The Legal Pulse Welcomes Blog to Its Blogroll

barsWashington Legal Foundation’s Legal Pulse is pleased to welcome to its blogroll today the White Collar Defense, Investigations & Compliance blog. The blog is published by the law firm Snell & Wilmer L.L.P. One of the blog’s creators and contributors is Greg Brower, who serves on WLF’s Legal Policy Advisory Board. Greg is a former U.S. Attorney for the District of Nevada and also serves in the Nevada State Senate.

WLF appreciates that among the blog’s initial posts was one by Greg that referenced a publication that he and his partner Brett Johnson wrote for WLF, When Enough Is Not Enough: Two Court Rulings Complicate Corporate Compliance Efforts.

The Meningitis B Outbreak: Heavy Doses of Government Can Be Costly

Princeton University campus
Princeton University campus

Cross-posted at WLF’s contributor page

President Obama often makes reference to how trying times can provide “teachable moments.” The recent outbreak of bacterial meningitis on college campuses is such a moment, but don’t expect the President to notice. The fact that school officials had to seek federal government permission to import a vaccine not yet legally available in the U.S., reveals anew the human cost of overbearing government regulation.

Seven cases of infection with the “B” strain of bacterial meningitis have occurred at Princeton University, and four have been confirmed at the University of California at Santa Barbara (UCSB). Statistically, 10% of those infected with meningitis B die, and 20% of those who recover suffer from severe side effects such as deafness and limb loss. Vaccines for every strain of meningitis have been approved for use in the United States except meningitis B; however a vaccine called Bexsero has been approved for use in Europe, Australia, and Canada.

At Princeton. Last October, with terrified students and their parents demanding action, school and state health officials had to ask federal health officials if Bexsero could be imported and administered at Princeton. Cue the creaky wheels of bureaucracy. The Centers for Disease Control and Prevention (CDC) asked the Food and Drug Administration (FDA) to issue an investigational new drug application, which is required to import Bexsero. The vaccine finally arrived at Princeton in early December, and immunization began there last week. Continue reading “The Meningitis B Outbreak: Heavy Doses of Government Can Be Costly”

Two More Food Labeling Class Action Rulings: Harbingers of the New Year?

Not from lactating cows
Not from lactating cows

Cross-posted at WLF’s contributor page

In our Legal Pulse commentaries on regulation-by-litigation of food labeling, one issue has predominated this year: What is a “reasonable consumer”? Two court decisions issued on consecutive days last week, one from the infamous Food Court (the Northern District of California) and the other from the Southern District of Florida, turned in large part on that issue and indicate that judges will continue addressing the question in 2014.

You Mean They’re Not from Cows? Ang v. Whiteway Foods, authored by Judge Conti of the ND of California, involved consumer fraud claims against the maker of soymilk/almond milk/coconut milk and related yogurt products. The plaintiffs challenged the use of the term “milk” in the products as well as ingredient references to “evaporated cane juice” (ECJ).

Judge Conti found that an earlier settlement in a similar Florida lawsuit barred Mr. Ang’s ECJ-based claims due to res judicata. He then turned to the soy/almond/coconut “milk” claims. He first found that federal labeling rules preempt Mr. Ang’s claims. Federal rules do not prescribe how the plant-based beverages must be labeled, and the rules relating to “milk” only “pertain to what milk is, rather than what it is not.” In such situations, federal rules require that products use “the common or usual name” for the food. Judge Conti found that the “Silk” drink makers did that, and thus Mr. Ang’s suit would improperly impose rules beyond what FDA requires. Continue reading “Two More Food Labeling Class Action Rulings: Harbingers of the New Year?”

Proxy Advisory Services: Making Glass (Lewis) Transparent—and ISS Too

nasdaqCross-posted at WLF’s contributor page

With 2014 and many corporations’ annual meetings just around the corner, more and more publicly-traded companies find themselves girding for costly proxy fights over corporate governance issues.  The small cadre of firms that provide proxy advisory services increasingly hamper management’s ability to prevent proxy battles, and to win those it can’t forestall.  Entities like Glass Lewis & Co. and Institutional Shareholder Services (ISS) provide advice to their institutional money manager and investment adviser clients that increase the percentage of shareholders voting against management’s recommendations.

But it is not at all clear that this proxy voting trend serves shareholder interests.  The Securities and Exchange Commission (SEC) has been studying these firms (which together control some 97% of the proxy services market )and their grip over proxies.  As Edward Knight, General Counsel of NASDAQ OMX (the public company that owns NASDAQ) points out: “[T]here is evidence that the Firms not only increase the costs of being a public company, but also create disincentives for companies to become public in the first place.”  Perhaps, as an October petition filed with SEC by NASDAQ OMX urges, it’s time the SEC stopped studying and started acting to make the methodology behind such influential proxy voting advice more transparent.

A Creature of Regulation.  The current problem began when, in an effort to curtail potential conflicts of interest, SEC imposed a new rule in 2003—the “Proxy Voting by Investment Advisers” rule—that required entities such as institutional investors and investment advisers to disclose “the policies and procedures that [they use] to determine how to vote proxies.”  To satisfy this new requirement, investment advisers began turning to third-party firms that offer advice on proxy voting.  When a 2004 SEC no-action letter clarified that relying on such firms creates a veritable safe harbor, the reliance on these firms grew and their impact blossomed.

Thanks to a second 2004 no-action letter, SEC has also instructed proxy advisory firms that they can provide advice to public companies on corporate governance issues—including how to win proxy votes—at the same time that they make proxy voting recommendations to investment advisers.  As James Glassman and J.W. Verret wrote in a Mercatus Center analysis last April, “Instead of eliminating conflicts of interest, the rule simply shifted their source.  Instead of encouraging funds to assume more responsibility for their proxy votes, the rule pushes them to assume less.”  Such concerns, voiced both by public companies and SEC Commissioners, led SEC to publish a “Concept Release on the U.S. Proxy System” that elicited over 300 comments. Continue reading “Proxy Advisory Services: Making Glass (Lewis) Transparent—and ISS Too”

With CLS Bank Int’l, SCOTUS to Decide if Computers are “Machines”

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Earlier this year, the U.S. Court of Appeals for the Federal Circuit sat en banc to review software patents in CLS Bank Int’l v. Alice Corp. This was a decision that was supposed to clarify business method patents and software patents, the scope of 35 U.S.C. § 101, and what an “abstract idea” means in practice. Instead of clarity, however, the judges of the Federal Circuit issued seven different opinions (or reflections), with no consensus beyond the ultimate judgment, which was that the invention was patent ineligible. The split gave almost every judge an opportunity to provide his or her unique philosophical view on software patents. As the title of this commentator’s last post on CLS Bank reflected, Want Clarity on Software Patents?: Skip CLS Bank Int’l Opinion and Wait for Supreme Court Review. That wait is now over, as the Supreme Court agreed on December 6 to review the Federal Circuit’s “decision.”

Prior Supreme Court decisions in cases like Bilski v. Kappos and Mayo v. Prometheus provide clues as to how the Supreme Court might rule in this case. First, the Supreme Court is probably not going to create “a categorical rule denying patent protection for inventions in areas not contemplated by Congress,” such as software, business methods, or even diagnostic testing. Indeed, the Supreme Court in Bilski explicitly stated that a “business method is simply one kind of ‘method’ that is, at least in some circumstances, eligible for patenting under § 101.” And the Court stated in Mayo that “too broad an interpretation” of exclusionary principals “could eviscerate patent law.” As a result, the Supreme Court will not even attempt to eliminate all types of method patents in one fell swoop.   Continue reading “With CLS Bank Int’l, SCOTUS to Decide if Computers are “Machines””

Fifth Circuit Overturns NLRB in D.R. Horton Arbitration Case

maatmanStrumwasser_LilyHRBWGuest Commentary

by Gerald L. Maatman, Jr. and Lily M. Strumwasser, Seyfarth Shaw LLP

Last week the U.S. Court of Appeals for the Fifth Circuit delivered welcome news to employers and practitioners of labor and employment law.  After years of heated debate regarding whether employers are permitted to use bilateral arbitration to resolve employment disputes, the Fifth Circuit answered with a resounding “yes.”  In D.R. Horton, Inc. v. NLRB, No. 12-60031 (5th Cir. Dec. 3, 2013), the Fifth Circuit reversed the National Labor Relations Board’s (“NLRB”) 2012 ruling and held that employers and employees are permitted to resolve disputes through individual rather than class or collective arbitration.

Laying The Groundwork – The NLRB’s Decision

As we wrote about here last year for Washington Legal Foundation, in this case, a former employee of D.R. Horton filed an unfair labor practice charge with the NLRB, alleging that a class action waiver contained in his arbitration agreement with D.R. Horton violates the NLRA.  Based on the employee charge, the NLRB’s General Counsel issued a complaint alleging that D.R Horton’s arbitration agreement violated Section 8(a)(1) of the NLRA by infringing the right of D.R. Horton’s employees to exercise their rights under Section 7 of the NLRA, which provides that employees may “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

In a two-member majority of the three-member Board, the NLRB held that because the arbitration agreement directly infringes on the substantive Section 7 rights of D.R. Horton’s employees, it necessarily fails.  The Board rejected the suggestion that Section 7 rights are procedural and not substantive.  The Board drew a critical distinction between the process of certifying a class of employees (which it conceded is procedural in nature) and the “collective action inherent in seeking class certification,” which it held is a substantive right under Section 7. Continue reading “Fifth Circuit Overturns NLRB in D.R. Horton Arbitration Case”

Eleventh Circuit’s Meticulous Ruling Plugs Loophole, Ends Unwarranted Clean Water Act Citizen Suit

11th CircuitCross-posted at WLF’s contributor page

Filing “citizen suits” is a major component of environmental activist groups’ business model. They raise revenue through fee-shifting provisions in federal laws; are an influential policy-making device, as reflected by the rise in so-called sue-and-settle agreements with federal agencies; and are a powerful fundraising tool. The federal government even “subsidizes” these organizations’ litigation activities through efforts like the U.S. Environmental Protection Agency’s (EPA) “ECHO” database, which helps activists determine when regulated entities are out of compliance with environmental laws.

Contrary to the desire of activist groups and their fellow travelers at EPA, federal laws like the Clean Water Act (CWA) reflect Congress’ intent that such litigation “supplement rather than supplant governmental action,” as the Supreme Court put it in Gwaltney v. Chesapeake Bay Fndt. A recent U.S. Court of Appeals for the Eleventh Circuit ruling firmly advanced this point and closed a perceived loophole in the CWA which activists had sought to exploit for new revenue.

Black Warrior Riverkeeper v. Black Warrior Minerals involved a coal mine’s alleged violation of federal “new source performance standards.” Black Warrior Riverkeeper and other “citizens” served the company as well as federal and state officials with notice that Black Warrior Minerals was violating both new source performance standards and its mine permit. Eleven days later, the citizens filed suit under the CWA alleging only new source performance standard violations. Why did they sue based only on those violations, and not also for the permit violations? Because the CWA requires 60 days notice prior to filing suit for all violations except for breaches of new source performance standards. But as the defendant pointed out to the federal district court, the new source performance standards were incorporated into the permit.  The district court ruled that the plaintiffs could not evade the 60-day notice requirement and awarded summary judgment to Black Warrior Minerals. Continue reading “Eleventh Circuit’s Meticulous Ruling Plugs Loophole, Ends Unwarranted Clean Water Act Citizen Suit”