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Patrick Forrest

Manufacturers’ Regulatory Litigation Update

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

Over the past eight years, manufacturers have been forced to contend with a series of burdensome and damaging regulations, from unwise union rules, to counterproductive worker safety policies, to reckless environmental plans. The National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action (MCLA) has fought back in court, using our expertise and the power of our legal community to stop harmful actions and make important progress. And today, it’s clear that we’re not only succeeding but also inspiring others in Washington to take up the charge.

Promising Developments

Last week, the Trump administration released its Unified Agenda of Regulatory and Deregulatory Actions, which provided an up-to-date forecast on the work that administrative agencies are doing to reform regulations across the government. The news was encouraging for manufacturers. On a variety of fronts, the administration is marching in lockstep with the NAM’s advocacy efforts. And at three agencies in particular—the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA)—the Trump administration is tackling issues that the MCLA has long been working to address in court.

DOL

At the DOL, we’re seeing increased efforts to enact smart, commonsense reform along the lines we’ve advocated. Leadership is expected to review issues around the “persuader” rule, which required employers to report to the DOL anytime they consulted with labor relations experts on union-organization efforts—a clear violation of manufacturers’ constitutional rights and the subject of the NAM’s successful litigation in Associated Builders & Contractors v. Perez. We expect the DOL to publish a Request for Information about the expensive and problematic “overtime” rule, which the NAM challenged and stopped in Plano Chamber of Commerce v. Perez—a case that the DOL examined before deciding to take action. In both cases, the administration is building on the MCLA’s efforts in court.

OSHA

We’re also hearing promising news from OSHA. In the coming days, the agency will issue a proposal to reconsider, revise or remove provisions of the “injury and illness rule”—a rule that harms workplace safety by restricting employer safety incentive programs and drug testing programs. OSHA will also be addressing beryllium exposure standards that apply to construction and shipyard operations in a move that we hope will pave the way for similar work on fair beryllium regulations for manufacturing. And while the OSHA agenda doesn’t address the new “silica” rule, which halves the permissible exposure limit and mandates costly engineering controls, we’re optimistic that OSHA will consider reasonable modifications to the current silica standard. Addressing these issues, which the NAM has litigated in Texo ABC/AGC, Inc. v. Perez, Airborne v. OSHA and North America’s Bldg. Trades Unions v. OSHA, will make workers safer, processes more efficient and manufacturers better able to succeed and thrive.

EPA

Finally, the EPA is making significant strides in rolling back harmful regulations and streamlining unruly processes. The EPA, along with the Department of Defense, intends to review and rescind or replace the “Waters of the United States” rule, wading through issues that the NAM has litigated in American Farm Bureau Federation v. EPA, Murray Energy Corp. v. EPA and NAM v. U.S. Dep’t of Defense. The EPA has also proposed to withdraw the Clean Power Plan—a set of regulations that the NAM challenged in West Virginia v. EPA—and to address implementation requirements for the 2015 National Ambient Air Quality Standard for ozone, which the NAM argued in Murray Energy Corp. v. EPA would be difficult and expensive for manufacturers.

The Ongoing Fight

These are important strides forward. At the NAM, we’re excited about the progress we’ve made, and we’re pleased to have partners in the Trump administration who are dedicated to our priorities. But we’re not about to get complacent or rest on our laurels. It will be up to manufacturers and the MCLA to defend the progress we’re making when outside organizations and interest groups try to stand in our way by launching litigation of their own. We must be ready—and well-funded—for that fight. We intend to redouble our efforts in court—to protect your interests, to advance your priorities and to stand up for manufacturers across America.

NAM Urges Supreme Court to Review False Claims Act Pleading Standards

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

The ManufacturersCenter for Legal Action filed an amicus brief on June 22 urging the U.S. Supreme Court to consider a decision out of the 3rd Circuit involving qui tam pleading standards for the False Claims Act (FCA). The standard set by the 3rd Circuit is the most lenient of those adopted and would require the pleading party to show nothing more than an opportunity for fraud by a business. Such a standard would lead to increased litigation and abuse of the FCA harming businesses, their employees, their owners, shareholders, the public at large and even the government. 

In the underlying case, Customs Fraud Investigations, LLC (CFI) filed a reverse false claim against Victaulic Co. as a qui tam relator. A reverse false claim occurs when a party creates false records or statements to avoid payment obligations to the government, and a qui tam relator is a private person bringing FCA actions on behalf of the government with the potential benefit of a monetary award. Pleading standards for a qui tam relator’s complaint are governed by Rule 9(b), which requires a party pleading fraud to “state with particularity the circumstances constituting fraud. . . ” However, in this case, the 3rd Circuit established an overly lenient pleading standard that effectively eliminates Rule 9(b)’s particularity requirement and allowed CFI’s fraud claims, largely based on reviews of eBay image postings, to proceed. By setting a standard that requires relators show nothing more than the opportunity for fraud, the 3rd Circuit allows Victaulic to be subject to an unfounded lawsuit and opens other businesses up to the same potential harms. 

The National Association of Manufacturers argued that resolving the circuit split and establishing a strict, consistent pleading standard would ensure appropriate application of Rule 9(b) and prevent speculation and forum shopping by outsider relatorsrelators with no insider knowledge of the company. Strict enforcement of Rule 9(b) ensures that outsider relators will not use the system to their advantage in pleading speculation, not facts, and helping themselves to discovery that is costly to businesses, the judiciary and the government.

The 3rd Circuit reasoned in its opinion that concerns regarding discovery could be mitigated through “controlled discovery” in which the courts use tools and discretion to curb discovery abuse; however, these tools cannot take the place of Rule 9(b) requirements. Controlled discovery can still be burdensome, and utilization of controlled discovery in place of dismissal principally violates pleading requirements in general. Furthermore, in qui tam cases, before a court decides on a Rule 9(b) issue, the government has already conducted its own statutorily-mandated investigation of the complaint using “discovery tools” to decide whether to intervene in the action. In cases where the government has declined to intervene following the conclusion of its own investigation of a business, the court should consider it inappropriate to apply the relaxed Rule 9(b) standard.     

The courts are expected to act as gatekeepers preventing non-particularized and meritless claims from proceeding; unfortunately, the courts cannot effectively fulfill this role under toothless standards like that established by the 3rd Circuit. The Supreme Court should end the confusion within the circuit courts and decide the appropriate Rule 9(b) standard as applied to the FCA. 

 

High Court Limits Class-Action Suits in Microsoft Ruling

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

The U.S. Supreme Court’s June 12 ruling in Microsoft v. Baker is an important victory for manufacturers because it could prevent certain types of class-action lawsuits and expensive piecemeal litigation.

In the underlying case, owners of Microsoft’s Xbox 360 sought to file a class-action lawsuit alleging a design defect in the game console. The District Court’s order said that class allegations could not be included in the complaint against Microsoft, and the 9th Circuit Court of Appeals denied the plaintiffs’ request to appeal that order. This meant that while Xbox 360 owners could not bring a class-action suit against Microsoft, they were free to pursue their individual claims. The Xbox owners decided to voluntarily dismiss their claims against Microsoft with prejudice and only challenge the District Court’s order that prevented them from pursuing a class-action suit.

The 9th Circuit Court of Appeals ruled that it had jurisdiction to hear the appeal challenging the striking of class allegations even though the order from the District Court was not a final decision by a lower court, as understood by Congress. As a result, the case was dismissed, effectively eliminating a controversy.

Congress granted federal courts of appeal authority to review a lower court’s decision when that decision was final. Said another way, Congress did not give the federal courts the authority to hear all disputed decisions of lower courts. The National Association of Manufacturers (NAM) has long argued for the faithful adherence to this general rule in order to avoid a backlog of piecemeal litigation at the federal courts on every matter taken up by lower courts. The NAM’s Legal Center filed amicus briefs in this matter urging the Court to affirm longstanding congressional intent.

The Supreme Court agreed, and Justice Ruth Bader Ginsberg in her majority opinion stated, “Congress chose the rulemaking process to settle the matter, and the rulemakers did so by adopting Rule 23(f )’s evenhanded prescription. It is not the prerogative of litigants or federal courts to disturb that settlement.” Furthermore, Ginsburg explained that a plaintiff could not transform an order into a final judgment simply by dismissing his or her claims with prejudice.

The Supreme Court’s ruling is exactly what the Legal Center called on the Court to do in its briefs: It preserves adherence to jurisdictional statutes enacted by Congress and prevents the development of multiple, piecemeal appeals from a single district court proceeding. We applaud Microsoft for fighting this case in the High Court and helping to preserve efficiency in the court system.

Obama’s Regulations in a Trump Presidency

By | Manufacturers’ Center for Legal Action, Regulations, Shopfloor Legal, Shopfloor Main | No Comments

President Barack Obama has relied on, and expanded, the power of the administrative state by making substantial use of both executive orders and presidential memoranda to achieve policy objectives. Executive orders are appealing to any president because they can be quietly and quickly implemented without hearings, votes or substantive public feedback. President Obama has been direct in favoring this approach, stating, “We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the kind of help they need. I’ve got a pen, and I’ve got a phone.”

The National Association of Manufacturers (NAM) ramped up its litigation in response to the tsunami of regulations coming out of the White House. In this final year of the president’s term, the regulatory spigot has only been turned up. The NAM is currently suing the federal government in 16 cases for overregulation.

The Manufacturers’ Center for Legal Action has argued in the courts that the president overstepped his constitutional power in issuing many memoranda and executive orders affecting labor and environmental law. However, a presidential legacy implemented by the pen can be destroyed by the pen. First, an executive order can be revoked by another executive order, and it is common for presidents to revoke some of their predecessors’ executive orders. Second, Congress can revoke an executive order through legislation. Third, an executive order can be revoked by a federal appeals court or the Supreme Court.

This year’s election will have a profound impact on future NAM litigation efforts to limit executive overregulation through the courts. President-elect Donald Trump will fill the Supreme Court vacancy created by Justice Antonin Scalia’s death and potentially two or more additional seats as justices retire. If multiple vacancies occur, the Supreme Court will shift from its previous makeup of five conservative and four liberal justices that shaped some of the nation’s most significant issues on social norms, individual rights, the balance of government powers and business and workplace matters. Several, if not all, of the cases in which the NAM is suing the government for executive overreach may end up in a newly configured Supreme Court, and the outcome of President Obama’s regulatory legacy will largely rest on the Supreme Court nominees of President-elect Trump.

The Supreme Court has not had a liberal majority since the retirement of Chief Justice Earl Warren in 1969, and during the past 48-year period, the Supreme Court has made a modest shift to curtail executive overreach. Without a majority conservative Supreme Court, many pro-business decisions on labor and environmental issues would likely not have been rendered. It is generally thought that President-elect Trump will support Supreme Court nominees who believe the Founders’ words in the Constitution mean what they say, not that the Constitution should be seen as a living document. Justices in this mold will likely not support broad deference to executive authority and agency actions. The issues at stake range from the ability of citizens to challenge regulations by administrative fiat to the ability of workers to unionize.

The morning after the election brought with it discussion of whether Democrats will filibuster the Trump administration’s Supreme Court nominees. The Senate confirmation process will offer a critical view into the Supreme Court’s future and the legacy of President Obama’s executive orders.

Unequal Justice Under Law: NAM Files Brief Challenging NLRB’s Permissive Discrimination

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

On September 2, the Manufacturers’ Center for Legal Action filed an amicus brief in the U.S. Court of Appeals for the Eight Circuit challenging a National Labor Relations Board (NLRB) decision forcing Cooper Tire & Rubber Company (Cooper) to reinstate an employee who used racial epithets toward a replacement worker while the employee was on the picket line. The NLRB’s decision overturned an arbitration decision finding that Cooper dismissed its employee for good cause. This decision does not align with existing federal law, forces manufacturers to execute a policy that leaves them open to civil liability and requires businesses to tolerate behavior antithetical to American values.

The NLRB’s decision to reinstate an employee who used racist speech does not follow federal law by violating Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1981. These laws prohibit discrimination and harassment on grounds such as race and allow for an employer to fire an employee in violation. The work environment should encourage openness and understanding of all employee backgrounds. Forcing a company to condone racist behavior violates other workers’ rights to a hostile-free workplace. Ultimately, this decision by the NLRB significantly diminishes an employer’s ability to cultivate an inclusive work environment, which hurts workers, productivity and profit.

Not only does this decision negatively impact the working environment, but it also forces manufacturers to accept conduct, which leaves them open to liability. Under federal law, when a racial statement is made directly to an employee, an employer can be liable if it knows about the statement and fails to take proper action. If the NLRB’s erroneous decision is upheld, employers in many instances will be forced to allow discrimination to continue, instead of firing employees for racial harassment. This would, therefore, require employers to follow a pro-discriminatory policy, exposing them to possible litigation and allegations of cultivating a hostile workplace environment.

This NLRB decision challenges American progress on issues of race and diversity in both business and culture. Employers should not be required to condone racism in the workplace. We are hopeful that the Eighth Circuit will understand the importance of overturning this discriminatory NLRB decision, which not only negatively impacts the way we conduct business but also the way we conduct ourselves.

Administration Shoehorns Modern Problems into Antiquated Laws

By | Briefly Legal, Manufacturers’ Center for Legal Action, Shopfloor Legal, Shopfloor Main | No Comments

The federal government is now routinely using laws passed before the invention of the fax machine to control dynamic information systems like cloud computing and broadband access. These efforts to regulate and police the innovation economy will loosen constitutional privacy protections and chill technological innovation.

For example, relying on the Electronic Communications Privacy Act of 1986, the Department of Justice has recently sought to search Microsoft customers’ e-mails. Microsoft has pushed back, alleging that the Justice Department’s orders violate its customers’ privacy and infringe on its right to free speech. Many of these demands prohibit Microsoft from informing customers that their information is being investigated.

Most laws governing government searches were written before the widespread use of digital communications. At that time, if the government wanted to execute a search warrant to look through one’s files, notice was necessary since a search would require entering a home or office to access documents. Now that many Internet users store their information in the cloud, rather than locally on their computers, the government can bypass notification of the customer by directly contacting providers such as Microsoft. Therefore, simply because the location of information has changed, users now experience different legal protections. Microsoft argues this is unconstitutional because Fourth Amendment protections on the reasonableness of searches should not discriminate based on how a citizen stores his or her information.

The privacy and free speech implications of the government’s actions have significant consequences for the greater business community and the innovation economy. When the government treats those who store their information at home differently than those who use the cloud, individuals are less inclined to use this potentially transformative new technology to protect their privacy. When individuals forgo cloud-computing services, innovative manufacturers will lose customers.

The National Association of Manufacturers will continue its fight to uphold proper constitutional protections and promote balanced and reasonable resolution through the courts.

Canada in Crosshairs for Promise Utility Doctrine at Investor Dispute Hearing

By | Manufacturers’ Center for Legal Action, Shopfloor Legal, Shopfloor Policy, Trade | No Comments

Co-authored by Linda Dempsey, Vice President of International Economic Affairs

Canada’s attempts to defend a questionable intellectual property approach have taken a hit in recent weeks as government experts faced scrutiny from a team of neutral international arbitrators, based on the official hearing transcripts released on August 3. These hearings are vitally important for a wide range of innovative manufacturing companies using patents or investing internationally.

During two weeks of International Court of Settlement for Investment Disputes (ICSID) hearings in late May and early June, Canadian officials and experts faced crossfire for attempts to defend Canada’s “promise utility doctrine.” This rule, which constitutes a “revolution” in Canadian patent law, was invented by their courts and rests on the concept that patents that do not fulfill their “promise”as arbitrarily construed by the courts often years after the patent was filedcan be ruled invalid, even if they meet all of the internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 25 patents that were invented to help millions of people suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions. Read More

Appeals Court Errs on Net Neutrality; NAM Will Press for Legal Fight in Higher Court

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By Patrick Forrest, vice president and deputy general counsel and Cedrick Dalluge, legal fellow, National Association of Manufacturers

On June 14, 2016, a federal appeals court ruled to uphold new Federal Communications Commission (FCC) regulatory action on “net neutrality” classifying broadband providers not as an information service, but as a telecommunications provider.

The FCC heavily relied on a Great Depressionera statute enacted long before the internet was created to create its rule. Congress in 1934 never intended its Communications Act to govern 21st-century internet operations. Rather than substantively analyzing the FCC’s rule, the court insulated itself by deferring to the agency.

The court also rejected the business communities’ argument that reclassification will undermine investment in broadband infrastructure. Ironically, the court relied on the FCC assertion that “major infrastructure providers have indicated that they will, in fact, continue to invest under the framework. Those same parties later walked away from those statements, but the court emphasized that the FCC’s conclusions don’t have to be “the ones that we would reach on our own,” they only have to be “reasonable, and the majority concluded they were.

Consequently, the court failed to conduct a reasonable analysis regarding the operational business impact this rule would have on broadband providers, creating an opening for the possible deterioration of services. Overregulation risks providers diverting money from the development of new networks and technologies, stifling investment in U.S. broadband.

In dissent, Judge Williams correctly found the FCC’s order violates basic principles of agency rule-making. Regarding reclassifying broadband services on the basis of the 1934 statute, Judge Williams writes that the FCC’s justification “fails for want of reasoned decision making.” Beyond that, in crafting its rule, the FCC relied on changed factual circumstances and weak policy decisions. Judge Williams’ grave concerns regarding this ruling, shared by the National Association of Manufacturers (NAM), demand greater consideration.

By handing down this ruling, the U.S. Court of Appeals for the D.C. Circuit dictated the future of internet use. In effect, the court allowed the FCC to usurp the legislative process to pursue an inefficient quick fix to a complicated issue.

The NAM, as a leader on this issue, will continue this fight. Likely the ultimate decision-making body will be the Supreme Court, and the NAM is committed to seeing this issue through to the end.

Court Upholds Industry Position on Requisite Harm to Initiate Litigation

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On May 16, 2016, the Supreme Court ruled in a 62 decision in favor of the NAM position in Spokeo, Inc. v. Robins. This case arose from an alleged statutory violation of the Fair Credit Reporting Act (FCRA). Spokeo published inaccurate information on its website that portrayed that the plaintiff, Robins, as having more education and a higher income than was true. Robins sued under the act for this error. This was a significant case for the business community that could have opened the litigation floodgates. The Ninth Circuit held that “the violation of a statutory right is usually a sufficient injury in fact to confer standing,” and that Robins could establish injury-in-fact because he alleged violations of “his statutory rights.”

The Supreme Court rejected the Ninth Circuit’s reasoning that particularization alone is enough to constitute injury-in-fact. Rather, the Supreme Court said to constitute injury-in-fact the harm must be both particularized (meaning that it must affect the plaintiff in a personal and individual way) and concrete (meaning it must be a de facto, real harm).

The Ninth Circuit erred by eliding over the separate concreteness inquiry, rendering its standing analysis incomplete.

The Supreme Court emphasized that concrete injuries need not necessarily be tangible, giving examples of injuries to free speech and free exercise. And it added that Congress plays an important role in elevating intangible harms to judicially redressable injuries. However, the Supreme Court said, “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” A plaintiff cannot simply allege a “bare procedural violation.” After all, a failure to provide the required notice under the FCRA might not cause any harm, because the information reported might be accurate. And even inaccurate information (for example, the Supreme Court said, listing an incorrect zip code) may not present any material risk of harm. The Supreme Court remanded the case to the Ninth Circuit to address whether the procedural violations of the FCRA alleged by Robins entail a degree of risk sufficient to meet the injury-in-fact concreteness requirement.

MCLA Helped Secure Another Win for Businesses and Manufacturers

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This week, the MCLA helped secure another win for the business community. The decision in DC, CCDC v. DOL, by the D.C. Circuit Court, applied commonsense reasoning to reject the Department of Labor’s unprecedented attempt to expand the scope of federal law applicable to public works into the private sector. The court confirmed that where a public entity is not party to a construction contract, a “public works” project will not be subject to Davis-Bacon wage regulation, unless the project meets at least one of two criteria: (i) construction with public funding, or (ii) ownership or operation by the government.

The ruling could encourage private developers to seek out further opportunities to lease land from government entities for cost-efficient construction and development of private enterprises, because the risk of being subject to increased wage costs is eliminated if the developers follow the project delivery method used for the CityCenterDC, in which the District was not a party to the construction contracts leased the land to private developers. That being said, there are other similar cases in the legal pipeline, and this decision may be appealed to the U.S. Supreme Court. Notably, the president’s nominee for the Supreme Court was on the panel to hear the case, but recused himself from this decision.

The MCLA will continue to advocate for manufacturers in the courts preventing radical expansion of federal regulations. To learn more about the MCLA, visit our website.