NCLC Business Alert

February 26, 2008

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In This Edition

News:

NCLC's Moot Court Program

NCLC hosted a moot court in Exxon Shipping Co. v. Baker on February 24, 2008, a case before the Supreme Court addressing whether maritime law permits a $2.5 billion dollar punitive damage judgment for conduct leading to the Exxon Valdez incident.  Oral argument is scheduled for Wednesday, February 27, 2008.

NCLC hosted a moot court in Allison Engine Co., et al. v. United States ex rel. Sanders on February 19, 2008, a case before the Supreme Court addressing whether the False Claims Act, with its threat of treble damages, applies to private transactions where no false claim is actually presented to the federal government.  Oral argument is scheduled for February 26, 2008.

Spriggs & Hollingsworth to host 20th Annual Litigation Defense Seminar at US Chamber
On April 8-9 the law firm of Spriggs & Hollingsworth will hold its 20th annual Seminar on Toxic Torts & Pharmaceutical Litigation Defense in the U.S. Chamber's Hall of Flags.  This seminar series, to be held at the Chamber for the fourth consecutive year, is the longest continually running event of its kind and has attracted more than 800 in-house counsels.  This invitation-only event is offered at no cost to in-house corporate counsel.  For more information, please visit http://www.spriggs.com/seminars/index.cfm. 

Recent Decisions:

Court Remands Age Discrimination Case Involving Admission of Non Party Evidence
On February 26, 2008, in Sprint/United Management Co. v. Mendelsohn, the Supreme Court overturned a Tenth Circuit ruling on how courts are to treat "me too" evidence — workplace discrimination testimony by workers other than the one raising a job bias claim.  The high court held that the Tenth Circuit erroneously assessed the relevance of testimony of nonparty employees who alleged age discrimination in an individual disparate treatment case, and conducted its own balancing of probative value and potential prejudicial effect of such evidence, instead of allowing the district court to make that determination.  In its brief, NCLC pointed out the distinction between disparate treatment and disparate impact cases, and argued that claims of discrimination by employees other than the plaintiff are irrelevant and unfairly prejudicial in disparate treatment cases.

High Court Declines to Review Constitutionality of "Reverse Bifurcation" Practice
On February 25, 2008, the Supreme Court declined to grant review of West Virginia's practice of requiring juries to assess punitive damages before determining liability or compensatory damages ("reverse bifurcation").  In Phillip Morris USA, Inc., et al. v. Accord, et al., NCLC contended that this case presents this Court with a valuable opportunity to clarify and enforce the limitations placed by the Due Process Clause of the Fourteenth Amendment on the authority of state courts to abandon traditional, time-honored safeguards historically observed in the conduct of civil litigation.

Second Circuit Affirms Dismissal of Alien Tort Statute Claim
On February 22, 2008, the Second Circuit upheld a district court's dismissal of claims brought by Vietnam nationals against U.S. corporations under the Alien Tort Statute (ATS) for harm suffered from the defoliant Agent Orange during the Vietnam War.  The district judge reached the right result in dismissing the cases, but improperly opined on corporate liability under ATS and time limits for filing suits inconsistent with the Supreme Court's opinion in Sosa v. Alvarez-Machain.  Because the plaintiffs cannot find their cause of action in international law or federal statutory law, they have asked U.S. courts to create a federal common-law cause of action for damages. NCLC noted in its brief that ATS lawsuits have the potential to cause diplomatic friction between governments, as well as stifle trade and foreign investment.

Ohio Supreme Court Affirms Constitutionality of Ohio Tort Reform Law
In Groch, et al. v. General Motors Corp., the Ohio Supreme Court on February 21, 2008 rejected the plaintiffs' bar's latest attempt to undo Ohio's much-needed enactment of tort reform. The plaintiffs in this case contended that the legislature invaded the province of the judiciary by modifying common law by statute. However, as NCLC explained in its brief by canvassing 18th century reception statutes, the legislature merely delegated the power to create tort law to the judiciary; it did not in any way relinquish its authority to vacate that delegation or to override judge-made common law.

Court Holds that the Federal Arbitration Act Preempts California Talent Agents Act
On February 20, 2008, in Preston v. Ferrer, the Supreme Court clarified that its decision in Buckeye Check Cashing v. Cardegna applies with equal force to state administrative agencies' decisions about contract validity when the contract includes an arbitration provision.  In Buckeye Check Cashing, the Court relied on well-established precedent to conclude that arbitrators - not courts - are empowered by the Federal Arbitration Act to resolve issues of contract validity when the validity of the arbitration provision itself is not at issue.  In this case, the state trial court held that, under California law, petitioner must first exhaust administrative remedies with the California Labor Commissioner before seeking relief from an arbitrator.  In its brief, NCLC argued that the FAA preempts California law and that decisions about contract validity should be made by arbitrators in the first instance.

High Court Grants Federal Preemption in State Tort Law Case
On February 20, 2008, in Riegel v. Medtronic, Inc., the Supreme Court concluded that the Medical Device Amendments to the Food, Drug and Cosmetic Act preempts state law personal injury lawsuits where the device in question received premarket approval.  In this case, the plaintiff's husband died after a balloon catheter manufactured by the defendant ruptured during an angioplasty.  Because the catheter had been approved by the Food and Drug Administration ("FDA") pursuant to a rigorous premarket approval process, NCLC contended that personal injury lawsuits, which impose regulatory-like burdens of their own, conflicted with the considered judgment of the FDA and should be preempted.

Supreme Court Reaffirms Federal Preemption of Local Motor Carrier Regulation
On February 20, 2008, the Supreme Court affirmed the First Circuit's determination in New Hampshire Motor Transport Association v. Rowe that Maine's effort to regulate motor carrier traffic where it involved the unknowing transport of tobacco products is preempted by the federal Motor Carrier Act and the Federal Aviation Administration Authorization Act. In its brief, NCLC stressed that motor carriers should not be required to deal with a patchwork of state regulations and that Congress addressed this concern by enacting uniform national regulation.

Supreme Court Allows for Individual Plan Relief under ERISA
On February 20, 2008, in LaRue v. DeWolff, Boberg & Associates, Inc., the Supreme Court disagreed with NCLC holding that a participant in a defined contribution pension plan may sue a fiduciary under ERISA when the claim is that the fiduciary breach caused an individual loss to his 401(k) plan account.  The Court did not address the second issue in the case: whether an action by a plan participant against a fiduciary to recover losses caused by a breach of duty seeks "equitable relief" for purposes of ERISA Section 502(a)(3).  In its brief, NCLC argued that judicial expansion of ERISA remedies beyond what Congress intended would encourage more litigation, and impose unpredictable costs on employers and other plan sponsors.

Ninth Circuit To Review Class Certification Involving Overtime Claims in California
As urged by NCLC, on February 19, 2008, in Mevorah, et al. v. Wells Fargo Home Mortgage, the Ninth Circuit granted immediate review of a class certification of  nationwide litigation brought by home mortgage consultants. The plaintiffs in this case sued under California Labor Code and the Unfair Competition Law ("UCL"), based on a violation of the federal Fair Labor Standards Act ("FLSA").  By alleging claims as violations of the UCL, plaintiffs are able to circumvent the FLSA two-year statute of limitations and claim a four-year period.  Likewise, because the UCL is a California statute, the district court certified the case as a Rule 23 opt-out California class action instead of a FLSA opt-in collective action. In its brief, NCLC argued that the Ninth Circuit must immediately address the district court's holding because lower courts need clarity, and erroneous class certification decisions impose unique and unwarranted burdens on litigants, employers, courts and society.

California Supreme Court Adopts Continuous Shareholder Doctrine
On February 14, 2008, the California Supreme Court made clear that plaintiffs who file shareholder derivative actions must remain shareholders during the pendency of the litigation, a doctrine known as the continuous shareholder doctrine.  NCLC filed a brief in Grosset v. Wenaas encouraging the California Supreme Court to reaffirm the internal affairs doctrine but the Court declined to reach that issue.  NCLC explained in its brief that multi-state corporations require clarity as to the law which will govern the relationships between the corporate entity and its officers and directors.  In this case, relying on California law, a former shareholder has filed a derivative action against officers and directors of a Delaware corporation.  In its brief, NCLC underscored that the internal affairs doctrine (which looks to the state of incorporation for the substantive law governing a dispute) gives effect to the choices made by both the corporation in its choice of location for incorporation and the state of incorporation in its decisions about the content of its law.

New Filings:

NCLC Urges Court to Grant Review to Consider Federal Jurisdiction over Federal Tax Controversies
On February 22, 2008, NCLC urged the Supreme Court to review whether a state court case arising out of allegations that the defendant improperly prepared a Form 1099 can be properly removed to federal court.  In Centerior Energy Corp., et al. v. Mikulski, the Sixth Circuit concluded that the question of whether the Form 1099 was improperly prepared—while raising federal issues—was not substantial and therefore rejected the availability of federal jurisdiction.  In its brief, NCLC argued that the Sixth Circuit misread Supreme Court precedent to the detriment of federal taxpayers, who deserve the uniform application of federal law that federal jurisdiction promises.

Amicus brief.

NCLC Urges the Supreme Court to Consider State Sovereign Immunity in Patent Context
On February 22, 2008, NCLC urged the Supreme Court to review in Biomedical Patent Management Corp. v. California Department of Health Services to consider whether a state waives its sovereign immunity against the filing of patent infringement cases against the state when the state itself has filed numerous patent infringement cases in federal court.  In its brief, NCLC noted the incongruity between permitting a state to invoke the federal forum repeatedly to protect its patents but resisting the federal forum when accused of patent infringement.  NCLC made clear that prior Supreme Court precedent should not upset the careful balance set by Congress in patent litigation when states repeatedly make use of federal courts to assert their rights in other patent infringement cases.

Amicus brief.

NCLC Urges Court to Require Reliance in RICO Case
On February 21, 2008, NCLC filed a brief in Bridge, et al. v. Phoenix Bond & Indemnity, arguing that the Racketeer Influenced and Corrupt Organizations Act ("RICO") requires proof of reliance when the predicate conduct consists of mail fraud.  In its brief, NCLC further argued that RICO was not intended to be a private attorneys general statute where individuals could seek to combat fraud against the government and urged the Court to require a specific showing that the plaintiff - rather than a third-party - relied on the defendant's fraudulent behavior.

Amicus brief.

NCLC Urges Court to Reject Liability for Secondary Exposure to Asbestos
Raising the specter of almost limitless liability, NCLC urged the Sixth Circuit on February 21, 2008 to reject finding liability under Kentucky law on the part of employers for secondary exposure to asbestos.  In Martin v. Cincinnati Gas and Elec. Co., et al., NCLC canvassed the asbestos litigation crisis and the plaintiffs' bar's never-ending search for a solvent bystander.  Secondary exposure has become the new front in the asbestos plaintiffs' bar's assault on American industry.  In response, NCLC has filed briefs in courts across the country urging them to maintain traditional understandings of duty and foreseeability in tort law.

Amicus brief.

NCLC Urges Court to Reject Retroactive Application of Judicial Precedent
In Dicenzo v. A-Best Products Co., Inc., NCLC urged the Ohio Supreme Court on February 21, 2008 to confirm that its 1966 decision providing for strict liability for asbestos manufacturers did not apply—at that point, without development or precedent—to suppliers of asbestos as well.  The Ohio Supreme Court did not formally extended strict liability to suppliers until 1977.  NCLC argued in its brief that 1977, not 1966, should be considered the starting point for such liability.  The intermediate appellate court disagreed and thereby placed small and medium sized businesses in Ohio in jeopardy of being sued for conduct that occurred over thirty years ago.

Amicus brief.

NCLC Urges Court to Uphold Outside Sales Exemption From Overtime Pay for Pharmaceutical Sales Representatives
On February 20, 2008, in Barnick v. Wyeth, et al. and D'Este v. Bayer Corporation, NCLC urged the Ninth Circuit to affirm district court decisions holding that pharmaceutical sales representatives were exempt under federal and California's mandatory overtime laws as  outside salespersons.  In its briefs, NCLC argued that the statutory definition of "sales" was intended to be flexible and broadly applied and the sales model used by the pharmaceutical industry fits comfortably within the definition of "outside sales."

Amicus brief in Barnick.  Amicus brief in D'Este.  

NCLC Urges Supreme Court to Grant Review of Aiding and Abetting Liability under the Alien Tort Statute
On February 11, 2008, NCLC urged the Supreme Court to review the Second Circuit's erroneous decision in American Isuzu Motors, et al. v. Ntsebeza to permit plaintiffs to hold liable—via the Alien Tort Statute—dozens of leading American and foreign companies for aiding and abetting South African apartheid.  During the 1980s, the political branches of the United States government settled on a policy of constructive engagement with South Africa in the hopes of spurring on political change.  This lawsuit contravenes that policy and further undermines the South African government's own efforts at reconciliation.  Underscoring the lack of clarity for American business engaged in foreign trade, NCLC made clear that whether the Alien Tort Statute provides for aiding and abetting liability is vitally important to the American business community and therefore deserves immediate review.

Amicus brief.