The “21st Century Cures Act” Draft Legislation Includes Welcome Support for First Amendment Rights

FDAThe House Energy and Commerce Committee released a 400-page “discussion draft” of its proposed “21st Century Cures Act” late last month. The bill includes a broad range of reforms governing the regulation of drugs and medical devices, most of which have been warmly received by broad segments of those industries. The bill is particularly welcome to supporters of commercial speech rights; it includes several provisions designed to ensure that government regulators do not prevent manufacturers from speaking truthfully about their medical products.

Social Media

One particular area of concern has been Food and Drug Administration (FDA) restrictions on manufacturer use of social media. Subtitle I of Title I of the bill would overturn those restrictions. One characteristic of social media is that it places a premium on brevity. For example, Twitter limits messages to 140 characters or less. In a Draft Guidance issued on June 18, 2014, FDA concluded that drug/device manufacturers should rarely, if ever, attempt to use social media platforms with character space limitations because those limitations deprives manufacturers of sufficient space to include all the risk and benefit information that the agency asserts is a necessary part of any such communications. It is not sufficient, FDA concluded, for a Twitter message to include the name of the drug and its intended uses, and then provide a hyperlink where detailed risk and benefit information is available. But as Washington Legal Foundation (WLF) pointed out in comments urging withdrawal of the Draft Guidance, a de facto prohibition on use of social media platforms raises serious First Amendment concerns. The First Amendment does not allow the government to prohibit an entire method of communication simply because other methods of communications are available to the speaker, at least not where the government’s goals can be achieved through more narrowly tailored means. Continue reading

The D.C. Circuit’s “POM Wonderful” Decision: Not So Wonderful for FTC’s Randomized Clinical Trial Push

FTC_Man_Controlling_TradeThe U.S. Court of Appeals for the D.C. Circuit last Friday largely upheld the Federal Trade Commission’s (“FTC”) ruling that POM Wonderful, Inc. violated the Federal Trade Commission Act by making unwarranted disease-prevention claims for its pomegranate juice products. But the ruling is far from the sweeping endorsement of FTC advertising-control measures that the Commission might have been hoping for. In particular, the ruling provides little, if any, support for the FTC’s recent assertions that food and dietary supplement manufacturers are largely barred from including health-related claims on product labels unless their claims are supported by randomized and controlled human clinical trials (“RCTs”). To the contrary, the appeals court made clear medical studies that do not meet RCT standards may nonetheless have considerable value, and that the FTC’s regulation of advertising is subject to strict First Amendment limitations. The decision suggests that courts may be very reluctant to uphold the FTC’s application of RCT standards to claims that a product promotes general health and nutrition, as distinct from claims that a product is effective in preventing or curing specific diseases.

POM’s ads were an easy target for the FTC. The ads touted POM’s products as effective in preventing a variety of diseases/conditions, including cardiovascular disease, prostate cancer, and erectile dysfunction (“ED”). Yet they failed to mention numerous shortcomings in the medical studies on which the disease-prevention claims were based—including that the studies’ findings were directly contradicted by other, larger clinical studies. Indeed, the D.C. Circuit held that it would have concluded that the ads were deceptive even had it chosen to apply a de novo standard of review to the FTC’s findings. (Because the case was on appeal from an FTC administrative proceeding, the D.C. Circuit reviewed those findings under a far more deferential “substantial evidence” standard.) Continue reading

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

Supreme Court Observations: “Dart Cherokee” Eliminates the Presumption against Removal of Class Actions

supreme court*Joining WLF’s Richard Samp as a guest commentator on this post is M.C. Sungaila, a partner with Snell & Wilmer LLP. Ms. Sungaila acted as counsel to the International Association of Defense Counsel and the Federation of Defense and Corporate Counsel, both of which joined WLF in its amicus brief in Dart Cherokee.

The Supreme Court’s ruling Monday, December 15 in Dart Cherokee Basin Operating Co. v. Owens, overturning a Tenth Circuit removal jurisdiction decision, was hardly surprising. After all, the Tenth Circuit’s restrictive interpretation of the federal removal statute, 28 U.S.C. § 1446(a)—that a defendant forfeits its removal rights unless the removal petition attaches documentary evidence supporting the jurisdictional allegations—conflicted with decisions from every other federal courts of appeal that has addressed the issue and elicited no supporting comments from the justices during October’s oral argument. Of far more lasting significance was Dart Cherokee’s rejection of a presumption against removal, in class-action cases and perhaps in other removal cases as well. That presumption had been adopted by 10 of the 11 regional courts of appeals and has been cited by countless district courts as the basis for remanding cases to state court. Organizations with which we are affiliated—the Washington Legal Foundation, the International Association of Defense Counsel, and the Federation of Defense and Corporate Counsel—are justly proud of having filed a brief that focused attention on the presumption-against-removal issue, an issue largely ignored by the parties.

Background. Dart Cherokee involved a class-action claim that an oil company breached a contract by underpaying royalties allegedly owed to lessors from production of oil wells located in Kansas. The oil company removed the case to federal district court, asserting jurisdiction under the Class Action Fairness Act (CAFA). CAFA permits removal of class actions even in the absence of complete diversity of citizenship, so long as the amount in controversy exceeds $5 million. The plaintiffs filed a motion to remand, asserting that the removal petition inadequately demonstrated the amount in controversy.

The district court agreed and ordered a remand. It did so despite acknowledging that the oil company’s response to the motion adequately demonstrated that the amount in controversy exceeded $5,000,000 and that the plaintiffs conceded as much. The court concluded that under Tenth Circuit case law, evidence supporting federal removal jurisdiction must be included within the removal petition itself and not added later. The court explained that its decision to remand was “guided by the strong presumption against removal.” It noted that the Tenth Circuit “narrowly construes removal statutes, and all doubts must be resolved in favor of remand.” Continue reading

“Direct Marketing” Supreme Court Case Points Out Federal Courts’ Obligation to Exercise Jurisdiction

supreme courtYesterday’s oral argument in Direct Marketing Assoc. v. Brohl indicated that the Supreme Court does not think very highly of the Tenth Circuit’s expansive interpretation of the Tax Injunction Act (TIA). The appeals court concluded that the TIA deprived federal courts of jurisdiction to hear a challenge to a Colorado statute that imposes notice and reporting requirements on out-of-state retailers. Questions at yesterday’s argument suggested that most justices interpret the TIA’s limitations on jurisdiction as inapplicable when, as here, the plaintiff is not seeking to enjoin the collection of a state tax. However, Direct Marketing’s greater significance may lie in its illustration of lower federal courts’ continued resistance to hearing matters involving States and their laws. That resistance, largely the byproduct of overcrowded dockets and a sense that state issues are often of insufficient importance to warrant the attention of federal judges, is inconsistent with federal courts’ obligation to hear each case in which jurisdiction has been properly invoked.

The Petitioner in Direct Marketing is a trade group that represents online and mail-order retailers. They object to a statute adopted by the Colorado legislature to assist the State in collecting sales and use taxes from its own citizens who purchase products from out-of-state retailers. The Supreme Court’s 1992 Quill decision held that a State may not require out-of-state retailers to collect sales/use taxes on such purchases, even if the retailer ships its product into the State. Colorado’s response: it adopted a statute imposing onerous notice and reporting requirements on any out-of-state retailer that does not voluntarily collect sales/use taxes on such sales, including requiring submission to tax officials of an annual Customer Information Report that details all purchases made by Colorado residents. The Petitioner asserts that the statute violates numerous provisions of federal and state law. Continue reading

“Perez v. MBA”: Clashing Perspective on Administrative Law Meet at the Supreme Court

supreme courtThe contrasting perspectives of the stakes in Perez v. Mortgage Bankers Ass’n, an administrative law case that the U.S. Supreme Court will hear on Monday, December 1, could not be starker. Law professors are allegedly unanimous that the Court should reverse the U.S. Court of Appeals for the D.C. Circuit doctrine at issue, a doctrine that, in their view, severely hampers the ability of federal administrative agencies to respond to changing conditions. On the other hand, lawyers representing regulated entities have rallied to the defense of the D.C. Circuit’s doctrine; they view it as an essential check on arbitrary agency rulemaking. What explains these contrasting visions? The explanation could lie in the ongoing battle over how much deference courts should accord to agencies’ interpretations of their own rules. At time when courts are increasingly deferential to agencies, regulated entities will forcefully act to preserve other tools—such as the D.C. Circuit doctrine at issue in Perez—to keep federal agencies in check.

Perez concerns the scope of notice-and-comment rulemaking. The Administrative Procedure Act (APA) requires federal agencies, before they adopt a “substantive” or “legislative” rule, to provide notice of the proposed rule and a meaningful opportunity for members of the public to comment on the proposal. Exempted from the APA’s notice-and-comment requirement are “interpretive” rules. Agencies seek to avoid notice-and-comment requirements where possible; it is a burdensome process that can delay rulemaking for months and even years. Yet, despite nearly 70 years of APA litigation, the meaning of exempt “interpretive” rules has never been fully pinned down. Continue reading

Why “King v. Burwell” Obamacare Case Is Not “NFIB v. Sebelius” Redux

supreme courtThe Supreme Court’s decision to hear King v. Burwell means that the Court, for the second time in three years, will be deciding an issue that will have a major impact on the Obama Administration’s ability to implement the Affordable Care Act. The ACA’s requirement that individuals purchase health insurance or else pay a penalty barely survived a constitutional challenge in June 2012 when the Court voted 5-4 in NFIB v. Sebelius to uphold the mandate as a proper exercise of Congress’s power under the Taxing Clause. The claim raised in King—that individuals who purchase insurance on the federal government’s healthcare exchange are not entitled to the tax subsidies available to those purchasing on state exchanges—would, if accepted by the Court, have an impact on the ACA every bit as great as a decision striking down the individual mandate. That fact has caused some commentators to draw spurious parallels between the two cases. Many Obamacare partisans who dismissed the NFIB constitutional challenge as a “shameful” and hypocritical “solicitation of right-wing judicial activism,” are making the same accusation against the King challenge.

The accusations were inaccurate in NFIB; they are hopelessly wrong when applied to King. Before such unfounded criticism of King takes hold, it is important to emphasize major distinctions between the two cases. The petitioners in NFIB were asking the Court to take a decisive step: to strike down legislation adopted by Congress and signed by the President. Those petitioners, in my opinion, raised highly plausible (and indeed, partially successful) arguments in support of their constitutional claims. However, a majority of the justices—mindful of separation-of-powers concerns that arise whenever they are asked to override the will of Congress and the President—followed the Court’s long-held preference that, in the words of Chief Justice Roberts, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Continue reading