Manufacturers In The Courts: October 2011

A Publication of the National Association of Manufacturers
October, 2011

The NAM's law suit challenging the National Labor Relations Board's employee-rights posting requirement continues to gain momentum. This month, the NLRB agreed to postpone the effective date of the regulation by 2½ months to January 31, 2012. This will give the judge additional time to consider the merits of our suit and prevent unnecessary compliance expenses and concerns. Since our suit was filed, seven other organizations have joined or filed similar suits.

In other news, the Supreme Court has agreed to review another Alien Tort Statute (ATS) case, and will decide whether corporations, as opposed to individuals, may be sued under universally agreed-upon rules of customary international law. The NAM is considering filing a brief in the case, and we weighed in this month in another ATS case involving this issue, as well as whether aiding-and-abetting claims are universally recognized international law violations.

October developments in these and other significant cases affecting manufacturers are summarized below.

Decided Cases


Polar bear rule remains largely intact. A federal judge has rejected a challenge by three environmental organizations to the Department of the Interior's rule relating to naming the polar bear a threatened species under the Endangered Species Act (ESA). The NAM was involved to support the Department's conclusion not to require special permits for companies that conduct greenhouse gas-emitting activities outside the range of the polar bear. The court ruled that the ESA does not require the U.S. Fish and Wildlife Service to regulate greenhouse gases, and that the Service had a rational basis for its decision, despite the fact that it may limit the ability of environmental groups to sue greenhouse gas emitters. The judge also determined that FWS must conduct some review of the rule under NEPA, and vacated the final rule and reinstated the Interim Final 4(d) Rule pending this review. Center for Biological Diversity v. Salazar (D.D.C.).


Economic nexus for states imposing business and occupation taxes. The Supreme Court declined to hear an appeal supported by the NAM challenging Washington state's power to tax companies based merely on their "economic presence" in the state. Typically, some physical presence in the state is required before a state has tax jurisdiction. Laws like these are often ambiguous, vary widely from state to state, and are highly burdensome for taxpayers doing business in multiple jurisdictions. Lamtec Corp. v. Dept. of Revenue (S. Ct.).

Pending Cases

Alien Tort Statute

Foreign suit against manufacturers draws NAM's attention. The Alien Tort Statute (ATS) continues to be a source of substantial concern for manufacturers that do business abroad and that are alleged to assist regimes accused of various human rights violations. In a lawsuit that attempts to expand the limits of the ATS by making "aiding and abetting" a violation of international law, the NAM and four international law professors joined together in an amicus brief urging the Ninth Circuit to reject these broad claims, arguing that they do not reflect a well-established, specifically defined and universally agreed-upon rule of customary international law. In addition, the ATS should not be extended to imply private rights of action that have a significant potential for interference with the conduct of foreign affairs by the political branches of government. Doe v. Nestle USA, Inc. (9th Cir.). The Supreme Court has agreed to hear arguments in another case involving whether corporations, as opposed to corporate executives, can be held liable under the Alien Tort Statute. The lower court found that no corporation has ever been subject to any form of liability under the customary international law of human rights. Kiobel v. Royal Dutch Petroleum Co. (S. Ct.).


EPA compliance orders challenged. When the EPA orders a company, or in this case a husband and wife, to remediate alleged violations of the Clean Water Act, there is no right to judicial review of the EPA's order or jurisdiction. You must either comply or violate the order and defend subsequent judicial proceedings. The Supreme Court agreed to review this case, and the NAM filed an amicus brief October 3 arguing for fundamental due protections to prevent agency abuse. The case has implications beyond the Clean Water Act to similar orders under other environmental statutes. Sackett v. EPA (S. Ct.).

EPA opposes NAM filing in revoked permit case. EPA revoked an already-issued Clean Water Act permit for Mingo Logan's coal operations. In a suit challenging the revocation, the NAM moved to file an amicus brief, along with an economic report, explaining the substantial adverse effects that EPA's practice will have on investment decisions and expectations. In June, EPA was unsuccessful in trying to keep the NAM from participating, while not challenging parties who support its position. Now, EPA is challenging the NAM's economic report. Our response - the report is not supplementing the factual record that EPA used in this specific case, but rather gives the court a perspective on the dangerous effects of EPA's new interpretation of its statutory authority. Mingo Logan Coal Co. v. EPA (D.D.C).

Freedom of Association

NAM works to protect privacy rights for trade association discussions. The NAM filed an amicus brief Oct. 20 urging the Supreme Court to review a decision that threatens to allow broad discovery by plaintiffs' attorneys of internal policy and strategy deliberations among members of a trade association. We argued that an association's members need assurance that internal communication between members and the association will not be subject to public disclosure, and that the right to privacy of belief and association lies at the heart of the First Amendment freedoms of association and petition. NATSO, Inc. v. 3 Girls Enterprises, Inc. (S. Ct.).

Junk Science

Expert opinions raise NAM concerns. Ever since the Supreme Court cracked down on junk science in the courtroom, judges have played a more active role as gatekeepers of scientific testimony in product liability and other cases. The NAM has supported an appeal to the Supreme Court of a decision that allowed an expert to testify based on his judgment and the "weight of the evidence" that a particular cancer could be caused by exposure to benzene. Our brief argued that scientific expert testimony must be based upon reliable scientific methodology, subject to testing and validation, and not on a witness transforming disparate pieces of scientifically unreliable evidence into a scientifically reliable whole based on the expert witness' claimed weighing of the evidence. United States Steel Corp. v. Milward (S. Ct.).

Labor Law

NLRB delays posting requirement rule. During a status conference in our lawsuit against the National Labor Relations Board over its employee-rights posting requirement, attorneys for the Board announced it would voluntarily delay implementation of posting requirement until January 31, 2012. The NAM was the first to file suit against the NLRB, arguing that requiring all employers to post a notice of employees' rights to unionize exceeds the Board's statutory authority. The legal arguments in support of our motion for summary judgment were filed Oct. 26, oral argument is scheduled for Dec. 19, and a decision is expected before January 31. NAM v. NLRB (D.D.C.).


NAM weighs in on asbestos pre-emption case. Asbestos claims have a long and tortuous history in the courts, and the NAM filed an amicus brief on October 11, in a case involving pre-emption of claims of workplace exposure to asbestos. The Supreme Court will decide whether federal law pre-empts state tort suits involving locomotive equipment manufacturers. The NAM argued that nearly a century of precedent holds that such claims are pre-empted, and that pre-emption applies with equal force to state statutes, regulations and court decisions. This case is yet another example of the relentless search for new defendants and new theories of liability. See Kurns v. Railroad Friction Products Corp. (S. Ct.).


NAM supports eligibility of supplies for R&D tax credit. A federal tax court judge has thrown a monkey wrench into determining what costs may be included as "qualified research expenses" eligible for the research and development (R&D) tax credit when companies undertake manufacturing process improvements. His 2009 decision is now on appeal to the Second Circuit, and the NAM filed an amicus brief underscoring why supply costs are legitimate research expenses for process improvements. Whether such supplies wind up as salable products is not relevant to their eligibility for tax-favored treatment, as they are critical to the process and denying them would discourage experimentation and encourage economic waste. Union Carbide Corp. v. Commissioner (2d Cir.).

Commercial Transactions

UCC Sale of Goods proposal is shelved. For many years, an NAM-led coalition has been opposing proposed changes to Article 2 of the Uniform Commercial Code (UCC) governing the sale of goods. The changes would have rewritten a large part of the existing laws in virtually every state, introducing new and unwarranted liabilities for manufacturers and creating intentional ambiguities that would spur litigation. With the NAM's help, opposition at the state level has prevented the rules from being adopted in any state, and the proposal has been quietly relegated to an appendix of the UCC. The existing text of Article 2 now remains the official text.

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

National Association of Manufacturers
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Washington, DC 20004-1790

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