In its late June decision in NLRB v. Noel Canning, the U.S. Supreme Court unanimously invalidated President Obama’s efforts to make three recess appointments to the National Labor Relations Board. The Court was sharply divided, however, on the rationale for its decision. Five justices joined Justice Breyer’s majority opinion, which rejected the most sweeping challenges to the recess appointments and ruled against the Administration on the much narrower ground that the Senate was not, in fact, in recess at the time that the appointments were made. As a long-time advocate of judicial restraint, I applaud the narrow approach adopted by Justice Breyer. Justice Scalia’s opinion concurring only in the judgment would have had the effect of preventing future Presidents from making recess appointments except in the rarest of circumstances. To me, it illustrates the shortcomings of originalism as a means of ensuring judicial restraint.
Article II of the Constitution mandates that the President ordinarily must obtain “the Advice and Consent of the Senate” before appointing an officer of the United States. The Recess Appointments Clause creates a limited exception to that requirement by authorizing the President, on a temporary basis, “to fill up all Vacancies that may happen during the Recess of the Senate.” Noel Canning forced the Court to construe the meaning of two phrases contained in the clause.
First, what is meant by “the Recess of the Senate?” Those challenging the NLRB appointments claimed that the phrase refers only to an inter-session recess, i.e., a break between formal sessions of Congress. On the other hand, President Obama asserted (as have all recent Presidents) that the phrase also encompasses an intra-session recess, such as a summer recess in the midst of a session. The NLRB appointments would have been improper under the challengers’ interpretation because the Senate indisputably was not on an inter-session recess at the time of the appointments.
Second, what is the scope of the phrase “Vacancies that may happen?” The challengers asserted that the phrase refers only to vacancies that first come into existence during a recess. President Obama (and his predecessors dating back for at least a century) urged a broader reading that would also encompass vacancies that arise prior to a recess but continue to exist during that recess. The NLRB appointments would have been improper under the challengers’ interpretation because they were made to fill offices that first became vacant before the start of the recess in question.
Concerns that businesses were being victimized by abusive lawsuits filed in state courts—in particular, nationwide class actions and mass actions—led Congress to adopt the Class Action Fairness Act (CAFA) in 2005. Congress intended that CAFA ease removal of class and mass actions from state to federal court. The law has had mixed results in that regard, , as plaintiffs’ lawyers have devised a variety of clever ways to evade CAFA and thereby ensure that their nationwide suits can remain in state court. If a recent Oklahoma state-court decision is any indication, however, the plaintiffs’ bar may finally have met its match: the Supreme Court’s January 2014 decision in Daimler AG v. Bauman. That decision imposed strict limitations on a court’s exercise of general jurisdiction over out-of-state defendants. The Oklahoma court invoked Daimler to dismiss hundreds of plaintiffs from a mass action that the U.S. Court of Appeals for the Tenth Circuit already had deemed not removable under CAFA.
The case involved product liability claims by 702 individuals from 26 States, each of whom alleged that she had suffered injuries from pelvic mesh surgical devices manufactured by Ethicon, Inc. (a subsidiary of Johnson & Johnson). CAFA permits removal to federal court of “mass actions” filed by 100 or more plaintiffs raising substantially similar claims. To reduce the risk of removal, the plaintiffs’ lawyers grouped the claims into 11 separate lawsuits, each containing fewer than 100 plaintiffs. Nonetheless, it was obvious that the plaintiffs wanted the cases tried together: they filed the lawsuits in a tiny Oklahoma county with only a single trial judge, thereby ensuring that all 702 claims would be heard by a single judge. They also took steps to prevent removal based on diversity of citizenship: they included at least one New Jersey resident as a plaintiff in each of the 11 lawsuits. Because the defendants have their principal places of business in New Jersey, the inclusion of one New Jersey plaintiff in each case eliminated complete diversity of citizenship and thus precluded removal based on diversity. Continue reading
In adopting the Natural Gas Act (NGA), Congress determined that wholesale natural gas pricing issues should be the exclusive preserve of the Federal Energy Regulatory Commission (FERC) and thus that State efforts to regulate the wholesale market were preempted. Courts uniformly barred States from seeking to regulate any “practice . . . affect[ing]” the wholesale rates charged by natural gas companies—until a 2013 U.S. Court of Appeals for the Ninth Circuit decision that is the subject of a pending Supreme Court certiorari petition. ONEOK, Inc. v. Learjet, Inc., No. 13-271. The decision below would permit plaintiffs’ lawyers to proceed with antitrust challenges under state laws to industry practices that directly affected wholesale prices. The court reasoned that preemption was inappropriate because the challenged practices also directly affected a small number of retail natural gas sales.
In response to an invitation from the justices, the Solicitor General of the United States last week filed a brief urging that certiorari be denied. Interestingly, however, the Solicitor General’s brief agrees with the defendants (natural gas suppliers who engage primarily in wholesale transactions) that the Ninth Circuit’s anti-preemption ruling was dead wrong. The Solicitor General recommends against Supreme Court review primarily because he concludes that other courts are unlikely to repeat the Ninth Circuit’s error, particularly with respect to transactions arising after Congress revised the NGA in 2005. But in light of the Ninth Circuit’s fundamental misunderstanding of the scope of NGA preemption, I am far less sanguine that it will eventually see the error of its ways. Unless review is granted, there is every reason to believe that the Ninth Circuit will adhere to its anti-preemption precedent in future cases.
On ten or more occasions every term, the justices request the views of the Solicitor General on whether the Court should grant specific certiorari petitions. The Solicitor General correctly recognizes in his ONEOK brief that merely because the decision below was incorrect is not alone sufficient grounds to recommend that review be granted. The Court has limited the size of its docket to about 75 cases per term. The justices thus usually adhere to the dictates of Supreme Court Rule 10, which states that the Court generally will grant certiorari only in cases that raise an “important question of federal law” and that have decided the question in a manner that conflicts with a relevant decision of the Supreme Court or other appellate courts. Accordingly, the Solicitor General not infrequently recommends that the Court deny a certiorari petition even though he concludes, as here, that the decision below was incorrectly decided.
But the Solicitor General’s principal rationale for recommending a denial of certiorari—that the Ninth Circuit’s error is of reduced importance because it is unlikely to be repeated—is subject to serious question. The plaintiffs accuse natural gas traders of having manipulated privately published price indices in 2001-02. Because buyers and sellers rely on those indices as reference points for pricing all types of natural gas transactions, the direct effect of the alleged manipulation was to raise wholesale natural gas prices. While conceding that wholesale purchasers were barred by the NGA from challenging the alleged manipulation on state antitrust grounds, the Ninth Circuit held that preemption did not extend to suits brought by retail purchasers who challenged the very same manipulation, because retail sales fall outside of FERC’s jurisdiction. The court concluded this despite the fact that the alleged manipulation unquestionably was a “practice . . . affect[ing]” wholesale prices within the meaning of the NGA.
The Obama Administration has been a faithful friend of the plaintiffs’ bar, particularly regarding federal preemption of State-law tort claim against product manufacturers. The Food and Drug Administration has, for example, proposed a regulation (with direct input from plaintiffs’ lawyers) on labeling of generic drugs that would sweep away a federal preemption defense upheld twice by the U.S. Supreme Court.
A Supreme Court brief filed on May 20 by the Solicitor General of the United States provides another example of just how committed the Administration is to this mutually beneficial friendship. In urging the Court to deny review in a medical device preemption case, the brief urges the Court to ignore an express preemption statute and to effectively overrule its 2008 pro-preemption decision in Riegel v. Medtronic.
The Supreme Court has steered a middle course when previously considering claims that the federal statute at issue, 21 U.S.C. § 360k(a), preempts product liability suits against medical device manufacturers. It held in a 1996 case that federal law does not preempt claims involving the vast majority of medical devices: those devices being marketed based on a determination that they are “substantially equivalent” to devices already on the market as of 1976 (so-called § 510(k) devices). The Court explained that FDA never undertook a formal review of the safety and effectiveness of such devices, and thus there was no reason to believe that Congress intended to prevent States from imposing their own safety and effectiveness requirements. The Court later held in Riegel that § 360k(a) generally does preempt design defect and failure-to-warn claims involving the small number of Class III devices that FDA has approved for marketing following a safety and effectiveness review undertaken in accordance with the agency’s rigorous pre-market approval (PMA) process.
The Solicitor General’s office submitted its brief in connection with a petition (Medtronic v. Stengel) seeking review of a U.S. Court of Appeals for the Ninth Circuit decision that claims involving a PMA device for delivering pain medication were not preemped. (WLF filed an amicus brief in support of certiorari). Riegel left open the possibility that some State law claims might escape § 360k(a) preemption if they were “parallel” to federal law; i.e., if the State were simply imposing the very same requirements on a device that FDA regulations specific to the device already imposed. Lower courts have struggled in the ensuing years to craft a workable definition of a “parallel claim,” and the Stengel petition asks the Supreme Court to resolve a well-entrenched conflict among the federal appeals courts regarding the meaning of the parallel-claims exception. Last October, the Supreme Court invited the Solicitor General to comment on the petition. Continue reading
In publications, formal comments, and here at The Legal Pulse, Washington Legal Foundation has consistently questioned the wisdom and legality of requiring “plain packaging” for disfavored consumer products. We wrote in a December 2011 post that plain packaging laws like the one Australia formally adopted in 2012 will “boomerang . . . by creating a vigorous black market in cigarettes and forcing tobacco prices down as new and cheaper cigarettes enter the marketplace.”
Recent sales data and studies on the tobacco market in Australia show how that nation’s plain packaging law has, in fact, boomeranged as we predicted it would.
First, a late-2013 study by KPMG revealed that counterfeit tobacco sales in Australia had risen since the passage of the plain packaging law to almost 14% of the Australian market. Illicit sales not only deprive Australia of hundreds of millions in lost tax revenue, they also increase law enforcement costs in reaction to greater criminal black market activity. Australian press accounts demonstrate how the illicit sales are funding larger criminal enterprises, such as gangs. In addition, counterfeit sales have harmed Australia’s small retailers, as a study by an Australian market research firm has demonstrated.
Second, much to the shock of plain-packaging devotees, tobacco sales are increasing Down Under. Reports last month indicate that deliveries to tobacco retailers rose in 2013 for the first time in five years. This news should not be a surprise to anyone who understands basic economics and consumer behavior. Tobacco producers who are no longer able to differentiate their cigarettes from rivals through package branding and imaging, are forced to lower their prices to maintain or expand market share. Lower prices, of course, routinely lead to increased sales. Such a reaction is especially true when generic, lower-cost cigarette companies enter the market, as they have in Australia. WLF explained this effect in its 2010 comments to the Australian Parliament, emphasizing the success generic tobacco brands have had in the U.S.
Other nations such as Britain looking to sweep away trademark and speech rights with plain packaging laws should pay heed to these developments in Australia. Regulators who proceed in the face of such demonstrated economic hazards will be doing so more for ideological, rather than public health, reasons.
Also available at WLF’s Forbes.com contributor page
In the long-running legal battle between Argentina and its “holdout” bondholders, each side has been seeking to line up high-profile allies in pending Supreme Court proceedings. Last week, a few foreign governments filed amicus curiae briefs in the Court in support of Argentina. Today, the bondholders lined up what may prove to be a more important set of allies: 21 States filed an amicus curiae brief urging the Court to rule against Argentina.
The States are not simply disinterested observers of these court proceedings, which will determine the power of U.S. courts to issue injunctions designed to force foreign countries to honor their commitments to repay bond debt. Through their public pension funds, States have invested billions of dollars in foreign sovereign debt. It’s not surprising, therefore, that they oppose Argentina’s contention that the Foreign Sovereign Immunities Act (FSIA) largely bars U.S. courts from taking steps to enforce judgments entered against issuers of defaulted sovereign debt. The States’ willingness to come forward so publicly should serve as an important reminder to the High Court that American taxpayers and pensioners will be badly harmed if foreign governments are permitted to walk away from their contractual commitments.
The dispute between Argentina and its holdout bondholders actually encompasses two separate Supreme Court proceedings. The States’ brief (one of several filed today in support of the bondholders) was filed in the proceeding that addresses whether Argentina can be required to answer questions regarding the location of its commercial assets. Bondholders want that information to assist in their efforts to seize non-exempt Argentine assets in satisfaction of court judgments they previously obtained. The FSIA provides that a sovereign’s commercial assets (but not its governmental assets) may be seized by judgment creditors. U.S. courts have the power to order seizure of commercial assets located within the United States, while judgment creditors must seek the assistance of courts in a foreign country if they wish to seize the sovereign’s commercial assets located in that country. The question before the Supreme Court: may a sovereign debtor be required by a U.S. court to answer questions regarding the location of its commercial assets in foreign countries, or would such a requirement affront the nation’s sovereign dignity?
The States’ amicus curiae brief strongly urges the Court to grant bondholders access to that information. They argue that even though Argentina waived its sovereign immunity and agreed to be subject to suit in New York courts when it borrowed money from the States and other bondholders, those concessions would be meaningless if bondholders were denied the tools necessary to enforce their repayment rights. They note that unless bondholders are granted the ability to discover the location of a sovereign nation’s commercial assets, they will have no way of knowing where to turn to initiate enforcement proceedings.
Those arguments may persuade the Supreme Court. More importantly, the Supreme Court filing by 21 States (represented by a bipartisan group of Attorneys General) reinforces the breadth of the opposition to Argentina’s position. Their presence also serves as a reminder to the Court that allowing foreign governments to walk away from their debts would harm millions of Americans.
Also published on Washington Legal Foundation’s Forbes.com contributor page
Argentina this week received some support (in the form of several amicus curiae briefs) for its efforts to obtain Supreme Court review of the setback it suffered in Second Circuit at the hands of Argentine bondholders. Argentina needs all the help it can get; it is nearing the end of the line in its thus-far unsuccessful efforts to ignore the claims of “holdout” bondholders. However, the most important news from the Court this week was who did not file: the United States government declined entreaties by Argentina to urge the High Court to review the case. Without the support of the United States, Argentina has little hope of convincing the Supreme Court to hear its appeal.
The holdouts will file their brief in May, and the Justices will convene in early June to decide whether to hear the case. If, as is likely, they decide not to hear it, that will be the end of the line for Argentina in U.S. courts on this issue.
Among the briefs filed this week, one that stands out is the brief filed by Brazil. Its principal argument was that the injunction issued against Argentina—requiring Argentina to treat all its bondholders equally—“offends the sovereignty and dignity of Brazil.” It is hard to understand how that is so, unless Brazil wants to join Argentina in refusing to pay its bondholders. Moreover, Brazil seems to overlook that the Second Circuit did not order Argentina to pay anything. The court’s injunction merely said, in effect, “You are a sovereign nation and cannot be forced to use your non-commercial assets to repay your debts. But you can’t have it both ways; if you refuse to make any payments to creditors whose claims have been upheld by our courts, you cannot expect to be granted easy access to American equity markets.” Brazil need not worry that it too will be denied access to equity markets so long as it abides by its contractual commitments to treat all bondholders fairly.
Like all of the other amicus briefs filed this week, Brazil’s fails to cite a single U.S. court decision that conflicts with the Second Circuit decision. In the absence of such a conflict, the U.S. Supreme Court is likely to deny review. Indeed, of the many thousands of petitions it receives each year, it agrees to hear on average only 70. Nor is the Court usually impressed by the sheer number of amicus curiae briefs (ten were filed in support of Argentina); it is identity of the filer (e.g., briefs submitted by the United States carry significant weight) rather than quantity of filings that the Justices focus on most closely. For example, the Court is unlikely to give much weight to Brazil’s brief, in light of press reports suggesting that Brazil decided to file only after demanding and receiving trade concessions from Argentina (as discussed here at The Legal Pulse). The Court takes a dim view of amicus briefs that are, in effect, paid for by one of the parties.
In a last-ditch effort to stave off defeat in its long-running battle with bondholders who want to be paid, Argentina in February asked the U.S. Supreme Court to hear its appeal from an adverse appeals court decision. It is now busy trying to line up amici curiae (“friends of the court”) to file supporting briefs with the High Court. The deadline for filing amicus briefs is next Monday, and a number of groups and foreign countries have given official notice of their intent to file briefs in support of Argentina.
However, there are some indications that Argentina has paid for one or more of the anticipated amicus filings. The Supreme Court takes a dim view of that practice; it wants each amicus filer to truly be a “friend of the court,” not a “friend of a party.” The Court does not strictly prohibit the filing of amicus briefs that have been paid for by a party. But it requires that the fact of payment be explicitly disclosed in the opening footnote of the amicus brief.
Lawyers who practice regularly before the Court know that a disclosure of payment in Footnote 1 is a black mark; the Court is unlikely to pay much attention to a paid-for brief. The justices view such briefs as simply a second brief from one of the parties, an effort to evade the strict word limit that the Court imposes on parties’ briefs.
Brazil’s potential brief is particularly suspect. Accounts appearing this week in the Brazilian press (here, here, here, here, and here; translated stories here) relate that Brazil has agreed to a request from Argentina to file an amicus brief in support of Argentina’s petition for review. The press accounts claim that Brazil agreed to the request in return for financial favors. In return for agreeing to file, Brazil allegedly received commitments from Argentina for: (1) removal of trade barriers, particularly in the automobile industry; and (2) financing for Argentine car dealerships, to allow them to purchase more Brazilian cars.
Mexico has already filed its intent to file an amicus brief in support of Argentina. Argentina may also be courting France to file with the Court; President Kirchner met today with President Hollande It’s hard to say if Argentina is using the same tactics with Mexico and France, but if any sort of financial encouragement is on the table, both nations should be aware of the “Footnote 1” ramifications and take heed.
If the Brazilian press accounts are accurate, then its lawyers will be required under Supreme Court rules to disclose in the opening footnote of their brief the payments made by Argentina to finance the brief. Would Brazil still decide to file once its lawyers inform it of the required disclosures? An amicus brief submitted by a disinterested South American country urging the Court to hear a case raising issues deemed important by that country might have some influence on the Court’s decision-making process. In contrast, an amicus brief filed by a country that has been paid for the filing by one of the parties is likely to sit on a shelf gathering dust.
The Supreme Court on Wednesday issued a divided opinion in a case that raised an important issue of arbitration law: should an arbitrator or a judge decide whether an international treaty requires a private party to bring a commercial dispute before a judge prior to attempting arbitration? In BG Group PLC v. Republic of Argentina, the Court ruled 7-2 against Argentina, concluding that arbitrators acted within their power when they concluded that a British firm was not required to file suit in Argentina’s courts before seeking arbitration. Chief Justice Roberts, joined by Justice Kennedy, dissented; they argued that in signing the bilateral UK-Argentina investment treaty, Argentina agreed to arbitration only on condition that investors bring their disputes to an Argentine court first. But there was one point on which the justices agreed unanimously: Argentina has a sorry history of living up to its contractual commitments to investors. That point of agreement does not bode well for Argentina, which in two pending Supreme Court cases is asking the Court to permit it to invoke sovereign immunity as the basis for resisting repayment of sovereign debt.
The case involved claims by a British firm, BG Group plc, that Argentina breached a natural gas distribution contract. Washington, D.C.-based arbitrators awarded BG Group $185 million in damages, and Argentina turned to American courts to overturn the award. It cited the terms of the UK-Argentina treaty as the basis for its claim that the arbitrators lacked jurisdiction to hear the case. The treaty provides that an investor asserting a claim under the treaty may not initiate arbitration until 18 months after filing a claim against Argentina in an Argentine court.
The arbitrators held that BG Group should be excused from complying with the 18-month litigation requirement. They noted that Argentina, after taking steps that essentially expropriated BG Group’s property, adopted a series of laws designed to block any BG Group lawsuit. They held that these laws, “while not making litigation in Argentina’s courts literally impossible, nonetheless hindered recourse to the domestic judiciary to the point where the Treaty implicitly excused compliance with the local litigation requirement.” Continue reading
The U.S. Supreme Court this week has a chance to strike a blow for judicial modesty and at the same time call a halt to a disturbing trend being pushed by the plaintiffs’ bar: class-action lawsuits in which no one was injured but that seek millions of dollars in “damages.” The Court is being asked, in the case of First National Bank of Wahoo v. Charvat, to consider whether federal courts possess jurisdiction to hear such no-injury lawsuits. The Court should accept the invitation and announce that attorneys will no longer be permitted to flout Article III of the U.S. Constitution, which limits the filing of federal lawsuits to those who have actually suffered an injury.
The case involves two small Nebraska banks that, like most banks, charge a small fee to non-customers who use their ATM machines. Federal law requires banks to provide notice that they charge such a fee. The two Nebraska banks did provide notice (on the very first screen seen by ATM users), and no one has come forward to claim that he or she used one of the ATMs without being aware that a fee would be incurred.
Here’s the wrinkle: at the time this lawsuit arose, federal regulations (since repealed) also required a second form of notice—on a small placard physically attached to the ATM. Some of the ATMs maintained by the First National Bank of Wahoo and the Mutual First Federal Credit Union did not display the placard. Jarek Charvat, an enterprising young man working with a local plaintiffs’ law firm, knew about the ATM fees and observed that the banks were not in full compliance with the federal placard regulation. So he went from bank branch to bank branch, making ATM withdrawals and deliberately incurring a $2.00 fee at each stop. Continue reading