NCLC Business Alert

July 9, 2008

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In This Edition

Upcoming Events

Laboring for a Lawsuit? The Growth in Employment Litigation and What it Means for American Business
July 30, 2008, 1:30 p.m. - 5:00 p.m.

Examining the increasingly complex employment litigation environment faced by U.S. employers as they strive to comply with an alphabet soup of statutes and regulations, panelists will discuss the implications for business of developments in wage and hour-related litigation, as well as recent Supreme Court jurisprudence.

This event is cosponsored by the National Chamber Litigation Center, the U.S. Chamber's Institute for Legal Reform, the U.S. Chamber's Labor, Immigration, and Employee Benefits Division, and the National Chamber Foundation.  To register, please click here. 

Recent Decisions

Rhode Island Court Rejects Abusive Use of "Public Nuisance" Lawsuit in Lead Paint Cases

Agreeing with NCLC on July 1, 2008, the Rhode Island Supreme Court joined a chorus of other courts to hold that the public nuisance doctrine cannot be used to hold manufacturers of lead pigment liable for the alleged presence of lead paint in buildings throughout the state. In State of Rhode Island v. Lead Paint Industries Ass'n, the Court agreed that the trial court's rulings represented a vast departure from the foundational requirements of public nuisance law and create a new form of absolute liability.

NCLC Granted Permission to Intervene in Litigation Over New Ozone Regulations

On June 30, 2008 a court granted NCLC and other members of a coalition of trade associations permission to intervene in litigation challenging the EPA's new, stricter ozone regulations. In the consolidated cases of Mississippi v. EPA and American Lung Association (ALA) v. EPA, the ALA and Mississippi sued the EPA seeking even more restrictive regulations than those promulgated by the Agency. NCLC argued that the more stringent ozone standards will harm the trade association members.

Supreme Court Rejects Review of Excessive Punitive Damages Case

On June 27, 2008, the Supreme Court declined to review Continental Carbon Co., et al. v. Action Marine, Inc., et al., a case considering whether a $17.5 million punitive damages award violates the standards articulated in State Farm v. Campbell. In this case, the Eleventh Circuit failed to heed the Supreme Court's guidance that a punitive damages award should be limited where there is a large compensatory damages award. In addition, the court of appeals did not compare defendant's conduct to the conduct of other defendants in punitive damages cases. In its brief, NCLC noted its continuing concern about the failure of lower courts to faithfully apply the relevant constitutional guideposts.

Court Won't Force EPA to Issue Greenhouse "Endangerment Finding"

On June 26, 2008, the D.C. District Court, in the case of Massachusetts, et al. v. EPA, denied a mandamus writ asking the court to order the EPA to issue an "endangerment finding" – the precursor to developing and enforcing new EPA regulations – for greenhouse emissions. The court agreed with NCLC that the EPA cannot be compelled by a writ of mandamus to make an endangerment finding because such a requirement is not specified in any statute or Supreme Court decision. Had the court forced the EPA to issue an endangerment finding for greenhouse emissions, without first evaluating the issue further, the result would have been a swift and radical expansion in the scope of regulation for all manufacturers, not just those of new automobiles.

EEOC Cannot Disclose Business' Confidential Information to Potential ADEA Plaintiffs Without Prior Notification

Agreeing with NCLC on June 27, 2008, the D.C. Circuit prohibited the EEOC from disclosing confidential company information to potential ADEA plaintiffs without first notifying the employer.  In Venetian Casino Resort v. EEOC, the EEOC refused to revoke or modify an administrative subpoena seeking confidential company records for an age discrimination case. In its brief, NCLC argued that the EEOC's practice of disclosing confidential business information pursuant to its internal compliance rules is inconsistent with the Freedom of Information Act, and that the district court was wrong to permit the EEOC to disclose confidential company information that it obtains from an investigation. Such practices of turning over confidential company information will have a chilling effect on businesses in the future when considering whether to comply with EEOC subpoenas.

California Supreme Court Leaves Lower Courts Guessing in Asbestos Litigation

Rejecting a petition for review in Norris v. Crane Co., the California Supreme Court on June 25, 2008 lost an opportunity to clarify that de minimis or incidental exposure to asbestos does not satisfy the legal causation requirement that asbestos exposure be a "substantial factor" in bringing about particular injury. As a result, some lower courts will continue to interpret "substantial factor" in a manner that imposes liability based on flimsy causation testimony. Also, some jurisdictions will continue to use the "consumer expectations" test, a flawed test used to determine whether a product design is defective. Without clearer guidance from the California Supreme Court, asbestos litigation will continue to have a dramatic impact on the California economy.

High Court Reins in Excessive Punitive Damages in Exxon Maritime Case

The Supreme Court held on June 25, 2008 that a $2.5 billion punitive damages award against Exxon was excessive as a matter of maritime common law, and limited the award to a 1:1 ratio of compensatory to punitive damages.  In the ruling for Exxon Shipping Co. v. Baker, the Court was equally divided on whether maritime law allows corporate liability for punitive damages for the acts of a shipowner's agents, and left that part of the lower court's decision undisturbed. The Court also rejected the argument that the Clean Water Act displaced federal common law remedies such as punitive damages.  Although the decision focused on maritime law, the Court's sensitive and rigorous analysis of punitive damages is likely to be cited before judges state and federal for the proposition that tight ratios provide the best solution to outlier decisions by juries.

Arkansas Supreme Court Allows Multistate Class Action to Proceed

The Arkansas Supreme Court affirmed on June 19, 2008 the circuit court's order granting certification of a class of 4,000,000 truck owners, concluding that it is not necessary for an Arkansas court to conduct choice-of-law analysis to determine whether a class is manageable enough for certification.  The Court also found in Bryant v. General Motors Corp. that, although there were at least thirteen individualized factual inquiries that a court would need to make regarding each plaintiff, the individualized factual questions were insufficient to decertify the class.

Chamber Victorious Before Supreme Court in Labor Union Dispute

In Chamber of Commerce of the United States of America v. Brown, the Supreme Court struck down a California law that prevented employers from using state funds to speak to employees about unionization, holding that the law is preempted under the National Labor Relations Act. The statute prohibited employers that annually receive more than $10,000 in state funds from using those funds to assist, promote, or deter union organizing. The Supreme Court, reversing an en banc Ninth Circuit opinion on June 19, 2008, agreed with the Chamber of Commerce, holding that the law is preempted because it regulates a zone protected and reserved for market freedom.

Employers Bear the Burden in ADEA Claims to Show that Employee

Disagreeing with NCLC on June 19, 2008, the Supreme Court held that employers bear the burden of proving that the employer relied on "reasonable factors other than age" (RFOA) for disparate impact claims under the ADEA.  In its brief for Meacham v. Knolls Atomic Power Laboratory, NCLC argued that plaintiffs have a statutory burden to establish that the alleged discrimination was because of the plaintiffs' age. NCLC also argued that Congress designed the ADEA to target arbitrary discrimination based on stereotypical judgments about older workers, while carefully preserving employers' flexibility to make the type of reasoned workplace decisions that not uncommonly correlate with age.

Court Subjects Claim Evaluations by ERISA Plan Administrators Who Also Pay Claims to Heightened Judicial Review

On June 19, 2008, the Supreme Court disagreed with NCLC and held that a plan administrator that both evaluates and pays claims operates under a conflict of interest that is subject to a heightened judicial review of ERISA benefits decisions. In Metropolitan Life Insurance Company v. Glenn, the plaintiff sued MetLife, who both funded and paid the long term disability benefits plan, for making a determination that she was not eligible for long-term disability payments under the ERISA plan. In its brief, NCLC argued that market pressures and regulatory constraints on plan administrators operate to ensure that fiduciary claim determinations are not driven by improper considerations, but are made with an eye toward the best interests of the plan as a whole.

401(k) Plans May Still Be Liable to Former Employees Even After They "Cash Out"

Disagreeing with NCLC on June 16, 2008, the Fourth Circuit concluded that former "cashed-out" employees had standing under ERISA to sue their defined contribution plans and their fiduciaries for money damages. In Wangberger v. Janus Capital Group Inc., et al., the plaintiffs of four consolidated district court cases were all participants in their respective employers' 401(k) retirement plans, left their employment, and voluntarily withdrew their entire benefit from the plans. They thereafter filed putative class actions, alleging that the plans' fiduciaries had committed fiduciary breaches under ERISA by allowing participants to invest in mutual funds that had engaged in "market timing." In its brief, NCLC argued that former participants of a retirement plan have no interest in the long-term survival of the plan or how costly it may become for the employer to maintain it, and therefore have no standing to bring actions on the plan's behalf.

Massachusetts Courts Rejects Class Action Where Plaintiffs Suffered No Injury

On June 13, 2008, the Massachusetts Supreme Judicial Court dismissed both the implied warranty and the consumer fraud claims that rest on the "bare assertion" that the defendant knowingly sold a product that is "defective" or suffers from a "safety-related defect." In Iannacchinno, et al. v. Ford Motor Co., there was no allegation that the plaintiffs suffered personal injury or property damage. At the request of the Massachusetts high court, NCLC had filed a brief to assist the court as it considers whether unrealized "diminution in value" damages in connection with an allegedly defective product are obtainable under the Massachusetts Consumer Protection Act. In its brief, NCLC made clear its concern that this theory, if adopted, would expose the business community to potentially unlimited class action claims for "diminution in value" damages.

New Filings

Supreme Court Should Clarify Federal Jurisdiction Over Wetlands

On July 7, 2008, NCLC urged the Supreme Court to clarify what standard courts should apply when deciding whether there is federal jurisdiction over a wetland under the Clean Water Act (CWA). In its brief for Lucas v. United States, NCLC argued that lower courts have been unsuccessful discerning the governing standard in the Court's deeply divided decision in Rapanos v. United States and as a consequence, millions of acres of property remain in limbo until it can be determined whether the property is subject to federal jurisdiction.

Amicus brief.

NCLC Urges Supreme Court to Shore Up Statute of Limitations Defense in Securities Fraud Cases

NCLC urged the Supreme Court on June 30, 2008 to decide whether the statute of limitations for 10(b)-5 fraud actions begins to run when an investor is put on notice to inquire about the possibility of fraud, or when there is evidence of an actual intent to defraud, as held by the lower court. If the lower court's decision in Trainer Wortham & Company, Inc., et al. v. Betz is left to stand, securities fraud plaintiffs in some circuits could have years longer to bring a lawsuit than plaintiffs raising identical claims in other circuits, effectively eliminating the two-year statute of limitations Congress provided in the law.

Amicus brief.

NCLC Urges Michigan Supreme Court to Require Rigorous Review of Class Certification Requests

On June 27, 2008, NCLC urged the Michigan Supreme Court to reject certification of a class of plaintiffs allegedly injured by dioxin contamination.  NCLC argued in its brief for Henry v. Dow that the class should be decertified because the trial court failed to conduct an independent, rigorous analysis of the class certification prerequisites. The trial court ignored substantial evidence in the record indicating that individual issues of fact and law predominated over common issues.  If affirmed, the trial court's "laissez faire" approach to class certification will lead to "drive by" class certifications where trial courts routinely grant class certification based on the plaintiff's bare assertions.

Amicus brief.

NCLC Seeks Permission to Intervene in Litigation Over New Ozone Regulations

As a member of a coalition of trade associations, NCLC petitioned the court on June 26, 2008 for permission to intervene in litigation challenging the EPA's new, stricter ozone regulations. In the consolidated cases of Mississippi v. EPA and American Lung Association (ALA) v. EPA, the ALA and Mississippi sued the EPA seeking even more restrictive regulations than those promulgated by the Agency. NCLC argued that the coalition of trade associations should be allowed to intervene because, should ALA prevail, their members will be adversely affected by the more stringent ozone standards. Moreover, neither the EPA nor the ALA can adequately represent the trade associations' interests.

Motion.