The Center News: July 2017

NAM Impact
Legal Perspectives
By Linda Kelly, SVP, General Counsel and Corporate Secretary

For every action, there is an equal and opposite reaction
-Newton’s Third Law of Physics

The new Administration is moving forward with gusto in its efforts to unwind the deluge of regulations imposed on manufacturers over the past several years, including a number of issues the Manufacturers’ Center for Legal Action (MCLA) has been litigating.  From the issuance of an Executive Order directing the regulatory agencies to eliminate two regulations for every new one they impose, to sweeping efforts at the EPA to pull back the Clean Power Plan, delay the implementation of the ozone rules and revisit the Risk Management Program, to review of the Department of Labor’s new overtime rules for white collar workers, to a delay in the implementation of the OSHA Injury and Illness Reporting Rule, the deregulatory push is on.  For the MCLA, which at this time last year carried an active party litigation docket of 16 cases, not counting amicus work, this should be an opportunity to pause and catch our breath.  Not so fast. 

Proponents of the regulations have amassed huge legal war chests, fundraising off each new announcement from the Administration of a regulatory review or rollback.  And the NGOs are using these resources to fight back in court.   While the MCLA and other business legal groups have been the chief plaintiffs challenging the federal agencies for the past several years, it is now groups such as Public Citizen, the Natural Resources Defense Council, and the Communications Workers of America that are moving into that role.  For example, in Public Citizen, Inc. v. Trump, the plaintiff NGOs are challenging President Trump’s authority to issue the Executive Order directing the agencies to do the one-in, two-out rulemaking.  (See the MCLA amicus brief in support of the Administration in this case.)

The Center for Biological Diversity claims on its website that it has filed 26 lawsuits against either President Trump or his Administration so far, including: a challenge to the approval of the Keystone XL pipeline; a suit against the EPA’s delays in reducing ozone in the Sacramento area and parts of Los Angeles, Riverside and San Bernardino counties; and a suit against EPA for failing to finalize deadlines for the District of Columbia and Philadelphia to meet 2008 ozone standards.

State Attorneys General are also stepping into the fray.  Seven states and D.C. moved to intervene in the litigation over the Obama Administration’s 2015 ozone regulation. Many of them had supported the rule with an amicus brief, but they now seek permission to become full parties – intervenors – because the Trump Administration indicated that it will no longer vigorously defend the 2015 rule in court.  (See Murray Energy Corp. v. EPA (D.C. Cir.))

The need for the MCLA to play an active role in litigating these issues has not diminished.  Our role has merely shifted—from the plaintiff’s seat to the role of defendant-intervenor—inserting ourselves into the litigation to defend the efforts of the regulatory agencies to roll back and restore reason to our federal regulatory system.  We will need the strong financial support of our members to ensure these efforts to deregulate will be successful and to provide a strong counterweight to the massively funded NGO community.  For information on how to support the efforts of the MCLA, please contact me at [email protected].


MCLA in the Courts

NAM files brief supporting class-action waivers and arbitration: On June 16, the NAM filed a brief on the merits in the U.S. Supreme Court regarding the permissibility of class-action waiver and mandatory arbitration provisions in employment contracts. The National Labor Relations Board (NLRB) maintains that these provisions, which the Federal Arbitration Act (FAA) governs, violate employees’ rights to engage in protected, concerted activity. The NAM’s brief argues that the NLRB deserves no deference in its interpretation of the FAA because the act is outside the NLRB’s congressionally mandated role. The class-action waiver allows employers to resolve disputes with individual employees on particular issues without having to address an entire class of plaintiffs in a given case. The provisions are valuable to employment and encourage efficient employment practices by providing lower costs to the parties and faster results in a dispute, thus avoiding drawn-out and costly litigation.  The Supreme Court will hear argument in the case on October 2.

More Information: Epic Systems Corp. v. Lewis (U.S. Supreme Court)

NAM files brief supporting continuance of DAPL: The NAM and other industry associations filed a brief arguing that vacating the U.S. Army Corps of Engineers’ approvals for the Dakota Access Pipeline (DAPL) and ordering DAPL to cease operations because of a procedural error would be incredibly harmful and would not lead to additional benefits in safety. Ordering DAPL operations to cease in order for the Corps to conduct an additional environmental review would not lead to any changes in DAPL’s safety and integrity operations. Furthermore, court precedent demonstrates that DAPL operations do not legally need to stop because of a procedural error, particularly when the consequences of cessation are severe and far-reaching. Stopping DAPL operations would significantly harm businesses in the energy industry, states benefiting from DAPL operations and the individuals employed through DAPL.

More Information: Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers (D.D.C.)

NAM and EPA file oppositions to groups interfering in ozone lawsuit: The NAM, along with fellow industry and state petitioners in the case, filed a brief opposing a motion to intervene filed by the states of California, New York, Rhode Island, Vermont and Washington; the Commonwealth of Massachusetts; the Delaware Department of Natural Resources and Environmental Control; and the District of Columbia (jointly “California Movants”). California Movants filed the motion to intervene on July 6, a year and a half after the deadline for filing. The NAM opposed the Movants’ intervention because permitting intervention now would violate established rules of procedure. California Movants argue that they had “good cause” to file this motion so late, claiming that the Environmental Protection Agency (EPA) is not planning to vigorously defend the revised ozone standard and that they need to step in to present that defense. However, the EPA statements, on which California Movants rely, have been public since April, meaning that Movants are still outside of the 30-day filing deadline. The EPA also opposed intervention.

More Information: Murray Energy Corp. v. EPA (D.C. Circuit)

Court strikes portion of EPA recycling rule: The D.C. Circuit ruled on July 7 that some of the requirements imposed on companies using third-party recyclers exceeded the EPA’s statutory authority and improperly presumed that recycled materials were discarded simply because the recyclers did not meet various paperwork requirements. At the same time, the court agreed with us that much of the Verified Recycler Exclusion was lawful and dismissed challenges by environmental groups. The ruling is another significant example of the courts reining in EPA decisions that go beyond the agency’s statutory authority. For businesses that use third parties to help them recycle certain materials, it provides a more workable and efficient solution while still protecting the environment from recognized hazards.

More Information: American Petroleum Institute v. EPA (D.C. Circuit)

California court declines cap-and-trade tax appeal: In May, the NAM filed an appeal in the California Supreme Court of an adverse decision in our case challenging a greenhouse gas cap-and-trade auction system as an unauthorized tax. The Air Resources Board opposed the appeal, and the court declined to hear the appeal on June 28. This means that the allowance auctions may proceed and are not considered a new tax.

More Information: California Chamber of Commerce v. California Air Resources Board (California Supreme Court)

Court agrees to suspend risk management program litigation: The NAM and other associations are working with the EPA to consider changes to the Obama Administration’s risk management programs rule and asked the D.C. Circuit to suspend court proceedings while this process is under way. The court agreed, paving the way for negotiations among the parties. We are working with other groups on changes to the rule relating to security concerns from disclosure of hazardous material vulnerabilities as well as an audit requirement and considerations relating to costs and benefits.

More Information: American Chemistry Council v. EPA (D.C. Circuit)

NAM urges Supreme Court review of joint employer doctrine: On July 6, the NAM filed a brief urging the U.S. Supreme Court to grant the petition for writ of certiorari on a case addressing standards applicable to joint employment liability under the Fair Labor Standards Act (FLSA).

More Information: DirecTV v. Hall (U.S. Supreme Court)
Securities Regulation

NAM files merits brief in Supreme Court securities fraud liability case: Under Section 10(b) of the Securities Exchange Act of 1934, public companies face possible liability for securities fraud based on a failure to disclose adverse “trends” and “uncertainties.” The NAM filed an amicus brief supporting Supreme Court review of the case in November 2016, arguing that this issue is a slippery slope where manufacturers may be subject to private suits for securities fraud for failing to disclose information that may not be material. Issuers could be exposed to “fraud-by-hindsight” litigation if shrewd plaintiffs allege that an event was known to management as being reasonably likely to occur, including knowledge of “soft information.” The Supreme Court agreed to hear this case, and the NAM filed another amicus brief in June supporting the merits of the issue.

More Information: Leidos, Inc. v. Indiana Pub Retirement Sys. (U.S. Supreme Court)
Taxation and State Taxation

NAM supports challenge to state tax disguised as a regulation: On July 21, the MCLA filed a brief in the Oklahoma Supreme Court in support of a challenge to a new law that imposes a $1.50 fee on each pack of cigarettes sold in the state. We argued that the fee is actually a tax that was enacted in violation of a state constitutional guarantee that new taxes will originate in the state House of Representatives, be passed before the last five days of the legislative session and be approved by a three-fourths supermajority of the legislature. We are seeing more states use purported regulatory programs as a way of raising revenues for nonregulatory purposes—in this case, raising $257 million in annual revenues, which was the largest revenue bill in 2017.

More Information: Naifeh v. Oklahoma (Oklahoma Supreme Court)
Questions or Comments?

Contact Senior Vice President & General Counsel Linda Kelly at [email protected].