NCLC Business Alert

June 13, 2008

Visit NCLC for a complete look at the news.

In This Edition

Upcoming Events:

NCLC's Conrad and Sarwal to Participate in Conference on Federal Preemption

On June 17, 2008, NCLC Executive Vice President, Robin Conrad, and General Litigation Counsel, Amar Sarwal, will participate in a conference hosted by the law firm McKenna Long & Aldridge LLP.  The conference will focus on the hotly debated subject of States' rights and federal preemption of state and local law.   The one-day program will bring together policy, legal, and government affairs experts to address the many sides of the federal vs. state debate. Registration is offered free of charge. 

Recent Decisions:

New Mexico Supreme Court Recertifies Multi-State Class Action

On June 12, 2008 the New Mexico Supreme Court reinstated a multi-state class action composed of members from thirteen different states, and held that the district court's decision to apply New Mexico law to the entire class was proper because there were no "actual conflicts" among the laws. In its brief in Ferrell v. Allstate Ins. Co., NCLC had urged the court to affirm the appellate court's decision not to certify the class because of the difficulties in applying the laws of thirteen states. NCLC also contended that New Mexico could become a magnet for more multistate class actions filed by the plaintiffs' bar if it veers from the federal and majority state practice to rigorously analyze all class action requirements.

Rehire Plans After a Workforce Reduction Can Trigger "Disparate Impact" Liability , Court Says

On June 10, 2008 the Eighth Circuit disagreed with NCLC in EEOC v. Allstate Ins. Co. and upheld a lower court ruling that Allstate's rehire policy implemented after a workforce reduction of its sales representatives was an "employment policy" subject to disparate impact analysis under the Age Discrimination in Employment Act (ADEA).  In its brief in the case, NCLC argued that the district court erroneously mischaracterized the case as one involving termination, rather than hiring, and wrongfully extended the disparate impact theory under the ADEA.

For the Third Time, High Court Agrees to Review Oregon Punitive Damages Award

On June 9, 2008 the U.S. Supreme Court agreed to review a decision by the Oregon Supreme Court upholding a $79.5 million punitive damages award against Philip Morris. In its brief for Philip Morris v. Williams (II), NCLC argued that the lower Oregon court disregarded the Supreme Court's decision in Philip Morris v. Williams (I), which remanded the case after holding that Oregon unconstitutionally permitted punitive damages to be based on harm to nonparties. Instead of applying the appropriate constitutional standard, the state court applied an "independent state law standard" to affirm the decision of the trial judge.

Supreme Court Rejects Opportunity to Address "New Economy" Issues Under FLSA

The U.S. Supreme Court denied review of Tyson Foods, Inc. v. DeAsencio, et al. on June 9, 2008.  NCLC had urged the Court to review the Third Circuit decision addressing the definition of "work" within the meaning of the Fair Labor Standards Act (FLSA).  The litigation over the "donning and doffing" policies of meat processing plants highlights an unresolved issue at the center of myriad other lawsuits affecting the "new economy" – what constitutes compensable "work" under the FLSA.  In its brief, NCLC argued that the Supreme Court should clarify that the definition of "work" does not encompass pre-schedule, non-exertive activities, such as booting up a computer.

Supreme Court Unanimously Rejects Attempt to Radically Expand False Claims Act

A unanimous Supreme Court agreed with NCLC on June 9, 2008 that the federal False Claims Act is limited to attempts to defraud the United States Treasury.  NCLC urged the Supreme Court to reverse the Sixth Circuit's holding in Allison Engine Co., et al. v. United States ex rel. Sanders, which stated that the False Claims Act, with its threat of treble damages, applies to private transactions where no false claim is actually pre-sented to the federal government.  NCLC argued that this holding misread the statutory language and would hinder the resolution of private commercial disputes without preventing fraud actually committed against the government by attaching liability to any transaction where a claim is paid with funds traceable to the federal government.

In RICO Cases Predicated on Fraud, Supreme Court Says No Need to Prove Reliance by the Plaintiff

Disagreeing with NCLC, the U.S. Supreme Court ruled on June 9, 2008 that no proof of reliance is necessary in a Racketeer Influenced and Corrupt Organizations Act ("RICO") case predicated on mail or wire fraud.  NCLC had filed a brief in Bridge, et al. v. Phoenix Bond & Indemnity arguing that RICO requires proof of reliance when the predicate conduct consists of mail fraud.  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.

Judge Issues Preliminary Injunction Against Employment Provisions of Oklahoma Immigration Law

On June 4, 2008, the U.S. District Court for the Western District of Oklahoma granted NCLC's request for a preliminary injunction to delay the enforcement of the employment-related provisions of an Oklahoma law immigration law. NCLC, along with other Oklahoma business groups, filed Chamber of Commerce, et al. v.  Henry, et al. challenging the constitutionality of the law and arguing that it interferes with federal law regulating the employment of unauthorized workers. The Oklahoma law requires employers doing business with the state to use the "Basic Pilot Program," the federal government's voluntary and error-riddled experimental program for verifying work eligibility.  The law also requires businesses to verify the work authorization status of any individual independent contractors to avoid state tax penalties, and allows discharged employees to bring discrimination claims against their employers if they can show that the employer knew or "should have known" another employee was unauthorized.  In its complaint,  NCLC challenges the Oklahoma statute as unconstitutional because it preempted by federal law—the Immigration Reform and Control Act—which provides a comprehensive plan prohibiting the employment of illegal immigrants in the United States.

Washington Supreme Court Will Weigh Retroactivity of Court's Earlier Adoption of Strict Liability

The Washington Supreme Court agreed on June 4, 2008 to consider Lunsford v. Saberhagen Holdings.  The Court will decide whether the Court's 1960 and 1975 decisions adopting strict product liability as to manufacturers and sellers, respectively, may be applied retroactively.  The appellate court held that strict liability retroactively applies to all litigants whose claims are not otherwise barred, including plaintiff's claim for as-bestos exposure in 1958.  In its brief, NCLC made clear that, in addition to contradicting relevant Washington Supreme Court precedent, the lower court's decision was troubling for products liability defendants in Washington courts.

High Court Declines to Review Political Speech Decision by Washington Supreme Court
 
On June 2, 2008, the U.S. Supreme Court rejected certiorari in Voters Education Committee, et al. v. Washington State Public Disclosure Commission, a case that would decide whether regulation of political speech that "supports or opposes" a candidate offends the First Amendment on vagueness grounds. The Washington Supreme Court upheld an enforcement action by the Washington Public Disclosure Commission (PDC) against the Voter's Education Committee (VEC) for failure to follow registration and disclosure requirements required by the Washington Fair Campaign Practices Act ("FCPA").  Under the PDC's application of the FCPA, VEC constituted a "political committee" subject to regulation because it "supports or opposes" a candidate.  NCLC argued that the FCPA violates the First Amendment because the statute's definition of "political committee" is both vague and overbroad, reaching well beyond the traditional understanding of a committee.  Additionally, upholding the Washington Supreme Court ruling would subject to onerous regulation a wide range of organizations that routinely interact with government officials at issue-based forums or discussions.

Supreme Court Says Employees May Sue for Retaliation Under § 1981

The Supreme Court disagreed with NCLC on May 27, 2008, holding in CBOCS West, Inc. v. Humphries that a retaliation claim exists under 42 USC § 1981. The Court's decision will allow employees to bypass the procedural safeguard for retaliation claims included under Title VII, which contains a specific cause of action for retaliation but also includes mandatory conciliation procedures and a shorter statute of limitations.  In its brief, NCLC argued that the Seventh circuit decision expands the scope of Section 1981 claims to include retaliation and undermines Title VII's comprehensive enforcement and conciliation scheme.

New Filings:

Florida Supreme Court Should Adopt Section Two of Third Restatement of Torts and Require Proof of a Reasonable Alternative Design, NCLC Argues

In Liggett Group, Inc. v. Davis, NCLC urged the Florida Supreme Court to adopt Section Two of the Third Restatement to require that a reasonable alternative design must be proven before a product can be determined to be defectively designed.  In its brief filed on June 13, 2008, NCLC argued that a decision imposing liability on the defendant in this case would have a wide-reaching impact on all makers and sellers of all inherently dangerous products, contrary to Florida law and to sound public policy.

Amicus brief.

Pennsylvania Supreme Court Should Recognize "State-of-the-Art" Defense in Design Defect Cases, NCLC Argues

In Bugosh v. IU North America, NCLC urged the Pennsylvania Supreme Court to adopt Section 2 of the Third Restatement of Torts, permitting state-of-the-art evidence to be admitted in strict liability cases premised on design defect.  Section Two clarifies that a manufacturer or distributor may only be liable for failure to warn of foreseeable risks.  In its brief filed on June 13, 2008, NCLC argued that the lower court's decision imposes liability on distributors who neither knew nor should have known about asbestos risks, and this decision likely will cause some innocent Pennsylvania businesses to join ranks of Pennsylvania businesses forced into bankruptcy by asbestos-related liabilities. NCLC argued that the incorporation of foreseeable risk principles of Section 2 would make the law fairer, and also would encourage rather than deter innovation. NCLC also argued that Section Two should be applied in this particular asbestos case.

California District Court Erroneously Certified Class of Home Mortgage Consultants, NCLC Argues to Ninth Circuit

On June 13, 2008, NCLC argued that the district court erroneously certified a nationwide class of home mortgage consultants. The plaintiffs in In re Wells Fargo claim Wells Fargo Home Mortgage (WFHM) misclassified them as exempt from overtime pay requirements. In its brief filed June 13, 2008, NCLC argued that class certification is inappropriate because a court will need to conduct individualized inquiries into each plaintiff's employment situation. Also, NCLC argued that the district court erroneously permitted the employees' claims to be styled as "opt out" claims under the California Competition Law in order to avoid the FLSA's express "opt in" requirement, allowing the plaintiffs to circumvent the FLSA two-year statute of limitations.

Washington Supreme Court Should Hold That Earlier Adoption of Strict Liabil-ity May Not Be Applied Retroactively

On June 10, 2008, NCLC moved to re-apply as an amicus in Lunsford v. Saberhagen Holdings, and urged the Washington Supreme Court to reject a lower court decision holding that the Court's 1960 and 1975 decisions adopting strict product liability as to manufacturers and sellers, respectively, may be applied retroactively.  In this case, the plaintiffs claimed harms from asbestos exposure in 1958, before the court adopted strict liability.  In its brief NCLC made clear that, in addition to contradicting relevant Washington Supreme Court precedent, the lower court's decision was troubling for other products liability defendants in Washington courts.

Motion to re-apply for amicus status.
 
Second Circuit Should Reconsider Approach to Corporate Criminal Respondeat Superior Liability, NCLC Argues

In U.S. v. Ionia Management S.A., NCLC urged the U.S. Court of Appeals for the Second Circuit to reject a district judge's jury instructions that would allow the corporate defendant to be held criminally liable for the actions of low-level employee, even if the employee acted in direct contravention of corporate policy.  In its brief filed on June 6, 2008, NCLC argued that the statutes under which the defendant was charged did not indicate that Congress intended to impute criminal liability on employers for their employees' misconduct. Moreover, NCLC explained, the Supreme Court has rejected application of respondeat superior in analogous cases.  NCLC also noted that the judge's respondeat superior standard would make it easier to impute liability in criminal settings than in civil settings. 

Amicus brief.

California Supreme Court Should Review Decision Permitting Local Govern-ments to "Contract Out" Enforcement Power Through Contingency Fee Arrangements, NCLC Argues

In County of Santa Clara v. Superior Court (Atlantic Richfield Co., et al.), NCLC urged the California Supreme Court to bar local governments' use of contingency fee arrangements with private counsel to enforce the government's interests.  In this lead paint public nuisance case, the government retained private counsel to litigate on behalf of the government with the promise of a share of the recovery.  In its brief filed on June 2, 2008, NCLC explained that permitting a government to "contract out" its enforcement power to private attorneys could lead to prosecution of government lawsuits on the basis of profitability rather than to further the public interest.

Amicus brief.

NCLC Urges High Court to Rule that Drug Labeling Lawsuits Are Impliedly Preempted

NCLC urged the Supreme Court to reject the Vermont Supreme Court's erroneous decision to permit the plaintiff's failure to warn lawsuit to proceed even though the FDA had approved of the relevant drug labeling.  In its brief filed June 3, 2008 for Wyeth v. Levine, NCLC explained that state "failure to warn" lawsuits interfere with the capacity of the FDA to enforce meaningful drug labeling.

Amicus brief.

Governmental Entity Should Not Conceal the Existence of Parallel Criminal Investigation, NCLC Argues

On May 29, 2008, NCLC urged the Ninth Circuit to decide en banc whether and to what extent a governmental entity can actively conceal the existence of a parallel criminal investigation.  In U.S. v. Stringer, et al., the Securities and Exchange Commission (SEC) intentionally shielded from the defendant its knowledge that criminal investigations had already been initiated against the defendant, and that the SEC had already shared information with the prosecutors.  NCLC argued that defendants are entitled to be made aware of the existence of parallel civil and criminal investigations.  Because civil and criminal investigators share information, secret parallel criminal investigations increase the risk that defendants will share information in a civil proceeding that could be prejudicial in a criminal proceeding. NCLC argued that the appeals court's decision will encourage government entities to tactically conceal the existence of criminal proceedings.  The fear of secret criminal proceedings will dissuade defendants from cooperating in civil proceedings, undermining the enforcement capabilities of government entities.  NCLC also argued that the decision contradicts prior Supreme Court precedent in United States v. Kordel.

Amicus brief.

NCLC Asks Appellate Court to Review New Ozone Regulations

As a member of a coalition of trade associations filing in Ozone NAAQS Litigation Group, et al. v. U.S. EPA, NCLC petitioned the U.S. Court of Appeals on May 27, 2008 to review new ozone regulations promulgated by the EPA.  NCLC believes that the preexisting regulations were sufficient to safeguard against risks to public health and that the EPA has not identified any reliable scientific evidence since the promulgation of the prior rules suggesting otherwise.  Moreover, the EPA acted arbitrarily and capriciously when it did not take into account the effects of cross-border pollution.

Petition for review.