The Center News: February 2018

Court Allows State Antitrust Suit Against GSK: Over objections from the NAM, the U.S. Court of Appeals for the 3rd Circuit ruled that Louisiana could file a lawsuit against GlaxoSmithKline (GSK) even though the state had already received benefits from a separate class action—in which it was a class member—on the same issues. The NAM argued that Louisiana was double-dipping in a class-action context, and we supported the certainty that comes from final settlement agreements. Unfortunately, the court found the state had not waived its sovereign immunity and could sue GSK despite being included in the previous settlement agreement. This will prolong class-action litigation and make settlements more difficult when states are among those that can file claims against manufacturers.

NAM Files Motion in 2nd Circuit Supporting TSCA:On February 5, the NAM, along with the American Chemistry Council, filed a motion to intervene in Natural Resources Defense Council v. EPA in the 2nd Circuit Court of Appeals, supporting the Environmental Protection Agency’s (EPA) new regulations on chemicals under the updated Toxic Substances Control Act (TSCA). The Natural Resources Defense Council (NRDC) claims that the new standards put consumers at risk of harmful exposure. The NRDC is challenging Section 5 of the TSCA, which deals with the risk assessment standard for significant new use rules for chemicals and could potentially hinder approvals of new uses of chemicals. The NAM is moving to intervene on behalf of the EPA to ensure it retains proper standards that protect the interests of chemical manufacturers and users. This is the fifth TSCA lawsuit, and the NAM is also involved in the TSCA inventory reset litigation.

NAM Opposes “Conduit Theory” That Would Expand EPA Jurisdiction Under Clean Water Act: The NAM filed an amicus brief on February 7 in the U.S. Court of Appeals for the 6th Circuit in a case involving the “conduit theory” of liability under the Clean Water Act. Under that theory, any pollutants released to dry land or underground that might seep into groundwater and then to nearby surface waters are an illegal “discharge” under the Clean Water Act. This broad interpretation goes far beyond the scope and intent of the Clean Water Act. It duplicates other environmental statutes focused on land pollution, would be impossible to implement and would impose incalculable liability risk on manufacturers and other regulated industries. The NAM’s amicus brief argues against this overbroad theory of liability.

Ongoing Activity in WOTUS Litigation: On February 6, the EPA and U.S. Army Corps of Engineers published a final rule that adds an “applicability date” to the Obama administration’s 2015 “Waters of the United States” (WOTUS) rule. The applicability date rule delays the effectiveness of the 2015 WOTUS rule until February 6, 2020. That two-year delay is good news for manufacturers and other regulated industries because it means the 2015 WOTUS rule remains ineffective while the EPA and the Corps develop a replacement rule. Immediately upon promulgation of the applicability date rule, however, environmental groups and left-leaning states filed lawsuits in federal district courts to challenge the delay. The NAM has moved to intervene in those cases to help defend the applicability date rule. As an added layer of protection to help ensure the 2015 WOTUS rule remains ineffective, the NAM’s litigation coalition is seeking a nationwide injunction against enforcement of the 2015 WOTUS rule. We filed our final brief on that argument on February 7, and the court held a hearing on the arguments on February 22. A decision could come in the next few weeks.

State Vetoes of Interstate Natural Gas Pipelines: On February 20, the NAM filed an amicus brief in the U.S. Supreme Court in support of the Constitution Pipeline Company’s authority to construct a new natural gas pipeline from Pennsylvania to New York. New York previously rejected the proposed pipeline because the state disagreed with the pipeline’s proposed route. However, routing decisions for natural gas pipelines come within the power of the Federal Energy Regulatory Commission (FERC), not states. Therefore, New York’s denial improperly encroaches on the FERC’s siting authority. The NAM’s amicus brief argues that the Supreme Court should hear this case because New York’s rejection violates the law and would harm manufacturers and other users of natural gas.

NAM Opposes “Conduit Theory” That Would Expand EPA Jurisdiction Under Clean Water Act: In 2016, the NAM filed an amicus brief in the 9th Circuit to reverse a district court decision that broadly interpreted the scope of liability under the Clean Water Act. The district court adopted an overly broad theory of liability known as the “conduit theory.” Under that theory, any pollutants released to dry land or underground that might seep into groundwater and then to nearby surface waters are an illegal “discharge” under the Clean Water Act. This broad interpretation goes far beyond the scope and intent of the Clean Water Act. It duplicates other environmental statutes focused on land pollution, would be impossible to implement and would impose incalculable liability risk on manufacturers and other regulated industries. On February 1, the 9th Circuit affirmed the district court’s decision and validated the conduit theory of liability. It is possible that the defendant will ask the Supreme Court to hear an appeal of this decision, at which point the NAM would likely file an amicus brief in support of that request. The NAM has also recently filed amicus briefs in other circuit courts to fight this overbroad theory of Clean Water Act liability.

NAM Filed Second Brief Supporting Exxon in 5th Circuit: In 2015, the NAM filed an amicus brief, along with other business groups, in the 5th Circuit supporting a federal judge’s decision not to impose an additional $642 million in penalties on ExxonMobil for various permit violations at its large Baytown, Texas, facility. On remand to the district court, the plaintiffs reduced their requested amount of penalties from $642 million to about $40 million, and the district judge awarded them about $20 million, prompting Exxon’s appeal back to the 5th Circuit. The plaintiffs also asked for an additional $6 million in fees. On January 19, 2018, the NAM and other leading business associations filed another amicus brief arguing that the Constitution and Clean Air Act limit citizen suits. We have asked the 5th Circuit to enforce the constitutional line that limits federal courts to deciding discrete cases and controversies and prevents them from acting as regulators or policymakers.

Standard of Proof Required to Show Adverse Health Effects from a Chemical Release: The NAM filed an amicus brief on February 9 in a significant case involving liability for chemical exposures. A group of individuals sued CITGO Petroleum, alleging adverse health effects resulting from a release of oil and gas from CITGO’s Lake Charles, Louisiana, refinery in 2006. The plaintiffs did not offer expert testimony establishing the levels of their exposure to oil or gas from the release or even that any exposure was possible given the time and location of their alleged exposures. Nevertheless, the presiding elected judge awarded each plaintiff damages because she found the plaintiffs’ claims to be “very credible.” CITGO has appealed to the Louisiana Supreme Court, where it argues that the plaintiffs were required to provide expert testimony regarding their alleged injuries. The NAM’s amicus brief explains the significant negative impacts of allowing plaintiffs to establish liability without the need to provide expert testimony.

Brief Supporting Microsoft and Data Privacy: On January 18, the NAM joined other associations in filing an amicus brief in the U.S. Supreme Court supporting Microsoft. This case is about a U.S. government warrant for access to email that Microsoft stores on a server in Ireland. The government is trying to use a search warrant issued under the Stored Communications Act to gain access to digital information within the control of a U.S.-based internet service provider but stored on a foreign server. If the government wins, it will have an immediate chilling effect on the ability of U.S. companies to compete internationally. Asserting extraterritorial reach with a U.S. warrant violates fundamental principles of international comity and the plain language of U.S. law.

How Federal Courts Should Interpret Split Decisions by the U.S. Supreme Court: This case involves the question of how federal courts should interpret “split decisions” from the U.S. Supreme Court where fewer than five justices agree on a common rationale for deciding the case. One example of such a decision of importance to manufacturers and other regulated industries is the Supreme Court’s 4–1–4 decision in Rapanos v. United States. Rapanos involves the scope of federal jurisdiction over WOTUS under the Clean Water Act. In that case, a four-justice plurality offered one rationale in support of the holding, a single justice concurred in the holding but offered a different rationale, and four justices dissented from the judgment of the court, providing yet another holding. Lower courts have taken divergent approaches to interpreting such split decisions, which has caused confusion and chaos under the Clean Water Act and numerous other federal statutes and programs.

Hughes provides an opportunity for the Supreme Court to clarify the governing standard for lower courts to interpret split decisions from the Supreme Court. That clarity will help make any new WOTUS rule less susceptible to legal challenge and will provide needed clarity for other laws and regulations, thereby fostering certainty for manufacturers. The NAM’s coalition amicus brief highlights Rapanos as the poster child for why the Supreme Court must resolve this judicial confusion and supplies the Supreme Court with arguments that will help protect the validity of the upcoming WOTUS rule.

"Joint-Employer" Case Remanded to NLRB: In 2016, the NAM filed an amicus brief in the D.C. Circuit supporting Browning-Ferris in an appeal from an adverse decision by the National Labor Relations Board (NLRB). The NLRB had made it easier to make an employer jointly liable for the acts of contractors, and the NAM argued that the longstanding “direct control” standard should remain the means for determining joint employment. Late last year, the NLRB returned to its longstanding policy, and the court sent this case back for further consideration in light of the new policy.

NAM Files Brief Supporting Whirlpool in Collective Bargaining Agreement Case: The NAM, along with the Chamber of Commerce, the American Benefits Council, the Business Roundtable and the Ohio Manufacturers’ Association, filed an amicus brief in the 6th Circuit encouraging the court to clarify its rulings on retirement health care benefits in collective bargaining agreements. In previous cases, the court has come to seemingly conflicting rulings despite the 2015 Supreme Court case Tackett, in which the Supreme Court held that, using ordinary contract principles, parties to collective bargaining agreements would not intend retiree benefits to vest for life if not explicitly stated in the agreement. The NAM is asking the 6th Circuit to properly uphold this standard in the Whirlpool case.

NAM Files Brief Supporting Pfizer in Antitrust Case: On December 22, 2017, the NAM, along with the American Tort Reform Association and the Pharmaceutical Research and Manufacturers of America, filed an amicus brief in the U.S. Supreme Court urging it to review a decision by the 3rd Circuit accusing Pfizer of making an illegal reverse payment to keep a generic version of the cholesterol drug Lipitor off the market. The Supreme Court’s ruling in FTC v. Actavis Inc. determined that antitrust scrutiny should apply only to “large” and “unjustified” reverse payments made to a patent challenger to persuade the challenger to stay out of the market, and the 3rd Circuit’s decision extends this scrutiny to “commonplace” and “traditional” settlements by focusing on just one aspect of the agreement. Pharmaceutical patent laws facilitate litigation between innovator and generic drug manufacturers, the ability of the parties to settle these disputes is highly beneficial to the public, and speculative antitrust challenges to them will needlessly chill such settlements. Our brief also urges the Supreme Court to provide greater guidance on what qualifies as an impermissible reverse payment and what facts plaintiffs must include in a complaint to plausibly allege anticompetitive conduct to subject a pharmaceutical patent settlement to antitrust scrutiny. Providing such direction will be helpful to manufacturers so that they can protect their intellectual property rights in ways consistent with the antitrust laws and avoid improper antitrust challenges to their patent settlements.

Court Upholds Silica Regulation: The D.C. Circuit rejected the NAM’s challenge to the Occupational Safety and Health Administration’s (OSHA) silica regulation. The rule substantially lowers the amount of airborne silica permissible in the workplace and will cause significant hardship on the industry. The NAM and a coalition of other organizations challenged the rule for economic and technological feasibility as well as its overall effectiveness. The court gave OSHA considerable deference in establishing a standard that does not “threaten massive dislocation to, or imperil the existence of, the industry.”

NAM Files Brief Supporting GSK in Tort Case: On January 29, the NAM joined others in an amicus brief supporting GSK in a tort case on appeal to the 7th Circuit. Plaintiffs prevailed in the lower court by asking it to hold GSK liable for tort damages since a generic product caused the plaintiff injury, even though GSK made the name brand of the drug and did not participate in the selling or manufacturing of the generic drug. On appeal, the NAM is asking the 7th Circuit to hold to the court’s longstanding belief that defendants cannot be held liable for tort damages for products they did not sell or manufacture, despite the plaintiff’s desire to create a carveout exception for the pharmaceutical industry.

NAM Opposes “Any Exposure” Theory in New York Asbestos Appeal: The NAM joined others in filing a brief to the New York Court of Appeals—the state’s highest court—asking the court to consider if automobile mechanics had been exposed to enough asbestos to cause injury rather than simply finding liability if there was “any exposure,” even if the exposure was too minimal to cause harm. Both the trial court and the appellate court agreed with the NAM on the issue on appeal.

NAM Files Brief Supporting ConAgra in Public Nuisance Case: The NAM filed a brief supporting ConAgra and others in a claim brought against them by 10 California cities holding them liable for harm potentially caused by lead paint sold decades ago. We asked the California Supreme Court to reconsider the holdings of the courts below and not hold the manufacturers liable if the plaintiffs cannot prove that the companies knew of the potential harm or that the lead paint they specifically sold caused the harm. The court denied review on February 14. ConAgra now has the opportunity to seek review by the U.S. Supreme Court.

Novartis Loses in California Supreme Court: The issue in this case is whether the brand-name manufacturer of a pharmaceutical drug that divested all ownership interest in the drug can be held liable for injuries caused years later by another manufacturer’s generic version of that drug. The California Supreme Court ruled that the brand-name drug manufacturer is liable, a ruling that may be highly detrimental not only to pharmaceutical companies but also to the manufacturing industry overall. The NAM had filed a brief urging the court not to circumvent fundamental principles of liability law.

NAM Filed Brief Supporting BNSF in Asbestos Take-Home Exposure Case: On February 12, the NAM, along with other groups, filed an amicus brief in the New Mexico Court of Appeals arguing that manufacturers should not owe a duty of care to people exposed to toxic substances outside of the workplace. Requiring premises owners to prevent off-site exposures to asbestos or other toxic substances in the workplace would lead to potentially limitless and indefinite liability. Furthermore, such a duty would substantially burden the remaining, but increasingly remote defendants, in decades-old asbestos litigation. Courts in many states have articulated strong public policy reasons for rejecting a duty, and, in fact, courts in states like New Mexico that do not focus on foreseeability as part of the duty analysis have uniformly rejected take-home asbestos exposure claims.

NAM Responds to Motion to Dismiss CPSC Lawsuit: In December 2017, the NAM and American Chemistry Council, along with local Texas groups, filed a challenge in the 5th Circuit Court of Appeals to the Consumer Product Safety Commission’s (CPSC) final rule on phthalates, which restricts the phthalate DINP. The CPSC’s decision to restrict DINP was misguided, scientifically inaccurate and the result of a deeply flawed process that fabricated rationales for a predetermined outcome. In reaction, the CPSC filed a motion to dismiss the lawsuit, arguing that the 5th Circuit has no jurisdiction to hear the case. The NAM filed a response to the motion on February 5, arguing that the statutory language that gives the CPSC the power to make such regulations clearly gives jurisdiction to the courts over such issues.