The Center News: December 2015

A Publication of the National Association of ManufacturerstheCenter for Legal Action

Center Perspectives
By Linda Kelly, Senior Vice President and General Counsel

Sometimes David really does beat Goliath. For 17 years, Deerfield, Florida pump manufacturer Moving Waters Industries (MWI) fought the federal government in a False Claims Act case. And recently they won—and scored a victory for all manufacturers. The Manufacturers’ Center for Legal Action was pleased to have provided amicus support in this case contributing to the positive and somewhat surprising outcome. 

MWI is a small, family-owned manufacturer of water pumps used for irrigation and sanitation systems. Before this case began in 1998, MWI was a major exporter of pumps to developing countries. The particular sale at issue in the case involved sale of pumps to Nigeria. Financing documents in the transaction required the disclosure of any commissions that were not “regular.” There was not an existing regulatory definition or guidance about what the term “regular” meant, so MWI applied what it thought was a reasonable interpretation—that a normal, longstanding, market rate commission was regular. Based on a complaint initiated by a qui tam relator who asserted that the commission was in fact “irregular,” the government initiated first a Foreign Corrupt Practices Act investigation, which it dropped, then a criminal False Claims Act investigation, which it dropped, and finally a civil False Claims Act case, which it pursued. Following a federal trial, the jury found in favor of the government and awarded substantial damages. Subsequent litigation addressed the proper amount of damages to be paid when the loan was paid back to the government in full, with interest, and the government suffered no actual damages. 

In a government-initiated appeal to the DC Circuit concerning the damages amount, MWI decided to file a “Hail Mary” cross-appeal, questioning the underlying liability determination. They challenged the jury’s finding of False Claims Act liability based on three issues: (1) the term at issue was ambiguous, (2) the government had never provided guidance on how it should be interpreted and (3) the company had made a reasonable interpretation of the term. In an opinion that will have far-reaching implications for all industries subject to potential False Claims Act claims, on November 24, the DC Circuit reversed the jury verdict, finding that the False Claims Act was not intended to impose liability for an innocent, good faith mistake about the meaning of an applicable regulation. This outcome is an important victory for due process, and highlighted the fundamental unfairness of subjecting parties to liability for violating a rule without first providing notice of what the rule requires.

Congratulations to the leadership and the legal team at MWI, who persisted through the years in fighting to vindicate their company’s good name. Their resolve has yielded a great benefit for everyone in clarifying the law and protecting due process. The MCLA was proud to play a role in advancing this just outcome. This is the very reason we come to work each day.

Best wishes to all of our readers for a terrific 2016!

MCLA in the Courts

NAM Challenges Definition of Solid Waste: The NAM filed its main brief on the merits of our challenge to the Environmental Protection Agency’s (EPA) new rule relating to the definition of solid waste under the Resource Conservation and Recovery Act (RCRA). The rule regulates “discarded” materials, and it exceeds the agency’s authority. Our principal concerns stem from new affirmative duties and conditions on in-process materials that are not discarded. RCRA allows the EPA to regulate solid waste, but it is trying to regulate materials that are not yet waste; that is, they are not "disposed of, abandoned, or thrown away." The rule affects the primary metals sector, recycling, petroleum production, chemicals and many other sectors.

More Information: American Petroleum Inst. v. EPA (U.S. Court of Appeals for the D.C. Circuit)

NAM Seeks Clarity on Preemption for Permitted Emissions: The NAM submitted an amicus letter in a Texas case in which residents sued for alleged fumes of natural-gas compressor stations. The NAM’s letter urges the Texas Supreme Court to review and clarify the respective roles of federal and state environmental authorities for preemption of permitted emissions from state tort claims. Using state tort remedies as an alternative means to control air pollution creates additional liabilities that adversely influence investment, operations, industrial growth and job creation.

More Information: Sciscoe v. Enbridge Gathering (North Texas), L.P. (Texas Supreme Court)

EPA micromanagement of state water discharges: The NAM, U.S. Chamber of Commerce and National Federation of Independent Business filed an amicus brief urging the Supreme Court to review an adverse decision from the Third Circuit that allows EPA to dictate minute details of land use planning relating to land in the Chesapeake Bay watershed. Our brief maintains this overreach is not authorized by the Clean Water Act because it makes individual permit holders responsible for excess effluents from others. It severely constrains companies with National Pollutant Discharge Elimination System permits and delays revisions and approvals, disfavoring innovation and growth and curtailing development.

More Information: American Farm Bureau Fed. v. EPA (U.S. Supreme Court)
Labor Law

Understanding California’s Day of Rest Law: In an important case of statutory interpretation, the NAM filed an amicus brief to persuade the California Supreme Court to adopt a reasonable, practical definition of the Day of Rest Law—to confer the most benefit on both employees and employers in the state. The NAM’s brief did not seek to deny “one day’s rest in seven” for all eligible California employees under California labor law. Rather, the NAM contends that employees should have a say in the exercise of that right.

More Information: Mendoza v. Nordstrom, Inc. (California Supreme Court)

Legal requirements for on-call rest periods: An employer providing security services required employees to remain on-call during rest breaks in case of an emergency, and plaintiffs sued, alleging a violation of California law by requiring on-call breaks. Last month, the NAM filed an amicus brief in the California Supreme Court, defending the employer and explaining the serious policy implications for the broad swath of industries outside of the security sector that would flow from a rule prohibiting on-call rest breaks.

More Information: Augustus, et al. v. ABM Sec. Serv., Inc. (California Supreme Court))
Product Liability

NAM Supports Ford in Nevada Product Design Case: The NAM filed an amicus brief in the Nevada Supreme Court regarding an important legal test in a complex product design liability litigation involving a rollover accident. The NAM’s brief opposes using a “consumer expectations” test, which is more appropriate to address manufacturing flaws, and urges the court to instead support a “reasonable alternative design” test with a risk-utility component, which allows companies to design optimally safer products.

More Information: Ford Motor Co. v. Trejo (Nevada Supreme Court

Liability of raw material supplier for end product injuries: The NAM sent an amicus letter to the California Supreme Court urging it to review the decision of a lower court that departed from settled principles of liability in holding a manufacturer of raw materials liable for end product injuries. If allowed to stand, this ruling will have serious adverse consequences for manufacturing, commerce and society as a whole. The NAM has a strong interest in the development of tort law and the application of doctrines that place reasonable limits on strict product liability claims.

More Information: Johnson v. U.S. Steel Corp. (California Supreme Court

Allowing non-settling defendants to present cross-claim proofs: The NAM joined an amicus brief in support of the trial court’s decision to allow cross-claim proofs in an asbestos claim dispute with multiple defendants, some settled and some that went to trial. The presentation of cross-claim proofs against settled defendants is critical to help ensure that non-settling defendants do not bear an unfair and disproportionate burden, and to preserve assets for future claimants that could be threatened if current plaintiffs are able to receive large, windfall recoveries for their injuries in the tort system.

More Information: Condon v. Advance Thermal Hydronics, Inc. (New Jersey Superior Court)
Other News

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Questions or Comments?

Contact Senior Vice President & General Counsel Linda Kelly at lkelly@nam.

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