Administration Shoehorns Modern Problems into Antiquated Laws

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

The federal government is now routinely using laws passed before the invention of the fax machine to control dynamic information systems like cloud computing and broadband access. These efforts to regulate and police the innovation economy will loosen constitutional privacy protections and chill technological innovation.

For example, relying on the Electronic Communications Privacy Act of 1986, the Department of Justice has recently sought to search Microsoft customers’ emails. Microsoft has pushed back, alleging that the Justice Department’s orders violate its customers’ privacy and infringe on its right to free speech. Many of these demands prohibit Microsoft from informing customers that their information is being investigated.

Most laws governing government searches were written before the widespread use of digital communications. At that time, if the government wanted to execute a search warrant to look through one’s files, notice was necessary since a search would require entering a home or office to access documents. Now that many Internet users store their information in the cloud, rather than locally on their computers, the government can bypass notification of the customer by directly contacting providers such as Microsoft. Therefore, simply because the location of information has changed, users now experience different legal protections. Microsoft argues this is unconstitutional because Fourth Amendment protections on the reasonableness of searches should not discriminate based on how a citizen stores his or her information.

The privacy and free speech implications of the government’s actions have significant consequences for the greater business community and the innovation economy. When the government treats those who store their information at home differently than those who use the cloud, individuals are less inclined to use this potentially transformative new technology to protect their privacy. When individuals forgo cloud computing services, innovative manufacturers will lose customers.

The National Association of Manufacturers (NAM) will continue its fight to uphold proper constitutional protections and promote balanced and reasonable resolution through the courts.

Canada in Crosshairs for Promise Utility Doctrine at Investor Dispute Hearing

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

Co-authored by Linda Dempsey, Vice President of International Economic Affairs

Canada’s attempts to defend a questionable intellectual property approach have taken a hit in recent weeks as government experts faced scrutiny from a team of neutral international arbitrators, based on the official hearing transcripts released on August 3. These hearings are vitally important for a wide range of innovative manufacturing companies using patents or investing internationally.

During two weeks of International Court of Settlement for Investment Disputes (ICSID) hearings in late May and early June, Canadian officials and experts faced crossfire for attempts to defend Canada’s “promise utility doctrine.” This rule, which constitutes a “revolution” in Canadian patent law, was invented by their courts and rests on the concept that patents that do not fulfill their “promise”as arbitrarily construed by the courts often years after the patent was filedcan be ruled invalid, even if they meet all of the internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 25 patents that were invented to help millions of people suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions. Read More

Good News in Case Against “Legal Fraud of the Century”

By | Energy, Shopfloor Legal, Shopfloor Main | No Comments

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.

Court Ruling Pushes EPA Toward More Regulation

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

Government agencies have a tremendous advantage when it comes to defending new regulations in court. Judges start with a legal presumption that not only gives the benefit of the doubt to the agency, but sets a very high bar for reversing rules that most people might not have issued. As long as an agency’s rules are authorized by statute and not clearly erroneous or otherwise an abuse of discretion, courts will accept them.

That’s what the D.C. Circuit did today when it largely upheld the Environmental Protection Agency’s (EPA) rules on boilers and incinerators. All of the challenges to the rules by the Manufacturers’ Center for Legal Action and other business organizations were rejected by the appellate court. The court upheld one EPA requirement that could not be met by any small, remote incinerator or heavy oil-fired boiler in use today. It similarly rejected industry complaints about new energy assessment and recordkeeping requirements, as well as concerns about compliance with the rules when equipment malfunctions despite full compliance with regulations and due diligence by operators.

What is unusual is that the court agreed with several arguments made by environmental groups. It ordered the EPA to issue a regulation for cyclonic burn barrels and to decide whether certain other incinerators must be regulated under the Clean Air Act. The court also ordered the agency to provide further explanations about the decisions it made not to regulate emissions of a certain hazardous pollutant (non-dioxin/furan organic pollutant), about why certain exemptions should be allowed and about why it declined to regulate certain non-mercury emissions.

The bottom line is the court upheld all of the EPA’s regulations and ordered the agency to cover even more than it did, or at least give a full explanation of why it won’t.

If You’ve Touched Asbestos or a Similar Hazard, Can You Sue?

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

How much exposure to a hazardous substance gives you the right to sue the manufacturer? Now that scientific analysis of genes and atoms is so widespread, are manufacturers obligated to warn of infinitesimal risks? If not, where do you draw the line? How much exposure is enough to require a company to take action to warn everyone who might be exposed?

State courts around the country are now answering these questions. Earlier this month, the Georgia Supreme Court ruled that proving that a substance caused an injury requires reliable expert testimony, and not an expert who simply concludes that any exposure to asbestos at work–regardless of the extent of the exposure–was a cause of the worker’s mesothelioma. The expert’s testimony must be based on sufficient facts or data, using reliable scientific principles and methods. The Manufacturers’ Center for Legal Action argued for this result in an amicus brief filed with the court.

Courts in at least eight other states have recently ruled likewise, concluding that the theory that any exposure to a hazard causes an injury is not a scientifically proven proposition that is accepted in epidemiology, pulmonology or other medical fields. Nevertheless, it is still possible for plaintiffs with sufficient evidence of “frequency, regularity and proximity” of exposure to make a case.

Scientific discovery is therefore the keystone for future litigation. Manufacturers will need to keep up with the latest scientific findings relating to their products. Courts will need to assess whether a product is hazardous enough to actually cause harm, taking into account the latest information about dosage and response. It is critical that courts be gatekeepers who allow only valid scientific principles and sufficient evidence of exposure. Less demanding standards would essentially result in absolute liability for any company that makes hazardous materials if those products cross the path of the client of an aggressive trial lawyer. The Georgia court’s decision upholding strict evidentiary standards will help manufacturers focus on what they do best: improving products and creating jobs.

Manufacturers File Brief Supporting Energy Access

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

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.

NAM Files Lawsuit to Protect Workplace Safety

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

The Manufacturers’ Center for Legal Action filed a lawsuit on Friday, July 8, 2016, to challenge the Labor Department’s Occupational Safety and Health Administration (OSHA) workplace injury and illness New Rule. The New Rule places unreasonable restrictions on employer programs to increase workplace safety. As noted in our press release, not only does OSHA lack statutory authority to enforce this rule, but the agency has also failed to recognize the infeasibility, costs and real-world impacts of what it preposterously suggests is just a mere tweak to a major regulation.

The NAM’s complaint challenges the New Rule’s prohibitions and limits on employer safety incentive programs and drug testing programs. Incident-based safety incentive programs and post-accident drug testing programs help employers promote workplace safety, which is supposed to be OSHA’s primary mission. Instead, out of a misguided zeal to improve accuracy of reporting on workplace injuries, OSHA has lost sight of the importance of reducing the number and severity of injuries themselves. Properly designed incident-based employer safety incentive programs are the most effective tool to get employees and supervisors immediately invested in workplace safety. Through these programs, employees are continuously motivated to improve their environment and to look out for their safety and the safety of others and to eliminate unsafe behaviors. The result is a dramatic decrease in accident frequency and severity.

By encouraging all employees, including supervisors, to improve workplace safety, incident-based safety incentive programs jump-start a change in culture that results in a prompt and sustained decrease in accident frequency and severity. Without these incident-based safety incentive programs, instituting a culture of safety in the workplace is much more slow and difficult and seldom leads to the same dramatic reductions in serious accidents. The New Rule is unlawful and must be vacated because it exceeds OSHA’s statutory authority; was adopted without observance of the procedures required by law; and because the challenged provisions, and their underlying findings and conclusions, are arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law.

In addition, on July 12, 2016, the NAM filed a memorandum and emergency motion for a preliminary injunction seeking to prohibit OSHA from implementing the New Rule, which will otherwise take effect on August 10, 2016, causing irreparable harm to many thousands of employers across the country. The New Rule irreparably harms employers and employees by making their workplaces less safe and increasing the likelihood of workplace injuries and fatalities. If OSHA’s rule is not struck down, manufacturers will have to make a “Hobson’s choice” between eliminating or drastically restricting highly effective incident-based safety programs and/or drug testing programs, thereby increasing the number of employee injuries and even fatalities in the workplace; or else risking exposure to increased OSHA citations, inspections and penalties if the safety programs are not removed. OSHA’s main goal is to eliminate or minimize the frequency and severity of workplace injuries, illnesses and deaths—this misguided New Rule does not accomplish that goal.

Four Ways the Supreme Court Helped Your Business This Year

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The U.S. Supreme Court issued its final opinions of the term this week, and various hot-button social issues caught much of the media’s attention. But what about the cases that directly affect manufacturers? How did the Supreme Court rule on issues that affect your ability to compete and create jobs, such as the burden of government regulations and aggressive litigation against you?

There is good news to report. First, the Supreme Court issued a rare decision ordering the Environmental Protection Agency (EPA) to halt enforcement of the Clean Power Plan while the rule’s legality is sorted out in a lower court. The Manufacturers’ Center for Legal Action (MCLA) sought this order because of the dramatic way in which the EPA decided to regulate the electric generation sector.

Second, the Supreme Court was quite willing this year to allow manufacturers to challenge other agency decisions in court. The Hawkes Co. case allows immediate judicial review of the Army Corps of Engineers’ decisions about their jurisdiction. The Encino Motorcars case shows how companies can challenge significant changes in agency interpretations that are insufficiently justified. At the same time, the Supreme Court made it clear that parties that sue companies must meet rigorous standing requirements to be in court. However, it allowed the certification of a class of plaintiffs through statistical evidence of injury rather than actual injury, making class-action cases against manufacturers easier to file.

Third, a couple of aggressive theories of liability have been tamped down. In particular, litigation from foreign parties against manufacturers in the United States continued to be scaled back when the Supreme Court ruled that the European community cannot use our Racketeer Influenced and Corrupt Organizations Act to litigate claims arising from acts occurring abroad unless there is a clear injury in the United States. In addition, claims by third parties against manufacturers under the False Claims Act for regulatory violations were substantially limited to claims for actual fraud.

Fourth, the Supreme Court continues a longstanding policy of enforcing arbitration agreements that states have tried to undermine with consumer protection laws allowing for burdensome class-action procedures. The DIRECTV case threw out a California statute that would have eliminated class-action waivers in consumer contracts.

Most of these decisions stand the test of time, making it even more important for the Supreme Court to hear from manufacturers about the substantial effect that litigation has on their ability to survive and thrive. The MCLA made your voice heard in the Supreme Court this year, with important and beneficial results.

Unanimous Supreme Court Ruling Offers Some Relief

By | Shopfloor Legal | No Comments

Responsible government contractors can breathe a short sigh of relief as a result of a surprisingly helpful opinion, albeit one that does not entirely relieve companies of liability under the broadly worded and highly punitive False Claims Act. At a time when consensus is hard to come by in other branches of government, a unanimous Supreme Court decision today cracked down on an expansive litigation tactic that would have subjected manufacturers across the country to potential treble damages liability for a wide range of regulatory or contractual violations.

The ruling affects companies that sell goods or services to the federal government. If you submit a bill to the government, someone may claim that you are trying to defraud the government if you are not in full compliance with your contract or with statutory or regulatory requirements under it. Fortunately, the Supreme Court scaled back the types of claims that third parties can make about your billing. It reversed an appeals court ruling that would have made every bill an implied representation of compliance with all relevant regulations and would have made any undisclosed violation of a precondition of payment grounds for a lawsuit for fraud.

Instead, courts will recognize fraud claims only if they involve violations of material statutory, regulatory or contractual requirements. The FCA does not apply to insignificant regulatory or contractual violations. However, the court will allow implied false certification claims in limited circumstances, where your claim for payment makes specific representations about the goods or services provided and where your failure to disclose noncompliance with material requirements “makes those representations half-truths.” This means that future lawsuits will require courts to conduct a “rigorous” and “demanding” inquiry into what you told the government about your deliverables, what part of your performance of the contract was deficient and how important that deficiency was to the government. Much leeway remains for third parties to make claims arising from a company’s lack of compliance with its obligations, but the legal standards are much clearer and eliminate FCA liability for insignificant violations of thousands of complex statutory and regulatory provisions that are not material to the contract.

The case is Universal Health Services, Inc. v. United States ex rel. Escobar, and the Manufacturers’ Center for Legal Action filed an amicus brief supporting this result.

Appeals Court Errs on Net Neutrality; NAM Will Press for Legal Fight in Higher Court

By | Shopfloor Legal | No Comments

By Patrick Forrest, vice president and deputy general counsel and Cedrick Dalluge, legal fellow, National Association of Manufacturers

On June 14, 2016, a federal appeals court ruled to uphold new Federal Communications Commission (FCC) regulatory action on “net neutrality” classifying broadband providers not as an information service, but as a telecommunications provider.

The FCC heavily relied on a Great Depressionera statute enacted long before the internet was created to create its rule. Congress in 1934 never intended its Communications Act to govern 21st-century internet operations. Rather than substantively analyzing the FCC’s rule, the court insulated itself by deferring to the agency.

The court also rejected the business communities’ argument that reclassification will undermine investment in broadband infrastructure. Ironically, the court relied on the FCC assertion that “major infrastructure providers have indicated that they will, in fact, continue to invest under the framework. Those same parties later walked away from those statements, but the court emphasized that the FCC’s conclusions don’t have to be “the ones that we would reach on our own,” they only have to be “reasonable, and the majority concluded they were.

Consequently, the court failed to conduct a reasonable analysis regarding the operational business impact this rule would have on broadband providers, creating an opening for the possible deterioration of services. Overregulation risks providers diverting money from the development of new networks and technologies, stifling investment in U.S. broadband.

In dissent, Judge Williams correctly found the FCC’s order violates basic principles of agency rule-making. Regarding reclassifying broadband services on the basis of the 1934 statute, Judge Williams writes that the FCC’s justification “fails for want of reasoned decision making.” Beyond that, in crafting its rule, the FCC relied on changed factual circumstances and weak policy decisions. Judge Williams’ grave concerns regarding this ruling, shared by the National Association of Manufacturers (NAM), demand greater consideration.

By handing down this ruling, the U.S. Court of Appeals for the D.C. Circuit dictated the future of internet use. In effect, the court allowed the FCC to usurp the legislative process to pursue an inefficient quick fix to a complicated issue.

The NAM, as a leader on this issue, will continue this fight. Likely the ultimate decision-making body will be the Supreme Court, and the NAM is committed to seeing this issue through to the end.

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