D.C. Circuit’s “COOL” Decision Eases Government’s Burden in Justifying Compelled Speech

DC CircuitIf government wants to force you to say something you would not otherwise express, it must have a very good reason for doing so. This bedrock First Amendment principle applies to individuals and business enterprises alike.

In July, the U.S. Court of Appeals for the D.C. Circuit—arguably the nation’s second most important federal court—carved away at this principle and the constitutional protection it provides. Below, we discuss how that court allowed a federal agency to repeatedly change its declared reason for compelling speech and in an en banc panel opinion improperly eased government’s burden to prove a substantial governmental interest.

District Court Challenge. The compelled speech at issue in American Meat Institute (AMI) v. USDA is a country of origin label (“COOL”) recording the place of birth, residence, and slaughter of the animal from which each cut of meat taken. In the proposed rule’s Statement of Benefits and Costs, USDA asserted the mandate was justified because “certain U.S. consumers valued the designation.” AMI argued in its public comments that this interest was neither governmental nor substantial. USDA responded in the final rule with a stunning tautology: our interest is substantial and governmental because Congress empowered us to impose the COOL mandate.

When AMI sued to enjoin COOL on July 25, 2013, the agency again shifted focus, advancing a new justification that never appeared in the administrative record: “correct misleading speech and prevent consumer deception.” The federal district court bought USDA’s made-for-litigation governmental interest while denying AMI’s motion. In permitting this new justification, Judge Jackson ignored a 1947 Supreme Court precedent, SEC v. Chenery Corp. That decision holds that when judging the propriety of agency action, courts are limited to what is in the administrative record. Continue reading

Washington Post Parrots Activists’ Skewed Spin of FDA’s “GRAS” Process

The ScreamJust below the fold in the print and digital versions of this morning’s Washington Post blares the headline “Food additives on the rise as FDA scrutiny wanes.” The story dutifully advances the perspective of professional activists that the Food and Drug Administration’s (FDA) “generally recognized as safe” (GRAS) process for food additives is perilously broken. Food nanny organizations such as Center for Science in the Public Interest and the Natural Resources Defense Council have ramped up their attacks on GRAS over the past several years, assisted by a 2010 Government Accountability Office (GAO) report calling for changes to the process.

As explained in a Washington Legal Foundation Legal Backgrounder by Hyman, Phelps & McNamara attorneys Roberto Carvajal and Nisha Shah, the GRAS process dates back to 1958, when Congress determined that certain uses of substances in foods that were generally recognized as safe need not go through formal FDA approval. For nearly four decades, FDA applied that exception very narrowly, but the Clinton-era agency leadership altered that interpretation in 1997. They concluded that narrow application of the GRAS exception deeply strained agency resources and chilled food industry innovation. The agency’s new approach permitted food processors to self-report new uses of certain substances and provide FDA with the science supporting the GRAS conclusion. In response to the critical 2010 GAO report, the agency acknowledged that while the GRAS process could be improved, “FDA believes that the GRAS concept has continuing utility as a practical tool for distinguishing between substances and new uses of substances that merit a full pre-market safety evaluation by FDA and those that do not.”

FDA’s resolve on the GRAS process seems to be weakening, however. The Post article features a troubling front-page quote from FDA’s Deputy Commissioner Michael Taylor: “We simply do not have the information to vouch for the safety of many of these chemicals.” He goes on to proclaim later in the article, “We aren’t saying we have a public health crisis.” But of course Deputy Commissioner Taylor understands that when FDA uses the term “public health crisis,” even when denying the existence of one, it sounds alarm bells. FDA’s latest statements could be setting the stage for regulatory action against such common, widely-used ingredients as caffeine and sodium, which the agency has long considered GRAS.

For those who might be interested in learning more about the GRAS process from a far different perspective than the Washington Post provided today, watch WLF’s free July 10 Web Seminar, The Future of FDA’s “GRAS” Designation in an Era of Increased Scrutiny. The Powerpoint presentation utilized by our speakers, Keller and Heckman LLP’s Melvin Drozen and Evangelia Pelonis, is available here.

Federal Jurists ♥ Utilitarian Philosopher Jeremy Bentham

BenthamThe U.S. Court of Appeals for the D.C. Circuit, sitting as an en banc panel of 11 judges, sent shock waves through the world of First Amendment enthusiasts on July 29 with its opinion in American Meat Institute v. U.S. Dept. of Agriculture. We’re still digesting this compelled speech ruling, and will be producing a number commentaries over the next several weeks with our thoughts and insights from other experts.

But in the meantime, we couldn’t resist highlighting a wonderful quip in Judge Janice Rogers Brown’s dissent and how it relates to a dissent by Justice Antonin Scalia in a 2013 opinion (which borrowed a concept from 18th Century philosopher, jurist, and utilitarianism proponent Jeremy Bentham).

Upon reading American Meat Institute, an attorney who’s written publications for WLF on commercial speech called to our attention Judge Brown’s creative phrasing, which he thought rivals a quip he recalled Justice Scalia making last year in Maryland v. King.

At the outset of her American Meat Institute dissent, Judge Brown stated, “If, as Jeremy Bentham once quipped, a fanciful argument may be dismissed as ‘nonsense upon stilts,’ the court’s analysis in this case can best be described as delirium on a pogo stick.” Such an intelligently cutting statement is not at all unusual for Judge Brown, whose well-written and cogently reasoned opinions are often peppered with witty historical references. An NPR report about Judge Brown’s U.S. Senate confirmation hearings noted that her opinion writing “reminds [one] very much of Justice Scalia’s writing style.” Continue reading

FDA Advisory Committee Not Rife with Conflicts of Interest? — “Please!” Quips Federal Judge

FDAIn order to achieve results that it believes are vital to public health, the Food and Drug Administration (FDA) has demonstrated time and again that it’s not afraid to trample laws and constitutional rights along the way. Occasionally, judges reintroduce FDA to the Rule of Law. We applaud one such recent rebuke by Judge Richard Leon, whose July 21 Lorillard v. FDA decision reminded FDA that it cannot stack a science advisory panel with members who will tell the agency what it wants to hear.

FDA tobacco control. After the U.S. Supreme Court rejected the agency’s attempt to seize regulatory oversight of tobacco products in 2000 (FDA v. Brown & Williamson), Congress granted FDA the authority it coveted in 2010. Banning or severely restricting the use of menthol in cigarettes has long been a goal of FDA’s friends in the anti-tobacco movement. FDA created a science advisory panel, the Tobacco Products Scientific Advisory Committee (TPSAC) to study menthol. The TPSAC concluded in 2011 that menthol had a negative effect on public health. Two companies filed suit in Febuary 2011, charging that FDA violated federal law by appointing members to the TPSAC who had clear conflicts of interest. The plaintiffs asked the court to strike the TPSAC’s report from the regulatory record.

Judge Leon’s opinion. The TPSAC members in question had ongoing contracts to testify as expert witnesses for plaintiffs in suits against tobacco companies. They also served as consultants to manufacturers of tobacco cessation products. FDA didn’t feel such relationships conflicted with their duties on the TPSAC. Judge Leon was quite flabbergasted by FDA’s decision. “Please!” he exclaimed, adding, “This conclusion defies common sense.” With regard to the members’ work with plaintiffs’ lawyers, Judge Leon explained that they had a financial incentive not to make any recommendations that would compromise the lawsuits in which they would testify. On the product consulting work, the judge noted that any FDA regulation of menthol would likely inspire more smokers to quit, potentially with the assistance of cessation products. Thus the TPSAC members also had a financial incentive to offer advice that would encourage a ban or restrictions on menthol. Judge Leon concluded that such blatant disregard for obvious conflicts violated federal law, and he enjoined FDA from utilizing the report in its assessment of menthol. Continue reading

No Name Calling in My Court: Judge Bans Use of Term “Patent Troll” in Jury Trial

thumbnailTrollThis recent item from Law360 (subscribers only) caught our eye: “Judge Koh Bars Apple From Calling Rival ‘Patent Troll’ At Trial.”

In addition to being referenced regularly at this blog for her food labeling class action rulings, Judge Lucy Koh of the U.S. District Court for the Northern District California has been presiding over a number of high-profile skirmishes in the “Smartphone Patent Wars.”

The case before her is GPNE Corp. v. Apple, Inc. GPNE alleged in its complaint last June that Apple iPads and iPhones infringe patents GPNE holds on data transmission. GPNE’s business model is arguably similar to that of other entities commonly labeled “patent trolls.” It does not practice its patents; rather, it seeks revenue through licensing and litigation. GPNE views the term as prejudicial and urged Judge Koh to prohibit its use before the jury.

In her June 24 Pretrial Order Re: Motions In Limine, Judge Koh dictated:

Apple may not refer to GPNE as a ‘patent troll,’ ‘pirate,’ ‘bounty hunter,’ ‘privateer,’ ‘bandit,’ ‘paper patent,’ ‘stick up,’ ‘shakedown,’ ‘playing the lawsuit lottery,’ ‘corporate shell game,’ or ‘a corporate shell.’

She did, however, permit Apple to use other terms when referring to GPNE:

Apple may refer to GPNE as a ‘non-practicing entity,’ ‘licensing entity,’ ‘patent assertion entity,’ ‘a company that doesn’t make anything,’ or ‘a company that doesn’t sell anything.’ The Court finds that this conclusion strikes the balance between allowing Apple to argue that GPNE’s status as a non-practicing entity is relevant to the calculation of reasonable royalties and to secondary considerations of non-obviousness without unduly prejudicing GPNE or confusing the jury. See Fed. R. Evid. 403.

Judge Koh’s order reflects how this once “inside baseball” term has become part of the broader patent law and technology policy lexicon. “Patent troll” was coined, ironically, in 1999 by an Intel attorney, Peter Detkin.  Detkin left Intel and eventually co-founded Intellectual Ventures, a non-practicing entity which some have called “a patent troll on steroids.”

For years, only those who were narrowly involved with patent licensing and litigation uttered the term. Lately, however it is being utilized in everyday discussions on patents and technology. While President Obama did not specifically use the term is his February 2013 “Fireside Hangout” on Google Plus,  he did accuse entities “that don’t produce anything themselves” of “extort[ing] money” out of technology producers. A document issued by the White House Task Force on High-Tech Patent Issues last June, however, did utilize the term “patent trolls” when discussing the need for reform.

One could argue that “patent troll” has become so widely used that it has lost its “punch” as a pejorative in characterizing those whose singular business is sticking up or shaking down technology-producing companies through opaque demand letters and playing the lawsuit lottery. Obviously, Judge Koh does not see it that way, and declared her courtroom a troll-free zone. Whether that helps GPNE prevail in its claim, however, is uncertain.

Also published at WLF’s Forbes.com contributor page

Pennsylvania High Court Joins Judicial Stampede That’s Trampling State Attorneys-General/Plaintiffs’ Bar Alliances

PA scotusOn June 16, the Pennsylvania Supreme Court rejected the Commonwealth’s arguments that Bristol Myers Squibb (BMS) was liable for fraudulently overcharging state health agencies. The state had sued BMS and 13 other pharmaceutical companies and won a $27 million damage award. In the unanimous ruling, the Court dropped a noteworthy footnote in which it questioned Pennsylvania’s reliance on private contingent-fee lawyers to prosecute the case. The decision is just the latest in a string of costly failures by deputized plaintiffs’ lawyers in state actions against drug companies.

The Court’s unanimous Commonwealth v. TAP Pharmaceutical Products decision turned on whether the Pennsylvania agencies suffered any financial loss when taking into account the value of rebates that BMS provided the state for drug purchases. The state claimed that BMS took advantage of the complex “average wholesale price” (AWP) formula to artificially increase its profits from sales to health agencies. BMS denied those charges, and argued that even if the agencies were overcharged, the rebates offset the alleged financial harm. Despite testimony from state officials that they did take rebates into consideration when assessing drug payments, Pennsylvania excluded rebates when formulating its damages claim. The trial court bought the state’s justification for this contradictory stance, as did the Commonwealth Court on appeal.

The justices seemed shocked by the lower courts’ unquestioned acceptance of Pennsylvania’s stance on rebates. Justice Saylor wrote, “[T]his Court is not in need of a body of evidence to apprehend that a rebate operates to reduce the net price of a commodity.” The Supreme Court found it “astonishing” that the Commonwealth Court would allow the state to collect “a billion dollars in rebates relative to social welfare reimbursements while giving no credit to the payers.” Continue reading

Quick Take: Some Possible Impacts of SCOTUS’s POM Wonderful Decision on State-law Food Labeling Class Actions

food-courtIn some of our commentaries on food labeling class actions (collected under the “Food Court” tag), we have lamented how such lawsuits end-run the federal Food Drug and Cosmetic Act’s (FDCA) prohibition on private enforcement. Defendants have argued that the FDCA preempts lawsuits brought under laws such as California’s Sherman Law or Unfair Competition Act. Regrettably, judges have rejected this argument, and have found preemption only if a lawsuit would impose labeling requirements beyond what Food and Drug Administration (FDA) regulations would require.

Plaintiffs and defendants in these suits expressed significant interest when the U.S. Supreme Court agreed in January to review a U.S. Court of Appeals for the Ninth Circuit decision, POM Wonderful LLC v. Coca-Cola Co. There, the Ninth Circuit ruled that the FDCA precluded POM’s federal Lanham Act suit charging that a Minute Maid Blueberry Pomegranate juice’s name and label were misleading. While POM Wonderful involved the interplay between two federal statutes, rather than between federal and state statutes, some opined that a broadly written Supreme Court opinion could either help state-law food labeling suit defendants defeat those claims or add powerful credence to plaintiffs’ arguments that the FDCA does not impede their private enforcement actions.

The High Court decided POM Wonderful on June 12. In an opinion authored by Justice Kennedy, the Court unanimously reversed the Ninth Circuit. While the ruling could inspire more Lanham Act lawsuits between  competitors, it is unlikely to have a major impact on the types of class actions being filed in The Food Court and elsewhere.

Justice Kennedy stated baldly that “this is not a pre-emption case,” and thus “the state-federal balance does not frame the inquiry.” POM Wonderful therefore will not impact arguments that the FDCA preempts state-law class actions challenging food labels. Justice Kennedy also observed “this is a statutory interpretation case,” and focused the Court’s analysis on whether the FDCA and the Lanham Act were complementary or conflicting. Continue reading