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 burden—requiring 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 ruled—twice—that 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.
The Environmental Protection Agency’s (EPA) new Risk Management Program (RMP) rule, published on January 13, 2017, revised an existing rule designed to reduce chemical hazards and related accidental releases. The rule imposes various recordkeeping, auditing, disclosure and mitigation mandates under the Clean Air Act on companies that handle various chemicals, which include many manufacturing companies. The new requirements were not adequately evaluated or justified by the Obama administration, and we have been working with the EPA under the Trump administration to improve some of these problems.
For example, the rule raises significant security concerns from required disclosures of hazardous material information and compliance issues that will cause irreparable harm to manufacturers by requiring them to make available sensitive information that could expose plant vulnerabilities. The rule also imposes costly audit requirements for “each covered process” without justification, and the agency failed to conduct an adequate assessment of the costs and benefits.
On February 28, the NAM and other industry associations submitted to the EPA a petition for reconsideration of the RMP, and the agency agreed to meet with us the following week to listen to our concerns.
The NAM and industry groups also filed a lawsuit on March 13 in the U.S. Circuit Court of Appeals for the District of Columbia, asking the court to review the validity of the Obama administration’s action implementing changes to the RMP rule under the Clean Air Act. Later that same day, EPA Administrator Scott Pruitt issued a 90-day delay of the effective date of the RMP rule. This will give the agency time to review our concerns and will temporarily suspend the compliance burden.
We are pleased that the EPA listened to manufacturers’ issues with the new rule and that it agreed to delay the effective date. This delay gives the EPA time to reconsider and review the rule’s requirements, without imposing unnecessary confusion and compliance costs on manufacturers.
The Manufacturers’ Center for Legal Action will continue to monitor developments affecting manufacturers and provide regular updates. Please do not hesitate to contact NAM Associate General Counsel Leland Frost at firstname.lastname@example.org with any questions.
Co-authored by Patrick Forrest, NAM Vice President of Litigation and Deputy General Counsel
Manufacturers in the United States are deeply disappointed by an international panel decision that ruled in Canada’s favor purely on a threshold issue, sidestepping core investment and intellectual property (IP) issues at the heart of the case. In so doing, the panel failed to provide relief from Canada’s actions that undermine innovation and IP protection to the detriment of U.S. manufacturing and jobs. Read More
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.
Manufacturers like the law to be clear. The rules about organizational structure, taxation, employee rights and benefits, importing and exporting, permits and financing, to name a few, are critical to investing in, building and operating a business that will provide steady jobs for workers and a reasonable return for investors.
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.
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.
A lawsuit by Kimberly-Clark Corporation against Minnesota’s taxing authorities is now before the eight Justices of the Supreme Court, who will decide whether to hear the appeal next week. The outcome could have a significant impact on states that join the Multistate Tax Compact, which created a uniform system of taxation of companies doing business in multiple states.
Minnesota signed onto this agreement in 1983, and businesses relied on the Compact’s consistency and predictability. However, the state later repealed one of the Compact’s principles—the key provision giving taxpayers the option of apportioning their multistate income using a three-factor, equal-weighted formula. This formula determines how much of a business’s nationwide income should be attributed to a particular state. If a state can simply disregard the formula and use a different one, some companies will owe more in income taxes than they ever anticipated.
Other states across the country are taking similar action, and state courts in Oregon, Texas, Michigan and California so far have upheld their action. Without uniformity in state enforcement, the original intent of the multistate compact will be undermined, making certain states less attractive for business and hurting job prospects.
The Manufacturers’ Center for Legal Action filed an amicus brief in support of review, opposing Minnesota’s attempt to change the rules in the middle of the game. We argued that long-term tax predictability is of immense business importance, that the Multistate Tax Compact offers such predictability and uniformity and that Minnesota should honor the agreement it joined. We hope the Supreme Court will accept this case for review and prevent states from taking a dysfunctional, uncoordinated approach to taxation.
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.