses through the courts. Not only are the specifics of the case very important, but in this era of heightened Executive branch power, the underlying separation of powers principles are equally so.