Manufacturers In The Courts: March 2011

A Publication of the National Association of Manufacturers
March 2011

The Wal-Mart case argued this week in the Supreme Court could significantly alter the course of class-action litigation against manufacturers. Even though the company has an explicit nondiscrimination policy, the suit involves allegations that the company-wide management style allowed individual managers at Wal-Mart stores to engage in acts of discrimination. Of course, this claim could be made against virtually any company whose employment decisions are not centralized. The Court's ruling will be critical in determining whether such large discrimination suits, which typically involve individual behavior, can be certified as class actions. If they can, statistical pay disparities can lead to liability, and manufacturers will have tremendous difficulty defending against individual claims.

Manufacturers continue to press the courts for sensible interpretations of class-action rules, state and federal statutes, and constitutional provisions. Outlined below are the latest developments in cases in which the NAM is participating.

Decided Cases

Government Disclosure of Business Information

Supreme Court rejects corporate privacy under FOIA. The Supreme Court decided March 1 that a provision in the Freedom of Information Act (FOIA) that protects against unwarranted invasions of personal privacy does not protect corporations from government disclosure of private information to competitors, trial lawyers or others. Although "person" is defined by FOIA to include corporations, the Act does not define "personal," and the Court ruled that the ordinary meaning covers only individuals. The NAM filed a brief urging broader protections, but the decision eliminates all protections except those found in Exemption 4 of FOIA, relating to trade secrets and privileged or confidential commercial or financial information. FCC v. AT&T, Inc. (S. Ct.).

Labor Law

Complaining employees gain new rights to sue. Grumbling or complaints from employees are nothing new, but until a Supreme Court decision this week, such actions were not always considered "filing a complaint" that gave the employees the right under the Fair Labor Standards Act to claim retaliation after an adverse employment action. On March 22, the Court interpreted that Act to grant full anti-retaliation protections to employees for verbal complaints about the workplace. The NAM had filed a brief warning that this interpretation would undermine the ability of employers to effectively manage their workforces, but the Court limited the protections to an employee with a complaint that is "sufficiently clear and detailed for a reasonable employer to understand it . . . as an assertion of rights protected by the statute and a call for their protection." Kasten v. Saint-Gobain Performance Plastics Corp. (S. Ct.).

Product Liability

Who decides whether a manufacturing design is defective? That question under Nevada law remains unanswered in a case that recently settled. The trial court ruled that, under strict liability principles, a product is designed unreasonably if it poses a risk of injury beyond what would be expected by the product user's own subjective expectations. The NAM and other groups argued that the test must be objective: a design is unreasonable only if it poses a risk of injury beyond what would be expected by "the ordinary user having the ordinary knowledge available in the community." Uncertainty in this area of the law could lead to expanded claims against manufacturers. LeMans Corp. v. Provenza (Nev.).

Securities Litigation

Clarification needed in stock-drop litigation. The Supreme Court has declined an appeal supported by the NAM involving the efficient market theory. Shareholder-plaintiffs may avoid having to prove that they relied on an allegedly fraudulent statement by a company because the market for stock information is efficient and reliance is presumed. Had this case been accepted for review, the Court would have decided whether the same efficient-market theory benefits defendant companies when they issue corrective disclosures to the market. Apollo Group, Inc. v. Policemen's Annuity and Benefit Fund (S. Ct.).

New Cases


NAM files reply brief in challenge to EPA's denial of Texas Flexible Permit program. On March 17, the NAM and others filed a reply brief arguing that states have substantial discretion under federal law to adopt flexible requirements that apply to minor changes in plant operations as long as air quality is protected. We argued that EPA improperly speculated that the Texas program allows major New Source Review requirements to be circumvented, and that EPA's assertion that the state program is deficient on enforcement is factually and legally unsupported. This litigation is intended to eliminate the ambiguity of EPA's latest actions and to restore predictable air pollution control regulation in Texas. Texas v. EPA (5th Cir.).

Government Regulation

Right to EPA hearing prior to revoking pesticide tolerances. The NAM and other groups filed a brief urging the Supreme Court to review a case where the EPA unilaterally revoked a pesticide tolerance under the Federal Food, Drug and Cosmetic Act (FFDCA). The action effectively banned the pesticide, violating the right of pesticide manufacturers to an adjudicatory hearing. Whether such a right will be enforced has ramifications for pharmaceuticals, medical devices, food and beverages and certain consumer products as well. National Corn Growers Ass'n. v. EPA (S. Ct.).

Labor Law

Defining the scope of bargaining units. The NLRB is considering whether to allow very small bargaining units during union organizing efforts. The Coalition for a Democratic Workplace, of which the NAM is a member, filed an amicus brief on March 8 opposing the idea that employees performing the "same job at a single facility is presumptively appropriate" as the bargaining unit. The Board's ruling could reverse 50 years of case law by radically changing the standard for determining an appropriate bargaining unit, subjecting employers to increasingly complex labor-management compliance issues. In re Specialty Healthcare and Rehabilitation Center (NLRB).

Product Liability

Product-alteration defense. The North Carolina Supreme Court has accepted for review a case challenging a ruling that removed a standard product alteration defense in a product liability case. The defense protects manufacturers against liability when their products are altered by someone else, but the lower court said the defense is not available unless the alteration was done by a party to the litigation. The NAM argued that the "party" can be any party, not just one involved in the lawsuit, and that manufacturers should not be liable for harms caused by product misuse. Stark v. Ford Motor Co. (N.C.).


NAM fights to eliminate export taxes. In an amicus brief filed on March 16, the NAM supported Supreme Court review of a decision that undermines the Constitution's protection against export taxes. The decision allows taxes based on a product's weight to avoid the export tax ban, even though the tax is imposed on goods in export transit. Unless reversed, the decision will encourage administrative agencies and Congress to impose more excise taxes on exports, threatening the recovery and small and medium-sized businesses. Consolidation Coal Co. v. United States (U.S. Supreme Court).

Did you include the NAM 's Manufacturing Law Center in your budget? We take on a seemingly endless docket of cases to keep litigation fair, to help manufacturers cope with an increasingly complex and often conflicting set of legal requirements at the local, state, national and international levels, and to highlight emerging threats from the trial bar. This activity is not funded by member dues. Your separate contributions are needed to allow us to raise our voice in the courts, to highlight these problems, to offer solutions, and to provide a critical perspective to those judges who hold much of our future in their hands. Please consider making a contribution now. Thanks!

For details on these and other cases, visit the Manufacturing Law Center . If you know of cases where our involvement could help manufacturers, please let us know.

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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