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.
On May 2, 2016, the National Association of Manufacturers joined with the American Foundry Society to challenge the Occupational Safety and Health Administration’s (OSHA) new crystalline silica rule, which cuts the current permissible exposure limit in half and requires employers to implement costly engineering controls. The rule attempts to limit exposure to silica-containing materials, such as concrete and stone, in industries like brick manufacturing, foundries and hydraulic fracturing. We are fighting this rule on all fronts by both petitioning for review of the final rule and intervening to address the union filings directly. Last week, on November 11, we filed our joint industry opening brief to oppose this rule, which will severely stunt the economy and burden manufacturers. Read More
President Barack Obama has relied on, and expanded, the power of the administrative state by making substantial use of both executive orders and presidential memoranda to achieve policy objectives. Executive orders are appealing to any president because they can be quietly and quickly implemented without hearings, votes or substantive public feedback. President Obama has been direct in favoring this approach, stating, “We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the kind of help they need. I’ve got a pen, and I’ve got a phone.”
The National Association of Manufacturers (NAM) ramped up its litigation in response to the tsunami of regulations coming out of the White House. In this final year of the president’s term, the regulatory spigot has only been turned up. The NAM is currently suing the federal government in 16 cases for overregulation.
The Manufacturers’ Center for Legal Action has argued in the courts that the president overstepped his constitutional power in issuing many memoranda and executive orders affecting labor and environmental law. However, a presidential legacy implemented by the pen can be destroyed by the pen. First, an executive order can be revoked by another executive order, and it is common for presidents to revoke some of their predecessors’ executive orders. Second, Congress can revoke an executive order through legislation. Third, an executive order can be revoked by a federal appeals court or the Supreme Court.
This year’s election will have a profound impact on future NAM litigation efforts to limit executive overregulation through the courts. President-elect Donald Trump will fill the Supreme Court vacancy created by Justice Antonin Scalia’s death and potentially two or more additional seats as justices retire. If multiple vacancies occur, the Supreme Court will shift from its previous makeup of five conservative and four liberal justices that shaped some of the nation’s most significant issues on social norms, individual rights, the balance of government powers and business and workplace matters. Several, if not all, of the cases in which the NAM is suing the government for executive overreach may end up in a newly configured Supreme Court, and the outcome of President Obama’s regulatory legacy will largely rest on the Supreme Court nominees of President-elect Trump.
The Supreme Court has not had a liberal majority since the retirement of Chief Justice Earl Warren in 1969, and during the past 48-year period, the Supreme Court has made a modest shift to curtail executive overreach. Without a majority conservative Supreme Court, many pro-business decisions on labor and environmental issues would likely not have been rendered. It is generally thought that President-elect Trump will support Supreme Court nominees who believe the Founders’ words in the Constitution mean what they say, not that the Constitution should be seen as a living document. Justices in this mold will likely not support broad deference to executive authority and agency actions. The issues at stake range from the ability of citizens to challenge regulations by administrative fiat to the ability of workers to unionize.
The morning after the election brought with it discussion of whether Democrats will filibuster the Trump administration’s Supreme Court nominees. The Senate confirmation process will offer a critical view into the Supreme Court’s future and the legacy of President Obama’s executive orders.
Last year, the Manufacturers’ Center for Legal Action filed our lawsuit against the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers over their expansive interpretation of their jurisdiction to require permits for the use of a wide variety of land across the country. More than 150 other business organizations, states and other groups have also challenged the “Waters of the United States” (WOTUS) rule in various courts, and many of these challenges, including ours, have been consolidated in one federal appellate court—the Sixth Circuit. Some of this background, and the justification for our litigation, is summarized in this post from February.
Two key events have happened recently. First, the National Association of Manufacturers (NAM) asked the Supreme Court in September to review a splintered decision from the Sixth Circuit that allows that court to continue to hear arguments in the case, despite a widely held view among lawyers that the Clean Water Act requires the case to be heard by a trial court, not an appeals court, in the first instance. The administration will be filing its response next Monday. If the court agrees to review this issue, considerable time and effort could be saved in trying to resolve the underlying merits of the challenges to the WOTUS rule.
Second, today, business and municipal groups filed a detailed 93-page brief describing point by point the numerous concerns of all the petitioners about the rule. The brief contains textbook examples of arguments that are all too frequently made about government regulations: the rule was promulgated in violation of basic principles of notice-and-comment rulemaking, the agencies failed to comply with the Regulatory Flexibility Act, the rule is inconsistent with the statutory language of the statute (the Clean Water Act), the rule is unconstitutionally vague, and it violates the Commerce Clause and federalism principles. There are also more unusual arguments arising from EPA’s “covert propaganda” efforts in support of the rule.
Courts give agencies considerable deference when interpreting their statutory authority, but the Supreme Court has weighed in several times to try to provide some constitutional limits on the EPA’s jurisdiction, and a significant part of our brief is dedicated to it. The brief argues that the agencies relied too heavily on Justice Kennedy’s concurring opinion in the Rapanos case, which cannot be reconciled with the other justices’ views in the way attempted by the EPA. The EPA’s approach brings into its jurisdiction countless features that lack the volume of flow and proximity needed to ensure that effects on navigable waters are more than insubstantial or speculative.
The scope of the agencies’ jurisdiction is one of the most fundamental issues affecting the regulation of land use in the United States. Today’s brief brings us one step closer to resolving the allocation of regulatory power among federal, state and local governments.
Yesterday, Judge Marcia A. Crone of the Eastern District of Texas granted a nationwide injunction for the majority of the Fair Pay and Safe Workplaces regulation, otherwise known as “blacklisting.” The order states that business groups “properly demonstrated immediate and ongoing injury to their members if the rule is allowed to take effect,” adding that based on the National Association of Manufacturers’ conflict minerals disclosure lawsuit against the Securities and Exchange Commission, the Blacklisting Order was also likely a “compelled public reporting requirement violating the First Amendment.”
The regulation, finalized in August, places extensive and burdensome new reporting requirements on federal contractors in an attempt to achieve broad and sweeping labor law reforms, and it would have gone into effect today if the judge had not ruled. The only area where the preliminary injunction was not granted is the January 1, 2017, Paycheck Transparency provision, which, upon implementation, would require contractors and subcontractors to provide employees with documentation of regular and overtime hours worked, pay and additions to or deductions from pay that are not currently included in employee paychecks. The decision strongly affirms the arguments related to the First Amendment, due process, constitutional, arbitrary and capricious concerns and others raised in the complaint.
This regulation arises out of the executive branch’s attempt to parlay the federal government’s limited proprietary authority over the procurement of government contracts into a regulatory tool designed to achieve broad and sweeping labor-law reforms. Implementation for prime contractors was set to begin on October 25, 2016, for contracts of $50 million or more and requires reporting of one prior year of labor law violations. The threshold for contract size drops to $500,000 on April 25, 2017. The reporting period extends to the three prior years of labor law violations starting on October 25, 2018. Covered disclosures of labor law violations include civil judgments, administrative merits determinations and arbitral awards, including those that are not final or still subject to court review. The number and severity of the alleged and proven violations will be a factor in the awarding of contracts, affecting thousands of manufacturers.
The judge ruled that the First Amendment claim will likely be successful on the merits based on the court’s logic in NAM v. SEC (D.C. Cir. 2014). Specifically, the court stated, “The Executive Order, FAR Rule and DOL Guidance share the same constitutional defect as the conflict minerals rule in NAM, only more so. The Order, Rule and Guidance compel government contractors to ‘publicly condemn’ themselves by stating that they have violated one or more labor or employment laws. The reports must be filed with regard to merely alleged violations, which the contractor may be vigorously contesting or has instead chosen to settle without an admission of guilt, and, therefore, without a hearing or final adjudication.” The appeals court in NAM “further took issue with the government’s attempt to force companies to ‘stigmatize’ themselves by filing the required reports, stating, ‘Requiring a company to publicly condemn itself is undoubtedly a more ‘effective’ way for the government to stigmatize and shape behavior than for the government to have to convey its views itself, but that makes the requirement more constitutionally offensive, not less so.’”
Manufacturers are pleased that Judge Crone enjoined the implementation of this regulation that would have far-reaching negative impacts on companies with federal contracts. The NAM will continue fighting for manufacturers in the courts to turn back the growing wave of federal regulations that hamper growth.
The Supreme Court’s new term began this month with only eight Justices, with prospects slim for adding a ninth in time to participate in any of the cases being argued over the next seven months. It is thus harder to get a majority of five to agree on a result and therefore more likely that rulings already made by the lower courts will stand.
Nevertheless, oral arguments will proceed, and manufacturers are concerned about 10 upcoming decisions that will affect their competitiveness and ability to create jobs.
High on our priority list is Microsoft v. Baker, a class action involving the Xbox 360 console. The Supreme Court will decide whether an appeals court was correct in allowing an immediate appeal of a decision that refused to allow a group of plaintiffs to file a class action when they had already voluntarily dismissed their claims. It’s a tortured procedural issue but will determine whether class-action plaintiffs can appeal decisions that deny class certification—that is, decisions that require each plaintiff to sue individually for the damages they allege. The Manufacturers’ Center for Legal Action filed briefs in this case.
Another important case challenges whether the general counsel of the National Labor Relations Board properly authorized thousands of complaints against companies for labor law violations. The outcome could affect decisions made by senior government officials at six other government agencies as well. See our previous blog post here for details.
Other significant cases on the docket include the following:
- Samsung Electronics Co. v. Apple Inc.: Apple claimed that Samsung infringed upon the patented design of Apple’s iPhone. The legal issue involves calculating damages for infringement—whether “total profit” from the infringement is calculated from sales of all the phones, or rather whether it should be some fraction of that based on the extent to which the design was used on the infringing phones.
- Star Athletica, LLC v. Varsity Brands, Inc.: The Supreme Court will explain the appropriate test to determine when the design of a useful article is protected by copyright law. Designs may be copyrighted, but “useful articles” may not.
- SCA Hygiene Prod. v. First Quality Baby Prod.: Patent owners may lose their rights if they don’t sue fast enough for infringement. The Supreme Court will clarify the doctrine of “laches” under the patent laws.
- Venezuela v. Helmerich & Payne Int’l.: A company sued Venezuela for expropriating 11 oil drilling rigs and related property, and the question is whether that government can be sued under provisions of the Foreign Sovereign Immunities Act.
- Life Technologies Corp. v. Promega Corp.: At issue is whether supplying a single component of a patented multicomponent invention violates a law prohibiting companies from supplying “all or a substantial portion of the components of a patented invention” and from inducing the combination of components overseas in a way that would infringe a patent. The Supreme Court will decide how broadly this statute should be interpreted to punish manufacturers of parts that are incorporated into others that infringe patents.
- Visa, Inc. v. Osborn: Industry trade associations must be careful to avoid agreements in restraint of trade under the antitrust laws, and this case involves whether members of an association are deemed to have entered into an agreement merely because they agree to adhere to an association’s governance rules. The issue arose from an agreement among credit card companies and banks over fees when using automated teller machines. It could result in even stricter limits on association activities.
- Expressions Hair Design v. Schneiderman: The government regularly compels manufacturers to say things about their products or services that are controversial, without sufficient legal justification. This case involves a law that allows different pricing for cash and credit-card transactions but prohibits retailers from calling a credit-card differential a “surcharge.” The Supreme Court will decide whether this law violates the First Amendment because it restricts what merchants can tell their customers.
- Goodyear Tire & Rubber Co. v. Haeger: If a manufacturer hires trial counsel to defend a product liability case, and that counsel fails to turn over relevant documents during discovery, what sanction may a court impose on the company? In this case, the Supreme Court will decide whether the damages must be limited to the harm directly caused by the misconduct, or can be much higher, without affording the parties the protections of criminal due process.
In addition to some of these cases, the Manufacturers’ Center for Legal Action has been active in others awaiting a decision whether the Supreme Court will hear the appeals. We will provide an update on those cases in another blog post shortly.