Will the High Court Permit Backdoor Regulation of Natural Gas Industry Via State-Law Antitrust Suits?

oneokEarlier this month, the Supreme Court heard oral argument in ONEOK v. Learjet, an important case that hinges on the scope of the Federal Energy Regulatory Commission’s (FERC) field preemption under the Natural Gas Act (NGA). I attended to hear the argument in person because Washington Legal Foundation has been quite active in the case.

While it is undisputed that the NGA preempts state-law claims directed at conduct affecting the wholesale rates for natural gas, the Court must now consider whether such claims are preempted when the same alleged conduct affects both wholesale and retail rates. Reversing the district court, the Ninth Circuit rejected ONEOK’s preemption argument on the basis that the state-law claims brought by the plaintiff-purchasers arose from retail gas transactions.

On behalf of ONEOK, Neal Katyal argued that even though the alleged conduct at issue in this case affected both retail and wholesale rates, it still counts as a practice that affects wholesale rates for preemption purposes. The only relevant question, then, is whether plaintiffs’ state-law claims are directed at conduct in the field that the NGA occupies—and they are. The United States, representing FERC’s regulatory interests, filed an amicus brief and argued on the merits in support of ONEOK’s position.

From his questions, Justice Breyer seemed to appreciate the difficulty in setting a strict boundary between wholesale and retail sales in cases where the retail and wholesale prices are both affected by the same conduct. He could prove to be the decisive vote in the case.

Plaintiffs’ attorney Jeffrey Fisher insisted that FERC has no power over antitrust claims tied to retail prices, which the NGA excepts from federal regulation. The State of Kansas as amicus curiae, joined by 20 other states, argued in support of Plaintiffs, with attorney Steven McAllister emphasizing the states’ strong interest in policing antitrust violations.

Justice Kagan seemed fully prepared to side with the Plaintiffs, explaining that so long as no conflict exists between state antitrust liability and regulation by FERC, “I don’t really see a reason … why you would exclude the state entirely, even if nothing the state was doing was conflicting with federal regulation or federal policy.”

In all likelihood, the Supreme Court will issue its decision within the next few months. As WLF’s amicus brief argued, the stakes for the natural gas industry are high. The NGA promotes uniformity, not random regulation by jury verdicts in 50 states. Permitting private plaintiffs to pursue state-law antitrust remedies that second-guess FERC—including in states where antitrust remedies dwarf those available under federal law—would create industry-wide chaos and an unnecessary drag on investment in a vibrant and growing sector of the economy.

The Court agreed to grant review in the case following WLF’s brief in support of the petition for certiorari—and WLF’s separate online analysis of the Solicitor General’s unusual advice to the Supreme Court about (not) granting review in the case. WLF’s brief on the merits provides the Court with additional policy reasons to overrule the Ninth Circuit.

Also published by Forbes.com at WLF’s contributor page

New Jersey High Court Confirms Proper Test for Defining “Independent Contractor”

body_TabakmanMEGuest Commentary

by Mark E. Tabakman, Fox Rothschild LLP

A November 2014 I authored for Washington Legal Foundation, New Jersey Supreme Court Set to Rule on Definition of “Independent Contractor”, analyzed questions that had been certified to the New Jersey Supreme Court on whether an individual was an independent contractor under New Jersey wage-hour laws. My reading of the tea leaves was that the Court would adopt the test already engrafted into the New Jersey Unemployment Law. That is in fact what the Court did.

On January 14, 2015, the Court in Hargrove v Sleepy’s, LLC (“Hargrove”) (Dkt. No. A-70-12) resolved the issue of when an individual may be properly classified as an independent contractor under the New Jersey Wage Payment Act (“WPA”) and the New Jersey Wage Hour Law (“WHL”) and held that the “ABC” test governs. Under the ABC test, services performed by an individual are deemed to be employment unless the following is shown:

(a) that the individual has been and will continue to be free from control…;

(b) that the services provided are either outside the usual course of business…or performed outside of all the places of business of the enterprise…; and,

(c) that the individual is customarily engaged in an independently established trade, occupation, profession, or business.

The Court noted that both of New Jersey’s wage and hour laws neither defined “employee” or “independent contractor” nor set forth the standards to be utilized in such analyses. The Court then examined the plain language of the laws and the implementing regulations of both laws, and concluded that deference should be given to the position of the New Jersey Department of Labor and Workforce Development (“NJDOL”), as it was the Agency charged with interpreting and enforcing these laws. On that basis, the Court concluded that the same test, under both laws, should be utilized to determine whether or not an employment relationship existed.

In holding that the ABC test governs, the Court rejected the common law “right to control” test and the “economic realities” test because the “right to control” test, as the Court noted, is incompatible with the legislature’s goal of ensuring economic security and the “economic realities” test, as the Court noted, could lead to inconsistent results.

By requiring that each element be satisfied, the ABC test (which NJDOL supports and utilizes) facilitated, as the Court explained, “greater income security” for workers—the underlying purpose of both laws at issue. The ABC test presumes that an employment relationship exists and places the burden on the employer to prove differently. The last prong (i.e. independently established business), is where the issue is joined most of the time and where (often) most of the cases flounder for the putative employer. Accordingly, the Hargrove decision has decidedly and emphatically increased the coverage and protection of New Jersey’s wage and hour laws in favor of “employees.”

Businesses in New Jersey that presently utilize or are considering use of independent contractors would be well advised to work with experienced employment counsel to ensure compliance with the Court’s holding.

Supreme Court Observations: The Fair Housing Act and “Disparate Impact” Claims

supreme courtThe Supreme Court on Wednesday will hear arguments in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, a case that will determine whether the federal Fair Housing Act (FHA) applies to conduct that, although not intentionally discriminatory, has an allegedly disparate impact on protected groups. Assertions that disparate-impact claims are cognizable under the FHA are difficult to square with the statutory language, which bars housing discrimination “because of” race, color, religion, sex, familial status, or national origin. The phrase “because of” suggests volition by the defendant, not merely that the effects of his actions were felt more strongly by members of protected groups. Proponents of disparate-impact liability frequently respond that whatever the scope of the FHA when first adopted in 1968, Congress later expanded the statute by acquiescing to an unbroken line of court and Executive Branch decisions that had interpreted the FHA as encompassing disparate-impact claims.

But an examination of the federal appeals court decisions cited by the Solicitor General and other disparate-impact claims proponents indicates that lower courts’ endorsement of such claims has been anything but uniform. Thus, putting to one side whether it is ever appropriate to discern the meaning of a federal statute based on evidence of Congress’s inaction in the wake of decisions construing the statute, the case for using that method of statutory interpretation in this instance is particularly weak.

In making the case for congressional acquiescence, the Solicitor General’s brief focuses on 1988, when Congress amended several FHA provisions but did not amend the “because of” language set forth in 42 U.S.C.§ 3604(a). According to the Solicitor General, “Between the enactment of the FHA in 1968 and its amendment in 1988, all nine of the courts of appeals to consider the issue concluded that the Act authorizes disparate impact claims.” Based on that history, he asserts, the 1988 amendments “confirm” that Congress sanctioned disparate-impact claims under the FHA. Continue reading

Seventh Circuit Sheds Light on Foreign Reach of Federal Antitrust Laws

Dugan_Brady-WEB135AlfanoFeatured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Sitting in for Featured Expert Contributor Mark J. Botti on this post are Squire Patton Boggs partner J. Brady Dugan and associate Peter C. Alfano, both in the firm’s DC office.

Whether U.S. antitrust laws reach wholly foreign conduct is a question that has been addressed by all levels of the federal court system over the past decade, including by the U.S. Supreme Court.1 Nevertheless, it is a question as to which many companies, in the U.S. and abroad, may feel there is not a clear answer. Consider, for example, a corporation that purchases a product in the U.S. that was finished or assembled overseas. If the finished product includes a component that the assembler purchased at a price that had been inflated by an overseas price-fixing conspiracy among the component manufactures, can the U.S. purchaser of the finished product sue the component seller in U.S. court for treble damages? Can the overseas assembler recover damages from the overseas component manufacturer in the U.S.? Or to put it another way, can a foreign corporation that manufactured and sold a product overseas, to an overseas assembler, be sued for price-fixing in the U.S. by a U.S. customer of the foreign assembler? It will come as no surprise that the answers to these questions are very fact-specific. But recently, a panel of the U.S. Court of Appeals for the Seventh Circuit issued a decision that helps clarify the law. Continue reading

The 2015 Dietary Guidelines: Another Federal Food Activism Vehicle?

MyPlateEvery five years, the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Agriculture (USDA) jointly issue the latest iteration of the federal government’s formal guidance on healthy eating, the Nutrition Guidelines. These Guidelines not only inform as to how government feeds its millions of employees (including the military) and those who eat in a government facility (i.e. public schools, prisons), but they also influence food-related laws and regulations.

A federal advisory committee is expected to report its recommended updates for the 2015 Guideline to HHS and USDA this month. If the committee’s proceedings and its December 15, 2014 interim report are any indication, the 2015 “My Plate” will feature supersized, empty-calorie portions of activism and food-nanny nagging.  We should expect to be lectured on the need to eat “sustainably,” the imperative for mandated “added sugars” food labeling, and the importance of imposing marketing restrictions on certain foods.

The advisory committee. None of this comes as a surprise, given the makeup of the Dietary Guidelines Advisory Committee (DGAC) and the motivations of the regulators at HHS and USDA who appointed its 15 members. Every single member hails from academia, and as one assessment of the DGAC and its work published by Capital Research Center noted,

There is not a single business owner, family physician, working nutritionist, food services executive, or federal nutrition program director in the mix.

Continue reading

WLF Developments You May Have Missed During the Holidays

new yearHere’s some things you may have missed from Washington Legal Foundation during the December 2014 holidays season.

WLF Amicus Briefs:

  • King v. Burwell (On December 29, 2014, WLF asked the U.S. Supreme Court to reverse an appeals court ruling that, if upheld, would allow IRS to appropriate billions of dollars a year without authorization from Congress.)
  • In re: Deepwater Horizon (On December 24, 2014, WLF filed a brief in the U.S. Court of Appeals for the Fifth Circuit, urging it to remove the court-appointed Claims Administrator who evaluates all claims filed by those seeking to recover economic losses suffered as a result of the 2010 Gulf of Mexico oil spill. )

WLF Publications

WLF Legal Pulse Posts

Struggle over Federal Environmental Law Preemption of Public Nuisance Suits Heats Up in Kentucky

faulkFeatured Expert Column − Complex Serial and Mass Tort Litigation

by Richard O. Faulk, Hollingsworth LLP*

It’s been a long wait for those who believe the federal Clean Air Act preempts public nuisance claims under state common law.

When the Supreme Court reversed and remanded Connecticut v. American Electric Power in 2011, it refused to rule on the preemption issue—leaving the question for the U.S. Court of Appeals for the Second Circuit to resolve on remand.1 Before that could happen, however, the plaintiffs withdrew their complaints—and the opportunity vanished.2

When a federal district court granted dismissal of a public nuisance claim in Bell v. Cheswick Generating Station, the opportunity rose again. Hopes were high that the Third Circuit would affirm the dismissal, but alas, the court reversed. Nevertheless, the case rose to the Supreme Court on a petition for certiorari. Numerous amicus curiae briefs were submitted to support the petition, but the Supreme Court denied review. Many were left wondering whether the Supreme Court’s remand of the issue in AEP truly reflected the Court’s interest in the issue—or whether it was simply a matter of appellate housekeeping. Continue reading