Legal Perspectives
By Linda Kelly, SVP, General Counsel and Corporate Secretary
This week, the U.S. Supreme Court wrapped up its October 2016 term. While most legal reporters would tell you this was a mundane term with few blockbuster cases, there were some very significant holdings this term for manufacturers.
Chief among these significant cases were three involving the fundamental question of where a lawsuit may be brought. For our members who find themselves targets of civil litigation, one of the most significant factors is where they are sued. Not only does tort law vary from state to state, but certain state court jurisdictions have become favorite destinations of the plaintiffs’ bar because the juries and the court systems have the reputation of being pro-plaintiff and anti-corporate Because of this, plaintiffs’ lawyers will go to great lengths to construct their cases to include parties and claims that will allow the cases to be brought in their favored jurisdictions. This can sometimes lead to tortured construction of claims in order to have the cases be heard where the plaintiffs’ lawyers think they have the best chance of winning.
Such was the case in BNSF v. Tyrrell. In BNSF, two parties brought employment claims against the railroad company in Montana state court. Neither party worked in Montana, resided in Montana, or claimed injury in Montana. Nor did they claim that their injuries were related to BNSF’s activity in Montana. Nor is the company headquartered there nor even have a significant presence there. It was simply the plaintiffs’ choice of venue for the lawsuit. In a significant blow to forum-shopping, the court held that BNSF could not be sued in Montana because it was not found at home there and the claim had no connection to the state.
Similarly, in Bristol Myers Squibb v. Superior Court, the court considered whether claims by Ohio and New York residents could be brought in California court, joined with claims by California residents, for damages arising from the plaintiffs’ use of the drug Plavix. The Ohio and New York plaintiffs claimed no connection between their injuries and the state of California—they had not been prescribed the drug there, had not purchased it there, and had not ingested it there. The Supreme Court held 9-1 that the California court did not have jurisdiction over the plaintiffs simply because they had suffered the same injuries as California plaintiffs. Justice Sotomayor was the lone dissenter because she feared the holding would lead to fragmented, piecemeal litigation and eliminate the ability to have a nationwide mass action. (Note that had the plaintiffs’ lawyers wished to adjudicate the case efficiently as a nationwide action, they could have brought it in federal court.)
Finally, in TC Heartland v. Kraft Foods, a case in which the Manufacturers’ Center for Legal Action (MCLA) did not participate, the court limited jurisdiction for patent lawsuits to the state of incorporation or residence of the defendant or to the venue where infringement occurred and the defendant has a business presence. This holding is highly significant because it will greatly limit the number of cases that can be brought in the Eastern District of Texas, which has become a forum of choice of patent litigation.
While these cases may seem mundane to reporters—many of whom reported more about the fact that Justice Breyer’s cell phone rang on the day BNSF and BMS were argued than on the arguments themselves—they are important clarifications to the rules of the road for civil litigation involving manufacturers. Perhaps more important, they reinforce core elements of due process, including the principle that you can’t sue anyone anywhere you want to. The court has to have jurisdiction over the defendant by virtue of either the defendant’s or the claim’s connection to that jurisdiction. The MCLA was proud to support the outcomes in BNSF and Bristol-Myers Squibb with our amicus program. These commonsense holdings will go a long way to help restore some rationality to our out of control tort system. Indeed, the term was very significant for manufacturers.
MCLA in the Courts
| Arbitration |
NAM files brief supporting class-action waivers and arbitration: On June 16, 2017, the NAM filed a second 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 (NRLB) maintains that these provisions, which are governed by the Federal Arbitration Act (FAA), violate employees’ rights to engage in protected, concerted activity. The NAM’s brief argues that the NRLB deserves no deference in its interpretation of the FAA because the FAA 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.
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| More Information: Epic Systems Corp. v. Lewis (U.S. Supreme Court) |
| Environment |
Texas Supreme Court tosses nuisance lawsuit: On May 19, 2017, the Texas Supreme Court dismissed an appeal in a case involving alleged noise and fumes emitted by natural-gas compressor stations. Under the state’s two-year statute of limitations, the claims were filed too late. The NAM had urged the court to reject the claims as preempted because the companies were complying with valid permits, but the court did not need to decide this issue.
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| More Information: Sciscoe v. Enbridge Gathering (North Texas), L.P. (Texas Supreme Court) |
| Government Regulation |
NAM files brief in two-for-one regulation case: On June 12, 2017, the MCLA filed an amicus brief in a lawsuit challenging the Trump Administration’s executive order mandating the elimination of two regulations for every new one. The brief urges the streamlining of federal regulations, linking this to executive orders in prior administrations with the same goals while highlighting successes of similar efforts in the United Kingdom and Canada.
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| More Information: Public Citizen, Inc. v. Trump (D.D.C.) |
| Jurisdiction |
Supreme Court win for BNSF: On May 30, 2017, the U.S. Supreme Court moved to safeguard the due process rights of manufacturers by ruling 8–1 in BNSF v. Tyrrell to affirm that passing through a state does not invite a lawsuit there. The case involved two separate workplace injury claims against BNSF in Montana under the Federal Employers’ Liability Act. The Supreme Court held that train routing alone, without any other connection, fails under the due process clause of the 14th Amendment to allow a court jurisdiction over a defendant—i.e., to permit a lawsuit there. The MCLA filed amicus briefs in this case supporting this outcome, which provides a measure of predictability to our often irrational state tort system.
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| More Information: BNSF Ry. Co. v. Tyrrell (U.S. Supreme Court) |
| Labor |
Overtime rule: On September 20, 2016, a coalition including the NAM, states and trade associations successfully sued to enjoin implementation of the Department of Labor’s (DOL) overtime rule by a Texas federal court. The DOL announced on June 7, 2017, it will be releasing a request for information on the overtime rule in the coming weeks. The DOL has not stated whether it will continue to appeal the federal court’s decision, but we anticipate the request for information is part of the DOL’s decision-making process.
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| More Information: Plano Chamber of Commerce v. Perez (E.D. Tex.) |
| RICO |
NAM opposes RICO lawsuit against Abbott Labs and AbbVie: On June 12, 2017, the NAM filed an amicus brief in the 7th Circuit contending that pharmaceutical companies should not be subject to treble damage litigation under the Racketeer Influenced and Corrupt Organizations Act (RICO) for alleged misrepresentations to doctors of the efficacy of a prescription drug. Our brief argues that RICO liability requires a direct connection between misrepresentation and injury, and that there are too many complications between the company and the use of a drug to satisfy the directness requirement. Imposing liability in cases like this will chill medically important communications between manufacturers and physicians and open a lucrative avenue for litigation by third-party payors in the health care system.
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| More Information: Sidney Hillman Health Ctr. v. Abbott Labs., Inc. (7th Circuit) |
| Taxation |
Supreme Court declines to review Michigan’s unfair tax law: In 2016, the MCLA filed an amicus brief in five cases on appeal to the U.S. Supreme Court challenging Michigan’s repeal of a tax provision that had allowed multistate companies to use a standard three-factor formula to compute taxes. The formula, part of what we argue is a binding agreement under the Multistate Tax Compact, prevents double taxation and provides a reliable tax structure. Moreover, Michigan’s changes reached back almost seven years, demanding more than $1 billion in extra taxes from multistate companies. Despite our brief urging review, on May 22, 2017, the U.S. Supreme Court declined to hear the appeal and left the state law in place.
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| More Information: Sonoco Prods. Co. v. Dep’t. of Treasury, Michigan (U.S. Supreme Court) |
Questions or Comments?
Contact Senior Vice President & General Counsel Linda Kelly at [email protected].