Manufacturers In The Courts: July 2010

A Publication of the National Association of Manufacturers
July 2010

Outlined below are this month's developments in litigation in which the NAM is involved.

Decided Cases


Fourth Circuit issues a strong ruling against public nuisance litigation . On July 26, a federal appeals court completely vindicated the views of the NAM in litigation brought by North Carolina against the Tennessee Valley Authority over strict air pollution controls on power plants in Tennessee and Alabama. The ruling overturns a trial judge that had imposed controls far beyond state and federal controls, under a theory that emissions in those states caused a "public nuisance" in North Carolina. Had the suit been allowed, any source of emissions in the country could be subjected to arbitrary case-by-case nuisance claims. The appeals court ruled that Congress is responsible for setting national standards, and that that one state may not apply its law to activities occurring in another state. Public nuisance litigation is a dangerous threat to all manufacturers, and this decision is an important milestone in our fight against it. North Carolina v. Tennessee Valley Auth. (4th Cir.).

Product Liability

California court allows governments to use private attorneys under contingent fee agreements . The California Supreme Court on July 26 approved the practice of various cities and counties hiring trial lawyers on a contingent-fee basis to sue private industry for public nuisance. Over NAM objections, the court ruled that local governments may use such lawyers as long as the lawyers act under a "heightened standard of neutrality," where "neutral, conflict-free government attorneys retain the power to control and supervise the litigation." It imposed protections such as: (1) only government attorneys may settle a case, (2) defendants may contact the government attorneys directly without going through contingent-fee counsel, (3) government attorneys retain a veto power over any decisions made by outside counsel, and (4) a government attorney with supervisory authority must be personally involved in overseeing the litigation. The NAM had argued that the private interests of contingent-fee counsel conflict with the public interest, and the potential to earn huge profits "creates a powerful incentive for private attorneys wielding the power of government to make decisions based on their own pecuniary interests, rather than the interest of justice." It will be quite difficult for defendants to challenge such arrangements in the future, and other states are also using the same technique with increasing frequency. County of Santa Clara v. Superior Court (Cal.).

Pending Cases


Challenge to EPA's Light-Duty Vehicle GHG Emissions Standards. On July 6, an NAM coalition of 16 business associations filed a petition for review challenging the final regulation of light-duty motor vehicles, also known as the "tailpipe rule." The EPA has announced that this rule, which regulates greenhouse gases (GHGs) from certain motor vehicles, takes effect on January 2, 2011. The rule therefore establishes the first EPA regulation of GHG emissions, and the Agency has previously announced that once a pollutant is regulated, the usual permit requirements of the Prevention of Significant Deterioration (PSD) program kick in. As a result of this combination of interpretations, the EPA has begun to regulate stationary sources of GHG emissions such as manufacturing facilities around the country. This suit is one of a series of challenges being filed by the NAM contesting the EPA's regulation of stationary sources of greenhouse gases. NAM v. EPA (D.C. Cir.) (petition for review).

Recent EPA greenhouse gas interpretations make old rules subject to challenge. An NAM coalition of 17 business associations filed four law suits on July 6, challenging EPA regulations from 1978, 1980 and 2002 that are now part of the EPA's effort to regulate GHGs from stationary sources. No one anticipated that these previously issued rules would now be used to mandate GHG permit requirements, but that is the interpretation the EPA has adopted. The NAM also filed an administrative petition for reconsideration with the EPA on the same rules. The NAM's lawsuits and the administrative petition challenge each of the four older rules to the extent that the EPA considers them to allow the regulation of pollutants such as GHGs that are not subject to a National Ambient Air Quality Standard (NAAQS). The NAM's administrative petition goes into great detail regarding the grounds for our request. NAM v. EPA (D.C. Cir.) (petitions for review of Part 51 Rule, Part 52 Rule, and PSD & SIP Rules).

Another lawsuit over climate change tries to avoid being a political question . A native village in Alaska sued various energy companies, alleging that greenhouse gas emissions cause climate change and made them relocate their village because of coastal flooding. The trial court dismissed the case because it involves political questions that are not for courts to decide. It also said the plaintiffs did not have standing because they were unable to establish that their injuries are fairly traceable to the named defendants. The issue is now on appeal to the Ninth Circuit. The NAM filed an amicus brief July 7, arguing that the case represents an unprecedented attempt by environmental lawyers to recast public nuisance as a "super tort," in an effort to bypass fundamental elements of public nuisance law. They cannot establish direct causation between the defendants' energy activities and the plaintiffs' injuries, and resolving the claim would force a court improperly to address complex political questions and establish nationwide emissions standards. Even the plaintiffs admitted the case was borne out of their frustration with the legislative process. Allowing this kind of suit would give rise to endless claims of liability in highly speculative mass tort cases after every harsh weather event. Native Village of Kivalina v. ExxonMobil Corp. (9th Cir.).

International Litigation

NAM supports bilateral investment treaty arbitration. In 2003, a group of Ecuadorian nationals sued Chevron and Texaco Petroleum over environmental claims from oil drilling operations of various companies in Ecuador. In 2009, the companies began an arbitration proceeding against Ecuador under the U.S.-Ecuador Bilateral Investment Treaty (BIT). Ecuador went to U.S. court to prohibit the BIT arbitration, but the trial judge allowed it to proceed. The case is now on appeal. The NAM and Emergency Committee for American Trade filed a brief on July 1 arguing that the BIT arbitration procedure should proceed. This forum is entirely appropriate and a key reason to have BIT treaties. Republic of Ecuador v. Chevron Corp. (2nd Cir.).

Procedural Issues

Settlement agreements should be final. Toyota settled a personal-injury lawsuit in April, 2007. More than two years later, the plaintiff sought to reopen the case to argue about compliance with a discovery order. The company appealed for the discovery to be halted since the trial court no longer had jurisdiction over the case. On June 30, the NAM filed an amicus brief in support, arguing that the trial court's proceedings disturb the public policy in favor of finality. In re Toyota Motor Corp. (Tex.).

Civil death penalty should be the last resort for discovery problems. On July 26, the NAM and other organizations filed an amicus brief urging the Nevada Supreme Court to reconsider a decision that took away defense rights in a product liability case. Case law overwhelmingly states that an order striking all defenses to liability dictates the outcome of a case, and due process protections are required. This kind of sanction has been nicknamed the "civil death penalty," since it kills all defenses. Such a sanction, awarded for alleged discovery violations, should only be used as a last resort after lesser sanctions, such as fines or adverse inferences, are tried first, and a court should look carefully at the actual underlying discovery dispute. In this case, the Nevada Supreme Court did not consider the trial court's ruling to be a case-ending sanction, since damages were yet to be determined. If Nevada can so easily remove constitutional due process protections, it could become a magnet jurisdiction for litigation against manufacturers. Bahena v. Goodyear Tire & Rubber Co. (Nev.).

Courts should avoid resurrecting stale out-of-state claims . Because North Dakota has one of the nation's longest statutes of limitations, plaintiffs increasingly go there to file product liability suits that are otherwise time-barred. The state's Supreme Court is now looking at whether the substantive law that applies in these cases is the law of North Dakota, or the state with the most significant connection to the claims. The NAM has joined with other business associations in an amicus brief arguing that North Dakota should adopt the traditional position that applies the statute of limitations of the state in which the plaintiff's claims arose, and that allowing long-stale claims under state law would inundate its courts with claims from other states. There is no reason for the state to tarnish its good legal reputation by endorsing "blatant forum shopping and saddling North Dakota courts, taxpayers, and jurors with the heavy burden of hosting out-of-state litigation 'tourists.'" The Uniform Conflict of Laws-Limitations Act is designed to prevent this kind of gamesmanship and abuse. In addition, this is an asbestos liability case, and the history of asbestos litigation clearly demonstrates that nonresident claims improperly flow to jurisdictions that develop reputations for favorable procedures and a willingness to accept nonresident claims. Vicknair v. Phelps Dodge Inds . (N.D.).

Quentin Riegel
Vice President, Litigation & Deputy General Counsel
(202) 637-3058 "¢

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