Manufacturers In The Courts: September 2010

A Publication of the National Association of Manufacturers
September 2010

September brought a major development in the NAM's efforts to challenge the Environmental Protection Agency's greenhouse gas regulations. On September 15, we filed a motion for a partial stay of the enforcement of the regulations as they apply to stationary sources of emissions, pending a final ruling from the federal appeals court concerning the validity of the rules. This complex litigation involves eight separate suits by the NAM, and dozens more filed by states, environmental groups and business organizations. This month's developments in these and other cases involving the NAM are summarized below.

Decided Cases


Labor Law

EEOC is allowed broad enforcement tactics. Last December we urged a federal appeals court to reaffirm a decision which found that the Equal Employment Opportunity Commission's (EEOC) tactics regarding information gathering from companies had exceeded its authority. The EEOC wanted to search for systemic discrimination by employers or the third parties they hire to do personality tests or other tests prior to employment, but the authorizing statute is limited to investigations relating to the specific charge that an individual files. Unfortunately, the Third Circuit overturned the lower court's restrictions on the EEOC, ruling that its power "encompasses not only the factual allegations contained in the charge, but also any information that is relevant to the charge," a much broader standard. EEOC v. Kronos (3d Cir.).

Product Liability

Court ducks ruling on validity of cap on noneconomic damages . A man shot outside a convenience store in Mississippi sued the store, claiming it did not provide enough security. A judge reduced the subsequent jury verdict to $1 million for noneconomic damages (pain and suffering) in accordance with a recent Mississippi law capping such damages at $1 million. The constitutionality of that law was appealed, with the NAM supporting the cap. Our brief documented the positive results to the state's economy when noneconomic damages were capped. On Sept. 23, the court avoided the issue, instead ruling that the plaintiff failed to prove that any negligent omission by the store caused the injury. Double Quick, Inc. v. Lymas (Miss.).


Pending Cases

Environmental

NAM seeks to overturn greenhouse gas public nuisance claims . The Supreme Court is considering whether to review a very troubling decision by the U.S. Court of Appeals for the 2nd Circuit that allows 8 states to sue 6 major electric utility companies under a public nuisance theory. The theory is that each state is adversely affected by climate change caused in part by the utilities' electricity-generating plants, and the courts should impose emissions limits. We filed an amicus brief on Sept. 1 urging the Supreme Court to review the case, arguing that only the political branches of government are equipped to resolve the complex and dynamic issues relating to climate change regulation, that the plaintiffs' legal claims exceed the boundaries of public nuisance litigation, and that judges and juries are not empowered or competent to exercise extraordinary regulatory powers without clear boundaries and guiding principles. American Electric Power Co. v. Connecticut (S. Ct.).

NAM intervening in EPA greenhouse gas tailoring suits . Various states and environmental groups have filed separate challenges to EPA's tailoring rule, by which it is rolling out burdensome new Clean Air Act regulations to the largest stationary sources of greenhouse gases around the country. Environmental groups are likely to challenge EPA's decision to exempt smaller facilities for a while, while the states are likely to challenge EPA's plan to retroactively limit its previous approval of pollution thresholds in State Implementation Plans. The NAM and other members of our greenhouse gas litigation coalition moved to intervene in these cases to insure that the interests of manufacturers are fully presented to the judges. Center for Biological Diversity v. EPA (D.C. Cir.) (tailoring rule) and Alabama v. EPA (D.C. Cir.).

NAM challenges EPA's denial of Texas Flexible Permit program . The NAM and other associations have asked the U.S. Court of Appeals for the Fifth Circuit to review EPA's decision to disapprove revisions to a Texas Clean Air Act implementation plan that relates to the state's Flexible Permits Program. The Texas plan was submitted to EPA for approval in 1994 and revised several times since then, but EPA decided that the Texas plan did not meet its requirements. The Texas program allows operators of facilities that generate air emissions flexibility in managing their operations. EPA's action highlights a serious struggle between national and state environmental authorities in regulating air emissions. NAM v. EPA (5th Cir.).

NAM files motion for partial stay of EPA's greenhouse gas regulations . On Sept. 15, the NAM coalition challenging EPA's greenhouse gas regulations filed a motion for a partial stay of the regulations with respect to emissions from stationary sources. The motion was filed in the context of three EPA regulations, all separately challenged as part of our overall efforts in this area. The motion involves (1) the Tailoring rule (the regulation that sets out its schedule for enforcing regulatory controls on greenhouse gas emissions from stationary sources), (2) the "tailpipe rule (regulating emissions from certain motor vehicles beginning January 2, 2011), and (3) the "Subject to Regulation" rule (revising the so-called Johnson Memo to set the date on which regulations apply to stationary sources of greenhouse gas emissions. The motion provides a full explanation of the legal basis for our litigation and voluminous evidence of the irreparable harm the regulations will have on manufacturers and our economy. A briefing schedule on the motion has yet to be determined. NAM v. EPA (D.C. Cir.).

Product Liability

Federal lap/shoulder seat belt decisions should preempt state tort suits . This case involves whether an automobile manufacturer may be sued in state court for installing lap-only seatbelts in certain rear seating positions when the National Highway Traffic Safety Administration (NHTSA) specifically gave manufacturers the freedom to choose either a lap-only or a lap/shoulder seatbelt configuration. The NAM filed an amicus brief on Sept. 28 in the Supreme Court arguing that traditional preemption analysis prevents a state from displacing NHTSA's decision. Congress will never speak clearly on preemption, and the courts must recognize the importance of conflict preemption. Williamson v. Mazda Motor of America, Inc. (S. Ct.).

Punitive Damages

NAM seeks clarity in punitive damages cases . The NAM and the International Association of Defense Counsel filed an amicus brief Sept. 28 urging the Supreme Court to review an Oklahoma state court decision that imposed a $53 million punitive damage award on top of an award of $750,000 in a breach of contract dispute. The punitive damages portion is far greater than the Court has found acceptable in other rulings that compare the ratio of the punitive damages to the actual damages in the case. We urged the Court to provide guidance on the definition of compensatory damages. Shell Oil Co. v. Hebble (S. Ct.).

Taxation

NAM seeks review on tax issue . The NAM filed an amicus brief on September 7 urging the U.S. Court of Appeals for the Third Circuit to reverse a trial court's decision in a tax case that substitutes the judge's own policy judgment for the words in a statute. The case involves a somewhat complex swap-and-assign transaction for the repatriation of funds earned abroad into the United States, and whether the transaction is taxable as a lump-sum payment or over a period of years. Congress attempts to balance a variety of conflicting goals in establishing tax policy, and it is not the role of trial judges to discern an overarching policy that might help them override the language enacted into law. Merck and Co. v. United States (3d Cir.).


Quentin Riegel
Vice President, Litigation & Deputy General Counsel
(202) 637-3058 • qriegel@nam.org

National Association of Manufacturers
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Washington, DC 20004-1790


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