Manufacturers In The Courts: April 2010

A Publication of the National Association of Manufacturers
E-mail briefing from the
National Association of Manufacturers
April 2010

Our monthly wrap-up of litigation affecting manufacturers includes a significant ruling by the Supreme Court in favor of company pension plan administrators. Unfortunately, the D.C. Circuit upheld OSHA's power to issue multiple citations, and California's unfair competition law is being read liberally for consumer class actions. In addition, the National Association of Manufacturers' (NAM's) challenge to EPA regulation of greenhouse gases from stationary sources moved forward. These and other new developments are summarized below.

Decided Cases

Class Actions

Class action certification requirements for unfair competition cases in California. In March, the NAM urged the California Supreme Court to tighten up its standards for certifying classes that may sue manufacturers under the state's Unfair Competition Law, and to require proof of damage and reliance where fraud is alleged. We wanted the court to reaffirm that the claims of class representatives must be typical of those of the rest of the class, that trial judges have the flexibility to revise class certification orders when they are incorrect, and that a product user must prove reliance on a warranty provision before he or she may sue for damages. The case is one of an increasing number of consumer class actions that were intended to be restrained under Proposition 64 when it passed in 2004. Unfortunately, the court on 4/14/10 declined to review the lower court's ruling. Weinstat v. Dentsply International, Inc. (Cal.).


Deference to decisions by benefit plan administrators. On April 21, the U.S. Supreme Court overturned an appeals court decision that interfered with administrative decisions by those who run company pension plans. The case involves how a company's plan administrator should account for lump-sum retirement payments made to employees who retired but later returned to work for the company. The NAM had filed an amicus brief arguing - and the Supreme Court agreed - that courts should defer to the reasonable decisions by plan administrators trying to interpret benefit plan language under the Employee Retirement Income Security Act (ERISA). The Supreme Court's ruling in this case encourages certainty and predictability, tempers litigation expenses and administrative costs, and minimizes exposure to unanticipated benefits obligations. Conkright v. Frommert (S. Ct.).


Challenge to OSHA's per-employee citation authority. On April 16, the U.S. Court of Appeals for the D.C. Circuit upheld 34 OSHA workplace standards that permit the agency to obtain multiple penalties against an employer for providing incorrect personal protective equipment (PPE), no PPE, or incorrect training to employees. OSHA may multiply its standard fines by the number of employees affected by a specified violation. The court found that OSHA "stands in the shoes of the legislature" and can both define what constitutes a violation and define the unit of prosecution, or how many times a company can be fined for a single decision that affects many employees. The NAM and other groups brought this challenge to OSHA's authority in 2008. The decision will result in substantially greater fines and settlement leverage against companies that are alleged to have violated OSHA rules. Although OSHA's Field Operations Manual tells inspectors to issue multiple citations only when the employer's behavior is willful and egregious, the decision gives great discretion to the agency to change its practice in the future. National Ass'n of Home Builders v. OSHA (D.C. Cir.).

Product Liability

Duty to warn about hazards of third party products. The NAM filed a brief in January arguing that manufacturers should not have a new legal duty to warn customers about risks that might arise from products made by other manufacturers that are used in conjunction with their products. This new duty is inconsistent with California law and with most courts around the country. On April 22, 2010 the California court overturned a $5.6 million jury award, agreeing that a manufacturer does not have such a duty. William Powell Co. v. Walton (Cal. Ct. App.).

Pending Cases


Challenge to EPA's endangerment finding. Leading a broad coalition of business groups, the NAM on February 16 filed a petition in federal court challenging the Environmental Protection Agency's (EPA) process by which it found that greenhouse gas emissions justify an endangerment finding under the Clean Air Act. We oppose this step in the EPA's efforts to regulate stationary sources of greenhouse gases, including everything from industrial facilities to farms. EPA's action further complicates a permitting process that it is not equipped to handle, while increasing costs to the manufacturing sector. On April 15, the NAM and other petitioners filed a list of the legal issues to be litigated. At the same time, EPA asked the court to hold the case in abeyance until August 16 or until EPA can respond to various petitions for reconsideration that were filed with the agency, whichever comes first. NAM v. EPA (D.C. Cir.).

Validity of permit for exploratory oil and gas drilling in Alaska. The NAM has asked a federal appeals court to reject an effort that would delay exploratory drilling for oil and gas in the Beaufort Sea north of Alaska. The Department of the Interior has conducted an extensive evaluation of the process and concluded that exploration would cause no significant impact on the environment. The NAM filed an amicus brief on April 7 arguing that exploratory drilling is an important step in the process of utilizing the Outer Continental Shelf to improve energy self-sufficiency, national security, balance of payments and job creation. Native Village of Hope Point v. Salazar (9th Cir.).

Whether carbon dioxide must be considered in EPA PSD permits. On April 2, EPA completed its reconsideration of the Johnson memo and published a new "Subject to Regulation" notice that makes January 2, 2011 the date on which greenhouse gas emissions are regulated. The Sierra Club had challenged the earlier version of the EPA memo that had refused to require PSD permits for facilities that emit greenhouse gases. This case is being held in abeyance until EPA further considers its rules on GHGs. Sierra Club v. EPA (D.C. Cir.). .).

Please visit our rejuvenated Manufacturing Law Center to see further details on these and other cases affecting manufacturers. If you know of cases where NAM involvement could help provide the courts with the important perspective of manufacturers, please let us know. We may be able to help .

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

National Association of Manufacturers
1331 Pennsylvania Avenue, NW Suite 600
Washington, DC 20004-1790

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