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Manufacturers’ Center for Legal Action

La Jolla: Anatomy of a Plot, Part I.

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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.

The NAM Shines Light on Plaintiffs’ Attorneys “Reckless Assault” on Manufacturers

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We live in an era of lawsuits based more in emotion than fact. In the manufacturing sector, we see litigation costs continuously rising and often at the expense of a better wage for the American worker. The National Association of Manufacturers (NAM) will shine a light on this concerning trend, beginning with an opinion piece just published in Investor’s Business Daily.

Linda Kelly, NAM senior vice president and general counsel and leader of the Manufacturers’ Center for Legal Action, describes in Investor’s Business Daily how trial lawyers seek to extort American workers, consumers and shareholders purely for profit. The piece lays out the widespread ramifications that new lawsuits pose to manufacturers in America, including the 12 million men and women that the NAM proudly represents across the United States.

Since 2005, manufacturers in America have reduced carbon emissions by 10 percent, all the while growing the American economy by 19 percent. Despite this clear commitment to the environment and economic prosperity for the American people, trial lawyers have initiated a disingenuous campaign, backed by well-funded activists, to discredit manufacturers and reap financial benefits at the cost of American workers and their families.

“Manufacturers are committed to climate action and are actively crafting solutions to this complex global challenge.”

One lawyer in particular, Michael Pawa, is a repeat player in this arena. In 2008, he unsuccessfully argued that American manufacturers had created a “public nuisance” in an attempt to set precedent for future lucrative endeavors. U.S. courts resoundingly rejected Pawa’s claims, but his politically motivated legal efforts continue today in cities like San Francisco and Oakland.

“Manufacturers are confident the courts will once again dismiss these efforts and see these lawsuits for what they are—legal attacks aimed at punishing an industry they don’t like. But manufacturers continue to be harassed by politically motivated legal officers operating with impunity beyond the reach of the courts.”

As Kelly points out, “every dollar spent defending against meritless attacks is a dollar not spent on innovation and game-changing revolutions that make our world healthier and communities safer,” and American manufacturers can ill afford to sustain unnecessary costs to their businesses and reputations.

All Americans should be wary of this free-for-all targeting by trial lawyers against the lifeblood of our economy, especially given the remarkable achievements that manufacturers have made toward enriching our environment and economic prosperity. The NAM is proud to support its members facing these frivolous lawsuits and will continue to work on behalf of the millions of American workers, consumers and shareholders that bear the brunt of these misguided legal attacks.

Manufacturers’ Regulatory Litigation Update

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Over the past eight years, manufacturers have been forced to contend with a series of burdensome and damaging regulations, from unwise union rules, to counterproductive worker safety policies, to reckless environmental plans. The National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action (MCLA) has fought back in court, using our expertise and the power of our legal community to stop harmful actions and make important progress. And today, it’s clear that we’re not only succeeding but also inspiring others in Washington to take up the charge.

Promising Developments

Last week, the Trump administration released its Unified Agenda of Regulatory and Deregulatory Actions, which provided an up-to-date forecast on the work that administrative agencies are doing to reform regulations across the government. The news was encouraging for manufacturers. On a variety of fronts, the administration is marching in lockstep with the NAM’s advocacy efforts. And at three agencies in particular—the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA)—the Trump administration is tackling issues that the MCLA has long been working to address in court.

DOL

At the DOL, we’re seeing increased efforts to enact smart, commonsense reform along the lines we’ve advocated. Leadership is expected to review issues around the “persuader” rule, which required employers to report to the DOL anytime they consulted with labor relations experts on union-organization efforts—a clear violation of manufacturers’ constitutional rights and the subject of the NAM’s successful litigation in Associated Builders & Contractors v. Perez. We expect the DOL to publish a Request for Information about the expensive and problematic “overtime” rule, which the NAM challenged and stopped in Plano Chamber of Commerce v. Perez—a case that the DOL examined before deciding to take action. In both cases, the administration is building on the MCLA’s efforts in court.

OSHA

We’re also hearing promising news from OSHA. In the coming days, the agency will issue a proposal to reconsider, revise or remove provisions of the “injury and illness rule”—a rule that harms workplace safety by restricting employer safety incentive programs and drug testing programs. OSHA will also be addressing beryllium exposure standards that apply to construction and shipyard operations in a move that we hope will pave the way for similar work on fair beryllium regulations for manufacturing. And while the OSHA agenda doesn’t address the new “silica” rule, which halves the permissible exposure limit and mandates costly engineering controls, we’re optimistic that OSHA will consider reasonable modifications to the current silica standard. Addressing these issues, which the NAM has litigated in Texo ABC/AGC, Inc. v. Perez, Airborne v. OSHA and North America’s Bldg. Trades Unions v. OSHA, will make workers safer, processes more efficient and manufacturers better able to succeed and thrive.

EPA

Finally, the EPA is making significant strides in rolling back harmful regulations and streamlining unruly processes. The EPA, along with the Department of Defense, intends to review and rescind or replace the “Waters of the United States” rule, wading through issues that the NAM has litigated in American Farm Bureau Federation v. EPA, Murray Energy Corp. v. EPA and NAM v. U.S. Dep’t of Defense. The EPA has also proposed to withdraw the Clean Power Plan—a set of regulations that the NAM challenged in West Virginia v. EPA—and to address implementation requirements for the 2015 National Ambient Air Quality Standard for ozone, which the NAM argued in Murray Energy Corp. v. EPA would be difficult and expensive for manufacturers.

The Ongoing Fight

These are important strides forward. At the NAM, we’re excited about the progress we’ve made, and we’re pleased to have partners in the Trump administration who are dedicated to our priorities. But we’re not about to get complacent or rest on our laurels. It will be up to manufacturers and the MCLA to defend the progress we’re making when outside organizations and interest groups try to stand in our way by launching litigation of their own. We must be ready—and well-funded—for that fight. We intend to redouble our efforts in court—to protect your interests, to advance your priorities and to stand up for manufacturers across America.

NAM Urges Supreme Court to Review False Claims Act Pleading Standards

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The ManufacturersCenter for Legal Action filed an amicus brief on June 22 urging the U.S. Supreme Court to consider a decision out of the 3rd Circuit involving qui tam pleading standards for the False Claims Act (FCA). The standard set by the 3rd Circuit is the most lenient of those adopted and would require the pleading party to show nothing more than an opportunity for fraud by a business. Such a standard would lead to increased litigation and abuse of the FCA harming businesses, their employees, their owners, shareholders, the public at large and even the government. 

In the underlying case, Customs Fraud Investigations, LLC (CFI) filed a reverse false claim against Victaulic Co. as a qui tam relator. A reverse false claim occurs when a party creates false records or statements to avoid payment obligations to the government, and a qui tam relator is a private person bringing FCA actions on behalf of the government with the potential benefit of a monetary award. Pleading standards for a qui tam relator’s complaint are governed by Rule 9(b), which requires a party pleading fraud to “state with particularity the circumstances constituting fraud. . . ” However, in this case, the 3rd Circuit established an overly lenient pleading standard that effectively eliminates Rule 9(b)’s particularity requirement and allowed CFI’s fraud claims, largely based on reviews of eBay image postings, to proceed. By setting a standard that requires relators show nothing more than the opportunity for fraud, the 3rd Circuit allows Victaulic to be subject to an unfounded lawsuit and opens other businesses up to the same potential harms. 

The National Association of Manufacturers argued that resolving the circuit split and establishing a strict, consistent pleading standard would ensure appropriate application of Rule 9(b) and prevent speculation and forum shopping by outsider relatorsrelators with no insider knowledge of the company. Strict enforcement of Rule 9(b) ensures that outsider relators will not use the system to their advantage in pleading speculation, not facts, and helping themselves to discovery that is costly to businesses, the judiciary and the government.

The 3rd Circuit reasoned in its opinion that concerns regarding discovery could be mitigated through “controlled discovery” in which the courts use tools and discretion to curb discovery abuse; however, these tools cannot take the place of Rule 9(b) requirements. Controlled discovery can still be burdensome, and utilization of controlled discovery in place of dismissal principally violates pleading requirements in general. Furthermore, in qui tam cases, before a court decides on a Rule 9(b) issue, the government has already conducted its own statutorily-mandated investigation of the complaint using “discovery tools” to decide whether to intervene in the action. In cases where the government has declined to intervene following the conclusion of its own investigation of a business, the court should consider it inappropriate to apply the relaxed Rule 9(b) standard.     

The courts are expected to act as gatekeepers preventing non-particularized and meritless claims from proceeding; unfortunately, the courts cannot effectively fulfill this role under toothless standards like that established by the 3rd Circuit. The Supreme Court should end the confusion within the circuit courts and decide the appropriate Rule 9(b) standard as applied to the FCA. 

 

High Court Limits Class-Action Suits in Microsoft Ruling

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The U.S. Supreme Court’s June 12 ruling in Microsoft v. Baker is an important victory for manufacturers because it could prevent certain types of class-action lawsuits and expensive piecemeal litigation.

In the underlying case, owners of Microsoft’s Xbox 360 sought to file a class-action lawsuit alleging a design defect in the game console. The District Court’s order said that class allegations could not be included in the complaint against Microsoft, and the 9th Circuit Court of Appeals denied the plaintiffs’ request to appeal that order. This meant that while Xbox 360 owners could not bring a class-action suit against Microsoft, they were free to pursue their individual claims. The Xbox owners decided to voluntarily dismiss their claims against Microsoft with prejudice and only challenge the District Court’s order that prevented them from pursuing a class-action suit.

The 9th Circuit Court of Appeals ruled that it had jurisdiction to hear the appeal challenging the striking of class allegations even though the order from the District Court was not a final decision by a lower court, as understood by Congress. As a result, the case was dismissed, effectively eliminating a controversy.

Congress granted federal courts of appeal authority to review a lower court’s decision when that decision was final. Said another way, Congress did not give the federal courts the authority to hear all disputed decisions of lower courts. The National Association of Manufacturers (NAM) has long argued for the faithful adherence to this general rule in order to avoid a backlog of piecemeal litigation at the federal courts on every matter taken up by lower courts. The NAM’s Legal Center filed amicus briefs in this matter urging the Court to affirm longstanding congressional intent.

The Supreme Court agreed, and Justice Ruth Bader Ginsberg in her majority opinion stated, “Congress chose the rulemaking process to settle the matter, and the rulemakers did so by adopting Rule 23(f )’s evenhanded prescription. It is not the prerogative of litigants or federal courts to disturb that settlement.” Furthermore, Ginsburg explained that a plaintiff could not transform an order into a final judgment simply by dismissing his or her claims with prejudice.

The Supreme Court’s ruling is exactly what the Legal Center called on the Court to do in its briefs: It preserves adherence to jurisdictional statutes enacted by Congress and prevents the development of multiple, piecemeal appeals from a single district court proceeding. We applaud Microsoft for fighting this case in the High Court and helping to preserve efficiency in the court system.

NAM’s Challenge to Conflict Minerals Disclosure Requirement Comes to an End

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This month, a federal court concluded the National Association of Manufacturers(NAM) legal challenge to one problematic provision requiring disclosure of supply chain information about the use of “conflict minerals” in manufactured products.

The NAM has had a long history of defending the rights of manufacturers against government-compelled speech that violates the First Amendment. Restrictions on commercial speech are carefully reviewed by the courts to ensure that they are narrowly tailored to achieve a substantial government interest, such as preventing fraud or deceptive sales campaigns. But the speech that was mandated by the government under this law imposed an additional burdenrequiring affirmative research, investigation and analysis, recordkeeping and finally reporting to the Securities and Exchange Commission (SEC).

After several years of litigation, the federal appeals court in the District of Columbia ruledtwicethat the disclosure requirement is unconstitutional. Being forced to label a product as “conflict free” or not ethically taints and stigmatizes companies, many of which simply cannot determine the ultimate source of trace minerals from smelters around the world. Neither the government nor Amnesty International appealed this ruling to the Supreme Court, and on April 3, the trial court closed the case, declaring Sec. 1502 of the Dodd-Frank Act and the SEC regulation on conflict minerals unconstitutional to the extent that the statute and the rule require regulated entities to report to the Commission and to state on their websites that any of their products have not been found to be ‘DRC conflict free.’”

Our victory in this case has been and will continue to be used to help the NAM challenge other government-mandated speech, such as shop floor poster requirements, misleading product labeling laws and excessive disclosures of third-party allegations. And yet, the closing of this case and the subsequent determination by the SEC Division of Corporation Finance that it will not recommend enforcement action to the SEC if companies file conflict minerals reporting disclosures under certain provisions do not go far enough. The NAM continues to strongly urge the SEC to consider implementing a full suspension of the conflict minerals rule.

Supreme Court Takes up NAM’s WOTUS Case

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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 panels 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 Circuits decision put challengers to the EPA rule in an untenable positionif 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.

European Court of Justice Sets Aside Judgment Requiring Disclosure of Confidential Business Information

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On November 23, the European Court of Justice (ECJ) released its decision in European Commission v. Stichting Greenpeace, setting aside a lower court judgment requiring disclosure of confidential business information (CBI). While the ECJ’s decision is certainly good news for manufacturers, it is not yet a clear victory.

The plaintiffs requested the public disclosure of a massive amount of CBI relating to certain pesticides used both in the United States and Europe, including how products were manufactured and their final composition in order to assess potential environmental emissions. The lower court broadly interpreted EU emissions disclosure rules in favor of the plaintiffs, which left two options for companies selling goods in the European Union. Either they accept that their trade secrets will be made public, meaning that their data can be used and abused anywhere in the world by competitors, or they decide not to market their products in the European Union altogether, with obvious adverse consequences for the companies and the European Union as a whole.

In 2015, the ECJ granted the National Association of Manufacturers (NAM) intervener status, and in so doing, the court recognized the interest of the U.S. industry in this case. The NAM argued that the lower court’s interpretation was excessively broad and that the lack of adequate protection for the confidentiality of proprietary data in the European Union would be a significant barrier to market access for U.S. manufacturers of many products. The NAM is a strong supporter of global trade and investment rules that promote trade on a level playing field and provide a system in which all countries abide by core principles, including the protection of intellectual property. Governmental protection of CBI is needed to justify the considerable time, cost and effort involved in developing and marketing new technology as well as updating and improving older technologies.

The ECJ agreed with the NAM that the lower court erred by broadly interpreting EU disclosure for the emissions rule. The ECJ set aside the judgment and provided a more limited interpretation of EU disclosure rules. However, the ECJ did not assess whether the CBI in this case falls under that limited interpretation, and it sent the case back to the lower court to decide. Once the lower court decides whether the CBI at issue must be still disclosed under the limited interpretation, this case will potentially be appealed again. In the meantime unfortunately, the exact scope of the rule remains unclear. We prevailed on the larger attack against disclosing the CBI, but the fight will continue on this issue and in future cases concerning whether specific fact patterns fall within the emissions rule.

A Dropper Full of Litigation: Lawsuit About Waste Is Waste Itself

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Have you ever had to buy two items packaged together when you only wanted one? Does your perfume or cologne spray too much at a time? Are you paying extra to put air in your tires when you only need a few seconds at the pump? Can you sue someone for this waste?

Innovative lawyers have come up with many creative ways to squeeze money from successful businesses, particularly with product liability class-action suits for very small individual claims which, when aggregated, can provide a large pool of nuisance settlement money to share with the class. One such case is now before a federal appeals court, raising the question whether prescription eye drop medications are administered with an eye dropper whose tip is too big. The theory is that the eye droppers dispense more medication than is really needed, depleting the bottle sooner and making the customer buy more medication.

That’s a little like saying you’re selling me a bigger adhesive bandage than I need because not all cuts are the size of the bandages in the box. It doesn’t hurt me to use a bigger bandage, but why should I pay more for the extra material that I don’t need?

The trial court dismissed this case, saying the alleged injury was too speculative. Undaunted, the plaintiffs appealed, and the Manufacturers’ Center for Legal Action stepped in to support the court’s ruling. We argued that federal law prohibits changing the packaging without approval from the Food and Drug Administration (FDA), and even if the court could require smaller eye droppers, the company could price its medication by the number of doses without changing the total price to the consumer.

The case is Cottrell v. Alcon Laboratories, Inc. (3d Cir.). We argued that the plaintiffs received what they were promised: effective, FDA-approved prescription medications, and different packaging would not have guaranteed they would have paid less. But the biggest problem with this case is not that the claim is so speculative, but that product sellers have to hire a team of lawyers to defend it, including expensive appeals that can drag on for years. At risk is virtually any business practice that can be portrayed as inefficient, and the costs of fighting these claims are ultimately borne by customers, employees and investors. The waste alleged in this suit pales in comparison to the waste arising from the prosecution of lawsuits like this in the courts.

Manufacturers Applaud Delay on Overtime Rule

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National Association of Manufacturers (NAM) Senior Vice President and General Counsel Linda Kelly issued the following statement after a federal judge temporarily halted the Obama administration’s final overtime regulation:

“The Manufacturers’ Center for Legal Action is the last line of defense from unreasonable regulations that harm not just job growth but also manufacturers’ ability to stay in business. Today’s decision is an important win for all manufacturers in America—halting what would have been a dramatic and devastating change in labor law that manufacturers could not afford. The rule would have vastly expanded the number of employees that would be eligible for overtime. The decision brings us a step closer to curbing regulations that have resulted in $80 billion in compliance costs and more than 25 million hours of paperwork.

“In the days and weeks ahead, the NAM looks forward to working with the Trump administration and the 115th Congress to right a regulatory and legal system that has pummeled the manufacturing industry in America. The fights are not yet over—and our work is just beginning.”

The Manufacturers’ Center for Legal Action (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.

Manufacturers and their employees share a mutual goal of a safe, communicative and productive workplace, and good policy from Washington is part of the solution. To learn more, visit our website.