Author Archives: Glenn Lammi

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9th Circuit Ruling Issued In Midst Of Debate Over Federal Agency “Sue-and-Settle” Tactics

Northwest Forest Plan

Northwest Forest Plan

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

Complying with notice-and-comment and other due process requirements is expensive and time-consuming for federal agencies. Those procedural duties also make agencies accountable to the public and regulated entities. So it’s no surprise that regulators avoid formal rulemaking like the plague. As we’ve spotlighted at The Legal Pulse, agencies instead  issue “guidance” documents or utilize even more perversely creative tactics, such as setting new standards by replying to a U.S. Senator’s inquiry letter. Another evasive maneuver which has drawn the ire of not only affected businesses, but also state attorneys general and Members of Congress, is “sue-and-settle.”

Please Sue Us. Special interest groups, especially those with environmental-oriented missions, routinely sue federal agencies to compel actions, especially in situations where the regulators have missed deadlines, or, for political or other reasons, have stopped short of the most rigorous approach. The agencies are presented with an offer they can’t (and often don’t want to) resist: settle the citizen’s suit in a way that implements new mandates (and expands agency authority) without public input.

Judicial Rejection: Conservation Northwest v. Sherman. As noted above, elected officials are expressing their concern with this and seeking remedies (a bit on that below). In the meantime, however, an April 25 U.S. Court of Appeals for the Ninth Circuit decision reflects that judges can and should very closely scrutinize any friendly settlements between federal agencies and activists. In 2007, a throng of environmental groups sued the Bureau of Land Management (BLM) for attempting to eliminate a costly and complex surveying mandate from the management of the Northwest Forest Plan (a land use agreement arising from the 1990s’ spotted owl litigation wars). Continue reading →

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Imposing Weight-Loss Guidelines: Another Function of ObamaCare?

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

The federal Affordable Care Act, better known as “ObamaCare,” may provide activists and government a little-known wedge to advance their obesity agendas through regulated health-care providers — specifically America’s nearly 3,000 non-profit hospitals. One organization, The STOP Obesity Alliance, recently identified this wedge as a way to have such hospitals embrace its core convictions, including one principle which questions the role of personal responsibility as a cause and a solution to obesity.

Community Health Needs Assessments. Section 9007 of the Act requires non-profit hospitals, as a condition of maintaining their tax-exempt status, to conduct Community Health Needs Assessments (CHNAs). These documents, which must be filed with the IRS, will demonstrate the health needs of the hospitals’ local communities and explain how hospitals are meeting those needs. One assessment of CHNAs likened them to banks’ responsibilities under the Community Reinvestment Act, in the sense that the documents might be used as tools by activists to prompt agreements or actions. It’s likely the STOP alliance understood this when it made its “recommendations.”

STOP’s Recommendations. The STOP Obesity Alliance “strongly encourages nonprofit hospitals to overcome and prevent obesity on the following core principles.” On balance, the coalition’s principles are laudable (encourage physical activity, encourage best practices, address and reduce stigma). One recommendation — that CHNAs use a “sustained loss of five to ten percent of current weight” as a barometer to successful weight reduction — may be troublesome for hospitals. If hospitals incorporate such a specific goal into their CHNAs, and their patients don’t achieve such consistent weight loss, that could provide STOP and other advocates with the clear data they need to oppose continued non-profit status at the IRS or with a potent stick to prod hospitals to certain actions. Continue reading →

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A Judicial Solution to Non-Practicing Patent Holders’ Suits Vs. End Users?

coffee wi-fiCross-posted at WLF’s Forbes.com contributor page

Litigation by “patent-assertion entities” (PAE) was back in the news again last week with a jury decision from the Eastern District of Texas. The jury found that patents held by Alexsam Inc. which purportedly cover a system for processing pre-paid electronic gift cards were valid, allowing Alexsam’s infringement claims against Best Buy, Barnes & Noble, Gap, Home Depot, McDonald’s, JC Penny, and other retailers to advance. Whether the actions will proceed or the retailers decide to cut their losses and settle is unclear.

Claims by patent-assertion entities rarely get to the stage at which the gift card litigation currently stands. This is especially true when patent holders target purchasers and users of technology which allegedly infringe on their rights, rather than (or in addition to) the technology’s producers. When posed with the choice of investing six-figures defending a product you didn’t even create, or paying the PAE a four- or five-figure licensing fee, most small businesses will choose the latter, no matter how weak the legal claims may be.

Online technology journal Ars Technica has shined a spotlight on some of these PAE litigation threat campaigns. Several stories (here and here) document one anonymous patent holder’s systematic targeting of small businesses and even some individuals who use scanners that can send the scanned files via e-mail. The “scanner-trolling scheme,” as Ars calls it, divides up the U.S. into six areas, and in each area, a separate shell company demands $800-$1,200 licensing fees per employee to avoid a lawsuit. Another story focuses on how a Luxembourg-based PAE is suing cash-strapped public transit systems over their use of vehicle-tracking systems. The Electronic Frontier Foundation recently stepped in to request a reexamination of this PAE’s patent. Other stories have documented the litigation crusade of Innovatio, which has sued businesses offering Wi-Fi service on their premises. One law firm even has an entire section of its website devoted to the suits.

Such targeting of end users has led to calls from leaders in business and Congress to immunize such companies and individuals from patent lawsuits. While that may sound promising to under-assault small businesses, their next thought will likely be, “how many years did it take to pass the America Invents Act?” Continue reading →

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Anti-Hydraulic Fracturing Activists Focus Firepower on California

Monterey ShaleCross-posted at WLF’s Forbes.com contributor page

With a budget profoundly in the red and an unemployment rate hovering around 10%, one would think that elected officials and citizens’ groups in California would be figuring out how to move forward development of the massive shale “play” shown here to the right — The Monterey Shale. But instead, the same crowd that bestowed such regulatory gems as Proposition 65 on California’s business environment is busily plotting how to kill this golden goose.

Three proposals are currently advancing in the state Assembly to prohibit hydraulic fracturing in California until various studies can be done to definitively establish that the six decade-old gas extraction technique is 100% safe. The proposals eschew the traditional risk-based U.S. regulatory approach and embrace the European style of precaution, which demands ex post proof of safety even where no current evidence reveals environmental or health harms. Not surprisingly, a who’s who of activist groups support the bills, led by the Center for Biological Diversity, which has an ongoing suit against the state regarding hydraulic fracturing regulations. Even California’s state law schools are pitching in, with UC-Berkeley’s Center for Law, Energy and the Environment releasing a well-timed “report” calling for more controls.

“Let’s study the issue” is a non-threatening euphemism activists and government use in place of the scarier actual outcome sought: let’s forestall the activity being studied for as long as possible. New York’s moratorium on natural gas extraction has been dragging on for five years, with no timetable for release of the state health commission’s study of fracking (“I will continue to work on this until I am comfortable” says the Commissioner). While celebrity activists (or fracktivists as California-based think tank The Breakthrough Institute calls them) like Mark Ruffalo applaud the ponderous New York delays, jobs and revenue flow to neighboring states like Pennsylvania. Have any of the California legislators supporting the Assembly bills seen what natural gas development has done to nearby North Dakota’s economy?

The emergence of natural gas as an abundant, more efficient source of domestic energy than coal threatens the environmental activist movement’s utopian vision of alternative fuels. So hydraulic fracturing must be stopped. One supporter of a California moratorium from 350.org was clear on this: “We need a dramatic shift off carbon-based fuel: coal, oil and also gas,” calling natural gas “at best a kind of fad diet.” The three organizations listed as “co-sponsors” of one California fracking bill, AB 1301 – Center for Biological Diversity, Clean Water Action, and Food & Water Watch – each support outright bans on hydraulic fracturing.

The debate is ongoing in California, and as we learned from last year’s battle over mandatory biotech food labeling, when the public is fully educated about the negative ramifications of feel-good proposals, the best outcome for Californians can be reached. Here’s hoping that the facts can battle their way through the hype and emotion, so reasoned decisions can be made.

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Food Class Action Suit Invokes WLF-FDA Correspondence to Prove Website Is “Labeling”

OrganicVanilla-Bean-300x300Cross-posted at WLF’s contributor page at Forbes.com

Perusing yet another class action complaint filed in the Northern District of California, Gitson v. Clover-Stornetta Farms, we were positively amused to find that on page 19, the plaintiffs’ lawyers cite a letter from the Food and Drug Administration (FDA) to WLF for the proposition that under federal law, a company’s website is definitively considered “labeling.” FDA’s letter was in response to WLF’s April 2001 petition urging the agency to establish a formal policy on the nature of information on websites like that of Clover-Stornetta Farms.

While it’s flattering that WLF’s public interest work has such enduring relevance and utility, we can’t let the plaintiffs’ invocation of FDA’s letter pass without refutation.

Clover-Stornetta Farms’s alleged transgression was to misleadingly refer to the sweetener used in some of its yogurt products as “evaporated cane juice.” Misleading or false labeling under federal law, incorporated into the California laws under which Gitson is suing, renders the product “misbranded.” And according to the complaint, because the yogurt label referred to the company’s website (which did little more than helpfully reprint the ingredient label), the website constituted labeling which equally misbranded the product. Continue reading →

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“Natural,” “Honey,” and Lots of Fruit Products: Three Wins for Food Labeling Suit Defendants

ArizonaTea_3Cross-posted at WLF’s Forbes.com contributor page

With class action lawyers still buzzing around food makers like angry gnats in summer, targets of these labeling and marketing suits welcome any instance where a federal judge gets the fly-swatter out and slaps down a case or two. Or three, as we’re about to describe.

Evidence, Why do We Need Evidence?: Ries v. AriZona Beverages. We’ve been a bit hard on the U.S. District Court for the Northern District of California (aka “The Food Court”). We’ve even been critical of Judge Seeborg’s ruling in Ries late last year. His latest ruling in this “high fructose corn syrup (HFCS) and citric acid are not ’100% natural’” class action, however, hits the spot just like cold ice tea. The defendants moved for summary judgment based on the fact that Ries had not provided evidence that HFCS and citric acid are artificial. Judge Seeborg had granted Ries discovery last September and urged her to find such evidence.

As the judge wrote in his March 28 ruling, “Plaintiffs have not introduced any evidence showing that HFCS or citric acid are artificial.” The plaintiffs urged Judge Seeborg to “take judicial notice” of the fact that federal patents have been issued for the process of producing HFCS, which they claimed proved it was not natural. The judge saw this as “an extension of their rhetoric,” and that “In the face of a motion for summary judgment, rhetoric is no substitute for evidence.” Separately the judge also found that there was not a “scintilla of evidence” to support damages in the case, and that due to the attorneys’ failure “to prosecute this action adequately,” the class action should be decertified due to inadequate representation. Continue reading →

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Here We Go Again? Mandatory Biotech Food Labeling Initiative Moves Forward in Washington (State)

Genetically-enhanced wheat

Genetically-enhanced wheat

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

Not even a year after fighting a bruising and costly battle over the “California Right to Know Genetically Engineered Food Act” (Proposition 37), proponents and opponents of mandatory biotech food labeling are poised for a rematch in the state of Washington. In February, the Secretary of State’s office certified ballot initiative I-522, The People’s Right to Know Genetically Engineered Food Act, and forwarded it to the legislature.

Under Washington law, the legislature can either enact it into law, reject it or refuse to act on it, or approve an amended initiative. If lawmakers don’t act on, it goes to a public vote in November. If the legislature alters it, then both the altered version and the original version go on the November ballot. The likeliest scenario is no legislative action, which puts I-522 in the voters’ hands.

The similarities between the defeated California initiative and the impending Washington proposal go beyond their titles. The Washington proposal, authored by an advertising executive, embraces the spirit, if not the letter, of many of Prop 37′s provisions. One provision it did not borrow from Prop 37 was that initiative’s prohibition of “Natural” and “All-Natural” on food labels.

Some initial thoughts on I-522: Continue reading →

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Desperate to Foment New Regulations & Lawsuits, Activists Ratchet Up “Food Addiction” Campaign

BSFries

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

At a time when all their attempts to impose “sin taxes,” more regulation of advertising, and bans on certain products have been shot down, advocates of government intervention into America’s food choices have ratcheted up their below-the-belt demonization campaign.

Words such as “toxic,” “poison,” “manipulation,” “addictive,” and “inherently dangerous” are increasingly used in the media when food and obesity are discussed. Viewers of MSNBC’s popular “Morning Joe” last Tuesday were treating to a red-faced rant from co-host Mika Brezinski about how, among other things, “sugar is poison” and soda is “killing our children.” (An ironic side note: “Morning Joe” is sponsored by Starbucks, purveyor of the 20 oz. Java Chip Frappuccino (570 cal., 88 g. of sugar)). Thousands more viewers of Al Sharpton’s “Politics Nation” show on March 8 heard about how “food companies are manipulating their products in order to get you addicted to them.” A segment on the talk show “Dr. Oz” had the good doctor talking about how parents face “a powerful conspiracy when it comes to feeding their families.”

Such views and rhetoric are certainly not originating at the stratospheric level of the broadcast press. They are parroting what they hear in other media outlets, like The New York Times, Huffington Post, and The Atlantic, and also from public health academics/activists from schools such as Yale, NYU, and The University of California. The Times Magazine offered a must-read for activists and trial lawyers on February 20, excerpting from a Times reporter’s book, Salt Sugar Fat: How the Food Giants Hooked Us. It purports to relate through interviews and assessments of internal documents how processed food makers meticulously adjust their recipes to give their products (gasp!) maximum consumer appeal and achieve a “bliss point” where consumers want more. The author learned firsthand how bad things like cheese crackers and frozen waffles would taste without the additions of “toxic” salt and (heavily government-subsidized) sugar. Continue reading →

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Are Antitrust Agencies Nudging Standard Setting Bodies on Patent Licensing?

DOJ150px-US-FederalTradeCommission-Seal.svgEUAny article authored by three current or former economists from the world’s most powerful antitrust institutions would merit the free enterprise community’s attention (even if their bylines include the standard disclaimer that their views don’t necessarily reflect the views of their employers). But the context in which a recent Competition Policy International article was released and the message it sends make the piece required reading, especially for those in high-tech industries.

The FOSS Patents blog first flagged the article, Standard Setting Organizations Can Help Solve the Standard Essential Patents Licensing Problem. Its authors are the chief economist at the European Commission’s DG Competition agency; a former chief economist of the Justice Department’s Antitrust Division; and the Director of the Federal Trade Commission’s Bureau of Economics. The article was published in the context of a still-simmering debate over “standard-essential patents” (SEPs), a subject which we’ve addressed here (and here) several times. WLF has also waded into the most recent U.S. government pronouncement on SEPs, FTC’s consent decree with Google, with comments to the Commission.

The two thorniest challenges related to SEPs are: 1) whether SEP holders should be permitted to seek enforcement of their patents through injunction or exclusion order? and 2) what constitutes a “reasonable” royalty for such a patent, so that the patent holder is in compliance with its commitment to the standard setting organization (SSO) that set the underlying standard? Continue reading →

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Another Grocery Basket Full of Lawsuit Claims for The Food Court

Heading to The Food Court?

Heading to The Food Court?

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

Gum, crackers, granola, fruit punch, cheese, nuts and nut mixes, lemonade, stuffing mix, gelatin, easy bake mac-and-cheese.

A good day’s shopping for most, but for some, such as California resident Susan Ivie, this basket full of goods represents a lawsuit in the making. Ms. Ivie purchased these products, produced by Kraft Foods, Cadbury, and Back to Nature, over a four-year period. Upon discovering that those companies had, in her opinion, duped her into making those purchases through false or misleading statements, Ms. Ivie contacted some lawyers, and volunteered to be the lead plaintiff in a class action lawsuit.

Well, we’re not sure if Ivie v. Kraft Foods Global et. al actually came about that way, but a recent decision in the suit provides us another opportunity to opine about the proliferation of food labeling lawsuits and the preferred venue for these claims: The Food Court (aka the U.S. District Court for the Northern District of California). To learn more about this litigation trend and why the Northern District is so popular, read a recent story from The Recorder, coincidentally called “Welcome to Food Court“, or read our numerous past posts which use that moniker.

State-level enforcement of federal labeling rules. Ivie pleads her case under, among other laws, California’s “Sherman Laws.” Those laws explicitly adopt all federal food labeling laws and regulations. This tactic allows plaintiffs, and federal judges, to do what federal law explicitly reserves to the FDA — interpret and enforce food labeling rules. Defendants, such as Kraft, Cadbury, and Back to Nature, have tried to get such claims dismissed by arguing the “primary jurisdiction doctrine” and federal preemption. In Ivie, Judge Ronald Whyte went through Ms. Ivie’s shopping cart, item by item, and examined the defendants’ arguments. Continue reading →