Author Archives: Cory Andrews

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9th Circuit Refuses to Designate Utility Poles as Solid Waste Polluter

penta-poleWEBCross-posted at WLF’s Forbes.com contributor site

The U.S. Court of Appeals for the Ninth Circuit has certainly earned its reputation as a circuit willing to push out the boundaries of environmental laws and regulations. Consider its June 1, 2012 en banc ruling in Karuk Tribe of Ca. v. U.S. Forest Service, where seven of the sitting eleven judges held that the Forest Service’s decision not to regulate low-level mining activity on public lands constituted an action under the Endangered Species Act, requiring the Service to consult with the Fish and Wildlife Service. In a dissent joined by three other judges, Judge Milan Smith began his opinion with an image and quote from Gulliver’s Travels, and wrote “decisions such as this one, and some other environmental cases recently handed down by our court undermine the rule of law, and make poor Gulliver’s situation seem fortunate.” On March 19, the Supreme Court regrettably denied review in Karuk Tribe.

We must, however, give the Ninth Circuit credit on its environmental rulings when it is due, and it’s earned some accolades with its April 3 Ecological Rights Foundation v. Pacific Gas & Elec. ruling. And despite the “citizen’s group” plaintiff’s loss, the decision is one that on this Earth Day, environmental advocates should be applauding as well.

The plaintiffs sued under the citizen suit provisions of the Clean Water Act (CWA) and the Resource Conversation and Recovery Act (RCRA), alleging that poles treated with pentachlorophenol (PCP) contributed “solid waste” to waters of the United States through stormwater runoff. In other words, when it rains, PCP washes off of the poles and enters various bodies of water. As the court noted, EPA has not decided whether to regulate utility poles as “point sources” of pollution under the CWA. Reviewing applicable judicial precedents, the 9th Circuit panel concluded that because neither the poles themselves nor their owners channel or collect the runoff, the plaintiffs had no claim under the CWA. Continue reading →

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Judge Posner Takes on Lawyers Behaving Badly

7th circuit

Cross-posted at WLF’s Forbes.com contributor site

Federal Rule of Civil Procedure 11, which in part authorizes the imposition of sanctions on attorneys who sign frivolous pleadings in federal court, is not used nearly as much as it should be.  But that may be changing a little, at least in the U.S. Court of Appeals for the Seventh Circuit.

In a recently issued 18-page ruling, Judge Richard Posner authored a unanimous panel opinion reversing an Illinois district judge’s failure to impose Rule 11 sanctions on attorneys with the firm Robbins Geller Rudman & Dowd.  The factual background reads like a scenario plucked directly from a law school ethics exam.

Seeking hundreds of millions of dollars in damages, plaintiffs filed a putative class action alleging that Boeing Company, along with its CEO and the head of its commercial aircraft division, committed securities fraud in violation of federal law.  The district judge dismissed the complaint for failing to allege sufficient facts to properly plead the requisite scienter for fraud.  Not to be deterred, plaintiffs promptly filed an amended complaint, but this time with detailed bombshell revelations from a confidential source.  Ultimately, however, the allegations in the amended complaint could not withstand even the slightest scrutiny.

As Posner describes it:

The plaintiffs’ lawyers had made confident assurances in their complaint about a confidential source—their only barrier to dismissal of their suit—even though none of the lawyers had spoken to the source and their investigator acknowledged that she couldn’t verify what (according to her) he had told her.

Their failure to inquire further puts one in mind of ostrich tactics—of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing.

Noting that the same law firm had been accused of “similar conduct” in three other reported cases, Posner remanded the matter back to the district judge, who would be in a better position to calculate a dollar amount for Rule 11 sanctions.

The case is City of Livonia Employees’ Retirement System v. The Boeing Co.

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With Proposed Policy Change, EPA Fully Embraces Role of “Environmental Justice” Advocate

Photo from EPA's "Plan EJ 2014 Progress Report"

Photo from EPA’s “Plan EJ 2014 Progress Report”, page 14

Cross-posted at WLF’s Forbes.com contributor page

The Environmental Protection Agency has not been shy in its embrace and promotion of the “environmental justice” (EJ) movement. “Working for Environmental Justice” was one of seven priorities on EPA’s regulatory agenda last year. And its February “Plan EJ 2014 Progress Report,” full of loaded terms like “overburdened communities” and interspersed with photos like this one, reflects an “us vs. them” view of policy making and law enforcement, one that favors confrontation over seeking collaborative solutions. But EPA knows that reports and rhetoric alone won’t achieve “justice.” The Progress Report noted two proposed policy changes at EPA’s Office of Civil Rights, one of which could empower EPA to overturn state-level emissions permits that otherwise fully comply with federal law.

Disparate Impact Theory Background. During the 1990s, EPA adopted a very aggressive interpretation of a provision of the 1964 Civil Rights Act which applied to state use of federal funds, Title VI. State environmental regulators, to whom EPA delegates federal emissions permitting authority, could be accused of discrimination if the permits had a negative, disparate impact on “overburdened communities.” EPA formalized this theory into a “draft guidance” and EJ activists soon began filing Title VI complaints with the agency’s Office of Civil Rights. At the time, WLF, as well as others, argued that EPA lacked such authority and failed to follow administrative procedures.

EPA’s first ruling on a Title VI complaint in 1998 was quite pivotal. The agency presumed that no “adverse effect” (a key element in proving disparate impact) on minority or ethnic populations existed if the permitted entity (there, a steel mill in Michigan) would be in full compliance with the permit’s emissions limit. The EJ activists could not overcome that presumption, and EPA dismissed the complaint. EPA formalized that presumption in 2000 in a new draft guidance on Title VI complaints. Rebuffed by EPA, EJ activists tried to bring disparate impact lawsuits directly against state regulators, but courts ultimately ruled that no private right of action existed in Title VI. Continue reading →

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Encouraging Trend: Judges Can’t “Stand” Online Privacy Class Actions

security

Cross-posted at WLF’s Forbes.com contributor page

In their never-ending search for the next big thing, class action plaintiffs’ lawyers had high hopes for suits alleging various violations of Internet users’ “privacy.” All of the prerequisites for a big award seem to be present: (1) lots of class members; (2) easy-to-understand facts; (3) large, profit-seeking corporations; (4) sympathetic media coverage; and (5) an enforcement void (or the impression of one) left by state and federal regulators who talk more about protecting privacy than actually regulating.

But as two federal district court rulings in the waning days of 2012 reflect, online privacy class actions have generally been missing one other key element for success: actual harm. As we have addressed here several times in the past (here and here), thanks to that annoying constitutional “case or controversy” requirement, plaintiffs who don’t suffer a concrete loss or injury don’t have standing to be in federal court in the first place.  Judges have thankfully been quite demanding when applying this concept in an area like online privacy litigation, where the concept of “privacy” can be very subjective and slippery.

For instance, consider the December 28, 2012 decision in In re Google Inc. Privacy Policy Litigation. Suing on behalf of everyone in the U.S. who has a Google account or owns an Android device, the plaintiffs claimed that the company’s consolidation of its separate privacy policies (and thus the ability to access user information across Google services) violated various federal and state laws and common law protections. The plaintiffs advanced numerous theories of harm, all of which the judge rejected. Android device owners could not claim they were financially harmed by having to buy a replacement device because no proof was offered that any class member actually did buy a replacement. Nor could Google service users claim harm based on “abstract concepts” such as loss of control of personal information or fear that their data might be used against their interests.

In another late 2012 ruling, Pirozzi v. Apple, a federal trial court similarly dismissed plaintiffs’ privacy-related claims for lack of standing. According to the complaint, Apple allegedly violated federal, state, and common laws by failing to prevent third-party applications sold on its App Store from uploading user information from mobile devices. The alleged injury here?  First, Apple “misled” the plaintiffs into buying Apple mobile devices by falsely claiming their devices were “safe and secure.” As a result, plaintiffs’ information is at greater risk of being misappropriated.

On the first claim, the court agreed that bearing such a financial cost would constitute an injury, but only if the plaintiffs could show which particular statements of device safety they relied upon. Their complaint provided no such information. On the second claim, the court cited to the growing list of precedents which relate that mere “fear” of misappropriation of personal information is insufficient to establish standing to sue.

It’s unlikely we’ve heard the last of these cases, however, since both judges allowed the plaintiffs to amend and refile their complaints. No doubt the lawyers will continue the “throw lots of spaghetti against the wall” approach common to class actions, and hope some allegations stick. Such tactics waste precious judicial resources and divert companies’ attention and money from pro-consumer innovation and growth.

What’s worse, as Santa Clara University law professor Eric Goldman argued in a superb Working Paper last year, online privacy advocates should abhor class action litigation, as they utilize the same tactics those advocates despise. As he argues, class actions: (1) are typically opt-out, rather than opt-in; (2) provide plaintiffs with little meaningful notice or control; and (3) are gamed by lawyers who maximize their own financial interests over the interests of the class.

While litigating these suits is certainly a poor use of company resources, we hope that privacy class action defendants keep pushing back against the spaghetti-throwing lawyers, rather than settling for nuisance value. Court decisions such as In re Google and Pirozzi should help encourage them to do so.

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SCOTUS’s IMS Health Ruling Should Change 4th Circuit’s Mind on Alcohol Ad Ban

4th Circuit

Cross-posted at WLF’s Forbes.com Contributor Page

Virginia’s controversial ban against alcohol advertisements in college newspapers is back before the U.S. Court of Appeals for the Fourth Circuit (Educational Media Co. at Va. Tech, Inc. v. Insley).  Back in 2010, that court reversed a district court’s order overturning the ban for failing the third prong of Central Hudson—the “directly and materially advances” prong.  In the view of the Fourth Circuit, the mere “common sense” connection between advertising and demand was sufficient for Virginia to ban alcohol advertising in college newspapers to further its interest in combating underage drinking.

That ruling involved only a facial challenge.  The next phase of litigation involves an as-applied challenge and a claim that Virginia’s ban discriminates against a narrow segment of the media (both unsuccessful below), which are back before the appeals court.  But as WLF argues in its amicus brief to the 4th Circuit, a lot has changed for commercial speech jurisprudence since 2010—most notably, the Supreme Court’s decision in Sorrell v. IMS Health Inc.

In Sorrell, the Supreme Court overturned a Vermont law that prohibited the dissemination of certain prescriber-identifying information for pharmaceutical marketing purposes.  In overturning that law, Sorrell made clear that where a law restricts truthful, non-misleading commercial speech on the basis of its content and the identity of its speaker, that law must be subjected to “heightened judicial scrutiny.”  Sorrell also made clear that content- and speaker-based restrictions on commercial speech will fail such heightened scrutiny in the ordinary case. Continue reading →

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Four Takeaways from Sixth Circuit Ruling on False Claims Act Liability

Cross-posted at WLF’s Forbes.com contributor site

Federal and state governments are clearly “feeling their oats” in the area of False Claims Act (FCA) enforcement. FCA enforcement has never been more lucrative, with recoveries doubling to $9 billion over the last year. A large bulk of that profit has come from settlements, meaning that prosecutors’ theories and tactics face no judicial scrutiny. Big profits + little oversight = aggressive pursuit of increasingly novel FCA claims.

Challenges to government’s FCA theories and positive outcomes are increasingly few and far between, so we will actively assess and promote them whenever they arise. The U.S. Court of Appeals for the Sixth Circuit’s October 5 U.S. ex rel Williams v. Renal Care Group opinion firmly rejected federal efforts to expand key aspects of the FCA and offers some important lessons for FCA targets.

Background. The Justice Department intervened in a FCA qui tam action against a kidney dialysis provider (RCG), which had a wholly-owned subsidiary to offer dialysis equipment for home care. RCG created this subsidiary to take advantage of a particular method of Medicare reimbursement. The qui tam relator, and subsequently DOJ, argued that RCG’s creation of a subsidiary was a knowingly false and fraudulent attempt to claim federal Medicare reimbursement. A district court agreed, granting DOJ’s summary judgment motion and imposing nearly $83 million in fines. On appeal, the Sixth Circuit reversed the lower court and remanded the case. The unanimous decision provides four important takeaways: Continue reading →

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Update: Judge Rejects Settlement in Ben & Jerry’s “Natural” Class Action

Cross-posted at WLF’s Forbes.com contributor site

In our June 21 post, “Natural” Selection: Survival of the Litigious, we noted that consumer class action target Ben & Jerry’s decided to settle with the “deceived” plaintiffs once a judge on “The Food Court” (aka the U.S. District Court for the Northern District of California) denied their motion to dismiss. The plaintiffs in Astiana v. Ben & Jerry’s were claiming that because the company used cocoa processed with a synthetic ingredient, it couldn’t lawfully call its ice cream ”all natural.”

We learned today (hat tip to Shook, Hardy & Bacon and its excellent Food & Beverage Litigation Update) that presiding Judge Hamilton rejected the settlement on September 12. Ruling from the bench, she found the proposed settlement legally unconscionable. The proposal had set up a $7.5 million fund for the plaintiffs. Under the cy pres doctrine, the court would distribute any amount remaining after plaintiffs had asserted their claims to “not-for-profit charities related to food or nutrition in the United States.” For themselves, the class action attorneys sought $1.8 million in fees.

According to an attorney present at the September 12 hearing, Judge Hamilton stated that she had incomplete information on how the cy pres funds would be rewarded.  A Ninth Circuit ruling from last July, Dennis v. Kellogg Co. (see our post on that here) may have given Judge Hamilton pause.  The plaintiffs devoted a lengthy footnote (n. 6) in their proposed settlement explaining why their cy pres proposal was not disconnected from the misleading advertising claims, as the appeals court found in Kellogg (there, Kellogg products were to be donated to a food bank). Yesterday, both parties filed a motion with the judge seeking a status conference and noted that they had “new information” to share, so perhaps Ben & Jerry’s and the class action lawyers will provide specifics on the possible cy pres recipients.

Interestingly, one of the members of the nationwide class in Astiana, Illinois resident Colleen Tobin, not only filed an objection to the settlement but has filed her own nationwide class action against Ben & Jerry’s in a New Jersey federal court (Tobin v. Conopco and Ben & Jerry’s). She filed suit September 13, the day after Judge Hamilton rejected the Astiana settlement, alleging that Ben & Jerry’s ice cream was not all natural due to synthetic cocoa and because it contained genetically modified organisms. On September 21, Tobin filed a motion to transfer her suit to—you guessed it—the Northern District of California, where it seemingly could be consolidated with the Astiana class action. It remains unclear whether Ben & Jerry’s will contest the motion.

We will keep an eye on this case to see if it enters The Food Court, and if so, what impact it will have on the settlement of Astiana.

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Graphic Tobacco Warning Case Can Present SCOTUS Opportunity on Commercial Speech Doctrine

Cross-posted at Forbes.com’s WLF contributor site

The U.S. Court of Appeals for the D.C. and Sixth Circuits have issued differing opinions regarding the Food & Drug Administration’s graphic warnings rule for tobacco, making Supreme Court review highly likely. The appropriate amount of First Amendment scrutiny courts should apply when reviewing such compelled speech regulations will be directly at issue.  If the Court agrees, as it should, with the D.C. Circuit’s approach, we hope the Justices take the opportunity to clarify a critical part of the so-called Central Hudson test courts use to examine commercial speech restrictions.

Zauderer or Central Hudson?  If a content-based compelled speech requirement involves “purely factual and uncontroversial” disclosures aimed at preventing consumer deception, the Supreme Court applies a relaxed “reasonableness” standard of review as set forth in Zauderer v. Office of Disciplinary Counsel.  The Sixth Circuit applied Zauderer in its Discount Tobacco City v. U.S. decision upholding the graphic warnings.

In contrast, D.C. Circuit Judge Janice Rogers Brown’s opinion in R.J. Reynolds v. FDA reasoned that the nature of FDA’s mandated warnings required the court to apply the more rigorous First Amendment scrutiny required by Central Hudson Gas & Elec. v. Pub. Serv. Comm’n.  To survive such scrutiny, a commercial speech regulation must “directly and materially advance” a “substantial government interest,” and be no more extensive than necessary in affecting speech. Continue reading →

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High Court Accords No Deference to Department of Labor’s Regulatory Interpretation

In Auer v. Robbins, 519 U.S. 452 (1997), the U.S. Supreme Court extended Chevron-type deference to an agency’s “fair and considered” interpretation of its own regulations.  Today, however, the Supreme Court refused to accord binding Auer deference to the Department of Labor’s recent “reinterpretation” of regulations implementing the Fair Labor Standards Act’s (FLSA) “outside sales” exemption.  That interpretation, which the Secretary of Labor first announced in a 2009 amicus brief, would have required the nation’s more than 90,000 pharmaceutical sales representatives to be reclassified overnight as overtime-eligible employees under the FLSA.

In a 5-4 opinion in Christopher v. SmithKline Beecham, the Supreme Court held that Auer deference is inappropriate where an agency’s new interpretation is inconsistent with the applicable statute and implementing regulation, and where the agency has long acquiesced to the regulated industry’s decades-long practice.  “It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once an agency announces them,” Justice Samuel Alito wrote on behalf of the Court’s majority.  “[I]t is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference,” he concluded. Continue reading →

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Georgia Steps Up Transparency in State Attorney General-Trial Lawyer Contracts

Attorney General Sam Olens

Last week, the Peach State became the latest state to require full transparency on contingency fees for private lawyers when they are retained to litigate on the state’s behalf.On May 29, Georgia Attorney General Sam Olens issued an administrative order that requires all contingency-fee contracts with outside counsel (and details of all payments pursuant to such contracts) to be posted promptly on the Office of the Attorney General’s website. The new policy also requires any proceeds from litigation performed by outside counsel to be paid directly to the state agency involved in the litigation or otherwise to the state treasury for appropriate disposition through the normal appropriations process. It also calls for strict oversight by the AG’s office of all litigation undertaken by private attorneys, including all important decisions including settlement negotiations.

The recent trend among states to hire outside contingency-fee counsel is just another worrisome area for corporate defendants in facing prosecution under consumer protection laws.  The need for accountability in this area is great, and Georgia’s latest announcement continues a recent counter-trend where government is seeking more transparency.  As American Tort Reform Association President Tiger Joyce wrote for The Legal Pulse a little over a year ago, the Arizona legislature adopted reforms to require more transparency over AG-trial lawyer arrangements. And just last week, the Supreme Court of Mississippi ruled in two cases that the legislature, not the attorney general, is the entity responsible for paying contingent-fee lawyers their fees.  All very encouraging developments.