The Center News: July 2016

A Publication of the National Association of ManufacturerstheCenter for Legal Action

Center Perspectives

OSHA Delays Effective Date for New Rule on Injury and Illness
By Leland Frost, Associate General Counsel

The Manufacturers’ Center for Legal Action (MCLA), the litigation arm of the National Association of Manufacturers (NAM), filed a lawsuit on July 8, 2016, challenging OSHA’s workplace injury and illness rule, as it believes the rule places unreasonable restrictions on employer programs to increase workplace safety. In addition, on July 12, 2016, we filed for an emergency preliminary injunction seeking to prohibit OSHA from implementing the new rule. One day later, OSHA delayed the effective date from Aug. 10, 2016, until Nov. 1, 2016.

The rule prohibits and limits employer incident-based safety incentive programs and post-accident drug-testing programs, which help employers promote workplace safety. Out of a misguided zeal to improve the accuracy of reporting on workplace injuries, OSHA has lost sight of the importance of reducing the number and severity of injuries themselves. Properly designed incident-based employer safety incentive programs are the most effective tool to get employees and supervisors immediately invested in workplace safety. Through these programs, employees are continuously motivated to improve their work conditions, look out for their safety and the safety of others, and eliminate unsafe behaviors, resulting in dramatically decreased accident frequency and severity.

Without these incident-based safety incentive programs, instituting a culture of safety in the workplace is much more difficult and seldom leads to the same dramatic reductions in serious accidents. The NAM’s lawsuit argues that OSHA must vacate the rule because it exceeds the agency’s statutory authority; it was adopted without following standard legal procedures; and the provisions, findings and conclusions are arbitrary, capricious, an abuse of discretion and otherwise not in accordance with the law.

Though OSHA pushed back the effective date, the fight is just beginning. If the rule is not struck down, manufacturers will have to make a “Hobson’s choice” between eliminating or drastically restricting highly effective incident-based safety and/or drug-testing programs, thereby increasing the number of employee injuries and fatalities in the workplace, or risking exposure to increased OSHA citations, inspections and penalties if the safety programs are not removed. OSHA’s main goal is to eliminate or minimize the frequency and severity of workplace injuries, illnesses and deaths, but this misguided rule does not accomplish that goal.

MCLA in the Courts
Civil Procedure

New York court ducks asbestos case management issue: In February 2016, the NAM urged New York's highest court to substantially curb the use of trial consolidations in asbestos cases. Where individual cases are not legally and factually similar, combining them is unlikely to increase efficiency and can be highly prejudicial to the defendants. On June 29, 2016, the court rejected the appeal on procedural grounds, leaving the issue unresolved. We will continue to support challenges to the consolidation of cases with dissimilar facts.

More Information: Konstantin v. 630 Third Avenue Assocs. (New York Court of Appeals)

NAM urges resolution of Waters of the United States (WOTUS) jurisdictional issue: The NAM filed an amicus brief in the 10th Circuit on July 11, 2016, supporting an appeal of a judge's ruling that challenges to the EPA's rule establishing jurisdiction over waters of the United States should be heard in appellate courts. This procedural issue takes the first step toward resolving substantive arguments by many states and members of the business community against the EPA's decision to assert jurisdiction in many areas where it previously had none. We are ultimately seeking a ruling by the Supreme Court that clarifies which court should hear challenges to the EPA's rule so we can get a quicker resolution of the substantive challenge.

More Information: Chamber of Commerce v. EPA (10th Circuit)

Federal court strikes down Minnesota law restricting out-of-state coal-fired electric generation: The 8th Circuit struck down Minnesota's law prohibiting the importation of electricity from new, large, out-of-state energy facilities that would contribute to carbon dioxide emissions. The appeals court found that the law is preempted by federal law, and one judge found that it interfered with interstate commerce. The NAM filed a brief last year supporting this result. It is an important reminder about the limits states have in trying to control electricity generation in other states.

More Information: North Dakota v. Heydinger (8th Circuit)
Federal Contractors

False Claims Act: The Supreme Court on June 27, 2016, declined to review an appeal in a False Claims Act (FCA) case involving AT&T. The NAM filed an amicus brief last year supporting review in this case involving whether relators filing FCA claims must include specific allegations of false claims. There is currently a split among the federal circuits as to whether the Federal Rules of Civil Procedure require such particularized pleadings in FCA cases. The circuit split encourages speculative claims and forum shopping.

More Information: AT&T, Inc. v. United States ex. rel. Heath (U.S. Supreme Court)

Court adopts rigorous requirements for fraud under False Claims Act: The Supreme Court decided that government contractors can be liable for making false claims if they knowingly violated a requirement they knew was material to the government's decision to pay the bill. This is a rigorous test that requires more than simply failing to comply with certain statutory, regulatory and contractual requirements. The NAM filed a brief in January urging the Court to reject suits under a so-called “implied false certification” theory, in which a contractor has no intent to defraud the government. The Court agreed, raising the bar for such claims. This is a win for government contractors, since the FCA is highly punitive and subject to abuse by plaintiffs.

More Information: Universal Health Services, Inc. v. United States (U.S. Supreme Court)
Free Speech

GMO labeling bill expected to moot Vermont litigation: On July 14, the House passed S. 764, previously passed by the Senate, that provides a national mandatory disclosure standard for bioengineeered foods and preempts state genetic-engineering labeling requirements. President Obama is expected to sign the bill, and we have notified the Second Circuit of this development. The legislation is expected to make further litigation of the Vermont law unnecessary.

More Information: Grocery Manufacturers Ass’n. v. Sorrell (2nd Circuit)
International Regulation

Extraterritorial Reach of US Warrants: On July 14, 2016, the 2nd Circuit Court of Appeals overturned a troubling lower-court decision holding that the government can use a search warrant issued in the United States under the Stored Communications Act to gain access to digital content owned by a non-U.S. customer and located outside of the United States. The court explained that territorial and constitutional limits still govern a warrant enforced abroad. This decision stems originally from a warrant directed at Microsoft ordering the company to produce the contents of a customer’s email account. Microsoft refused to produce content stored on servers outside the United States and moved to quash the warrant. The NAM filed an amicus brief in support of Microsoft in its appeal, arguing that these types of warrants create a chilling effect on the ability of U.S. companies to compete internationally and that asserting such an extraterritorial reach with a U.S. warrant violates fundamental international principles and the plain language of U.S. law.

More Information: Microsoft Corp. v. United States (2nd Circuit)

What constitutes "joint employer": On June 14, 2016, the NAM filed a joint amicus brief to the D.C. Circuit Court of Appeals to support Browning-Ferris in its appeal. The NAM argued that the longstanding “direct control” standard should remain the means for determining joint employment. Even the National Labor Relations Board relied on a direct control standard to determine joint-employer status long before its previous decisions on this issue. This standard protects the rights of temporary employees to engage in collective bargaining efforts, whereas the board’s loosened standard merely subjects companies to unmerited liability.

More Information: Browning-Ferris Industries v. NLRB (D.C. Circuit)

Department of Labor (DOL) Persuader Rule: The NAM brought suit on March 30, 2016, challenging the rule in the U.S. District Court for the Eastern District of Arkansas, and a judge stayed the July 1 implementation of the rule.  In response, the NAM asked the judge to consolidate the preliminary injunction motion with a determination on the merits, which the NAM anticipated would require briefing on summary judgment. DOL has agreed to that approach and asked for simultaneous final briefs to be filed on August 15.

More Information: Associated Builders and Contractors v. Perez (E.D. Ark.)
Product Liability

New York court requires manufacturers to warn about products made by others: New York's highest court ruled on June 28, 2016, that valve manufacturers must warn purchasers about the dangers that asbestos provided by other companies might pose when used in conjunction with their valves. The rule imposes liability for damages for failure to warn if the use of asbestos was reasonably foreseeable and the third-party product containing asbestos was necessary to enable the manufacturer's product to function as intended. The NAM had filed an amicus brief opposing this outcome, arguing that many states do not impose liability for such warnings about the products of other companies and imposing liability is unsound public policy and could worsen the asbestos litigation crisis.

More Information: Suttner v. Crane Co. (New York Court of Appeals)

Georgia rejects expert who claimed any exposure to asbestos is sufficient to cause injury: The Georgia Supreme Court delivered a favorable decision for manufacturers on July 5, 2016, ruling that any exposure to a hazardous material like asbestos is insufficient to prove that it caused an injury. The testimony should have been excluded by the trial judge because "it could only serve to confuse the jury on the issue of causation." This is a significant positive result for manufacturers in the Georgia courts and is one of several recent state decisions rejecting the "any exposure" theory of causation. The ruling benefits the wide variety of companies that have been sued for asbestos exposure liability.

More Information: Scapa Dryer Fabrics, Inc. v. Knight (Georgia Supreme Court)

NAM calls for Supreme Court review of California tax system: We filed an amicus brief on June 30, 2016, in support the Supreme Court’s review of an adverse decision in a case involving California's system of taxing multistate corporations. California withdrew the option of using a three-factor apportionment test for multistate companies, resulting in double taxation of income. Our brief highlights the fact that companies rely on a predictable and uniform system of taxation by states that have agreed to the Multistate Tax Compact and partial withdrawal from the compact's obligations is a contract violation that changes the rules in the middle of the game.

More Information: Gillette Co. v. California Franchise Tax Board (U.S. Supreme Court)
Questions or Comments?

Contact Senior Vice President & General Counsel Linda Kelly at lkelly@nam.

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