Manufacturers In The Courts: March 2010

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

Litigation against the Environmental Protection Agency (EPA) over greenhouse gas regulation took center stage in February as many groups, including the NAM, filed petitions for court review of that agency's conclusions. While that case continues,
and EPA prepares to issue further regulations that will regulate stationary sources
of greenhouse gases, our appellate litigation program continues to handle cases in
other legal areas affecting manufacturers. Product liability, taxation and free
speech issues were active in the courts in March. Here are the cases in which there
are new developments.

Decided Cases


Application of arm's length transaction principle to related-party transactions . Last year, the NAM joined 15 other organizations in an amicus brief urging the Ninth Circuit to reconsider the 2-1 decision by three of its judges. We argued that for more than 75 years, Congress, the courts and the IRS consistently have mandated the application of the arm's length standard for transactions governed by Section 482 of the Code. This is designed to prevent the manipulation of profits between related entities. It is very important that one internationally accepted objective measure be used to evaluate related-party transactions to prevent double taxation. We are pleased to report that the judges vacated their original ruling, and on March 22, 2010, ruled as we had suggested. Xilinx, Inc. v. Commissioner (9th Cir.).

Pending Cases

Class Actions

Class action certification requirements for unfair competition cases in California . The NAM and other industry groups on March 18 filed an amicus letter in the California Supreme Court, urging that 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 want 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. Weinstat v. Dentsply International, Inc. (Cal.).

Free Speech

Use of fraud law to chill free speech rights . On March 22, the NAM and the Washington Legal Foundation filed an amicus brief urging the Supreme Court to hear an appeal of an adverse ruling under the Racketeer Influenced and Corrupt Organizations Act (RICO) for speech relating to the sale of "light" cigarettes. The Government used federal fraud statutes to target the speech of industry members made during decades-long public debates over the health and safety of smoking. It did so without any showing that the speaker had fraudulent intent or that the speech was material to consumers, and the appeals court failed to independently review the trial court's finding, eliminating a key safeguard for First Amendment protections. Our brief underscores the right of all parties, even those with an economic motive, to participate fully in discussions of matters of public concern. Philip Morris USA Inc. v. United States (S. Ct.).

Product Liability

Medical monitoring . On March 9, the NAM and nine other business groups filed an amicus brief urging the Third Circuit to reject a claim that a manufacturer should pay for medical monitoring of a plaintiff that has no proven physical injury from the use of the manufacturer's product. M.G. v. A.I. DuPont Hospital for Children (3d Cir.).

Liability for asbestos products made by another company and affixed post-sale . On November 12, 2009, the NAM and seven other companies filed an amicus letter urging review of this case to resolve a clear conflict between two California courts of appeal. Earlier in 2009, the First District held that a manufacturer of various parts supplied to the Navy had no duty to warn of the dangers of asbestos-containing products supplied by other manufacturers. In contrast, the Second District created a broad new duty rule that requires manufacturers to warn about risks in products made by others. On December 23, 2009, the court agreed to hear this appeal, and the NAM filed an additional brief on March 9, 2010. O'Neil v. Crane Co . (Cal.).


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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