The Center News is a monthly publication that highlights significant cases affecting manufacturers. The NAM’s Manufacturers' Center for Legal Action becomes involved in many of these cases to provide the judicial branch with an important perspective it might not otherwise hear. The NAM provides a voice for all manufacturers working to remain competitive amid the complexities of today’s legal system.

 

 
Council of Manufacturing Associations

April 16, 2014

Center Perspectives

By Linda Kelly, Senior Vice President and General Counsel

In a clear win for free speech and a partial win for the National Association of Manufacturers (NAM) and our affected member companies, the U.S. Court of Appeals for the D.C. Circuit ruled this week in NAM v. SEC that the Securities and Exchange Commission’s (SEC) conflict minerals rule violates the free speech rights of covered companies. The rule requires companies that incorporate certain minerals into their products, processes or supply chains—in even minute amounts—to disclose in public reports to the SEC and on their own websites whether or not their products are “Democratic Republic of the Congo conflict free.” The requirement—an ornament on the massive 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act legislative Christmas tree—has no impact whatsoever on financial services companies and a major one on manufacturers. While it had the well-intended purpose of seeking to address the terrible conflict in the Congo, the requirement took the questionable path of trying to do so through reporting of information that is very difficult to collect and confirm as factual.

In a 2–1 opinion drafted by Senior Judge Raymond Randolph, the D.C. Circuit held that compelling companies to report whether their products are “conflict free” violates their First Amendment rights. The opinion notes that “(p)roducts and minerals do not fight conflicts. The label ‘conflict free’ is a metaphor that conveys moral responsibility for the Congo war.”

The court upheld the underlying due-diligence requirements of the rule as well as the cost-benefit analysis applied to the rule. Only the reporting requirement itself was held to be deficient. Arguably, the gutting of the reporting requirement undermines the chief objective of the rule, which was to use the public disclosure requirement to shame manufacturers that used materials that originated or may have originated from the Congo in order to discourage them from doing so, under the notion that this would somehow bring the conflict in the region to an end.

The next move belongs to the SEC, which will hopefully stay the scheduled June 2 reporting deadline pending a resolution of the path forward on the rule’s constitutional deficiencies. The SEC also has 45 days in which to decide whether to appeal the ruling.

In addition to being a victory for manufacturers’ First Amendment rights, the NAM also hopes that this outcome will discourage future efforts to address foreign policy and other issues unrelated to the capital markets through SEC reporting.

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MCLA in the Courts

Environmental
Supreme Court Declines to Review Astounding EPA Permit Revocation: Four years after the Army Corps of Engineers issued a Clean Water Act permit, the Environmental Protection Agency (EPA) stepped in and revoked it. A federal appeals court upheld the EPA’s action, and the Supreme Court subsequently declined to review that decision. The NAM had urged the Supreme Court to hear the case.
More Information: Mingo Logan Coal Co. v. EPA.

Federal Appeals Court Opens Door to Additional Liability for Federally Approved Actions: Some private property owners sued a power company under common law tort claiming damages arising from emissions and particulates from the operation of a coal-fired power plant, which had permits from the EPA for the emissions. A trial court threw the case out, finding it preempted by the Clean Air Act, but the Third Circuit Court of Appeals reversed the lower court. The NAM led a group of 11 other industry associations in filing an amicus brief supporting review by the Supreme Court.
More Information: GenOn Power Midwest, L.P. v. Bell

Insurance Law
NAM Pushes Back on Judge-Made Exceptions to Insurance Law: In a case involving BP’s insurance coverage relating to the Deepwater Horizon accident in the Gulf of Mexico, the NAM filed an amicus brief asking the court to apply traditional contract principles. Our brief also urged the court not to create a subjective “sophisticated insured” exception to insurance law that has been recognized and applied for more than 125 years.
More Information: In re Deepwater Horizon

Attorney-Client Privilege
NAM Urges Confidentiality Protections for Manufacturers’ Internal Communications: Businesses often conduct internal investigations—which are usually protected by attorney-client privilege—when faced with allegations of misconduct. In this case, a judge ordered a company to turn over documents it deemed privileged. The NAM filed a brief in the case, which could have implications for manufacturers by penalizing companies for adopting internal compliance programs and forcing them to either risk a waiver of attorney-client privilege or to forgo legal advice.
More Information: In re Kellogg Brown & Root, Inc.

Contract
NAM Looks to Ensure Enforceability of Contracts with Foreign States: Next week, the Supreme Court will hear a case involving limits on the ability to enforce contracts with sovereign nations. The NAM filed a brief arguing that limiting discovery against foreign states would undermine the enforcement of valid commercial contracts. In addition, extending the Foreign Sovereign Immunities Act to post-judgment discovery against foreign states would impede discovery against state-run companies.
More Information: Republic of Argentina v. NML Capital, Ltd.

Labor
NLRB Should Maintain Presumption of Validity of Arbitral Decisions: In a matter before the National Labor Relations Board (NLRB), the NAM filed a brief arguing that the well-established, court-approved deferral standards that the NLRB has long used should remain in place without modification. Existing NLRB standards accommodate the clear preference for arbitral and other private resolution of disputes, while also protecting employees’ statutory rights.
More Information: Babcock & Wilcox Constr. Co.

Settlement Agreements
Appeals Court Threatens Future Settlements: A divided panel of the Fifth Circuit ruled against BP in its effort to seek relief from a Deepwater Horizon settlement agreement under which numerous claims were made even though they may not have arisen from the accident. The NAM filed an amicus brief urging the court to recognize that settlement agreements are only possible when the parties can be sure that they will be implemented as written and consistently with governing law. Otherwise, settlement could become a far riskier and much less desirable option.
More Information: Lake Eugenie Land & Dev., Inc. v. BP Exploration & Prod. Inc.

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Other News

Punitive Damages in Asbestos Cases Back in Play Thanks to Empire State Judge: New York state courts haven’t ruled on punitive damages in asbestos cases since 1996. That changed earlier this month when a judge issued a ruling lifting the “deferral” of punitive damages. As the American Tort Reform Association notes, “The mere availability of punitive damages will inflate settlement values in every case and place even greater pressure on companies named as defendants to settle even questionable cases, needlessly depleting resources available to future claimants.”

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