A Supreme Court Victory for Manufacturers’ Free Speech Rights

By | Shopfloor Legal, Shopfloor Main | No Comments

The U.S. Supreme Court last week struck down a Berkeley, California, city ordinance that required retailers to post misleading warnings in their stores about mobile phones. The ruling helps manufacturers by upholding their First Amendment right to choose how to speak about their own products.

The case—CTIA – The Wireless Association v. Berkeley, California—involved a Berkeley city ordinance that sought to require mobile phone retailers to post in-store signs that warn customers about the alleged dangers of radio wave emissions from mobile phones. A group of companies sued to challenge the requirement, arguing that it unconstitutionally compels speech in violation of the First Amendment to the U.S. Constitution.

The 9th Circuit Court of Appeals ruled against the companies, concluding that all compelled commercial speech is subject to the most deferential standard of judicial review (known as “rational basis” review). The plaintiffs asked the Supreme Court to review and reverse the judgment.

The National Association of Manufacturers’ Manufacturers’ Center for Legal Action (MCLA) filed an amicus brief in support of review because governments should not be able to dictate how manufacturers advertise, promote or describe their products unless there is a compelling public need for such disclosures. If such compelled disclosures are subject to merely rational basis review, then the federal, state and local governments would be empowered to force manufacturers to speak out against their own products—especially those that the government disfavors.

The Supreme Court granted review and summarily ordered the 9th Circuit to reconsider its ruling in light of another recent Supreme Court decision that reaffirmed strong protections against compelled speech. This ruling protects the right of manufacturers to speak—or not speak—about their products without unwarranted government intrusion. The MCLA is proud to have submitted a brief in support of this great result for manufacturers.

The Absent Amphibian That Could Cost Your Company Millions

By | General, Shopfloor Legal | No Comments

Since its enactment in 1973, the Endangered Species Act has helped endangered and threatened species recover and prosper. But the U.S. Fish and Wildlife Service (FWS) is now stretching the act to absurd lengths by restricting land use in the name of protecting a species that does not even inhabit the land.

The species in question is the dusky gopher frog. It lives only in Mississippi. In 2001, the FWS listed the species as endangered and declared 1,544 acres of private property 50 miles away in Louisiana as “critical habitat” for the frog—even though the frog does not live there and could not survive there under current conditions. The FWS defended the critical habitat designation on the basis that the frog could hypothetically survive on the Louisiana property if the landowner cuts down all the trees there, plants a different type of tree and then periodically burns the land to promote certain vegetation necessary for the frog’s survival.

A critical habitat designation broadly hampers the productive use of one’s land. Owners of land designated as critical habitat face immediate and significant restrictions on their otherwise lawful use of that land, as well as expensive and time-consuming new procedural requirements on ongoing and future projects, litigation risk and often a significant reduction in the property’s value.

Specifically, when a landowner applies for a federal permit to use or develop the property, a lengthy and expensive government consultation process is triggered. Based on that process, the government may substantially limit the scope of planned development and require burdensome mitigation measures. The FWS’s proposed mitigation measures for the dusky gopher frog on the Louisiana property, for example, would have destroyed $20.4 million of the land’s development value.

The broader consequences of the FWS’s position are frightening to imagine. With more than 1,500 different birds, mammals, amphibians, fish, plants and insects currently listed as either endangered or threatened, any land, infrastructure or factory site could be forced to comply with the onerous restrictions that accompany a critical habitat designation. The costs to individual businesses can easily reach into the millions of dollars. (Read more here.)

To fight this regulatory overreach, the Louisiana landowner sued in federal court to overturn the critical habitat designation. The case is now before the U.S. Supreme Court, where the NAM’s Manufacturers’ Center for Legal Action filed a brief this week in support of the landowner. Our brief argues that the FWS exceeded its statutory authority under the Endangered Species Act and highlights how these actions impose significant harm and business uncertainty on manufacturers and other businesses.

Where Can Manufacturers Be Sued? It’s Complicated, but Needn’t Be

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

As a manufacturer, the possibility of being sued is an unpleasant reality of doing business. But knowing when and where you might face litigation can at least help your company evaluate risk and inform business planning. Can a fabricator in Freeport, Maine, be sued in Fairbanks, Alaska? Must a manufacturer in Milwaukee, Wisconsin, face a civil trial in Maui, Hawaii? These questions have vexed courts—and manufacturers—for decades. The National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action (MCLA) is working to bring some needed clarity to these issues.

Generally, a business may only be sued in a state where it is headquartered, operates a factory or conducts other business. For some large corporations, that could mean being vulnerable to suit throughout the United States. But small and medium-sized manufacturers might only operate in one region of the country or even in a single state. Courts recognize there are situations where it would be unjust to force manufacturers to face lawsuits in far-flung states where the manufacturer has no operations.

A court has jurisdiction over a defendant if that defendant has “minimum contacts” with the plaintiff’s state. If a company has a physical presence in a state, the “minimum contacts” test is easily satisfied. But determining jurisdiction becomes more challenging when a manufacturer has no operations or other physical presence in a state, but its products are ultimately sold there.

A toy manufacturer is now asking the U.S. Supreme Court to provide some much-needed clarity on these issues. The case—Align Corporation v. Boustred—involves a Taiwan-based manufacturer of toy helicopters. The manufacturer has no operations, employees or other presence in the United States. It sells to U.S.-based distributors who then sell to retailers nationwide. A Colorado man bought one of the helicopters and then sued the manufacturer in Colorado after the helicopter allegedly injured him.

The manufacturer asked the court to dismiss the case because the manufacturer has no operations in Colorado. The Colorado Supreme Court ultimately rejected that argument, reasoning that the manufacturer had placed its product in the “stream of commerce” and did not prohibit distributors from selling to Colorado retailers.

Why should manufacturers in the United States care? This “stream of commerce” theory of minimum contacts means that any manufacturer in the United States, large or small, could be sued anywhere their products end up, regardless of whether the company has any operations or other activity in the state.

Is it fair for a family-run business in Vermont to be dragged into an Oregon court? Should a manufacturer in Pittsburgh be forced to fight a frivolous lawsuit in Alaska? The NAM’s MCLA doesn’t think so, and we filed a legal brief in this case for that very reason. We are asking the U.S. Supreme Court to take the case and reverse the Colorado court’s decision. A more constrained test would significantly narrow and clarify where manufacturers can be sued.

Manufacturers Fight “Ventriloquist Regulation”

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

The freedom to speak or refrain from speaking is a cherished right under the First Amendment to the U.S. Constitution. The ability of manufacturers to exercise that right is under attack, and the National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action (MCLA) is fighting back.

Over the past few years, some cities and even the federal government have sought to use manufacturers as ventriloquist puppets to spread political messages that could harm sales and damage company reputations. The latest example comes from San Francisco, where the city council passed an ordinance that requires warnings on certain advertisements for beverages containing added sugar. Here is how the warning would look on an actual advertisement:

Groups representing beverage manufacturers, retailers and advertisers sued in federal court to block the ordinance. They lost at the trial level but won on appeal. The city is now seeking a further appeal to the full U.S. Court of Appeals for the 9th Circuit, located in San Francisco.

The legal issues in this case, American Beverage Association v. City of San Francisco, will have far-reaching implications for manufacturers. If governments like San Francisco’s can force manufacturers to speak out against the very products they create or compel companies to spread controversial messages on their products or advertising, companies’ voices could be silenced and their business harmed.

This week, the MCLA filed an amicus brief in support of the beverage companies that argues against the city’s ordinance and the larger problem of regulation through forced speech. Our brief argues that courts should invalidate government efforts to coerce companies into spreading a political message or speaking out against their product or service. By promoting rigorous judicial review of these misguided regulatory efforts, we expect to deter other like-minded cities from enacting similar requirements. And if other cities continue to do so, the MCLA will be prepared to argue against those requirements and help strike them down as well.

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