Manufacturers In The Courts: Annual Report 2012

E-mail briefing from the
National Association of Manufacturers
Annual Report
January 2012


Welcome to the NAM's annual snapshot of litigation trends affecting American manufacturers. While companies continue to handle a wide range of traditional commercial, tax and employment litigation, our appellate litigation program takes a different approach - we tackle legal issues that arise from new regulations, new laws and new efforts by the trial bar to expand the liability of manufacturers. We are on the cutting edge of the evolution of remedies and defenses, and this report highlights a few key areas where activity has been pronounced and developments have been important.

The dominant problems for manufacturers in the courts in 2011, and what we continue to work on today, arise from regulations of the Obama Administration. In addition, we face a variety of substantial new challenges from environmental action groups and foreign parties intent on using the U.S. legal system against American companies.

What's Next for Clean Air?

Final preparations are under way for the business community and various state governments to present oral arguments in the D.C. Circuit in their challenge to a group of regulations from the Environmental Protection Agency (EPA) restricting greenhouse gas emissions from stationary sources. Because the EPA issued piecemeal regulations, the NAM filed eight different law suits, all of which have been consolidated into 4 main challenges, and consolidated with those of other industry groups and state governments. Oral arguments will occur over 2 days on February 28 and 29, 2012.

Our suits challenge the authority of the agency and the procedures it used. In addition, there are a variety of other actions that EPA has taken to force state enforcement agencies to implement the same greenhouse gas regulations, or to take over state enforcement itself. The NAM has also intervened in several of these suits, to make it clear to the courts that every step taken by the EPA in furtherance of its greenhouse gas regulatory objective is met with legal arguments of our own.

While these cases have been under consideration, two other major EPA regulatory projects have required litigation. One is ozone. EPA's last major reduction in permissible ozone levels came in 2008, and the NAM filed a challenge. For the past two years, our litigation has been on hold while EPA considered whether to make even further reductions in the permissible levels. Finally, after President Obama rejected the agency's latest plans, our preexisting litigation became ripe, and final briefing and argument will occur shortly.

The second is a variety of restrictions on boilers, commercial and industrial incinerators, Portland cement facilities, and other stationary sources of emissions. When the boiler MACT ("Maximum Achievable Control Technology") and CISWI ("Commercial and Industrial Solid Waste Incineration) rules came out in 2011, the NAM asked EPA for an immediate stay, and EPA agreed, announcing that it was reconsidering portions of the rules. Our court challenges have been deferred pending this reconsideration.

Private Litigation Over Clean Air

EPA and state enforcement of air regulations is only part of the burden on manufacturers. Over the past few years, environmental groups have filed a series of lawsuits making claims under state law or common law, using theories of public nuisance and public trust. A key ruling from the Supreme Court last June rejected claims under federal common law, finding that EPA's authority to regulate greenhouse gases displaces such claims. The NAM urged complete rejection of this litigation, but the Court left open the possibility that state law nuisance claims could proceed. That issue remains to be resolved in the courts, and several other public nuisance cases are still pending. More could follow.

Moreover, other environmental plaintiffs sued the federal government last year in an attempt to force 6 percent across-the-board reductions in carbon dioxide emissions every year starting in 2013. The NAM moved to intervene in this case to highlight the dramatic and devastating effects that such judicial intervention would have on manufacturing processes and investments, production and transportation costs, global competitiveness, domestic job creation and the U.S. economy. We also argued that the public trust doctrine simply does not exist under federal law and the claims have also been displaced by federal law. The case, originally filed in California, has been transferred to the District of Columbia, where briefing is expected to begin in 2012.

Other Environmental Issues

Fighting EPA regulations is a difficult and expensive process, but it is critical to carry on this effort in the face of regulations that will have a serious impact on the ability of U.S. manufacturers to survive global competition and cost pressures. Consequently, we participated in a variety of cases involving the following positions:

  • Supporting EPA's decision to allow state waivers of ozone regulatory fees
  • Supporting the Department of the Interior's conclusion not to regulate greenhouse gas emissions outside the range of the polar bear
  • Challenging EPA's denial of a flexible Clean Air Act permit program in Texas
  • Challenging a county regulation that interferes with the hauling of solid waste materials
  • Challenging EPA's decision to revoke an already-issued Clean Water Act permit for coal mining operations
  • Supporting EPA's approval of oil exploration in the Gulf of Mexico

The Supreme Court will soon decide whether anyone may go to court to challenge the jurisdiction of the EPA to order a work stoppage and restoration of land under development. The NAM has participated in several cases on this topic, and finally the high court will clarify how much power the EPA has. Oral arguments in the Sackett case generated considerable skepticism from the Justices, and the ultimate decision will be important to our overall efforts to ensure fair environmental enforcement.

Private Litigation Arising Abroad

Suits against American companies alleging environmental claims and human rights abuses abroad are now being brought in U.S. courts, and a federal appeals court recently allowed one to proceed, even though the trial judge had dismissed the case because non-resident aliens have no standing to sue in U.S. courts. The appeals court also recognized aiding-and-abetting liability as a legitimate claim under international law, an issue that divides the courts and is likely to gain Supreme Court review. The NAM opposed this lawsuit for interfering with U.S. foreign relations and impeding the policies designed to promote the very democratic and human-rights goals that the plaintiffs purport to advance.

Some of these suits are brought under the Alien Tort Statute, and the Supreme Court will soon decide whether corporations are recognized under the Law of Nations as subject to this kind of litigation. The NAM has participated in several suits where these issues continue to be litigated, and the Court's upcoming decision in the Kiobel case could be the most important ruling of the year for American manufacturers doing business abroad.

Labor Gains Friendly Rulings at the NLRB

The National Labor Relations Board (NLRB), over NAM objections, issued rulings in two cases last August that will make it easier for workers to unionize. In one, the Board reversed precedent and said that employees may not challenge a card-check union certification for a "reasonable period of time," which is no less than six months and no more than one year after the parties' first bargaining session. This overturned a previous ruling allowing challenges within 45 days of the card-check certification.

The Board also ruled that bargaining units may be very small, may be chosen by the employees who want to organize, and will be upheld if the unit consists of a clearly identifiable group and that group is "appropriate." The decision will permit micro-unions and will make organizing quite easy, thus subjecting manufacturers to increasingly complex labor-management compliance issues, such as managing multiple unions on the same shop floor.

Late in 2011, the NAM filed suit against the NLRB's latest effort to bolster union ranks - a new regulation requiring employers to post a notice of worker rights. The suit challenged the NLRB's authority to issue this rule at all, as well as its attempt to create a new unfair labor practice (failure to post), to eliminate the statute of limitations for certain claims, and to imply an anti-union animus against companies that fail to post the notices. The NAM's litigation led to a delay in the effective date of the regulation until at least April 30, 2012, and the court is expected to decide the case before then.

Commercial Speech

In a significant victory for commercial speech, the Supreme Court ruled in June that a Vermont law banning the use of prescription drug information for pharmaceutical marketing, but not for other purposes, is a restriction on speech that is based on the content of the message or the identity of the speaker, and is therefore subject to more rigorous judicial scrutiny than restrictions that are not. The creation and dissemination of information are speech covered by the First Amendment. The NAM had filed an amicus brief arguing that speech restrictions that are motivated by legislative hostility to the content of the speech should be scrutinized more carefully by the courts than content-neutral restraints. The Court agreed, finding that the state may not burden protected speech in order to tilt public debate in a preferred direction. Unfortunately, it is not unusual for federal, state and local officials to test the limits of their authority, and the NAM will continue to advocate for free speech rights for manufacturers.

Product Liability

Rounding out the most active areas of litigation affecting manufacturers are cases involving a variety of product liability issues. Over the years, we have championed constitutional limits on punitive damages, improvements in class action certification procedures, limitations on liability for products not made by the defendant, limits on the use of contingent-fee lawyers by state governments, and litigation support for legislative reform of tort law. In 2011, we secured victories that:

  • Restrict out-of-state plaintiffs from using a state's courts and liberal statute of limitations to litigate claims that arose in other states
  • Allow a manufacturer to sue a law firm and radiologist for conspiring to fake asbestos screenings
  • Refuse to require companies to pay for medical monitoring of individuals with no symptoms of exposure to hazardous materials and a miniscule risk of injury

However, substantial challenges remain for manufacturers defending against private litigation. While we continue to press the courts to recognize reasonable limits on aggressive trial lawyers, some problem areas remain:

  • State tort suits are not preempted unless a federal regulation has a significant objective that makes preemption necessary
  • A Florida tort reform law requiring asbestos claimants to wait until they actually have evidence of harm does not apply to claims pending at the time of passage
  • Courts should not bundle dissimilar cases, allow unreliable testimony, or accelerate trials without adequate discovery
  • The product-alteration defense should remain viable
  • Any exposure to a hazardous substance should not give rise to liability; proof of causation should still be required
  • Manufacturers should not have to warn about the possibility that another company's product might be used with theirs, causing risk.

The NAM Appellate Litigation Program

The cases described above comprise the lion's share of the NAM's work in 2011 and continuing efforts into 2012. Additional topics too numerous to mention in detail include disclosure requirements under the securities laws, the power of the states to tax interstate commerce, and litigation interpreting the research and development tax credit for manufacturing process improvements, among others.

To learn more about any of the cases described above, search either for cases decided in 2011 or active cases in the NAM's Law Center Search Engine . Better yet, let me know what you're interested in, and I'll direct you right to the information you need.

Manufacturers have a unique perspective that must be told in the courts. Quite often an individual case will affect companies far beyond those that are parties in the case. Moreover, our first-party litigation against excessive government regulation and oppressive procedures provides an essential balance that our courts were designed to protect. If your company is involved with issues that require judicial resolution, and their resolution affects more than just your company, let us know. The National Association of Manufacturers provides an important and credible perspective that can help the courts understand the full import of the decisions they must make.

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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Copyright © 2012 National Association of Manufacturers


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