The Supreme Court press and other court observers have spilled a lot of ink this past month discussing the cases the Supreme Court took and decided during October Term 2013. Relatively little was said about the cases the court chose not to decide—and it passed over some doozies. But as Rush drummer and lyricist Neil Peart put it so eloquently, “If you choose not to decide, you still have made a choice.”
Pro-Business? Journalists like to portray the Roberts Court as particularly business friendly (see, e.g., here , here, and here; but see here), but businesses asked the Court to take plenty of cases this past term that it instead declined. When the Court denies cert in cases of such importance to business at the same time that it has a historically light docket, it can hardly be said to be pro-business. Companies crave legal certainty, so even if the Court took these cases and decided them against business interests, many times simply settling contested questions would be better than leaving them up in the air.
Wanted: More Business Cases. The Court needs to hear more business cases than it currently is, for at least two reasons. First, the unprecedented proliferation of new regulations by this administration has given rise to many more conflicts of the kind that produce Supreme Court cases. Second, to the extent the Clinton-and-Obama-appointee-dominated lower courts are predisposed against business litigants (or, more charitably, deciding close questions consistently against them), businesses will appeal more cases to the Supreme Court when they believe a lower court has denied them justice. Of course the Supreme Court justices take neither of these criteria into consideration when assessing individual cases, but surely these factors matter when assessing whether the Court leans in favor of business in forming its docket. Continue reading
by Chip English, Davis Wright Tremaine LLP
Americans are naturally curious and interested about the food we eat and the products we buy—e.g., non-GMO labeling, country of origin labeling (“COOL”) and “conflicts minerals.” The question I explore here is whether and how far the government may constitutionally compel commercial interests to disclose information about their products when such compelled speech goes beyond preventing consumer confusion or deception.
These First Amendment issues are now front and center before the United States Court of Appeals for the District of Columbia Circuit (often referred to as the second highest court in the United States). While commercial speech is not as protected under the Supreme Court’s First Amendment jurisprudence, it is still subject to heightened scrutiny. But the question now before the D.C. Circuit is whether the general four part test formulated in Central Hudson Gas & Electric Corp. v. Public Ser. Comm’n, 447 U.S. 557, 566 (1980) applies to compelled speech, or whether the decision in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) carves out a special rule for all compelled speech as opposed to compelled speech designed to prevent confusion or deception.
On Monday, May 19, the entire D.C. Circuit, sitting en banc, will hear arguments regarding the constitutionality of USDA’s COOL requirements for meat and poultry labels. COOL requires all USDA regulated food labels to disclose the country or countries where the product was grown or produced. A panel of three judges upheld the constitutionality of COOL on March 28, 2014, concluding that Zauderer establishes essentially an exception to the more rigorous (if amorphous) Central Hudson heightened scrutiny test when the government seeks to compel commercial speech. American Meat Institute v. USDA, 1:13-cv-01033 (Mar. 28, 2014). The American Meat Institute (“AMI”) panel concluded that in addition to preventing deception, there may be multiple government interests in mandating a disclosure such as COOL that “are reasonably related to the state’s interests.” Id. at 11. The panel strained to define COOL as being supported by more than consumer curiosity—e.g., consumers may conclude that food produced in a particular country is not as safe as food produced in the U.S. (even though FDA and USDA are charged with appropriate food safety). Continue reading
That phrase is a “tried-and-true debate stopper,” ethicist Jack Marshall writes, “because of its ability to inhibit rational thought.” It’s no wonder, then, that professional activists and government regulators often cloak actions which might otherwise be highly questionable (and unconstitutional) in the appealing mantle of safeguarding America’s youth.
For instance, government routinely invokes protection of children as a justification for restricting commercial speech. Three years ago, a triumvirate of federal agencies tried to limit kids’ exposure to food and beverage ads through an informal guidance document. Thankfully, that effort fell flat. But Washington’s appetite for limiting “disfavored” speech—in the interest of those ubiquitous children—is never sated, as a recently proposed U.S. Department of Agriculture (USDA) regulation reminds us.
The February 26 proposal dictates how local education agencies (i.e. school boards) are to devise “local school wellness policies.” The USDA Secretary, joined by First Lady Michelle Obama, announced the rule at a White House event and proudly touted the proposal’s unprecedented prohibition of advertising for selected foods and beverages on school property. That part of the proposal violates the First Amendment, a conclusion which WLF shared with USDA last week in its formal comments to the agency. Continue reading
Two decisions issued a little over two weeks apart by separate U.S. Court of Appeals for the D.C. Circuit three-judge panels have created significant uncertainty on a critically important First Amendment issue. The court’s forthcoming actions in these cases will have a major impact on government regulation and on regulated industries as diverse as livestock, food, tobacco, smartphones, and medical devices.
The issue in both cases before the court is when can government compel businesses to provide information about their products or themselves. The U.S. Supreme Court held in Zauderer v. Office of Disciplinary Counsel that government can constitutionally require disclosures of a “purely factual” nature which are “reasonably related to the State’s interest in preventing deception of consumers.” The Court has repeatedly reaffirmed Zauderer, most recently in the 2010 case Milavetz, Gallop & Milavetz, P.A. v. U.S., where Justice Sotomayor wrote for a unanimous Court that a low level of scrutiny applies only in cases where the compelled speech is “directed at misleading commercial speech” (italics in opinion).
Country of Origin Labeling Rule. On March 28, a three-judge panel of Senior Judge Williams, Chief Judge Garland, and Judge Srinivasan upheld the Department of Agriculture’s country-of-origin labeling (COOL) rule in American Meat Institute v. U.S. Dept. of Agriculture. AMI argued that the compelled origin disclosure impinged on its members’ First Amendment rights, and because the information was not meant to prevent deception, the court should review the rule under the heightened scrutiny of Central Hudson v. Public Service Commission, and not the “reasonableness” standard of Zauderer. In upholding the COOL rule, the panel concluded that Zauderer encompassed government interests beyond just preventing consumer confusion, and thus it applied the minimal scrutiny of Zauderer rather than Central Hudson.
That conclusion rejected years of D.C. Circuit precedent (including last year’s R.J. Reynolds Tobacco Co. v. FDA) and instead embraced rulings from the First and Second Circuits. The panel acknowledged in a footnote that “reasonable judges” may read Reynolds as limiting Zauderer review to deception, and suggested en banc review for American Meat Institute. On April 4, the D.C. Circuit sua sponte vacated the panel decision and ordered en banc review. Oral argument is set for May 19. Continue reading
by John E. Villafranco, Michael C. Lynch, and Paul R. Garcia, Kelley Drye & Warren LLP*
(Ed. Note: Villafranco and Lynch authored an October 2013 WLF Legal Opinion Letter previewing the Lexmark case which can be accessed here)
On March 25, 2014, a unanimous Supreme Court in Lexmark Int’l, Inc. v. Static Control Components, Inc. ruled that a manufacturer of components for use in refurbished toner cartridges has standing under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), to sue the maker of printers in which the cartridges could be used for false advertising. Static Control Components, Inc., the component manufacturer, alleged that Lexmark International, Inc., the printer company, falsely told consumers that they could not lawfully purchase replacement cartridges made by anyone other than Lexmark, and falsely told companies in the toner cartridge remanufacturing business that it was illegal to use Static Control’s components.
The question before the Court was not whether Static Controls has constitutional standing under Article III, but whether it has so-called “prudential standing.” The Court initially noted that “prudential standing” is a misnomer, and that the real question “is whether Static Control falls within the class of plaintiffs whom Congress authorized to sue under § 1125(a).” Slip Op. 8-9. If it does, a court “cannot limit a cause of action that Congress has created because ‘prudence’ dictates.” Slip Op. 9. Rejecting the various approaches of the lower courts—from the competitor-only test, to antitrust standing, to the reasonable interest inquiry—the Supreme Court instead adopted a two-party inquiry.
Coleen Klasmeier, a partner with Sidley Austin LLP, Geoffrey M. Levitt, Senior Vice President and Associate General Counsel of Pfizer, Inc., and Jonathan L. Diesenhaus, a partner with Hogan Lovells US LLP discussed the impact of the Second Circuit’s December, 2013 Caronia decision on federal health product regulation and identify the latest developments and trends to follow in 2014 for public and private law enforcement targeted at off-label speech.
In our August 5 post, Former NCAA Athletes Still “In The Game” As Court Finds No First Amendment Immunity For EA Sports, we discussed a U.S. Court of Appeals for the Ninth Circuit ruling that allowed a suit against video game producer EA Sports, the NCAA, and Collegiate Licensing Company to proceed. The court held, 2-1, that the defendants could not assert a First Amendment defense to the state-based “right to publicity” claims.
The ruling, as well as the loss of backing by the NCAA and numerous college conferences, has now led EA Sports to not only drop its college football game from its product line, but also to settle the lawsuit. EA Sports, along with Collegiate Licensing Company, filed papers in the federal court in Oakland, California. The terms of the settlement remain confidential, but an ESPN report indicated that each athlete who is a member of the class of plaintiffs, including current NCAA players would receive “something substantive.”
According to the ESPN report, the NCAA was “not prepared to compromise on this case.”
by Chip English, Davis Wright Tremain LLP
Childhood obesity is a substantial problem worthy of serious discussion. Unfortunately, legislators also appear to see it as an issue worthy of unsound and unconstitutional legislative action. On July 25, 2013, Representative DeLauro, together with Representatives Lee, Defazio, Clay and Grijalva, introduced the most recent example of this food police problem. H.R. 2831 would “deny any [IRS tax] deduction for marketing directed at children to promote the consumption of food of poor nutritional quality.” The proposed legislation is both vague and overbroad and, more importantly, is an unconstitutional content, speaker, and audience targeted “tax on knowledge.” H.R. 2831 cannot withstand First Amendment scrutiny. Moreover, the proposal raises equal protection and arbitrary and capricious government action issues because government Speech Police would determine which marketing is “directed at children” and which food is of “poor nutritional quality.”
HR 2831 would amend the Internal Revenue Code to deny a broad array of travel, goods or services, gifts and other promotional expense deductions associated with “marketing directed to children” (persons under the age of 18) of “poor nutritional quality” foods. The Secretary of the Treasury, in consultation with the Secretary of Health and Human Services, would determine which foods are of poor nutritional quality by considering which foods are “inconsistent with the most recent Dietary Guidelines for Americans under section 301 of the National Nutrition Monitoring and Related Research Act of 1990 (7 U.S.C. § 5341).” Leaving aside the policy question of whether the IRS, which is still dealing with determinations of which organizations qualify for charitable organization status, should be involved in determining which foods are of poor nutritional quality, government determinations of what marketing is “directed at children” and what food products are “inconsistent” with Dietary “Guidelines”, will inevitably be arbitrary and capricious because those terms are vague and ambiguous. Continue reading
In a post last June, FDA And Caffeine: Selective Regulation By Unsubtle Threat, we mentioned San Francisco Attorney Dennis Herrera’s suit against energy-drink maker Monster Beverage Corp. for allegedly marketing to children. This suit was in fact filed after Monster had already filed its own declaratory judgment action against Attorney Herrara on April 18. In it, Monster urged the District Court for the Central District of California to declare Herrara’s pre-suit actions, which included letters to Monster and FDA, in violation of the First Amendment and preempted by federal law.
On August 22, Judge Virginia Phillips rejected Herrara’s effort to dismiss Monster’s these claims. She found that Monster’s First Amendment claims regarding Herrara’s labeling demands were viable. She found that the warnings Herrara’s letter referenced were in addition to what FDA already requires, and would thus be preempted. She then ruled that the prudential doctrine of primary jurisdiction would also bar the warnings Herarra sought.
This past summer, Monster successfully removed Attorney Herrara’s May 6 lawsuit against the company to the Northern District of California. Monster is currently petitioning that court to transfer the suit to Judge Phillips’ chambers in the Central District, arguing that the claims and defenses in the Monster v. Herrara case are substantially similar to those in Herrera v. Monster.
Proponents of paternalism in and outside of government have seemingly chosen energy drinks as their poster child/whipping boy for targeting (non-coffee related) foods and beverages with caffeine. The need for regulatory action is debatable, but as we argued in June, an on-the-record process at FDA is by far preferable to bureaucratic sabre rattling. And it certainly is preferable to a City Attorney’s regulation by letter and lawsuit.
by Stephanie Chipley, a 2013 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.
On May 28, 2013, the Treasury Department, via the Alcohol and Tobacco Tax and Trade Bureau (TTB), issued Ruling 2013-2, a temporary, voluntary labeling regulation that aims to help alcohol companies “provide truthful, accurate, and specific information to consumers about the nutrient content of their products on a per serving basis” in “Serving Facts” statements on labels and in advertisements of wine, distilled spirits, and malt beverages. For those companies who choose to use the new labels on their product packaging, the ruling allows the labels to include “serving size, the number of servings per container, and the number of calories and the number of grams of carbohydrates, protein, and fat per serving size.” In addition, companies may include the alcohol content of a product as a percentage of alcohol by volume and a statement of the fluid ounces of pure ethyl alcohol per serving.
TTB’s ruling shows just how far companies’ ability to share truthful information with consumers has come since Rubin v. Coors Brewing Co., 514 U.S. 476 (1995). In Rubin v. Coors, Coors Brewing Company applied to the Bureau of Alcohol, Tobacco and Firearms (BATF) for approval of labels and advertisements that revealed “truthful, verifiable, and nonmisleading factual information about alcohol content in its beer labels.” Id. at 478, 483. BATF rejected the application because it believed that § 205(e)(2) of the Federal Alcohol Administration Act (FAAA) “prohibited disclosure of the alcohol content of beer on labels or in advertising.” Id. Further, BATF argued that “the ban was necessary to suppress the threat of ‘strength wars’ among brewers, who, without the regulation, would seek to compete in the marketplace based on the potency of their beer.” Id. Coors argued that the § 205(e)(2) violated the First Amendment’s protection of commercial speech. Id. Ultimately, the United States Supreme Court held that although the Government had a “substantial interest in suppressing strength wars in the beer market,” the ban nevertheless failed to “directly and materially advance [the Government’s] asserted interest.” Id. at 488, 491. Consequently, the ban violated the First Amendment. Id. at 478. TTB’s viewpoints on allowing companies to share truthful information with consumers has come a long way since Rubin v. Coors, and its recent ruling reflects that change. Continue reading