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Quentin Riegel

The Gotcha Claim: It’s Easy to Defraud the Government

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

You don’t have to intend to defraud the government to be sued for doing it. These days, individuals are suing manufacturers over essentially government-contract or regulatory-compliance issues by using an aggressive theory of liability under the False Claims Act. Individuals that have not themselves been harmed can sue government contractors under the FCA and recover huge awards, even when the contractor has committed no fraud.

Here’s what can happen. Suppose a manufacturer sells items to the government at $10 apiece. The government buys 1,000 of them for $10,000. If someone discovers that the manufacturer was out of compliance with an environmental or workplace regulation, he or she may file an FCA claim saying every product was sold under the false premise of compliance with those regulations. The result: $30,000 in treble damages, aggregate civil penalties of up to $11 million, and attorneys’ fees – a steep penalty for a $10,000 contract.  All of this can happen even though the government is fully satisfied with the performance of the contract and got what it paid for. Read More

Manufacturers File Second Suit Against EPA’s Clean Power Plan

By | Briefly Legal, Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

Today, the Manufacturers’ Center for Legal Action filed a second lawsuit as part of our fight against the EPA’s overreaching regulations on energy. Earlier this year, we filed suit against the portion of the Obama Administration’s “Clean Power Plan” that would impose restrictions on existing power plants. Now, we’re arguing against the regulation on new power plants, which will limit access to new energy sources for manufacturers and for all Americans.

As we’ve noted before on Shopfloor, manufacturers have long demonstrated their commitment to environmental sustainability and reducing greenhouse gas (GHG) emissions. Since 2005, manufacturers’ annual GHG emissions have fallen by more than 10 percent while our value added to the economy has increased by 26 percent. We are producing more, while emitting less. In addition, manufacturers’ technological innovations and ingenuity have been integral in U.S. annual emissions falling by 700 million tons since 2005, which is a reduction greater than any other nation in the world. Read More

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Center Perspectives: Foreign Claims Against Manufacturers Deserve Supreme Court Scrutiny

By | America's Business, Briefly Legal, Shopfloor Legal, Shopfloor Main | No Comments

Foreign Claims Against Manufacturers Deserve Supreme Court Scrutiny

After a federal appeals court unearthed one provision of the Judiciary Act of 1789 in 1980, foreign nations have used the Alien Tort Statute (ATS) to claim violations of the “Law of Nations” by a variety of manufacturers for activities involving allegations of human rights abuses taking place in foreign countries. The statute was intended to allow federal courts to hear a few limited claims involving such matters as acts of piracy, violations of safe-conducts or interference with the rights of ambassadors. Read More

Free Flow of Commerce Suffers from Judge’s GMO Ruling

By | Manufacturers’ Center for Legal Action | No Comments

U.S. District Court Judge Christina Reiss ruled Monday that a major industry challenge to Vermont’s labeling law for food products containing genetically modified organisms (GMOs) can proceed, but that the enforcement process will not be slowed while the case is adjudicated. The ruling refused to forestall the effective date of July 1, 2016, when many food products offered for sale in Vermont must have labels saying whether they were produced entirely or in part with genetic engineering.

The ruling was in response to efforts by Vermont authorities to throw the case out, and by manufacturers to suspend the regulation until the courts can resolve fundamental constitutional and statutory questions that have arisen from this first-in-the-nation GMO labeling law. The 84-page decision covered a wide range of issues, and concluded that the industry was not able to overcome the substantial requirements for getting a preliminary injunction – most notably the need to prove irreparable harm from a law that will not be enforced for another year. Read More

Cost Consideration: Supreme Court Hears Arguments in Michigan v. EPA

By | Energy, Manufacturers’ Center for Legal Action | No Comments

Today the Supreme Court hears arguments in Michigan v. EPA, to resolve whether the Environmental Protection Agency (EPA) must consider costs when deciding whether it is appropriate to regulate hazardous air pollutants emitted by electric utilities.

It’s surprising that an agency would not consider costs when deciding how to regulate. We could make cars safer by requiring that they be made like tanks. We could reduce hospital infections by requiring hazmat-style protective equipment.  But alternatives like these are usually not appropriate. It is more reasonable to approach every regulation by weighing its unique costs and benefits. Read More

MCLA Amicus Argues a Balanced Consideration of Costs and Benefits for EPA

By | General | No Comments

If U.S. manufacturers had no costs from complying with federal, state and local regulations, they would have a significant advantage over competitors that have such costs. Wouldn’t that be nice? Obviously, compliance costs are an important factor in many business decisions, and the greater the costs, the harder it is for manufacturers to produce and to compete. Read More

BP Deepwater Horizon Settlement Raises Fundamental Constitutional Issue

By | Manufacturers’ Center for Legal Action | No Comments

This week, Halliburton Co. agreed to a $1.1 billion settlement of claims by the commercial fishing industry and others affected by the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.  Last year, BP Exploration and Production Inc. and BP America Production Co. (“BP”) sought a court ruling that its own agreement to pay claims to injured parties should be limited to those who were actually affected, directly or indirectly, by the spill.

This is an obvious argument. It is a bedrock principle of Article III of the U.S. Constitution that courts are to resolve actual cases or controversies, which means that plaintiffs must have some injury and defendants must be the ones responsible for it.  BP has already acknowledged responsibility for its share of the damages from the spill, and in order for courts to have jurisdiction, the plaintiffs must show that they were injured by the spill.

Unfortunately, the Fifth Circuit ruled in May, with 3 judges dissenting, not to review a ruling that allowed claims without having to submit evidence that the claims arose as a result of the spill.  See our blog post here.  This failure has serious implications because it allows courts to certify classes of claimants for settlement purposes that could never have been certified to sue in court. Manufacturers of all kinds could face huge liabilities to parties never affected by their products.

BP has appealed to the Supreme Court of the United States. The NAM’s Manufacturers’ Center for Legal Action filed an amicus brief today urging the Court to take the case and reverse the lower court.  We warned that the lower court’s ruling will allow improper settlements and distributions, discouraging future settlements, increasing litigation costs, and flooding the courts with complex, time-consuming and expensive cases.  It also makes the courts complicit in an unsettling expansion of their power.

Quentin Riegel is Vice President and General Counsel for the National Association of Manufacturers.

Nuisance in the Courts

By | Economy, Manufacturers’ Center for Legal Action | No Comments

Like invading hordes, plaintiffs have been seeking new ways to seize manufacturing assets—only they do it in court. The Manufacturers’ Center for Legal Action is seeing a rash of lawsuits alleging damages from activities that various government agencies have already approved under statutes enacted with bipartisan support and regulations that have balanced the interests of individuals, manufacturers and the public at large. These claims seek money from normal business activities that are fully permitted and regulated.

The latest threat is from landowners who sue manufacturing facilities that operate under emissions permits issued by a state or the Environmental Protection Agency (EPA), for damages from particulate matter or other pollution.  While the Clean Air Act allows suits for permit violations, these new suits do not allege any violations of existing permits. For example, in Iowa, landowners sued a corn milling plant that had valid state and EPA permits. When the case went to the Iowa Supreme Court, the National Association of Manufacturers (NAM) filed a brief supporting the plant, arguing that the suit is a political question unsuitable for the courts, and in any case is preempted by federal regulation.  However, that court decided that, even though a company is complying with federal and state environmental regulations, a landowner may still sue over the effects of the pollution, such as from dust, ash or unpleasant odors.

A similar suit in Pennsylvania against a power plant that was in compliance with federal and state regulations was initially dismissed by the trial court, but that decision was later reversed by an appeals court. The Supreme Court refused to hear that appeal, although we had urged them to.

Another suit alleging ground contamination near a North Carolina manufacturing plant site sought to impose damages above and beyond the cleanup obligations already required under the Superfund law. The NAM weighed in with an amicus brief in this case, and the Supreme Court decided not to authorize this expanded liability. While this win is reassuring, the case is another example of how manufacturers are being bombarded with lawsuits even though they are already complying with state and federal protocol.

Finally, we urged the Supreme Court to review a decision holding a company liable for MTBE (a fuel additive for gasoline engines) pollution-related injuries that have not actually happened in the groundwater of Queens, N.Y. The alleged contamination arose from using the safest feasible means of satisfying the federal oxygenation requirement for gasoline; yet, a lower court imposed retroactive liability on a company doing just that. Unfortunately, the Supreme Court declined to hear the case.

It’s enough to make you put up the barricades and call in the lawyers.

Manufacturers Continue Fight Against Public Nuisance Suits

By | Economy, Energy | No Comments

The Supreme Court meets today in closed conference to decide whether to hear a case that could set the stage for thousands of environmental suits against manufacturers who are in full compliance with their permits from the Environmental Protection Agency (EPA) and its state counterparts. Unless reversed, the appeals court decision in GenOn Power Midwest, L.P. v. Bell will open the courts for property owners and residents near manufacturing plants around the country to sue those companies for emitting anything from their plants.

An editorial in yesterday’s Wall Street Journal highlights the problem: “Failing to reverse the decision could expose U.S. industry to billion [sic] of dollars of liability and lead to a state-by-state chopped salad of pollution controls as judges make what are quintessentially political decisions.”

The Manufacturers’ Center for Legal Action is seeing this latest attempt to subject companies to so-called “public nuisance” litigation for activities already subject to permitting, equipment improvement requirements, monitoring, and public and private enforcement liability under the Clean Air Act. That law was supposed to provide a uniform system for environmental compliance and enforcement, but this lawsuit and others like it threaten to turn trial judges into EPA regulators, setting standards, monitoring compliance, and issuing penalties.  A similar case in Iowa is now awaiting a decision from that state’s Supreme Court.

We are harnessing the power of a broad range of manufacturing associations to help us tell our story in the courts.  Many groups, including the American Chemistry Council, the American Iron and Steel Institute, the Corn Refiners Association, and the Treated Wood Council, have joined in our effort to shine a light on this litigation problem.

In March, we asked the U.S. Supreme Court to review the GenOn Power case. We should find out on Monday whether the Court will hear the issue, and after full review, whether to end this nonsense once and for all.

Supreme Court Hears Securities Class Action Case

By | General, Manufacturers’ Center for Legal Action | No Comments

Playing the stock market is a better gamble if you can sue when you lose. That’s what some sophisticated investors have been doing with some success as a result of the 1988 Supreme Court decision in Basic v. Levinson.  Although there’s no statute that says you can sue when your stock bet loses money, you can always look around after the fact and try to find evidence that the company didn’t publicize something that might have had an effect on the price.  If you can show fraud by the company, you can sue under an implied right-of-action under the securities laws.

Showing that you were defrauded requires that you prove that you relied on some statement that the company made when deciding whether to buy or sell your stock.  Lucky for you, that requirement was eliminated when the Supreme Court ruled that a court may presume that you relied on information generally available to stock market participants. Under the “efficient capital markets” theory accepted by the Court, it is assumed that stock prices accurately reflect their true price in open and well developed markets with many trades.

If you relied on the efficient market in buying stock, a court will assume the price accurately reflects material information about the stock, and if there was price distortion from erroneous or misleading information, you can sue for your losses.

The Court assumed that investors invest on the assumption that the trading price of the stock accurately reflects the true value of the stock. The problem with that is that many sophisticated investors buy stock because they think it will outperform the valuation that the market assigns. Many investors buy or sell a security precisely because they believe the market price is wrong – buying when they assess the market has undervalued the stock and selling when the stock is overvalued in their estimation.

That’s the argument the NAM made to the Supreme Court in an amicus brief in Halliburton v. Erica P. John Fund, a case being argued March 5. The Court is reconsidering its presumption-of-reliance ruling, and we hope it will require that reliance be proven. You can’t have it both ways, relying on your own view of the market price, but also relying on the efficient market theory to sue if you guessed wrong.  That’s an unfair and expensive outcome that adds yet another cost to doing business, reducing competitiveness and hampering job creation.

Quentin Riegel is Vice President and Deputy General Counsel for the National Association of Manufacturers.