NCLC Business Alert

March 27, 2008

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In This Edition

NCLC News:

New York Times Profiles NCLC’s Supreme Court Practice
The New York Times Magazine of Sunday, March 16, 2008 prominently featured the National Chamber Litigation Center (NCLC) in its cover story on the U. S. Supreme Court. We appreciate being recognized for our role in helping to bring balance to the high court and in persuading the court to review more business cases.  We are also very grateful to have worked with so many extraordinary Supreme Court advocates who have successfully represented NCLC as amicus curiae in these cases over the years. 

Click here to read the full New York Times Magazine story. 

Recent Decisions:

Fourth Circuit Limits Sarbanes-Oxley Whistleblower Protection to Objectively Reasonable Suspicions of Shareholder Fraud
In Livingston v. Wyeth, Inc. the Fourth Circuit agreed with NCLC that Sarbanes-Oxley (SOX) “whistleblower protection” against retaliation applies only if the employee subjectively believes that the reported conduct may constitute fraud on shareholders, and if there is a reasonable, objective basis for suspecting fraud.  Livingston, the plaintiff, claimed that he had been terminated as retaliation for raising a concern whether Wyeth could comply with the timeline of a consent decree requiring Wyeth to implement a training program.  On March 24, 2008 the Fourth Circuit affirmed the lower court decision, rejecting Livingston’s claim because he failed to produce evidence that a reasonable employee could have believed that Wyeth’s activities constituted a violation of the securities laws. By limiting the application of SOX to preventing or exposing reasonable suspicions of shareholder fraud, this decision helps prevent the exploitation of SOX to second-guess an employer’s sound business decisions to terminate or otherwise discipline an employee.

Supreme Court Declines to Review Third Circuit Decision Permitting Employers to Coordinate Health Benefits Decisions with Medicare
The Supreme Court’s decision on March 24 to deny review of the Third Circuit decision in AARP v. Equal Employment Opportunity Commission preserves an important NCLC victory allowing companies to coordinate with Medicare to provide different health care benefits to employees who are eligible for Medicare.  By upholding an EEOC rule that exempts employers from liability under the Age Discrimination in Employment Act, the Third Circuit paved the way for employers to better manage and afford to provide adequate benefits for current and retiring employees.

Supreme Court Rejects Opportunity to Clarify ERISA “COLA” Rules for One-time Lump Sum Payments
On March 17, 2008 the Supreme Court declined to review the Seventh Circuit decision in Williams v. Rohm and Haas Pension Plan holding that defined benefit pension plans must provide cost-of-living adjustment (“COLA”) to plan participants who choose to receive their benefits in a one-time lump-sum distribution.  Although the Rohm and Haas pension plan explicitly excluded COLA from its definition of “accrued benefit,” the Seventh Circuit reasoned that COLA is a per se accrued benefit for participants who elect to receive monthly annuities.   NCLC argued that the Seventh Circuit’s decision contravenes the statutory language of ERISA and exacerbates the confusion among the courts regarding the distinction between accrued benefits and retirement-type subsidies.  NCLC also argued that the Seventh Circuit decision undermines sound retirement policy by eliminating an incentive for participants to choose monthly annuities instead of a lump-sum distribution.  The preference for lump-sum distributions increases the risk that plan sponsors will choose not to offer COLAs in the first place, in order to avoid subjecting plan sponsors to greater financial obligations than those that they originally assumed under the terms of a plan.

High Court Declines Review of Seventh Circuit Decision Favoring “Interest Arbitration”
On March 17, the Supreme Court rejected NCLC’s petition to review the Seventh Circuit case, Illinois Bell Telephone Co. v. International Brotherhood of Electrical Workers, Local 21, that judicially imposes “interest arbitration” into most collective bargaining agreements.  In this case, the union sought to compel the arbitration of a dispute regarding the company’s plans to implement new performance guidelines, even though the collective bargaining agreement (CBA) did not include a provision for arbitration of disputes over performance guidelines.  The Seventh Circuit held that the union could force arbitration of an interest not covered in the CBA because the review of performance guidelines was generally within the “zone of interests” of the CBA.  NCLC argued that although federal policy favors arbitration, courts should honor the contractually bargained-for arbitration limits included in a CBA. So-called “interest arbitration” subjects every action of an employer to challenge, undermining the stability and predictability that arbitration is intended to promote.

New Filings:

NCLC Petitions Ninth Circuit to Review Decision Permitting Suspicionless Seizure of Sensitive Electronic Data
On March 20, NCLC petitioned the Ninth Court to review en banc the decision by a three-judge panel in U.S. v. Comprehensive Commercial Drug Testing, Inc. that permitted the federal government to seize sensitive electronic data unrelated to a criminal investigation from companies that are not themselves the target of an investigation. As part of a criminal investigation into the Bay Area Lab Cooperative ("Balco") scandal involving the distribution of illegal steroids to certain Major League Baseball (MLB) players, the federal government seized from two private medical labs the medical records of hundreds of MLB players who were not targets of the investigation.  The Ninth Circuit reversed three lower court decisions and held that the government may seize “intermingled data for off-site review.”  NCLC argued that the Ninth Circuit rule disregards privacy and proprietary interests and will affect every employer who maintains sensitive or confidential information in an electronic format.  Although the government seized medical information in this case, the Ninth Circuit’s ruling would permit the government to seize without probable cause many other types of confidential information, including trade secrets, accounting records, and the personal information of innocent persons whose information is seized without notice. Moreover, unionized employers who collectively bargain over issues of employee drug testing would be seriously undermined in their ability to negotiate drug testing arrangements if there is no promise of confidentiality or anonymity in conducting such testing.

Amicus brief.

NCLC Urges Environmental Appeals Board to Reject Regulation of Carbon Dioxide Emissions from Electric Power Plants
At the request of the Environmental Appeals Board, on March 21, 2008 NCLC provided an amicus brief addressing the question whether the Supreme Court’s decision in Massachusetts v. EPA requires that the EPA regulate carbon dioxide emissions from stationary power sources.  In the case In re Deseret Power Electric Cooperative, the Sierra Club challenges an EPA decision to issue a “PSD” permit that would allow Deseret Power to construct a new coal-fired power plant.  NCLC argues that the Supreme Court’s decision addresses only the authority under the Clean Air Act to regulate emissions of carbon dioxide from new motor vehicles.  NCLC also argues that the sweeping expansion of Massachusetts v. EPA urged by Sierra Club would result in an unworkable regulatory regime that would tax the resources of the EPA and of American businesses. Individual, ad hoc rule-making by the Environmental Appeals Board would work a sea change in regulation under the Clean Air Act, imposing huge societal costs without successfully addressing the climate change problems suggested by the Sierra Club.

Amicus brief.

NCLC Defends Attorney-Client Privilege for Corporate Counsel in European Union
On March 19, NCLC sought permission to intervene (file an amicus brief) in an appeal before the European Court of Justice that will determine whether European Union laws protect the confidentiality of communications with corporate counsel.  The lower court rejected a claim that certain seized documents containing communications between management and in-house counsel are protected by attorney-client privilege.   In Akzo Nobel Chemicals Ltd. & Ackros Chemicals v. Commission, NCLC argues that if the European Union fails to protect in-house counsel attorney-client communications, then those communications could lose confidential status in the United States.  NCLC also argues that businesses will be less likely to seek legal advice from in-house counsel if those communications are not protected as confidential.  Failure to protect the attorney-client privilege would reduce compliance with the law and hinder the ability of businesses to proactively uncover and remedy wrongdoing.

Intervention request.

NCLC Challenges Certification of Largest Class Action in the History of the Americans with Disabilities Act
In Hohider v. UPS, NCLC requested that the Third Circuit reverse a district court order certifying a class of all current and former United Parcel Service (UPS) medical-released employees who subsequently were unable to return to work pursuant to UPS policies.  The questioned policies include an alleged policy requiring medically impaired employees to be “100% healed” before returning to work.  In its brief filed on March 17, NCLC argues that the class should be de-certified because the trial court failed to make a determination that the ADA claims, which require individualized proof, can be managed on a class-wide basis.  NCLC also argues that permitting the certification of a class action of this magnitude would significantly increase the pressure on employers to settle this and similar suits regardless of their merit.

Amicus brief.